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 7, 1998
--------------
Pennsylvania Real Estate Investment Trust
- ------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
Pennsylvania 1-6300 23-6216339
- ------------------------------------------------------------------------------
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
455 Pennsylvania Avenue, Suite 135, Fort Washington, Pennsylvania 19034
- ------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (215) 542-9250
--------------------------
- ------------------------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
Item 2. Acquisition or Disposition of Assets.
On August 7, 1998, PREIT Associates, L.P., a Delaware limited
partnership ("PALP") of which Pennsylvania Real Estate Investment Trust, a
Pennsylvania business trust ("PREIT"), is the sole general partner, acquired
all of the limited partner interests in The Woods Associates, a Pennsylvania
limited partnership (the "Woods Partnership"), and a subsidiary of PALP
acquired all of the general partner interests of the Woods Partnership. The
aggregate purchase price for the transaction was approximately $21.2 million,
consisting of (i) assumed debt of approximately $7.3 million, (ii) the payment
by PALP of approximately $11.8 million of cash to former partners of the Woods
Partnership electing to receive cash, (iii) the issuance by PALP of 72,592
units of Class A limited partner interest in PALP to former partners of the
Woods Partnership electing to receive operating partnership units, such units
having a value of approximately $1.7 million as of the closing and (iv) the
payment by PALP of a brokerage fee of approximately $0.4 million.
Prior to closing of the transaction, the sole purpose of the Woods
Partnership was the ownership and operation of a 100% fee simple interest in
The Woods Apartments, a Pennsylvania apartment property consisting of 320
dwelling units, a club house and swimming pool and a single-family dwelling
(the "Property"). PALP currently expects to continue to operate the Property
as a multifamily complex.
Prior to the transaction, the Woods Partnership had approximately 60
partners, two of which were corporate general partners controlled by Michael
Glick and Lester Morse, respectively, and the remainder of which were limited
partners. PREIT is not aware of any material relationship between either of
Mr. Glick or Mr. Morse and (i) PREIT or any of its affiliates, (ii) any
officer or trustee of PREIT or (iii) any associate of the officers or trustees
of PREIT. PALP financed the cash portion of the purchase price through a
borrowing under PREIT's existing revolving line of credit with First Union
National Bank. The purchase price was determined in arms-length negotiations
among the parties based upon PREIT's valuation of the cash flow of the
Property.
Location of the Property
The Property is located on a 33-acre site approximately 100 feet from
the off- and on- ramps for PA Route 309, at the intersection of Butler Pike
and Susquehanna Road, at 1410 East Butler Pike, Ambler, Montgomery County,
Pennsylvania, 19002-3737. The Property is two miles north of the Fort
Washington exit of the Pennsylvania Turnpike.
Description of the Property
The multifamily complex consists of 320 units in 27 two-story
buildings. Also located on the property are a three-bedroom house and a
century old stone mansion that is used as a clubhouse/leasing office. The
complex's amenities include a swimming pool, tennis courts, barbecue pit and a
clubhouse. Constructed in the mid-1970s, the Property contains approximately
235,000 square feet of leasable space.
The average square footage per unit of the complex's 320 units is
approximately 734 square feet. The apartments are generally rented for a term
of one year and automatically renew on an annual basis. The occupancy rate was
approximately 96% on August 7, 1998.
Taxes
The 1998 property taxes are expected to be approximately $270,000.
Assumed Debt
The Property is subject to a mortgage in the face amount of
$8,150,000, carrying an interest rate of 8.625%, amortizing over a 22-year
period. This mortgage was originated on May 19, 1993 and matures June 1, 2003.
The principal balance at the time of closing was approximately $7.3 million.
Competition
There are several apartment and condominium communities in Eastern
Montgomery County, Pennsylvania, only a few of which are located in the
immediate vicinity of the Property. Of the competing apartment communities,
some have monthly rents that are higher, and some have monthly rents that are
lower, than those of the Property.
Environmental
PREIT has completed certain environmental studies of the Property and
plans to conduct certain others, including customary tests for radon gas.
PREIT is prepared to take the remedial steps that might be required by the
results of such tests, but does not expect that any remedial efforts it
undertakes would have a material adverse impact on its business.
Management Arrangement
The Property will be managed by PALP or one of its affiliates.
