SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) September 17, 1998
Pennsylvania Real Estate Investment Trust
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(Exact Name of Registrant as Specified in Charter)
Pennsylvania 1-6300 23-6216339
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(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
455 Pennsylvania Avenue, Suite 135, Fort Washington, Pennsylvania 19034
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (215) 542-9250
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(Former Name or Former Address, if Changed Since Last Report)
Item 2. Acquisition or Disposition of Assets.
On September 17, 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 99%
of the membership interests in Equity-Prince George's Plaza, L.L.C., a Delaware
limited liability company ("EPGP, LLC"), and PR PGPlaza LLC, a Delaware limited
liability company and an affiliate of PALP, acquired the remaining 1% of such
membership interests from Edgewater Associates #3 Limited Partnership, an
Illinois limited partnership ("Edgewater") and became the managing member of
EPGP, LLC. PALP and PR PGPlaza LLC are collectively referred to herein as the
"Purchaser". The aggregate purchase price for the transaction was $65 million,
plus approximately $2 million cash in closing costs, customary apportionments
and mortgate escrows, consisting of (i) assumed debt of approximately
$43,700,000, (ii) the payment by PALP of approximately $20,300,000 of cash to
the Sellers and (iii) the issuance by PALP to Edgewater of 131,507 units of
Class B limited partner interest in PALP ("Units") having a value of $3 million.
The pricing of the Units was based on a formula tied to the average closing
sales price of the Shares of Beneficial Interest in PREIT underlying the Units
on the New York Stock Exchange for the 20 business days prior to the public
announcement of the transaction, which was $22.81 per Share.
EPGP, LLC is the sole beneficiary of a trust (the "Trust") that holds
title to a retail shopping center commonly known as "Prince George's Plaza"
located in Hyattsville, Maryland (the "Property"). As part of the transaction,
Samuel Zell withdrew as the sole trustee of the Trust and was replaced by
Jonathan B. Weller, the registrant's President and Chief Operating Officer.
Prior to the closing of the transaction, PREIT-RUBIN, Inc., an
affiliate of the Purchaser, managed the Property pursuant to a management
agreement with the Trust. The registrant currently intends to continue to
operate the Property, through PR PGPlaza LLC and PALP, as a retail shopping
center, under the management of PREIT-RUBIN, Inc.
The sole general partner of Edgewater is Samuel Zell. PREIT is not
aware of any material relationship between Mr. Zell 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. The Purchaser 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 52-acre site in Hyattsville, Prince
George's County, Maryland at 3500 East West Highway (Route 410). The location is
accessible from I-95 and the Capital Beltway (I-495) and the
Baltimore-Washington Parkway (Route 295). Prince George's Plaza is approximately
seven miles from the Northeast corner of Washington, DC and is in close
proximity to a Metrobus stop and Metrorail station.
Description of the Property
Prince George's Plaza is a single-level, enclosed regional shopping
center containing 850,000 square feet of gross leasable area. Originally
constructed as an open-air mall in 1959, the shopping center was enclosed in
1977, and renovated and expanded in 1990.
The anchor tenants, comprising approximately 400,000 square feet,
include Hecht's, J.C. Penney and G.C. Murphy. The balance of the shopping center
consists of approximately 120 mall shops, 10 kiosks and 10 food court units. The
occupancy rate was approximately 93.5% on June 30, 1998.
Taxes
The property taxes for the 1998 fiscal year are expected to be
approximately $730,000.
Assumed Debt
The Property is subject to a mortgage in the face amount of
$44,000,000, carrying an interest rate of 8.70%, amortizing over a 30-year
period. This mortgage was originated on May 16, 1997 and matures on June 1,
2027, with an option to prepay the loan on or after June 1, 2007. The principal
balance at the time of closing was approximately $43.7 million.
Competition
The primary competition for the Property consists of three regional
malls located within a fifteen-mile radius of the Property. Secondary
competition consists of several strip centers that share the Property's trade
area.
Environmental
PREIT commissioned a Phase I Environmental Site Assessment and a
follow-up Phase II Environmental Site Assessment for the Property. The Phase II
assessment was performed to investigate further each of the recognized
environmental conditions that were identified by the Phase I assessment.
According to the Phase II assessment results, no indications of recognized
environmental conditions exist at the Property except for a minor issue that a
tenant will be requested to rectify.
Management Arrangement
The Property will continue to be managed by PREIT-RUBIN, Inc.
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
The registrant believes that it is impracticable to provide at this
time the required financial information for the acquisition described in Item 2
of this report. The registrant expects to file the required financial
information by December 1, 1998, which is within 60 days after the date on which
this report is filed.
(b) Pro Forma Financial Information
The registrant believes that it is impracticable to provide at this
time the required pro forma financial information for the acquisition described
in Item 2 of this report. The registrant expects to file the required pro forma
financial information by December 1, 1998, which is within 60 days after the
date on which this report is filed.
(c) Exhibits
2.1* Purchase and Sale and Contribution Agreement dated as of
September 17, 1998 by and among Edgewater Associates #3 Limited Partnership, an
Illinois limited partnership, Equity-Prince George's Plaza, Inc., an Illinois
corporation, PREIT Associates, L.P., a Delaware limited partnership and PR
PGPlaza LLC, a Delaware limited liability company.
* Pursuant to Item 601(b)(2) of Regulation S-K, the schedules and exhibits
to the Purchase and Sale and Contribution Agreement are omitted. The
Purchase and Sale and 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.
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: October 2, 1998 By: /s/ Jonathan B. Weller
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Jonathan B. Weller
President and Chief Operating Officer
Exhibit Index
Number Exhibit Page Number
2.1 Purchase and Sale and Contribution Agreement dated as of 7
September 17, 1998 by and among Edgewater Associates #3
Limited Partnership, an Illinois limited partnership,
Equity-Prince George's Plaza, Inc., an Illinois corporation,
PREIT Associates, L.P., a Delaware limited partnership and PR
PGPlaza LLC, a Delaware limited liability company.