REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Trustees of
Pennsylvania Real Estate Investment Trust:
We have audited the accompanying consolidated balance sheets of Pennsylvania
Real Estate Investment Trust (a Pennsylvania Trust) and Subsidiaries as of
December 31, 1997, August 31, 1997 and August 31, 1996 and the related
consolidated statements of income, shareholders' equity and cash flows for the
four month period ended December 31, 1997 and for each of the three years in the
period ended August 31, 1997. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits. We did not audit the financial
statements for Lehigh Valley Mall Associates, a partnership in which the Company
has a 50 percent interest which is reflected in the accompanying financial
statements using the equity method of accounting. The equity in net income of
Lehigh Valley Mall Associates represents 19 percent, 23 percent, 31 percent and
32 percent of net income for the four month period ended December 31, 1997 and
for the years ended August 31, 1997, 1996, and 1995, respectively. The financial
statements of Lehigh Valley Mall Associates were audited by other auditors whose
report has been furnished to us and our opinion, insofar as it relates to the
amounts included for Lehigh Valley Mall Associates, is based solely on the
report of the other auditors.
We conducted our audits 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 statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. 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 audits provide a reasonable basis for our opinion.
In our opinion, based upon our audit and the report of other auditors, the
financial statements referred to above present fairly, in all material respects,
the financial position of Pennsylvania Real Estate Investment Trust and
Subsidiaries as of December 31, 1997, August 31, 1997 and August 31, 1996, and
the results of their operations and their cash flows for the four month period
ended December 31, 1997 and for each of the three years in the period ended
August 31, 1997, in conformity with generally accepted accounting principles.
/s/ ARTHUR ANDERSEN LLP
Philadelphia, Pennsylvania
December 21, 1998
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
CONSOLIDATED BALANCE SHEETS
ASSETS
December 31, August 31, August 31,
1997 1997 1996
------------ ------------ ------------
INVESTMENTS IN REAL ESTATE, at cost (Notes 1 and 3):
Multifamily properties $161,270,000 $159,967,000 $156,102,000
Retail properties 120,209,000 37,398,000 37,362,000
Industrial properties 5,078,000 5,078,000 5,078,000
Properties under development 1,369,000 -- --
------------ ------------ ------------
Total investments in
real estate 287,926,000 202,443,000 198,542,000
Less- Accumulated depreciation 53,171,000 50,711,000 44,693,000
------------ ------------ ------------
234,755,000 151,732,000 153,849,000
INVESTMENT IN PREIT-RUBIN, INC., at equity 4,853,000 -- --
INVESTMENTS IN AND ADVANCES
TO PARTNERSHIPS AND JOINT
VENTURES, at equity
(Notes 1 and 4) 14,505,000 1,039,000 16,995,000
ADVANCES TO PREIT-RUBIN, INC. (Note 3) 3,413,000 -- --
------------ ------------ ------------
257,526,000 152,771,000 170,844,000
Less- Allowance for possible losses 1,770,000 1,831,000 2,042,000
------------ ------------ ------------
255,756,000 150,940,000 168,802,000
OTHER ASSETS:
Cash and cash equivalents 1,324,000 1,399,000 1,030,000
Notes receivable -- -- 1,649,000
Rents and sundry receivables 441,000 590,000 608,000
Deferred costs, prepaid real estate
taxes and expenses, net (Note 1) 8,045,000 7,393,000 5,636,000
Deposits on properties -- 5,335,000 --
------------ ------------ ------------
$265,566,000 $165,657,000 $177,725,000
============ ============ ============
The accompanying notes are an integral part of these statements.
(Continued)
2
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
(Continued)
December 31, August 31, August 31,
1997 1997 1996
------------- ------------- -------------
LIABILITIES:
Mortgage notes payable (Note 6) $ 99,364,000 $ 83,528,000 $ 84,833,000
Bank and other loans payable (Note 6) 4,575,000 33,884,000 39,315,000
Tenants' deposits and deferred rents 1,317,000 1,346,000 1,422,000
Accrued pension and retirement benefits
(Notes 1 and 8) 1,011,000 1,091,000 1,207,000
Accrued expenses and other liabilities 4,964,000 4,369,000 3,901,000
------------- ------------- -------------
111,231,000 124,218,000 130,678,000
------------- ------------- -------------
MINORITY INTEREST (Note 3) 15,805,000 540,000 542,000
------------- ------------- -------------
COMMITMENTS AND CONTINGENCIES (Note 11) -- -- --
SHAREHOLDERS' EQUITY (Notes 1 and 9):
Shares of beneficial interest, $1 par;
authorized unlimited; issued and
outstanding 13,288,848, 8,685,098, and
8,676,098 shares at December 31, 1997,
August 31, 1997 and 1996, respectively 13,289,000 8,685,000 8,676,000
Capital contributed in excess of par 144,746,000 53,599,000 53,133,000
Distributions in excess of net income (19,505,000) (21,385,000) (15,304,000)
------------- ------------- -------------
138,530,000 40,899,000 46,505,000
------------- ------------- -------------
$ 265,566,000 $ 165,657,000 $ 177,725,000
============= ============= =============
The accompanying notes are an integral part of these statements.