After reasonable inquiry, PREIT is not aware of any material factors
relating to the Property, other than those described in the foregoing
discussion, that would cause the financial information reported in Item 7(a)
hereof not to be necessarily indicative of future operating results.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements
(3) Report of Independent Public Accountants
Statements of Revenue and Certain Expenses for the
Three Months Ended March 31, 1998
(unaudited) and the Year Ended December
31, 1997 (audited)
Notes to Statements of Revenue and Certain Expenses
(b) Pro Forma Financial Information
(1) Unaudited Pro Forma Consolidating Financial
Information:
Pro Forma Consolidating Balance Sheet as of
March 31, 1998
Pro Forma Consolidating Statement of Income for the
Twelve Months Ended August 31, 1997
Pro Forma Consolidating Statement of Income for the
Four Months Ended December 31, 1997
Pro Forma Consolidating Statement of Income for the
Three Months Ended March 31, 1998
(c) Exhibits
2.1* Contribution Agreement among The Woods Associates, a
Pennsylvania limited partnership, certain general, limited and special limited
partners thereof, PREIT Associates, L.P., a Delaware limited partnership, and
Pennsylvania Real Estate Investment Trust, a Pennsylvania business trust,
dated as of July 24, 1998, as amended by Amendment #1 to Contribution Agreement,
dated as of August 7, 1998.
* Pursuant to Item 601(b)(2) of Regulation S-K, the schedules and exhibits
to the Contribution Agreement are omitted. The Contribution Agreement
identifies the contents of all schedules and exhibits thereto, and the
registrant agrees to furnish supplementally copies of such schedules and
exhibits to the Securities and Exchange Commission upon request.
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934,
as amended, 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 13, 1998 /s/ Jonathan B. Weller
----------------------------------------
Jonathan B. Weller
President and Chief Operating Officer
THE WOODS APARTMENTS
STATEMENT OF REVENUE
AND CERTAIN EXPENSES
AS OF DECEMBER 31, 1997
TOGETHER WITH AUDITORS' REPORT
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Pennsylvania Real Estate Investment Trust:
We have audited the statement of revenue and certain expenses of The Woods
Apartments, as described in Note 1, for the year ended December 31, 1997. This
financial statement is the responsibility of the The Woods 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.
The statement of revenue and certain expenses was prepared for the purpose of
complying with the rules and regulations of the Securities and Exchange
Commission for inclusion in a Current Report on Form 8-K of Pennsylvania Real
Estate Investment Trust as described in Note 1, and is not intended to be a
complete presentation of The Woods Apartments' revenue and expenses.
In our opinion, the financial statement referred to above presents fairly, in
all material respects, the revenue and certain expenses of The Woods
Apartments for the year ended December 31, 1997, in conformity with generally
accepted accounting principles.
ARTHUR ANDERSEN LLP
Philadelphia, Pennsylvania,
June 22, 1998
THE WOODS APARTMENTS
STATEMENTS OF REVENUE AND CERTAIN EXPENSES (NOTE 1)
For the For the Three
Year Ended Months Ended
December 31, March 31,
1997 1998
------------ -------------
(Unaudited)
REVENUE:
Rent (Note 2) $2,725,000 $ 686,000
Other 123,000 30,000
---------- ----------
Total revenue 2,848,000 716,000
---------- ----------
CERTAIN EXPENSES:
Maintenance and other operating expenses 744,000 164,000
Utilities 92,000 21,000
Real estate taxes 264,000 68,000
---------- ----------
Total certain expenses 1,100,000 253,000
---------- ----------
REVENUE IN EXCESS OF CERTAIN EXPENSES $1,748,000 $ 463,000
========== ==========
The accompanying notes are an integral part of these financial statements.
THE WOODS APARTMENTS
NOTES TO STATEMENTS OF REVENUE AND CERTAIN EXPENSES
DECEMBER 31, 1997
1. BASIS OF PRESENTATION:
The statements of revenue and certain expenses reflect the operations of The
Woods Apartments (the "Property") located in Ambler, Pennsylvania. The
Property is expected to be acquired in August 1998 from The Woods Associates
by PREIT Associates, L.P. (the "Operating Partnership"), a limited partnership
of which Pennsylvania Real Estate Investment Trust (the "Company") is the sole
general partner. The Property is a multifamily apartment community comprised
of 320 apartment units. The net purchase price for the Property is expected to
be approximately $21 million.
The statements of revenue and certain expenses are to be included in the
Company's Current Report on Form 8-K, as the above-described transaction has
been deemed significant pursuant to the rules and regulations of the
Securities and Exchange Commission. The financial statements of the Property
have been prepared on an accrual basis in accordance with generally accepted
accounting principles. The accompanying financial statements exclude certain
expenses such as interest, depreciation and amortization, and other costs not
directly related to the future operations of the Property.
The statement of revenue and certain expenses for the three months ended March
31, 1998 is unaudited; however, in the opinion of management, all adjustments
(consisting solely of normal recurring adjustments) necessary for the fair
presentation of the statement of revenue and certain expenses for the interim
period have been included. The results of the interim periods are not
necessarily indicative of the results for the full year.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period. The
ultimate results could differ from those estimates.
