UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
[X] Quarterly Report Pursuant To Section 13 or 15(d) of the Securities Exchange
Act of 1934
[ ] Transition Report Pursuant To Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ______________________ to _______________________
Pennsylvania 23-6216339
------------------------------- ----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
455 Pennsylvania Avenue, Suite 135, Ft. Washington, PA 19034
------------------------------------------------------ ---------
(Address of principal executive office) (Zip Code)
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the last 90 days. Yes |X| No |_|
Indicate the number of shares outstanding of each of the issuer's classes of Common stock, as of the latest practicable date.
This report includes a total of 22 pages.
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
CONTENTS
Page
----
Part I. Financial Information
Item 1. Financial Statements (Unaudited):
Consolidated Balance Sheets--September 30, 1998
and August 31, 1997 1-2
Consolidated Statements of Income--Three and Nine Months
Ended September 30, 1998 and August 31, 1997 3
Consolidated Statements of Cash Flow--Nine Months
Ended September 30, 1998 and August 31, 1997 4
Notes to Unaudited Consolidated Financial Statements 5-11
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 12-19
Part II. Other Information
Item 1. Legal Proceedings 20
Item 2. Not Applicable --
Item 3. Not Applicable --
Item 4. Not Applicable --
Item 5. Not Applicable --
Item 6. Exhibits and Reports on Form 8-K 20-21
Signatures 22
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Part I. Financial Information
Item 1. Financial Statements
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
CONSOLIDATED BALANCE SHEETS
(Note 1)
ASSETS
(Unaudited)
September 30, August 31,
1998 1997
------------- ----------
INVESTMENTS IN REAL ESTATE, at cost:
Multifamily properties $185,207,000 $159,967,000
Retail properties 204,756,000 37,398,000
Industrial properties 5,078,000 5,078,000
Properties under development 23,167,000 --
------------ ------------
Total investments in real estate 418,208,000 202,443,000
Less- Accumulated depreciation 59,333,000 50,711,000
------------ ------------
358,875,000 151,732,000
INVESTMENT IN PREIT-RUBIN, INC. (Note 3) 5,386,000 --
INVESTMENTS IN PARTNERSHIPS AND JOINT VENTURES, at equity (Note 4) 23,981,000 1,039,000
ADVANCES TO PREIT-RUBIN, INC. (Note 2) 3,913,000 --
------------ ------------
392,155,000 152,771,000
Less- Allowance for possible losses 1,626,000 1,831,000
------------ ------------
390,529,000 150,940,000
OTHER ASSETS:
Cash and cash equivalents 1,333,000 1,399,000
Rents and sundry receivables 1,687,000 590,000
Deferred costs, prepaid real estate taxes and expenses, net 10,558,000 7,393,000
Deposits on properties -- 5,335,000
------------ ------------
$404,107,000 $165,657,000
============ ============
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(Continued)
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
CONSOLIDATED BALANCE SHEETS (Continued)
(Note 1)
LIABILITIES AND SHAREHOLDERS' EQUITY
(Unaudited)
September 30, August 31,
1998 1997
------------- ----------
LIABILITIES:
Mortgage notes payable $ 115,423,000 $ 83,528,000
Bank and other loans payable 116,261,000 33,884,000
Construction cost payable 2,646,000 --
Tenants' deposits and deferred rents 1,358,000 1,346,000
Accrued pension and retirement benefits 985,000 1,091,000
Accrued expenses and other liabilities 5,972,000 4,369,000
------------- -------------
242,645,000 124,218,000
------------- -------------
MINORITY INTEREST 23,663,000 540,000
------------- -------------
COMMITMENTS AND CONTINGENCIES (Note 8)
SHAREHOLDERS' EQUITY (Note 5):
Shares of beneficial interest, $1 par; 100,000,000 shares
of beneficial interest authorized and 25,000,000
preferred shares authorized; issued and outstanding
13,299,723 shares at September 30, 1998, and 8,685,098
shares of beneficial interest at August 31, 1997 13,300,000 8,685,000
Capital contributed in excess of par 144,942,000 53,599,000
Distributions in excess of net income (20,443,000) (21,385,000)
------------- -------------
137,799,000 40,899,000
------------- -------------
$ 404,107,000 $ 165,657,000
============= =============
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The accompanying notes are an integral part of these statements.
