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) December 23, 1998
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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.)
The Bellevue, 200 S. Broad Street, Philadelphia, Pennsylvania 19102
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (215) 875-0700
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455 Pennsylvania Avenue, Suite 135, Fort Washington, Pennsylvania 19034
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(Former Name or Former Address, if Changed Since Last Report)
Item 2. Acquisition or Disposition of Assets.
In its Current Report on Form 8-K filed with the Securities and
Exchange Commission on October 14, 1997, the Registrant (sometimes referred to
herein as "PREIT") reported that it had consummated a series of transactions on
September 30, 1997 (collectively, the "Transactions"), including the acquisition
of all of the non-voting common shares, constituting 95% of the equity, of The
Rubin Organization, Inc., a Pennsylvania corporation ("TRO") (now known as
PREIT-RUBIN, Inc.). Prior to the consummation of the Transactions, PREIT and
PREIT Associates, L.P., a Delaware limited partnership ("PALP") of which PREIT
is the sole general partner, had entered into a Contribution Agreement dated as
of July 30, 1997 (the "Contribution Agreement") permitting PALP to acquire at a
later date interests of certain persons associated or affiliated with TRO ("TRO
Affiliates"), including Mr. Ronald Rubin, Mr. George Rubin and Mr. Edward
Glickman, who now serve as executive officers or trustees of the Registrant, and
other persons, several of whom are now employed by PREIT or PREIT-RUBIN, Inc.,
in entities owning certain parcels constituting the Northeast Tower Shopping
Center (the "Northeast Property").
First Amendment to Contribution Agreement
Initial Closing. On December 23, 1998 (the "Closing Date"), PREIT, PALP
and the TRO Affiliates entered into the First Amendment to Contribution
Agreement (the "First Amendment") pursuant to which, on the Closing Date, (i)
PALP and an affiliate acquired from the TRO Affiliates the general partner
interests and approximately 89% of the limited partner interests in a limited
partnership ("Roosevelt II") that owns certain parcels at the Northeast Property
(collectively, the "Roosevelt II Parcel"), and (ii) an affiliate of PALP
acquired Roosevelt II's right to purchase another parcel of the Northeast
Property (the "Bradlees Parcel") from State Street Bank and Trust Company as
Owner Trustee ("State Street") as the result of the assignment of Roosevelt II's
rights under a purchase agreement with State Street. PREIT is not aware of any
material relationship between State Street and (i) PREIT or any of its
affiliates or (ii) any officer or trustee of PREIT or (iii) any associate of the
officers or trustees of PREIT. PALP is obligated to acquire the remaining
limited partner interests in Roosevelt II thirty-seven months following the
Closing Date. On the Closing Date, an affiliate of PALP acquired the Bradlees
Parcel.
Subsequent Closing. The First Amendment provides that, subject to the
satisfaction of certain conditions, on a subsequent date (the "Subsequent
Closing") PALP and its affiliates will acquire from the TRO Affiliates all of
the general partner interests and approximately 89% of the limited partner
interests in another limited partnership ("Roosevelt") which holds a leasehold
interest in another parcel of the Northeast Property, which parcel is subleased
to Home Depot, Inc. (the "Home Depot Parcel"). Roosevelt's leasehold interest in
the Home Depot Parcel continues only as long as the structured financing
arrangement between MetLife and Home Depot with respect to such parcel remains
outstanding. PALP is obligated to acquire the remaining limited partner
interests in Roosevelt thirty-seven months following the Subsequent Closing.
Consideration for Interests in Roosevelt II. The aggregate
consideration paid by PALP and its affiliates in respect of the interests in
Roosevelt II acquired on the Closing Date ("Roosevelt II Interests") was
approximately $21.3 million, consisting of (i) assumed debt and liabilities of
approximately $18.0 million, (ii) the payment by PALP of approximately $37,000
in cash, and (iii) the issuance by PALP of 139,454 units of Class A limited
partner interests in PALP ("Units").
The First Amendment provides for additional consideration for the
Roosevelt II Interests in the form of Units (primarily) and cash to be paid by
PALP on various dates after the Closing Date, the majority of such additional
amounts to be based upon the appraised value of certain space that remains
unleased and unoccupied as of December 31, 1999, the agreed-upon value of
certain space that becomes leased and occupied by tenants after the Closing Date
and prior to December 31, 1999 and the net proceeds received by PALP for certain
property sold by PALP prior to December 31, 1999.
The First Amendment provides that the TRO Affiliates may be entitled to
additional consideration in the form of Units (primarily) and cash following the
Closing Date in respect of the Bradlees Parcel depending upon whether certain
space within this parcel is leased by December 31, 1999 and on whether certain
other space within this parcel is occupied and leased by December 31, 1999 and
rent is being paid thereon.
The First Amendment provides that additional consideration will be paid
when the retained interests in Roosevelt II are subsequently conveyed (see
"Consideration for Retained Interests" below).