2. OPERATING LEASES:
The Property is leased to tenants under operating leases with terms generally
equal to one year or less.
3. RELATED PARTY TRANSACTIONS:
During 1997, the Property paid total management fees of $85,000 to The Lester
Morse Company, Inc. and The Michael I. Glick Company, both of which are
related parties of the seller, based on 3% of gross rental revenue. These
management fees are included within maintenance and other operating expenses
in the statements of revenue and certain expenses.
4. CAPITALIZATION POLICY:
It is the policy of the Property's management to capitalize certain
expenditures related to the replacement of appliances, carpets and roofs, as
well as other major repairs to buildings, decks or parking facilities.
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
PRO FORMA CONSOLIDATING FINANCIAL INFORMATION
On February 17, 1998, the Registrant filed a Form 10-Q for the transition
period ended December 31, 1997. As such, the following sets forth the pro
forma consolidating balance sheet of the Registrant as of March 31, 1998 and
the pro forma consolidating statements of income for the year ended August 31,
1997, the four-month transition period ended December 31, 1997, and the
three-month period ended March 31, 1998.
The unaudited pro forma consolidating financial information should be read in
conjunction with the historical financial statements of the Registrant, The
Rubin Organization, Inc. (subsequently renamed PREIT-RUBIN, Inc.), Magnolia
Mall, North Dartmouth Mall and Oxford Valley Road Associates and the related
notes thereto. In management's opinion, all adjustments necessary to reflect
the effects of the transactions have been made.
The accompanying unaudited pro forma consolidating financial information is
presented as if the transactions described below had been consummated on March
31, 1998 for balance sheet purposes and September 1, 1996 for purposes of the
statements of income:
o The Registrant acquired The Woods Apartments located in Ambler,
Pennsylvania on August 7, 1998 for a purchase price of approximately $21.2
million consisting of $12.2 million in cash, $1.7 million through the
issuance of Class A Operating Partnership ("OP") Units and $7.3 million
through the assumption of debt.
o The Registrant consummated an offering in December 1997 (the "Offering")
and applied the net proceeds therefrom as described below:
- The Company issued 4,600,000 shares of beneficial interest at
$22.375 per share of which 600,000 shares related to the
underwriter's exercise of the over-allotment option.
- The $8.8 million mortgage on Cobblestone Apartments was
prepaid in full.
- The remaining net proceeds of the Offering were used to repay
amounts outstanding on the Registrant's revolving credit
facility (the "Credit Facility").
o The Registrant acquired The Rubin Organization ("TRO") on September 30,
1997 (the "TRO Transaction") which involved a number of related
transactions, the combined effect of which was to form and capitalize an
Operating Partnership and to transfer ownership of the Registrant's direct
and indirect interests in its existing properties, or the economic
benefits thereof, to the Operating Partnership, and to effect the
acquisitions described below:
- TRO Acquisition. The Operating Partnership acquired all of the
non-voting common shares of TRO, constituting 95% of all of
the total equity of TRO, in exchange for the issuance of
200,000 Class A OP Units and a contingent obligation to issue
up to 800,000 additional Class A OP Units over the following
five-year period if the Registrant achieves certain specified
levels of funds from operations, on a per share basis, over
such period.
- Existing Retail Properties Acquisition. The Operating
Partnership acquired the interests of certain affiliates of
TRO ("TRO Affiliates") in four existing shopping centers, or
portions of shopping centers (the "Existing Retail
Properties").
Two of the properties (Magnolia Mall and North Dartmouth Mall)
were purchased from Equity Properties and Development Limited
Partnership ("EPDLP") for aggregate consideration, excluding
transaction costs, of approximately $80 million, of which (i)
$25.2 million represents an assumable mortgage, (ii) $5
million was paid through the issuance of approximately 213,000
Class B OP units to EPDLP for their interest in Magnolia Mall;
and (iii) the balance was financed with borrowings under the
Registrant's Credit Facility.
The Operating Partnership issued approximately 233,000
additional Class A OP units to TRO Affiliates in respect of
their 50% equity interest in the Court at Oxford Valley.
- Development Properties Acquisition. The Operating Partnership
became obligated to acquire, upon completion of construction,
for Class A OP Units, the interests of certain TRO Affiliates
in two shopping centers currently under construction, at
prices based upon a pre-determined formula.
o The Operating Partnership also acquired the rights of certain TRO
Affiliates in respect of three potential shopping center sites in exchange
for (i) a loan of cash to TRO in the amount of $3.4 million representing
actual out-of-pocket expenditures of TRO incurred with respect of such
properties through the closing date, and (ii) an obligation to issue, upon
completion of any property subsequently developed, Class A OP Units for
one-half of the difference between the aggregate value of all such
properties at the time of completion and the all-in-cost of all such
properties.