3
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
CONSOLIDATED STATEMENTS OF INCOME
For the Four
Month Period
Ended For the Fiscal Years Ended August 31,
December 31, -------------------------------------------------
1997 1997 1996 1995
------------ ------------ ------------ ------------
REVENUES:
Gross revenues from real estate $ 17,170,000 $ 40,231,000 $ 38,985,000 $ 36,978,000
Interest and other income 82,000 254,000 171,000 176,000
------------ ------------ ------------ ------------
17,252,000 40,485,000 39,156,000 37,154,000
------------ ------------ ------------ ------------
EXPENSES:
Property operating expenses 6,835,000 16,289,000 16,102,000 14,859,000
Depreciation and amortization 2,695,000 6,259,000 5,908,000 5,286,000
General and administrative expenses 1,088,000 3,324,000 3,119,000 3,091,000
Interest expense 4,349,000 9,086,000 9,831,000 8,908,000
Provisions for losses on investments -- 500,000 -- --
------------ ------------ ------------ ------------
14,967,000 35,458,000 34,960,000 32,144,000
------------ ------------ ------------ ------------
Income before equity in
unconsolidated entities, gains
on sales of interests in real
estate, minority interest and
extraordinary item 2,285,000 5,027,000 4,196,000 5,010,000
EQUITY IN INCOME OF PREIT-RUBIN, INC
(Notes 3 and 5) 260,000 -- -- --
EQUITY IN INCOME OF PARTNERSHIPS AND JOINT
VENTURES (Note 4) 2,101,000 4,337,000 6,258,000 6,381,000
GAINS ON SALES OF INTERESTS IN REAL ESTATE 2,090,000 1,069,000 865,000 119,000
------------ ------------ ------------ ------------
Income before minority interest and
extraordinary item 6,736,000 10,433,000 11,319,000 11,510,000
MINORITY INTEREST (Note 3) (474,000) (198,000) (275,000) (285,000)
------------ ------------ ------------ ------------
INCOME BEFORE EXTRAORDINARY ITEM 6,262,000 10,235,000 11,044,000 11,225,000
EXTRAORDINARY ITEM--LOSS ON EARLY
EXTINGUISHMENT OF DEBT (Note 6) (300,000) -- -- --
------------ ------------ ------------ ------------
NET INCOME $ 5,962,000 $ 10,235,000 $ 11,044,000 $ 11,225,000
============ ============ ============ ============
BASIC INCOME PER SHARE
(Note 7) $ .66 $ 1.18 $ 1.27 $ 1.29
============ ============ ============ ============
DILUTED INCOME PER SHARE
(Note 7) $ .66 $ 1.18 $ 1.27 $ 1.29
============ ============ ============ ============
The accompanying notes are an integral part of these statements.
4
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE FOUR MONTH PERIOD ENDED
DECEMBER 31, 1997 AND THE THREE FISCAL
YEARS ENDED AUGUST 31, 1997
Shares of Capital
Beneficial Contributed Distributions
Interest In Excess in Excess of
$1 Par of Par Net Income
------------ ------------ ------------
BALANCE, SEPTEMBER 1, 1994 $ 8,670,000 $ 53,039,000 $ (4,961,000)
Net income -- -- 11,225,000
Shares issued upon exercise of
options (Note 9) 6,000 94,000 --
Distributions paid to shareholders
($1.88 per share) -- -- (16,302,000)
------------ ------------ ------------
BALANCE, AUGUST 31, 1995 8,676,000 53,133,000 (10,038,000)
Net income -- -- 11,044,000
Distributions paid to shareholders
($1.88 per share) -- -- (16,310,000)
------------ ------------ ------------
BALANCE, AUGUST 31, 1996 8,676,000 53,133,000 (15,304,000)
Net income -- -- 10,235,000
Shares issued upon exercise of options
(Note 9) 9,000 166,000 --
Issuance of compensatory stock options
(Note 9) -- 300,000 --
Distributions paid to shareholders
($1.88 per share) -- -- (16,316,000)
------------ ------------ ------------
BALANCE, AUGUST 31, 1997 8,685,000 53,599,000 (21,385,000)
Net income -- -- 5,962,000
Shares issued upon exercise of options
(Note 9) 4,000 64,000 --
New shares issued (Note 9) 4,600,000 91,083,000 --
Distributions paid to shareholders
($.47 per share) -- -- (4,082,000)
------------ ------------ ------------
BALANCE, DECEMBER 31, 1997 $ 13,289,000 $144,746,000 $(19,505,000)
============ ============ ============
The accompanying notes are an integral part of these statements.
5
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Four
Month Period
Ended For the Fiscal Years Ended August 31,
December 31, ------------------------------------------------
1997 1997 1996 1995
------------ ------------ ------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 5,962,000 $ 10,235,000 $ 11,044,000 $ 11,225,000
Adjustments to reconcile net income to net cash
provided by operating activities-
Minority interest 474,000 198,000 275,000 285,000
Depreciation and amortization 2,695,000 6,259,000 5,908,000 5,286,000
Gains on sales of interests in real estate (2,090,000) (1,069,000) (865,000) (119,000)
Provision for losses on investments -- 500,000 -- --
Issuance of compensatory stock options -- 300,000 -- --
Loss on early extinguishment of debt 300,000 -- -- --
Equity in income of PREIT-RUBIN, INC (260,000) -- -- --
Decrease in allowance for possible losses (61,000) (710,000) (734,000) (460,000)
Change in assets and liabilities-
Rents and sundry receivables 149,000 18,000 (192,000) (18,000)
Deferred costs, prepaid real estate taxes and expenses (3,075,000) (10,000) (356,000) (837,000)
Accrued pension and retirement benefits (80,000) (116,000) (6,000) 130,000
Accrued expenses and other liabilities 296,000 (310,000) (54,000) 1,042,000
Tenants' deposits and deferred rents (29,000) (76,000) 70,000 138,000
------------ ------------ ------------ ------------
Net cash provided by operating activities 4,281,000 15,219,000 15,090,000 16,672,000
------------ ------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investments in wholly owned real estate (47,972,000) (3,901,000) (3,685,000) (38,058,000)
Investment in property under development (1,246,000) -- -- --
Investments in partnerships and joint ventures (9,947,000) (2,649,000) (897,000) (1,732,000)
Investment in and advances to PREIT-RUBIN, INC (1,448,000) -- -- --
Cash distributions from partnerships and joint ventures
in excess of (less than) equity in income (518,000) 17,605,000 889,000 (127,000)
Cash proceeds from sales of real estate investments -- -- 5,163,000 --
Cash proceeds from sales of interests in partnerships 3,862,000 2,069,000 -- --
Cash distributions to minority partners (44,000) (200,000) (261,000) (165,000)
Decrease in notes receivable -- 1,649,000 -- --
Deposits on agreement to purchase -- (5,336,000) -- --
Deferred acquisition costs -- (1,488,000) (276,000) --
------------ ------------ ------------ ------------
Net cash (used in) provided by investing activities (57,313,000) 7,749,000 933,000 (40,082,000)
------------ ------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal installments on mortgage notes payable (9,318,000) (1,305,000) (1,123,000) (821,000)
Increase in mortgage notes payable -- -- 8,800,000 35,000,000
Repayment of bank loans payable (29,309,000) -- -- --
Prepayment of mortgage notes payable -- -- (1,749,000) --
Proceeds from bank loan payable -- -- -- 39,379,000
Decrease in bank loan payable -- (5,431,000) (5,005,000) (35,000,000)
Decrease (increase) in deferred financing costs -- 278,000 (704,000) --
Payment of deferred financing costs (859,000) -- -- --
Shares of beneficial interest issued 96,829,000 175,000 -- 100,000
Distributions paid to shareholders (4,082,000) (16,316,000) (16,310,000) (16,302,000)
Distributions paid to OP Unit holders (304,000) -- -- --
------------ ------------ ------------ ------------
Net cash provided by (used in) financing activities 52,957,000 (22,599,000) (16,091,000) 22,356,000
------------ ------------ ------------ ------------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (75,000) 369,000 (68,000) (1,054,000)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 1,399,000 1,030,000 1,098,000 2,152,000
------------ ------------ ------------ ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 1,324,000 $ 1,399,000 $ 1,030,000 $ 1,098,000
============ ============ ============ ============
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING ACTIVITIES:
Net assets acquired $ -- $ -- $ -- $ 3,590,000
Liabilities assumed (primarily bank loans payable) -- -- -- (3,804,000)
------------ ------------ ------------ ------------
$ -- $ -- $ -- $ (214,000)
============ ============ ============ ============
Accrual of acquisition costs $ -- $ 778,000 $ -- $ --
============ ============ ============ ============
The accompanying notes are an integral part of these statements.