The consideration paid on the Closing Date for the Roosevelt II
Interests was based upon negotiations between the parties and a valuation of the
cash flow of the Roosevelt II Parcel.
Purchase Price for Acquisition of Bradlees Parcel. The aggregate
purchase price paid by PALP (and its affiliates) on the Closing Date for the
Bradlees Parcel was approximately $3.7 million in cash. The purchase price,
determined through arms-length negotiations with State Street, was financed
through a borrowing made under PREIT's existing line of credit.
Consideration for Interests in Roosevelt. The aggregate consideration
to be paid by PALP (and its affiliates) to the TRO Affiliates at the Subsequent
Closing in exchange for the interests in Roosevelt to be acquired by PALP (and
its affiliates) on such date is estimated to be approximately $1 million of
Units (primarily) and cash. Additional consideration is payable when the
retained interests in Roosevelt are subsequently conveyed (see below). The
determination of the consideration payable for the interests in Roosevelt to be
conveyed to PALP (and its affiliates) was based upon the present value of the
leasehold interest held by Roosevelt.
Consideration for Retained Interests. On or before thirty-seventh month
following the Closing Date, PALP is required to make a payment in Units to
Ronald Rubin and George F. Rubin in respect of their interests in Roosevelt II
being retained by them on the Closing Date. On or before thirty-seventh month
following the Subsequent Closing, PALP is required to make a payment in Units to
Ronald Rubin and George F. Rubin in respect of their interests in Roosevelt
being retained by them at the Subsequent Closing.
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Location of the Northeast Property
The Northeast Property is located at 4640 Roosevelt Boulevard,
Philadelphia County, Pennsylvania.
Description of the Northeast Property
The Northeast Tower Shopping Center is a regional shopping center
containing approximately 500,000 square feet of gross leasable area.
The anchor tenants, comprising approximately 250,000 square feet,
include Home Depot, Dicks, PetSmart and Staples. The balance of the shopping
center currently includes the following tenants: MedMax, Old Navy, Hometown
Buffet Restaurant, Mandees and Toy Works. The occupancy rate was approximately
75%, excluding the Bradlees Parcel, on December 11, 1998.
The Bradlees Parcel includes a building pad of approximately 100,000
square feet, which the Registrant currently expects to develop as additional
shopping center space.
Prior to the Closing Date, PREIT-RUBIN, Inc. managed the Northeast
Property as a retail shopping center. The Registrant currently intends to
continue to operate the Northeast Property through PALP and its affiliates,
including Roosevelt and Roosevelt II, as a retail shopping center under the
management of PREIT-RUBIN, Inc.
Taxes
The property taxes for the 1999 fiscal year are expected to be
approximately $425,000.
Assumed Debt
The Roosevelt II Parcel is subject to a mortgage in favor of PNC Bank,
N.A. in the face amount of approximately $17,000,000 with an interest rate of
8.75%. The loan matures on April 1, 1999. The principal balance at the time of
Closing was approximately $17,000,000.
The Bradlees Parcel is subject to a mortgage in favor of Roosevelt II
in the face amount of $3,000,000. This mortgage will be satisfied when certain
mechanic's liens are satisfied.
The Home Depot Parcel is subject to a mortgage in favor of MetLife in
the face amount of $12,500,000. This loan matures in May 2005. Home Depot is
responsible for all payments to MetLife under a structured financing
arrangement.
Competition
The primary competition for the Northeast Property consists of a large
retail complex within five miles of the site. Secondary competition consists of
numerous smaller community shopping centers which share the Property's trade
area.
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Environmental
PREIT commissioned a Phase I Environmental Site Assessment of the
Northeast Property, which did not identify any recognized environmental
conditions that are expected to have a material adverse impact on PREIT's
results of operations or financial condition.
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 March 1, 1999, 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 March 1, 1999, which is within 60 days after the date
on which this report is filed.
(c) Exhibits
2.1 Contribution Agreement dated as of July 30, 1997, among the
Registrant, PALP, Roosevelt Blvd. Co., Inc., a Pennsylvania corporation ("RBC"),
and Ronald Rubin, George Rubin, Gerald Broker, Leonard B. Shore, Joseph
Coradino, Lewis M. Stone, Patricia Berns, Edward Glickman, Douglas Grayson and
Judith Garfinkel (collectively with RBC, the "TRO Affiliates") (incorporated by
reference to Exhibit 2.1 to the Registrant's Current Report on Form 8-K filed
with the Securities and Exchange Commission on October 14, 1997).
2.2 First Amendment to Contribution Agreement dated as of December 23,
1998, among the Registrant, PALP and the TRO Affiliates.
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: January 7, 1999 By: /s/ Jonathan B. Weller
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Jonathan B. Weller
President and Chief Operating Officer
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Exhibit Index
Number Exhibit Page Number
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2.2 First Amendment to Contribution Agreement dated as of
December 23, 1998, among the Registrant, PALP and the
TRO Affiliates.