As these transactions are expected to occur in the future at amounts that
are not currently determinable, the financial impact of such future events
has not been reflected in the accompanying pro forma financial statements.
All of the acquisitions described above have been recorded by the Registrant
using the purchase method of accounting.
The pro forma consolidating financial information is unaudited and is not
necessarily indicative of what the actual financial position or results of
operations of the Registrant would have been had the transactions described
above been consummated as of the dates indicated, nor does it purport to
represent the future financial position and the results of operations of the
Registrant.
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
PRO FORMA CONSOLIDATING BALANCE SHEET
AS OF MARCH 31, 1998
(Unaudited)
(In thousands)
Woods PREIT
PREIT Apartments Pro Forma,
Historical Acquisition As Adjusted
---------- ----------- -----------
Assets
Investments in Real Estate, at cost:
Multifamily properties $ 161,907 $ 21,200 (A) $ 183,107
Industrial properties 5,078 -- 5,078
Retail properties 120,347 -- 120,347
Properties under development 10,042 -- 10,042
----------- ------------ ------------
Total investments in real estate 297,374 21,200 318,574
Less - accumulated depreciation 55,193 -- 55,193
----------- ------------ ------------
242,181 21,200 263,381
Investment in PREIT-RUBIN, Inc. 4,535 -- 4,535
Investments in partnerships and joint ventures,
at equity 15,353 -- 15,353
Advances to PREIT-RUBIN, Inc. 3,613 -- 3,613
------------ ------------ ------------
265,682 21,200 286,882
Less - allowance for possible losses 1,723 -- 1,723
----------- ------------ ------------
263,959 21,200 285,159
Other Assets:
Cash and cash equivalents 456 -- 456
Rents and sundry receivables 604 -- 604
Deferred costs, prepaid real estate taxes and
expenses, net 8,377 -- 8,377
----------- ------------ ------------
$ 273,396 $ 21,200 $ 294,596
=========== ============ ============
Liabilities and Shareholders' Equity
Mortgage notes payable $ 65,121 $ 7,340 (A) $ 72,461
Bank and other loans payable 49,526 12,160 (A) 61,686
Tenants' deposits and deferred rents 1,194 -- 1,194
Accrued pension and retirement benefits 969 -- 969
Accrued expenses and other liabilities 3,826 -- 3,826
----------- ------------ ------------
120,636 19,500 140,136
----------- ------------ ------------
Minority interest 15,773 1,700 (A) 17,473
----------- ------------- ------------
Shareholders' Equity
Shares of beneficial interest 13,295 -- 13,295
Capital contributed in excess of par 144,854 -- 144,854
Distributions in excess of net income (21,162) -- (21,162)
----------- ------------ ------------
136,987 -- 136,987
----------- ------------ ------------
$ 273,396 $ 21,200 $ 294,596
=========== ============= ============
The accompanying notes and management's assumptions are an integral part of this statement.
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
PRO FORMA CONSOLIDATING STATEMENT OF INCOME
FOR THE TWELVE MONTHS ENDED AUGUST 31, 1997
(Unaudited)
(In thousands, except per share data)
1997 Events 1998 Events
------------------------------ -------------------------
Woods
PREIT The TRO The Apartments Pro Forma PREIT
Historical Transaction Offering Historical Adjustments Pro Forma
---------- ----------- ----------- ------------ ----------- ------------
Revenues
Gross revenues from real estate $ 40,231 $ 12,490 (a) $ -- $ 2,687 $ -- $ 55,408
Interest and other income 254 234 (b) -- 126 -- 614
---------- ----------- ------------ ----------- ----------- ------------
Total revenues 40,485 12,724 -- 2,813 -- 56,022
---------- ----------- ------------ ----------- ----------- ------------
Expenses
Property operating expenses 16,289 3,964 (a) -- 1,116 -- 21,369
Depreciation and amortization 6,259 2,557 (c) -- -- 424 (j) 9,240
General and administrative expenses 3,324 -- -- -- -- 3,324
Mortgage and bank loan interest 9,086 6,183 (d) (6,102)(h) -- 1,545 (k) 10,712
Provisions for losses on investments 500 -- -- -- -- 500
---------- ----------- ------------ ----------- ----------- ------------
35,458 12,704 (6,102) 1,116 1,969 45,145
---------- ----------- ------------ ----------- ----------- ------------
Income before gains on sales of
interests in real estate, equity in
unconsolidated entities and
minority interest 5,027 20 6,102 1,697 (1,969) 10,877
Equity in income of PREIT-RUBIN, Inc. -- 192 (e) -- -- -- 192
Equity in income of partnerships and
joint ventures 4,337 420 (f) -- -- -- 4,757
Gains on sales of interests in real
estate 1,069 -- -- -- -- 1,069
---------- ----------- ------------ ----------- ----------- ------------
Income before minority interest 10,433 632 6,102 1,697 (1,969) 16,895
Minority interest (198) (750) (g) (65) (i) -- (43) (l) (1,056)
---------- ----------- ------------ ----------- ----------- ------------
Net income $ 10,235 $ (118) $ 6,037 $ 1,697 $ (2,012) $ 15,839
========== =========== ============ ============ =========== ============
Basic Net Income Per Share $ 1.18 $ 1.19
========== ============
Diluted Net Income Per Share $ 1.18 $ 1.19
========== ============
Weighted Average Number of Shares
Outstanding:
Basic 8,679 13,279
========== ============
Diluted 8,691 13,291
========== ============
The accompanying notes and management's assumptions are an integral part of this statement.