6
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE FOUR MONTH PERIOD ENDED DECEMBER 31, 1997
AND THE THREE FISCAL YEARS ENDED AUGUST 31, 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Nature of Operations
Pennsylvania Real Estate Investment Trust (collectively with its subsidiaries,
the "Company") is a fully integrated, self-administered and self-managed real
estate investment trust ("REIT") which acquires, develops, redevelops and
operates retail and multifamily properties. Substantially all of the Company's
properties are located in the Eastern United States, with concentrations in the
Mid-Atlantic states and in Florida.
The Company's interest in its properties is held through PREIT Associates, L.P.
(the "Operating Partnership"). The Company is the sole general partner of the
Operating Partnership and, as of December 31, 1997, the Company held a 95.4%
interest in the Operating Partnership. The Operating Partnership holds a 95%
economic interest in PREIT-RUBIN, INC. (the "Management Company") through its
ownership of 95% of the Management Company's non-voting preferred stock.
Consolidation
The Company consolidates its accounts and the accounts of the Operating
Partnership and reflects the remaining interest in the Operating Partnership as
minority interest. One partnership in which the Company is a 65% general
partner, and has control as provided in the partnership agreement, has been
consolidated for financial statement presentation. The minority partner's
interest is 35%. All significant intercompany accounts and transactions have
been eliminated in consolidation.
Investment in Management Company
The Company's investment in the Management Company is accounted for using the
equity method. See Note 5 for further discussion.
Partnership and Joint Venture Investments
In accordance with the American Institute of Certified Public Accountants'
Statement of Position 78-9, "Accounting for Investments in Real Estate
Ventures," the Company accounts for its investment in partnerships and joint
ventures which it does not control using the equity method of accounting. These
investments, which represent 25% to 70% noncontrolling ownership interests, are
recorded initially at the Company's cost and subsequently adjusted for the
Company's net equity in income and cash contributions and distributions.
7
Statements of Cash Flows
The Company considers all highly liquid short-term investments with an original
maturity of three months or less to be cash equivalents. Cash paid for interest
was $4,412,000, $8,963,000, $9,962,000 and $8,619,000 for the four month period
ended December 31, 1997, and the fiscal years ended August 31, 1997, 1996 and
1995, respectively.
Capitalization of Costs
It is the Company's policy to capitalize interest and real estate taxes related
to construction in progress and to depreciate these costs over the life of the
related assets in order to more properly match revenues and expenses. These
items are capitalized for income tax purposes and amortized or depreciated in
accordance with the provisions of the Internal Revenue Code. For the four month
period ended December 31, 1997, the Company capitalized interest and real estate
taxes of $247,000. No interest or taxes were capitalized for the fiscal years
ended August 31, 1997, 1996 and 1995.
The Company has capitalized as deferred costs certain expenditures related to
the financing and leasing of certain properties. Capitalized loan fees are being
amortized over the term of the related loans and leasing commissions are being
amortized over the term of the related leases.
During the fiscal year ended August 31, 1997, the Company capitalized certain
deposits associated with the planned future purchase of two regional malls.
These deposits were applied to the respective properties upon consummation of
the transaction described in Note 3.
Depreciation
The Company, for financial reporting purposes, depreciates its buildings,
equipment and leasehold improvements over their estimated useful lives of 10 to
40 years, using the straight-line method of depreciation. For federal income tax
purposes, the Company currently uses the straight-line method of depreciation
and the useful lives prescribed by the Internal Revenue Code.
Allowance for Possible Losses
The Company determines asset impairment, if any, in accordance with the
provisions of Statement of Financial Accounting Standards No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of." This Statement requires long-lived assets to be held and used by the
Company to be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. If the sum of the expected future cash flows (undiscounted and
without interest charges) is less than the carrying amount of the asset, an
impairment loss is recognized. Measurement of an impairment loss for these
assets is based on the fair market value of the assets.
During 1997, an impairment loss of approximately $500,000 was recorded following
the expiration of an option to sell certain land parcels held by a partnership
in which the Company holds an equity interest.
8
Benefit Plans
The Company has provided pension benefits since 1970 for all employees,
excluding the Chairman, for whom retirement benefits are provided in an
employment contract.
With regard to the Chairman's employment contract, no provision was required for
the four months ended December 31, 1997 or for the fiscal years ended August 31,
1997, 1996 and 1995.
Derivative Financial Instruments
In managing interest rate exposure on certain floating rate debt, the Company at
times enters into interest rate swap and cap agreements. When interest rates
change, the differential to be paid or received is accrued as interest expense
and is recognized over the life of the swap agreements. The costs of cap
transactions are deferred and amortized over the contract period. The amortized
costs of cap transactions and interest income and interest expense on swap
transactions are included in mortgage and bank loan interest.
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." This Statement
establishes accounting and reporting standards requiring that every derivative
instrument (including certain derivative instruments embedded in other
contracts) be recorded in the balance sheet as either an asset or liability
measured at its fair value. This Statement will be effective for the Company's
calendar year 2000. This Statement must be applied to (a) derivative instruments
and (b) certain derivative instruments embedded in hybrid contracts that were
issued, acquired, or substantively modified after December 31, 1997. The Company
does not expect the adoption of this Statement to have a material impact on its
financial position or results of operations.
Income Taxes
The Company has elected to qualify as a real estate investment trust under
Sections 856-860 of the Internal Revenue Code and intends to remain so
qualified. Accordingly, no provision for Federal income taxes has been reflected
in the financial statements.
Earnings and profits, which will determine the taxability of distributions to
shareholders, will differ from net income reported for financial reporting
purposes due to differences in cost basis, differences in the estimated useful
lives used to compute depreciation and differences between the allocation of the
Company's net income and loss for financial reporting purposes and for tax
reporting purposes.
The Company is subject to a Federal excise tax computed on a calendar year. The
excise tax equals 4% of the excess, if any, of 85% of the Company's ordinary
income plus 95% of the Company's capital gain net income for the calendar year
over cash distributions during the calendar year, as defined. The Company has in
the past distributed a substantial portion of its taxable income in the
subsequent fiscal year and may also follow this policy in the future.
No provision for excise tax was made for the four months ended December 31, 1997
or for the fiscal years 1997, 1996 and 1995 as no tax was due.
The tax status of distributions paid to shareholders was composed of the
following for the four month period ended December 31, 1997 and the calendar
years ended December 31, 1997, 1996 and 1995:
9
Years Ended December 31,
-------------------------------------------------
1997 1996 1995
---------------- ----------------- ------------
Ordinary income $ 1.66 $ 1.72 $ 1.88
Capital gains .22 .16 --
--------- --------- ---------
$ 1.88 $ 1.88 $ 1.88
========= ========= =========
The Management Company is subject to Federal and state income taxes. The
operating results of the Management Company include a provision for income
taxes.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amount 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.
Actual results could differ from those estimates.
Reclassifications
Certain prior year amounts have been reclassified to conform with the current
period presentation.
2. CHANGE IN FISCAL YEAREND:
On October 14, 1997, the Company filed a Form 8-K announcing their intention to
change their fiscal yearend from August 31 to December 31. On February 17, 1998,
the Company filed a Transition Report on Form 10-Q which included their results
for the period September 1, 1997 through December 31, 1997 and the comparable
period. Listed below is unaudited income statement information with respect to
the four months ended December 31, 1996:
Revenues $ 13,397,000
Net income $ 4,842,000
Basic income per share $ .56
Diluted income per share $ .56
10
3. THE TRO TRANSACTION:
On September 30, 1997, the Company completed a series of related transactions
pursuant to which the Company: (i) transferred substantially all of its real
estate interests to PREIT Associates, L.P. of which the Company is the sole
general partner; (ii) the Operating Partnership acquired all of the nonvoting
common shares of The Rubin Organization, Inc. ("TRO") a commercial real estate
development and management firm (renamed "PREIT-RUBIN, Inc."), constituting 95%
of the total equity of PREIT-RUBIN, Inc. in exchange for the issuance of 200,000
Class A Operating Partnership ("OP") Units and a provision to issue up to
800,000 additional Class A OP Units over the next five years according to a
formula based upon the Company's per share growth in adjusted funds from
operations; (iii) the Operating Partnership acquired the interests of certain
affiliates of TRO ("TRO Affiliates") in The Court at Oxford Valley, Magnolia
Mall, North Dartmouth Mall and Springfield Park; (iv) the Operating Partnership
agreed to acquire the interests of TRO Affiliates in Hillview Shopping Center
and Northeast Tower Center, at prices based upon a pre-determined formula; and
(v) the Operating Partnership acquired the development rights of certain TRO
Affiliates, subject to related obligations, in Christiana Power Center (Phases I
and II), Red Rose Commons and Blue Route Metroplex.
The following pro forma financial information of the Company for the four month
period ended December 31, 1997 and the fiscal year ended August 31, 1997 gives
effect to the properties acquired as if the purchases had occurred on September
1, 1997.
(Unaudited)
Four Month Fiscal Year
Period Ended Ended
December 31, August 31,
1997 1997
----------------- -----------------
Pro forma total revenues $ 18,292,000 $ 53,209,000
Pro forma net income $ 6,692,000 $ 10,459,000
Basic pro forma net income per common share $ .71 $ 1.21
Diluted pro forma net income per common share $ .71 $ 1.20
The pro forma financial information presented within this footnote is not
necessarily indicative of the results which actually would have occurred if the
acquisitions had been consummated on September 1, 1997, nor does the pro forma
information purport to represent the results of operations for future periods.
As part of the September 30, 1997 transactions discussed above, the Company
entered into a contribution agreement (the "TRO Contribution Agreement") which
includes a provision to issue up to 800,000 additional Class A OP units over the
five-year period beginning October 1, 1997 and September 30, 2002 according to a
formula based upon the Company's adjusted funds from operations per share during
the five-year period. The TRO Contribution Agreement establishes "hurdle" and
"target" levels set forth for the Company's adjusted funds from operations per
share during specified earn-out periods to determine whether, and to what
extent, the contingent OP units will be issued. The Company intends to account
for the issuance of contingent OP units as additional purchase price when such
amounts are determinable.
11
All of the acquisitions described above have been recorded by the Company using
the purchase method of accounting. The Company accounts for its noncontrolling
investment in PREIT-RUBIN, Inc. using the equity method. The excess of the
purchase price of PREIT-RUBIN, Inc. over the fair value of net assets acquired
is being amortized over 35 years.