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
PRO FORMA CONSOLIDATING STATEMENT OF INCOME
FOR THE FOUR MONTHS ENDED DECEMBER 31, 1997
(Unaudited)
(In Thousands, except Per Share Data)
1997 Events
---------------------------------
PREIT The TRO The
Historical Transaction Offering
---------- ----------- --------
Revenues
Gross revenues from real estate $ 17,170 $ 1,008 (m) $ --
Interest and other income 82 32 (n) --
----------- ----------- -----------
Total revenues 17,252 1,040 --
----------- ----------- -----------
Expenses
Property operating expenses 6,835 291 (m) --
Depreciation and amortization 2,695 213 (o) --
General and administrative expenses 1,088 -- (1,906) (t)
Mortgage and bank loan interest 4,349 545 (p) --
----------- ----------- -----------
14,967 1,049 (1,906)
----------- ----------- -----------
Income before equity in unconsolidated
entities, gains on sales of
interests in real estate, and
minority interest 2,285 (9) 1,906
Equity in income of PREIT-RUBIN, Inc. 260 751 (q) --
Equity in income of partnerships and
joint ventures 2,101 29 (r) --
Gains on sales of interests in real
estate 2,090 -- --
----------- ----------- -----------
Income before minority interest and
extraordinary item 6,736 771 1,906
Minority interest (474) (53) (s) (1) (u)
Extraordinary loss on early
extinguishment of debt (300) -- --
----------- ----------- -----------
Net income $ 5,962 $ 718 $ 1,905
=========== =========== ===========
BASIC INCOME PER SHARE:
Income before extraordinary item per $ 0.69
share
Extraordinary loss on early
extinguishment of debt (0.03)
-----------
Net Income Per Share $ 0.66
===========
Weighted Average Number of Shares
Outstanding 9,025
===========
DILUTED INCOME PER SHARE:
Income before extraordinary item per $ 0.69
share
Extraordinary loss on early
extinguishment of debt (0.03)
Net Income Per Share $ 0.66
===========
Weighted Average Number of Shares
Outstanding 9,049
===========
[RESTUBBED FROM TABLE ABOVE]
1998 Events
----------------------------
Woods
Apartments Pro Forma PREIT
Acquisition Adjustments Pro Forma
----------- ----------- ---------
Revenues
Gross revenues from real estate $ 915 $ -- $ 19,093
Interest and other income 38 -- 152
----------- ----------- -----------
Total revenues 953 -- 19,245
----------- ----------- -----------
Expenses
Property operating expenses 384 -- 7,510
Depreciation and amortization -- 141 (v) 3,049
General and administrative expenses -- -- (818)
Mortgage and bank loan interest -- 515 (w) 5,409
----------- ----------- -----------
384 656 15,150
----------- ----------- -----------
Income before equity in unconsolidated
entities, gains on sales of
interests in real estate, and
minority interest 569 (656) 4,095
Equity in income of PREIT-RUBIN, Inc. -- -- 1,011
Equity in income of partnerships and
joint ventures -- -- 2,130
Gains on sales of interests in real
estate -- -- 2,090
----------- ----------- -----------
Income before minority interest and 569 (656) 9,326
extraordinary item
Minority interest -- (26) (x) (554)
Extraordinary Loss on early
extinguishment of debt -- -- (300)
----------- ----------- -----------
Net income $ 569 $ (682) $ 8,472
=========== ============ ===========
BASIC INCOME PER SHARE:
Income before extraordinary item per $ 0.64
share
Extraordinary loss on early
extinguishment of debt (0.02)
-----------
Net Income Per Share $ 0.62
===========
Weighted Average Number of Shares
Outstanding 13,625
===========
DILUTED INCOME PER SHARE:
Income before extraordinary item per $ 0.64
share
Extraordinary loss on early
extinguishment of debt (0.02)
-----------
Net Income Per Share $ 0.62
===========
Weighted Average Number of Shares
Outstanding 13,649
===========
The accompanying notes and management's assumptions are an integral part of this statement.
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
PRO FORMA CONSOLIDATING STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1998
(Unaudited)
(In Thousands, except Per Share Data)
Woods
PREIT Apartments Pro Forma PREIT
Historical Historical Adjustments Pro Forma
---------- ----------- ----------- ---------
Revenues
Gross revenues from real estate $ 13,526 $ 686 $ -- $ 14,212
Interest and other income 121 30 -- 151
----------- ----------- ----------- ------------
13,647 716 -- 14,363
----------- ----------- ----------- ------------
Expenses
Property operating expenses 5,040 253 -- 5,293
Depreciation and amortization 2,138 -- 106 (a) 2,244
General and administrative expenses 738 -- -- 738
Mortgage and bank loan interest 1,978 -- 386 (b) 2,364
----------- ----------- ----------- ------------
9,894 253 492 10,639
----------- ----------- ----------- ------------
Income before equity in unconsolidated
entities, gains on sales of interests
in real estate, and minority interest 3,753 463 (492) 3,724
Equity in loss of PREIT-RUBIN, Inc. (358) -- -- (358)
Equity in income of partnerships and
joint ventures 1,475 -- -- 1,475
----------- ----------- ----------- ------------
Income before minority interest 4,870 463 (492) 4,841
Minority interest (277) -- (22) (c) (299)
----------- ----------- ----------- ------------
Net income $ 4,593 $ 463 $ (514) $ 4,542
=========== =========== =========== ============
Basic Net Income Per Share $ 0.35 $ 0.34
=========== ============
Diluted Net Income Per Share $ 0.34 $ 0.34
=========== ============
Weighted Average Number of Shares
Outstanding:
Basic
13,292 13,292
=========== ============
Diluted 13,334 13,334
=========== ============
The accompanying notes and management's assumptions are an integral part of this statement.
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
NOTES AND MANAGEMENT'S ASSUMPTIONS TO
UNAUDITED PRO FORMA CONSOLIDATING FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
1. BASIS OF PRESENTATION:
Pennsylvania Real Estate Investment Trust (the "Registrant") is a
self-administered equity real estate investment trust engaged, directly
and through subsidiaries and joint ventures, in owning and managing
income producing real estate, with an emphasis on shopping centers and
apartment complexes. As of August 11, 1998 the Registrant owned 51
properties of which 7 properties are currently under development. The
Registrant's interest in all of the Properties is held through PREIT
Associates L.P. (the "Operating Partnership").
2. ADJUSTMENTS TO PRO FORMA CONSOLIDATING BALANCE SHEET:
(A) To record the acquisition of the Woods Apartments as follows:
Purchase price $ 21,200
Mortgage indebtedness assumed $ 7,340
Borrowings under revolving line of credit $ 12,160
Issuance of 72,592 Class A OP Units at $23.425 per unit $ 1,700
3. ADJUSTMENTS TO PRO FORMA CONSOLIDATING STATEMENT OF INCOME FOR THE TWELVE
MONTHS ENDED AUGUST 31, 1997:
(a) To record the income and expenses associated with the acquisition of
wholly-owned shopping center properties as follows:
North
Magnolia Dartmouth Shopping
Mall Mall Centers
Historical Historical Pro Forma
---------- ---------- ---------
Revenues
Gross revenues from real estate $ 6,222 6,268 $ 12,490
Interest and other income 17 15 32
------------- ------------- -------------
6,239 6,283 12,522
Expenses
Property operating expenses 1,728 2,236 3,964
------------ ------------- -------------
EBITDA $ 4,511 $ 4,047 $ 8,558
============ ============= =============
(b) To record additional interest and other income as follows:
Interest and other income of Magnolia Mall and North Dartmouth Mall $ 32
Accrual of interest income on note receivable from PREIT-RUBIN,Inc.