The following table summarizes the consideration paid to acquire the assets and
businesses described above:
Net Other Total
Class A Cash Paid Liabilities Transaction Purchase
OP Units (Received) Assumed Costs Price
-------- ---------- --------------- ---------------- ----------------
Investment in
PREIT-RUBIN, Inc. $ 4,680,000 $ (878,000) $ -- $ 793,000 $ 4,595,000
Investment in The Court
at Oxford Valley 5,458,000 683,000 -- 688,000 6,829,000
Magnolia Mall 5,000,000 15,165,000 25,154,000 977,000 46,296,000
North Dartmouth Mall -- 35,000,000 -- 986,000 35,986,000
Development Properties -- 6,446,000 -- 1,859,000 8,305,000
--------------- --------------- --------------- ---------------- ----------------
$ 15,138,000 $ 56,416,000 $ 25,154,000 $ 5,303,000 $ 102,011,000
=============== =============== =============== ================ ================
4. INVESTMENTS IN PARTNERSHIPS AND JOINT VENTURES:
The following table presents summarized financial information as to the
Company's equity in the assets and liabilities of 22, 22, and 26 partnerships
and joint ventures at December 31, 1997, August 31, 1997 and 1996, respectively,
and 3 properties under development at December 31, 1997, and the Company's
equity in income for the four month period ended December 31, 1997 and the
fiscal years ended August 31, 1997, 1996, and 1995:
August 31,
December 31, -------------------------------------
ASSETS 1997 1997 1996
------ ----------------- ---------------- -------------------
Investments in real estate, at cost:
Multifamily properties $ 108,236,000 $ 107,604,000 $ 105,480,000
Industrial property 1,275,000 1,264,000 1,264,000
Retail properties 160,684,000 120,660,000 128,936,000
Properties under development 7,378,000 -- --
Land 4,446,000 4,446,000 4,446,000
----------------- ---------------- -----------------
Total investments in real estate 282,019,000 233,974,000 240,126,000
Less- Accumulated depreciation 71,155,000 71,838,000 73,989,000
----------------- ---------------- -----------------
210,864,000 162,136,000 166,137,000
Cash and cash equivalents 8,442,000 6,031,000 5,589,000
Deferred costs, prepaid real estate taxes and other, net 20,469,000 5,728,000 6,020,000
----------------- ---------------- -----------------
Total assets 239,775,000 173,895,000 177,746,000
----------------- ---------------- -----------------
12
August 31,
December 31, -------------------------------------
LIABILITIES AND PARTNERS' EQUITY 1997 1997 1996
-------------------------------- ----------------- ---------------- -------------------
Mortgage notes payable 213,018,000 162,097,000 133,578,000
Bank loans payable 6,724,000 8,770,000 9,124,000
Due to the Company 3,371,000 3,118,000 2,795,000
Other liabilities 7,601,000 4,341,000 4,436,000
----------------- ---------------- -----------------
Total liabilities 230,714,000 178,326,000 149,933,000
----------------- ---------------- -----------------
Net equity (deficit) 9,061,000 (4,431,000) 27,813,000
Partners' share (5,444,000) (5,470,000) (10,818,000)
----------------- ---------------- -----------------
Investment in and advances to partnerships and
joint ventures $ 14,505,000 $ 1,039,000 $ 16,995,000
================= ================ =================
EQUITY IN INCOME OF PARTNERSHIPS AND JOINT VENTURES
For the
Four Month
Period Ended For the Fiscal Years Ended August 31,
December 31, --------------------------------------------------
1997 1997 1996 1995
------------------ --------------- --------------- ---------------
Gross revenues from real estate $ 19,258,000 $ 52,446,000 $ 53,209,000 $ 52,339,000
---------------- --------------- --------------- ---------------
Expenses:
Property operating expenses 7,122,000 20,774,000 21,724,000 20,477,000
Mortgage and bank loan interest 5,205,000 14,908,000 11,984,000 12,463,000
Depreciation and amortization 2,609,000 6,978,000 6,833,000 6,502,000
----------------- --------------- --------------- ---------------
14,936,000 42,660,000 40,541,000 39,442,000
----------------- --------------- --------------- ---------------
4,322,000 9,786,000 12,668,000 12,897,000
Partners' share (2,221,000) (5,449,000) (6,410,000) (6,516,000)
----------------- --------------- --------------- ---------------
Equity in income of partnerships and joint
ventures $ 2,101,000 $ 4,337,000 $ 6,258,000 $ 6,381,000
================ =============== =============== ===============
Mortgage notes payable which are secured by the related properties, are due in
installments over various terms extending to the year 2016 with interest rates
ranging from 7.28% to 10.25% with an average interest rate of 7.93%. Principal
payments are due as follows:
For the years ended December 31:
1998 $ 13,146,000
1999 9,174,000
2000 20,017,000
2001 4,413,000
2002 4,718,000
2003 and thereafter 161,549,000
----------------
$ 213,017,000
================
13
The liability under each mortgage note is limited to the particular property
except for two loans in the amount of $8,334,000 which are guaranteed by the
partners of the respective partnerships, including the Company. In addition, one
bank loan in the amount of $867,000 has been guaranteed by the partners of the
partnership including the Company.
The Company's investments in certain partnerships and joint ventures reflect
cash distributions in excess of the Company's net investments totaling
$5,898,000, $5,833,000 and $5,976,000 for the four month period ended December
31, 1997 and the fiscal years ended August 31, 1997 and 1996, respectively. The
Company is generally entitled to a priority return on these investments.
The Company has a 50% partnership interest in Lehigh Valley Mall Associates
which is included in the amounts above. Summarized financial information as of
December 31, 1997, August 31, 1997, 1996 and 1995 and for the four month period
ended December 31, 1997 and the fiscal years ended August 31, 1997, 1996 and
1995 for this investment which is accounted for by the equity method is as
follows:
For the
Four Month
Period Ended For the Fiscal Years Ended August 31,
December 31, --------------------------------------------------------
1997 1997 1996 1995
------------------- ---------------- ---------------- ----------------
Total assets $ 24,943,000 $ 24,645,000 $ 23,552,000 $ 20,858,000
Mortgages payable 53,157,000 53,406,000 22,489,000 22,227,000
Revenues 4,266,000 14,840,000 13,823,000 13,667,000
Property operating expenses 1,508,000 4,657,000 4,198,000 3,412,000
Interest expense 1,289,000 4,638,000 1,998,000 2,040,000
Net income 2,313,000 4,660,000 6,915,000 7,548,000
Equity in income of partnership 1,157,000 2,330,000 3,458,000 3,774,000
5. INVESTMENT IN PREIT-RUBIN, INC.:
PREIT-RUBIN, Inc. is responsible for various activities including: management,
leasing and real estate development of certain of the Company's properties and
for properties on behalf of third parties. Total management fees paid by the
Company's properties to PREIT-RUBIN, Inc. are included in property operating
expenses in the accompanying consolidated statements of income and amounted to
$35,000 for the four month period ended December 31, 1997.
14
Summarized unaudited financial information for PREIT-RUBIN, Inc. as of and for
the four month period ended December 31, 1997 is as follows:
Total assets $ 13,859,000
===============
Management fees $ 1,377,000
Leasing commissions 1,877,000
Development fees 124,000
Other revenues 2,334,000
---------------
Total revenue $ 5,712,000
===============
Net income $ 303,000
===============
Company's share of net income $ 260,000
===============
6 MORTGAGE NOTES AND BANK LOANS PAYABLE:
Mortgage Notes Payable:
Mortgage notes payable which are secured by the related properties are due in
installments over various terms extending to the year 2025 with interest at
rates ranging from 5.90% to 9.50% with an average interest rate of 8.07%.