Based on intercompany advances at a rate of 12.5% 202
-------------
$ 234
=============
(c) To record additional depreciation expense as follows:
Magnolia Mall - depreciable basis of $45,998 over 30-year useful life $ 1,533
North Dartmouth Mall - depreciable basis of $30,709 over 30-year useful life 1,024
-------------
$ 2,557
=============
(d) To record additional interest expense as follows:
Magnolia Mall $25,200 mortgage note payable assumed at 8.20% $ 2,066
Magnolia Mall bank borrowings of $10,165 at 7.25% to fund remaining purchase price 737
North Dartmouth Mall bank borrowings of $35,000 at 7.25% to fund purchase price 2,538
Deposit of $5,000 at 7.25% 363
Bank borrowings of $11,482 at 7.25% to fund the cash portion of transaction costs 832
Less capitalized interest on bank borrowings for property under development (605)
Net increase in amortization of financing costs related to Credit Facility 252
-------------
$ 6,183
=============
(e) To record equity in income (loss) of PREIT-RUBIN, Inc. as follows:
TRO Pro Forma
Historical Adjustments Pro Forma
---------- ----------- ---------
Revenues
Management fees $ 6,171 $ - $ 6,171
Leasing commissions 9,605 - 9,605
Consulting fees 1,763 - 1,763
Development fees 581 - 581
Publication income 2,201 - 2,201
Other income 147 - 147
------------ ------------- -------------
Total revenues $ 20,468 $ - $ 20,468
============ ============= =============
Operating Expenses
Salaries, commissions, temporary services, payroll
taxes and employee benefits 11,781 300 (1) 12,081
Rent expense 784 - 784
Other operating expenses 3,744 - 3,744
Depreciation and amortization 961 - 961
Non-recurring expenses associated with the TRO
transaction 890 - 890
Expenses for start-up of EPDLP management contracts 951 - 951
------------ ------------- -------------
Total operating expenses 19,111 300 19,411
------------ ------------- -------------
Income from operations 1,357 (300) 1,057
Interest expense (891) 362 (2) (529)
Equity in loss from partnership investments (131) 131 (3) --
------------ ------------- -------------
Pre-tax loss 335 193 528
Provision for income taxes - (211) (211) (4)
------------ -------------- -------------
Net income $ 335 $ (18) $ 317
============ ============== =============
Amortization of excess purchase price over net assets acquired recorded in consolidation (115) (5)
Net loss after intangible amortization $ 202
=============
Operating Partnership's interest (95%) in loss of PREIT-RUBIN, Inc. $ 192 (6)
=============
(1) To record additional compensation expense in accordance with existing
employment contracts
(2) To adjust interest expense as follows:
Elimination of interest on debt not assumed $ 564
Accrual of interest on note payable to PREIT (202)
--------------
$ 362
=============
(3) To eliminate equity in loss of partnerships and joint ventures not being
acquired.
(4) Estimated tax requirements calculated using 40% effective tax rate.
(5) To record amortization of excess purchase price over net assets acquired
over 35-year amortization period.
(6) Represents 95% of PREIT-RUBIN, Inc.'s net loss after intangible
amortization.
(f) To record the Registrant's 50% share of income from The Court at Oxford
Valley:
Equity in the net income of The Court at Oxford Valley $ 605
Less amortization of the excess purchase price over the net book value of assets
acquired (185)
-------------
$ 420
=============
(g) To adjust the minority interest's share of the income in the Operating
Partnership (6.9% prior to the consummation of the Offering). $ (750)
===========
(h) To record the interest expense savings associated with the paydown of the
following debt amounts:
Payment of the mortgage loan on Cobblestone Apartments $ 690
Payment of bank borrowings incurred in connection with the TRO Transaction 4,469
Payment of other bank borrowings 943
-------------
$ 6,102
=============
(i) To adjust the minority interest's share of income in the Operating
Partnership (4.8% following the consummation of the Offering) $ (65)
=============
(j) To record depreciation expense on allocated building portion of $16,960 (80%)
of the $21,200 purchase price assuming a useful life of 40 years $ 424
=============
(k) To record interest expense on $12,160 of additional borrowings under the
Registrant's revolving credit facility at 7.5% and assumed mortgage indebtedness
of $7,340 at 8.625% $ 1,545
=============
(l) To adjust the minority interest's share of income in the Operating Partnership to reflect
the issuance of 72,592 Class A OP units at $23.425 per unit $ (43)
=============
4. ADJUSTMENTS TO PRO FORMA CONSOLIDATING STATEMENT OF INCOME FOR THE FOUR
MONTHS ENDED DECEMBER 31, 1997:
(m) To record the income and expenses associated with the acquisition of
wholly-owned shopping center properties as follows:
Magnolia North Dartmouth Shopping
Mall Mall Centers
Historical Historical Pro Forma
---------- ---------- ---------
Revenues
Gross revenues from real estate $ 548 460 $ 1,008
Interest and other income 2 12 14
----------- ------------- -------------
550 472 1,022
Expenses
Property Operating Expenses 132 159 291
----------- ------------- -------------
Net operating income $ 418 $ 313 $ 731
=========== ============= =============
(n) To record additional interest and other income as follows:
Interest and other income of Magnolia Mall and North Dartmouth Mall $ 14
Accrual of interest income on Note Receivable from PREIT-RUBIN,Inc.