Principal payments are due as follows:
For the years ended December 31:
1998 $ 35,301,000
1999 1,490,000
2000 1,610,000
2001 1,750,000
2002 1,885,000
2003 and thereafter 57,328,000
---------------
$ 99,364,000
===============
The carrying values of the mortgage notes and bank loans payable at December 31,
1997, August 31, 1997 and 1996 were approximately equal to their respective fair
values, as determined by using year-end interest rates and market conditions. At
December 31, 1997, the fair value of the interest rate protection referred to
above was approximately $0. In the event that the Company wanted to terminate
the swap agreement referred to above, the amount which would be payable at
December 31, 1997 was approximately $132,000.
Credit Facility:
On September 30, 1997, the Operating Partnership entered into a $150 million
revolving credit facility (the "Credit Facility"). The obligations of the
Operating Partnership under the Credit Facility have been guaranteed by the
Company.
The Credit Facility is for an initial term of two years and bears interest, at
the borrowers election, at (i) the higher of prime rate, or the Federal Funds
lending rate plus .5%, or (ii) the London Interbank Offered Rate plus margins
ranging from 1.1% to 1.7%, depending on the Company's consolidated Leverage
Ratio, as defined.
The Credit Facility requires the Company to maintain ongoing compliance with a
number of customary financial and other covenants, including leverage ratios
based on gross asset value, fixed charge coverage ratios and a minimum tangible
15
net worth requirement. Until the Company reduces its leverage ratio below 50%,
the lending banks will hold unrecorded mortgages on eleven unencumbered
properties which the Operating Partnership owns, directly or indirectly, and
would be entitled to record such mortgages upon any event of default.
As of December 31, 1997, the Operating Partnership had $10.3 million outstanding
on the Credit Facility ($4.6 million on wholly-owned properties and $5.7 million
on joint venture properties). The weighted average interest rate based on
amounts borrowed on the credit facility was 7.48% for the four month period
ended December 31, 1997.
At December 31, 1997, the Company was in compliance with all debt covenants.
During 1995, the Company purchased interest rate protection at a cost of
$250,000 on $15,000,000 of outstanding debt limiting the 30-day LIBOR rate to
7.5% for three years. The Company also limited its exposure to increases in
LIBOR on $20,000,000 of its floating rate debt by entering into a swap agreement
which fixes a rate of 6.12% versus 30-day LIBOR through June 2001.
The Company is exposed to credit loss in the event of nonperformance by
counterparties to the interest rate protection agreements; however, the Company
does not anticipate nonperformance by the counterparties.
During the four month period ended December 31, 1997, the Company wrote off
unamortized deferred financing costs of $300,000 in connection with the
refinancing of its Credit Facility. The write off of these costs has been
reflected as an extraordinary loss on the accompanying consolidated statement of
income for the four month period ended December 31, 1997.
7. NET INCOME PER SHARE:
In February 1997, the Financial Accounting Standards Board issued Statement No.
128, "Earnings Per Share" ("SFAS No. 128").
SFAS No. 128 establishes standards for computing and presenting earnings per
share ("EPS"). Basic earnings per share are based on the weighted average number
of common shares outstanding during the year. Diluted earnings per share are
based on the weighted average number of shares outstanding during the year
adjusted to give effect to common
16
shares equivalents. All per share amounts for all periods presented have been
restated to conform to SFAS No. 128. A reconciliation between basic and diluted
EPS is shown below (in thousands, except per share data).
For the
Four Month
Period Ended For the Fiscal Years Ended August 31,
December 31, ----------------------------------------------------------------------
1997 1997 1996 1995
--------------------- --------------------- --------------------- ---------------------
Basic Diluted Basic Diluted Basic Diluted Basic Diluted
----- ------- ----- ------- ----- ------- ----- -------
Income before extra-
ordinary item $ 6,262 $ 6,262 $ 10,235 $ 10,235 $ 11,044 $ 11,044 $ 11,225 $ 11,225
Extraordinary item (300) (300) -- -- -- -- -- --
--------- --------- --------- --------- --------- --------- --------- --------
Net income $ 5,962 $ 5,962 $ 10,235 $ 10,235 $ 11,044 $ 11,044 $ 11,225 $ 11,225
========= ========= ========= ========= ========= ========= ========= =========
Weighted average shares
outstanding 9,049 9,049 8,679 8,679 8,676 8,676 8,671 8,671
Effect of share options issued
-- 50 -- 25 -- 16 -- 17
--------- --------- --------- --------- --------- --------- --------- ---------
Total weighted average shares
outstanding 9,049 9,099 8,679 8,704 8,676 8,692 8,671 8,688
========= ========= ========= ========= ========= ========= ========= =========
Income per share before
extra-ordinary item $ .69 $ .69 $ 1.18 $ 1.18 $ 1.27 $ 1.27 $ 1.29 $ 1.29
Extraordinary item per share
(.03) (.03) -- -- -- -- -- --
--------- --------- --------- --------- --------- --------- --------- ---------
Net income per share $ .66 $ .66 $ 1.18 $ 1.18 $ 1.27 $ 1.27 $ 1.29 $ 1.29
========= ========= ========= ========= ========= ========= ========= =========
8. BENEFIT PLANS:
During 1995, the Company adopted a 401(k) Plan (the "Plan") in which
substantially all of the officers and employees are eligible to participate. The
period permits eligible participants, as defined in the plan agreement, to defer
up to 15% of their compensation, and the Company, at its discretion, may match a
percentage of the employees' contributions. The employees' contributions are
fully vested and contributions from the Company vest in accordance with an
employee's years of service as defined in the plan agreement. The Company's
contributions to the Plan for the four month period ended December 31, 1997 and
for the fiscal years ended August 31, 1997, 1996 and 1995 were $43,000, $41,000,
$39,000 and $1,000, respectively.
During 1995, the Company also adopted a Supplemental Retirement Plan (the
"Supplemental Plan") covering certain senior management employees. The
Supplemental Plan provides eligible employees through normal retirement date, as
defined in the plan agreement, a benefit amount similar to that which would have
been received under the provisions of a pension plan which was terminated in
1994. Contributions due by the Company under the provisions of this plan were
$11,000, $92,000, $160,000 and $168,000 for the four month period ended December
31, 1997 and for the fiscal years ended August 31, 1997, 1996 and 1995.
17
9. STOCK OPTION PLANS:
In December 1990, the shareholders approved an incentive stock option plan for
key employees and a stock option plan for nonemployee trustees, covering 200,000
and 100,000 shares of beneficial interest, respectively. Under the terms of the
plans, the purchase price of shares subject to each option granted will be at
least equal to the fair market value of the shares on the date of grant. Options
under the incentive stock option plan may be exercised as determined by the
Company, but in no event later than 10 years from the date of grant. In December
1993, the Board of Trustees amended the incentive stock option plan for key
employees, to increase the number of shares subject to option to 400,000 shares,
to change the name of the plan to "1990 Incentive and Non Qualifying Stock
Option Plan" and to expand some provisions of the plan. The stock option plan
for nonemployee trustees provides for annual grants of 1,000 options (becoming
exercisable in four equal installments). The options expire 10 years after the
date of grant.
In December 1993, the Board of Trustees adopted a nonqualifying stock option
plan covering 100,000 shares. The Company granted options on February 1, 1994
having a term of 10 years and subject to the other terms and conditions set
forth in the plan. All 100,000 shares are outstanding at December 31, 1997.
On September 30, 1997, the Company adopted an Incentive and Non-Qualified Stock
Option Plan (the "1997 Stock Option Plan") in connection with the TRO
Transaction. Options on 455,000 Shares were granted to former TRO officers and
employees on September 30, 1997 at an exercise price of $25.41 per share. All
options granted on September 30, 1997 vest in four equal annual installments
commencing January 1, 1999, and on each anniversary date thereof.
Changes in options outstanding are as follows:
1997 Stock Plan For
Exercise Option Employees Nonemployee
Price Plan Plan Trustees
-------------- ------------ ------------- -------------
Options outstanding at 8/31/95 $15.75-$25.375 -- 244,625 35,250
Options granted $20.375-$20.75 -- 50,500 6,000
Options exercised -- -- -- --
------------ -------------- ----------------
Options outstanding at 8/31/96 $15.75-$25.375 -- 295,125 41,250
Options granted $22.375-$24.625 -- 45,000 6,000
Options exercised $15.75-$25.375 -- -- (9,000)
------------ -------------- ----------------
Options outstanding at 8/31/97 $15.75-$25.375 -- 340,125 38,250
Options granted $25.41 455,000 -- --
Options exercised $15.75-$20.375 -- -- (3,750)
------------ -------------- -----------------
Options outstanding at 12/31/97 $15.75-$25.41 455,000 340,125 34,500
============ ============== ================
At December 31, 1997, options for 223,286 shares of beneficial interest with an
aggregate purchase price of $4,853,000, (average of $21.73 per share) were
exercisable.
18
During the fourth quarter of 1997, the Board of Trustees extended the exercise
dates for 62,500 options previously granted to an officer of the Company and two
retiring trustees. As a result, the Company recorded compensation expense of
$300,000 for the four month period ended December 31, 1997 relating to this
change in terms.
During fiscal year 1997, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 123, "Accounting for Stock-Based Compensation" (SFAS No.
123). SFAS No. 123 encourages a fair value method of accounting for employee
stock options and similar equity instruments. The statement also allows an
entity to continue to account for stock-based compensation using the intrinsic
value method in APB Opinion No. 25. As provided for in the statement, the
Company elected to continue the intrinsic value method of expense recognition.
If compensation cost for these plans had been determined using the fair value
method prescribed by SFAS No. 123, the Company's net income and net income per
share would have reflected the unaudited pro forma amounts indicated below:
For the
Four Month For the Fiscal Years Ended
Period Ended --------------------------------------
December 31, August 31, August 31,
1997 1997 1996
---------------- ------------------ -----------------
------------------------(Unaudited)------------------------
Net income:
As reported $ 5,962,000 $ 10,235,000 $ 11,044,000
Pro forma $ 5,861,000 $ 10,212,000 $ 11,033,000
Net income per share:
As reported-
Basic $ .66 $ 1.18 $ 1.27
Diluted $ .66 $ 1.18 $ 1.27
Pro forma-
Basic $ .65 $ 1.18 $ 1.27
Diluted $ .65 $ 1.18 $ 1.27
The pro forma effect on the results may not be representative of the impact in
future years because the fair value method was not applied to options granted
before 1996.
The fair value of each option was estimated on the grant date using the
Black-Scholes option pricing model and the assumptions presented below.
For the
Four Month For the Fiscal Years Ended
Period Ended -------------------------------
December 31, August 31, August 31,
1997 1997 1996
------------ ---------- ----------
Expected life in years 5 5 5
Risk-free interest rate 6.09% 6.10% 5.58%
Volatility 18.38% 17.31% 18.12%
Dividend yield 7.65% 7.28% 8.90%
The weighted average fair value of options granted was $2.34, $2.05 and $1.29
for the four month period ended December 31, 1997 and the fiscal years ended
August 31, 1997 and 1996, respectively.
19
10. OPERATING LEASES:
The Company's apartments are typically leased to residents under operating
leases for a period of one year. The Company's shopping centers are leased to
tenants under operating leases with expiration dates extending to the year 2012.
Future minimum rentals under noncancelable operating leases at December 31, 1997
are as follows:
1998 $ 12,049,000
1999 11,456,000
2000 10,839,000
2001 9,620,000
2002 7,947,000
Thereafter 29,537,000
----------------
$ 81,448,000
================
The total future minimum rentals presented above do not include amounts that may
be received as tenant reimbursements for charges to cover increases in certain
operating costs.
11. COMMITMENTS AND CONTINGENCIES:
During 1995 certain environmental matters arose at certain properties in which
the Company has an interest. The Company retained environmental consultants in
order to investigate these matters. At one property, in which the Company has a
50% ownership interest, groundwater contamination exists which the Company
alleges was caused by the former tenant. Estimates to remediate this property,
which are subject to the length of monitoring and the extent of remediation
required, range in total from $100,000 to $1,000,000. In addition, above normal
radon levels have been detected at two wholly owned properties. The estimated
remaining cost to remediate these properties is approximately $115,000, which
costs were received as a credit from the sellers as part of the initial
acquisition.
The Company has recorded its share of these liabilities totaling $363,000
related to the consultants evaluation of these matters which, in certain
instances, are subject to applicable state approvals of the remediation plans.
In Management's opinion, no material incremental cost will be incurred on these
properties. The Company will pursue recovery of remediation costs from all of
the responsible parties, including its tenants and partners.
12. ACQUISITION:
The Company acquired one property during the fiscal year ended August 31, 1995
for approximately $34,000,000 (including improvements) which was accounted for
by the purchase method. The results of operations for the acquired property has
been included from the respective purchase date. The pro forma financial
information presented within this footnote is not necessarily indicative of the
results which actually would have occurred if the acquisition had been
consummated on September 1, 1994, nor does the pro forma information purport to
represent the results of operations for future periods.