based on intercompany advances at a rate of 12.5% 18
-------------
$ 32
=============
(o) To record additional depreciation expense as follows:
Magnolia Mall - depreciable basis of $45,998 over 30-year useful life $ 128
North Dartmouth Mall - depreciable basis of $30,709 over 30-year useful life 85
-------------
$ 213
=============
(p) To record additional interest expense as follows:
Magnolia Mall $25,200 mortgage note payable assumed at 8.20% $ 172
Magnolia Mall bank borrowings of $10,165 at 7.25% to fund remaining purchase price 61
North Dartmouth Mall bank borrowings of $35,000 at 7.25% to fund purchase price 211
Deposit of $5,000 at 7.25% 30
Bank borrowings of $11,482 at 7.25% to fund the cash portion of transaction costs 100
Less capitalized interest on bank borrowings for property under development (50)
Net increase in amortization of financing costs related to Credit Facility 21
-------------
$ 545
=============
(q) To record equity in income of PREIT-RUBIN, Inc. as follows:
TRO Pro Forma
Historical Adjustments Pro Forma
---------- ----------- ---------
Revenues
Management fees $ 410 $ - $ 410
Leasing commissions 3,474 - 3,474
Consulting fees 104 - 104
Development fees 661 - 661
Publication income 555 - 555
Other income 142 - 142
------------ ------------- ------------
Total revenues $ 5,346 $ - $ 5,346
============ ============= ============
Operating Expenses
Salaries, commissions, temporary services, payroll
taxes and employee benefits 2,554 25 (1) 2,579
Rent expense 77 - 77
Other operating expenses 1,268 - 1,268
Depreciation and amortization 69 - 69
------------ ------------- ------------
Total operating expenses 3,968 25 3,993
------------ ------------- ------------
Income from operations 1,378 (25) 1,353
Interest expense -- (18) (2) (18)
Equity in loss from partnership investments (146) 146 (3) --
------------ ------------- ------------
Income before income taxes 1,232 103 1,335
Provision for income taxes - (534) (534) (4)
------------ ------------- ------------
Net income $ 1,232 $ (431) $ 801
============ ============= ============
Intangible amortization recorded in consolidation 10 (5)
------------
Net income after intangible amortization $ 791
============
Operating Partnership's interest (95%) in income of PREIT-RUBIN, Inc. $ 751 (6)
============
(1) To record additional compensation expense in accordance with existing
employment contracts
(2) To accrue interest on note payable to PREIT $ 18
=============
(3) To eliminate equity in loss of partnerships and joint ventures not being
acquired.
(4) Estimated tax requirements calculated using 40% effective tax rate.
(5) To record amortization of excess purchase price over net assets acquired
over 35-year amortizable period.
(6) Represents 95% of PREIT-RUBIN, Inc.'s net income after intangible
amortization.
(r) To record the Registrant's 50% share of income from The Court at Oxford
Valley:
Equity in the net income of The Court at Oxford Valley $ 44
Less amortization of the excess purchase price over the net book value of assets (15)
acquired -------------
$ 29
=============
(s) To adjust the minority interest's share of the income in the Operating
Partnership (6.9% prior to the consummation of the Offering). $ (53)
============
(t) To record the interest expense savings associated with the paydown of the
following debt amounts:
Payment of the mortgage loan on Cobblestone Apartments $ 216
Payment of bank borrowings incurred in connection with the TRO Transaction 1,396
Payment of other bank borrowings 294
-------------
$ 1,906
=============
(u) To adjust the minority interest's share of income in the Operating Partnership
(4.8% following the consummation of the Offering) $ (1)
==============
(v) To record depreciation expense on allocated building portion of $16,960 (80%)
of the $21,200 purchase price assuming a useful life of 40 years $ 141
=============
(w) To record interest expense on $12,160 of additional borrowings under the
Registrant's revolving credit facility at 7.5% and assumed mortgage indebtedness of $7,340
at 8.625% $ 515
=============
(x) To adjust the minority interest's share of income in the Operating
Partnership to reflect the issuance of 72,592 Class A OP units at $23.425 per unit $ (26)
=============
5. ADJUSTMENTS TO PRO FORMA CONSOLIDATING STATEMENT OF INCOME FOR THE THREE
MONTHS ENDED MARCH 31, 1998:
(a) To record depreciation expense on allocated building portion of $16,960
(80%) of the $21,200 purchase price over an assumed useful life of 40
years. $ 106
============
(b) To record interest expense on $12,160 of additional borrowings under the
Registrant's revolving credit facility at 7.5%, and assumed mortgage
indebtedness of $7,340 at 8.625%.
$ 386
============
(c) To adjust the minority interest's share of income in the Operating
Partnership to reflect the issuance of 72,592 Class A OP Units at
$23.425 per unit. $ (22)
============