20
Fiscal Year
Ended
August 31,
1995
-----------------
(Unaudited)
Pro forma total revenues $ 37,815,000
Pro forma net income $ 11,103,000
Basic pro forma net income per common share $ 1.28
Diluted pro forma net income per common share $ 1.28
13. SUBSEQUENT EVENTS:
On January 26, 1998, the Company acquired the remaining 50% interest in a
shopping center under construction located in Newark, Delaware, for a purchase
price of at least $8.7 million consisting of $6 million in cash, $2.7 million to
be paid through the issuance of Operating Partnership (OP) Units upon completion
of the shopping center, and a contingent payment to issue additional OP Units at
completion based on a predetermined formula which calculates the value of the
center.
On May 12, 1998, a partnership in which the Company owns a 50% interest acquired
a shopping center in Springfield, Pennsylvania for $7.3 million in cash of which
the Company's share was approximately $3.7 million.
On July 21, 1998, the Company acquired Foulk Plaza (subsequently renamed
"Brandywood Plaza") located in Wilmington, Delaware for a purchase price of
approximately $4.3 million consisting of $1.3 million in cash and $3.0 million
through the issuance of OP units.
On August 7, 1998, the Company acquired all of the partnership interests in a
partnership that owns The Wood Apartments located in Ambler, Pennsylvania for a
purchase price of approximately $21.2 million consisting of $12.2 million in
cash, $1.7 million paid through the issuance of OP units and $7.3 million
through the assumption of debt.
On August 27, 1998, the Company acquired Festival at Oaklands Shopping Center
(subsequently renamed, "Festival at Exton") located in Exton, Pennsylvania for a
cash purchase price of approximately $17.7 million.
On September 17, 1998, the Company acquired all of the beneficial interests in a
trust that owns Prince Georges Plaza located in Hyattsville, Maryland for a
purchase price of approximately $65.0 million, consisting of $19.0 million in
cash, $3.0 million paid through the issuance of OP units and $43.0 million
through the assumption of debt.
On December 18, 1998, the Company acquired the remaining 50% interest in two
multifamily communities and a parcel of undeveloped land located in Coral
Springs, Florida and Bear, Delaware. The Company paid $775,000 in cash to
acquire the partnership interests and assumed mortgage indebtedness of
approximately $29.8 million.
21
14. SUMMARY OF QUARTERLY RESULTS (UNAUDITED):
The following presents a summary of the unaudited quarterly financial
information for the three months ended December 31, 1997 and for the fiscal
years ended August 31, 1997 and 1996.
For the three months ended December 31, 1997, revenues totaled $13,831,000, net
income was $5,436,000, income before gains on sales of interests in real estate
was $3,795,000, and gain on sales of interests in real estate totaled
$2,090,000. On a per share basis, net income was $.60 and $.59 per basic and
diluted income share, income before gain on sales of interests in real estate
was $.42 and $.41 per basic and diluted income per share, and gain on sales of
interests in real estate was $.23 for both basic and diluted income per share.
For the Fiscal Year Ended August 31, 1997
(in thousands of dollars, except per share data)
----------------------------------------------------------------------------------
1st 2nd 3rd 4th
Quarter Quarter Quarter Quarter Total
------- ------- ------- ------- -----
Revenues $ 10,063 $ 10,186 $ 10,085 $ 10,151 $ 40,485
============ ============ ============ ============ ============
Income before gains (loss) on sales of
interests in real estate $ 2,639 $ 1,520(1) $ 2,785 $ 2,222(2) $ 9,166
Gains (loss) on sales of interests in real
estate -- 1,461 -- (392) 1,069
------------ ------------ ------------ ------------ ------------
Net income $ 2,639 $ 2,981 $ 2,785 $ 1,830 $ 10,235
============ ============ ============ ============ ============
Basic income per share:
Income before gains (loss) on sales of
interests in real estate
$ .30 $ .17 $ .32 $ .26 $ 1.06
Gains (loss) on sales of interests in
real estate -- .17 -- (.05) .12
----------- ----------- ----------- ----------- -----------
Total $ .30 $ .34 $ .32 $ .21 $ 1.18
=========== =========== =========== =========== ===========
Diluted income per share:
Income before gains (loss) on sales
of interests in real estate
$ .30 $ .17 $ .32 $ .26 $ 1.06
Gains (loss) on sales of interests in
real estate -- .17 -- (.05) .12
----------- ----------- ----------- ------------ -----------
Total $ .30 $ .34 $ .32 $ .21 $ 1.18
=========== =========== =========== =========== ===========
(1) Reflects the recording of a provision for asset impairment (see Note 1) and
the Company's share of prepayment fees relating to the refinancing of
certain debt at partnerships accounted for under the equity method.
(2) Includes additional compensation expense (see Note 9) relating to a change
in the terms of certain stock options previously granted.
22
For the Fiscal Year Ended August 31, 1997
(in thousands of dollars, except per share data)
----------------------------------------------------------------------------
For the Year Ended August 31, 1996
----------------------------------------------------------------------------
1st 2nd 3rd 4th
Quarter Quarter Quarter Quarter Total
------- ------- ------- ------- -----
Revenues $ 9,696 $ 9,667 $ 9,968 $ 9,825 $ 39,156
============ ============ ============ ============ ============
Income before gains on sales of
interests in real estate $ 2,845 $ 2,336 $ 2,625 $ 2,373 $ 10,179
Gains on sales of interests in real estate
-- -- 411 454 865
------------ ------------ ------------ ------------ ------------
Net income $ 2,845 $ 2,336 $ 3,036 $ 2,827 $ 11,044
============ ============ ============ ============ ============
Basis income per share:
Income before gains on sales of
interests in real estate
$ .33 $ .27 $ .30 $ .27 $ 1.17
Gains on sales of interests in
real estate -- -- .05 .05 .10
----------- ----------- ----------- ----------- -----------
Total $ .33 $ .27 $ .35 $ .32 $ 1.27
=========== =========== =========== =========== ===========
Diluted income per share:
Income before gains on sales of
interests in real estate
$ .33 $ .27 $ .30 $ .27 1.17
Gains on sales of interests in
real estate -- -- .05 .05 .10
----------- ----------- ----------- ----------- -----------
Total $ .33 $ .27 $ .35 $ .32 $ 1.27
=========== =========== =========== =========== ===========
23