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
CONSOLIDATED STATEMENTS OF INCOME
(Note 1)
(Unaudited)
Three Months Ended Nine Months Ended
------------------------------- ------------------------------
September 30, August 31, September 30, August 31,
1998 1997 1998 1997
------------- ---------- ------------- ----------
REVENUES:
Gross revenues from real estate $ 14,768,000 $ 10,115,000 $ 42,076,000 $ 30,263,000
Interest and other income 145,000 36,000 400,000 159,000
------------ ------------ ------------ ------------
14,913,000 10,151,000 42,476,000 30,422,000
------------ ------------ ------------ ------------
EXPENSES:
Property operating expenses 5,678,000 4,069000 15,820,000 12,385,000
Depreciation and amortization 2,231,000 1,598,000 6,482,000 4,718,000
General and administrative expenses 852,000 891,000 2,458,000 2,575,000
Interest expense 2,457,000 2,222,000 6,292,000 6,729,000
Provision for losses on investments -- -- -- 500,000
------------ ------------ ------------ ------------
11,218,000 8,780,000 31,052,000 26,907,000
------------ ------------ ------------ ------------
Income before equity in
unconsolidated entities, gains on
sales of interests in real estate
and minority interest in operating
partnership 3,695,000 1,371,000 11,424,000 3,515,000
EQUITY IN INCOME OF PREIT-RUBIN, INC. (Notes 2
and 3) 1,133,000 -- 274,000 --
EQUITY IN INCOME OF PARTNERSHIPS AND JOINT
VENTURES (Note 4) 1,343,000 850,000 4,032,000 3,011,000
GAINS (LOSS) ON SALES OF INTERESTS IN REAL ESTATE 1,277,000 (392,000) 3,043,000 1,069,000
------------ ------------ ------------ ------------
Income before minority interest
in operating partnership 7,448,000 1,829,000 18,773,000 7,595,000
MINORITY INTEREST IN OPERATING PARTNERSHIP (432,000) -- (961,000) --
------------ ------------ ------------ ------------
NET INCOME $ 7,016,000 $ 1,829,000 $ 17,812,000 $ 7,595,000
============ ============ ============ ============
BASIC INCOME PER SHARE (Note 5) $ .53 $ .21 $ 1.34 $ .88
============ ============ ============ ============
DILUTED INCOME PER SHARE (Note 5) $ .53 $ .21 $ 1.34 $ .87
============ ============ ============ ============
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The accompanying notes are an integral part of these statements.
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Notes 1 and 7)
Nine Months Ended
----------------------------------
September 30, August 31,
1998 1997
------------- ------------
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 17,812,000 $ 7,595,000
Adjustments to reconcile net income to net cash
provided by operating activities-
Minority interest in operating partnership 961,000 --
Depreciation and amortization 6,482,000 4,719,000
Gains on sales of interests in real estate (3,043,000) (1,069,000)
Equity in income of PREIT-RUBIN, Inc. (274,000) --
Decrease in allowance for possible losses (143,000) (666,000)
Provision for possible losses -- 500,000
Issuance of compensatory stock options -- 300,000
Change in assets and liabilities--
Rents and sundry receivables (1,246,000) 27,000
Deferred costs, prepaid real estate taxes and expenses (2,807,000) 13,000
Accrued pension and retirement benefits (26,000) 21,000
Accrued expenses and other liabilities 2,085,000 509,000
Tenants' deposits and deferred rents 40,000 145,000
Other 179,000 108,000
------------- -------------
Net cash provided by operating activities 20,020,000 12,202,000
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investments in wholly owned real estate (100,784,000) (2,906,000)
Investments in property under development (19,435,000) --
Investment in and advances to PREIT-RUBIN, Inc. (500,000) --
Investments in partnerships and joint ventures (9,938,000) (2,593,000)
Decrease in notes receivable -- 1,649,000
Cash proceeds from sale of interest in partnership 3,008,000 2,069,000
Cash distributions from partnerships and joint ventures
in excess of equity in income 496,000 1,800,000
Deposit on agreement to purchase -- (5,336,000)
Other (19,000) (1,682,000)
------------- -------------
Net cash used in investing activities (127,172,000) (6,999,000)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal installments on mortgage notes payable (1,034,000) (956,000)
Repayment of mortgage notes payable (33,680,000) --
Proceeds from bank loans payable 111,686,000 6,943,000
Proceeds from mortgage loans payable 51,014,000 --
Repayment of bank loans payable (241,000) --
Shares of beneficial interest issued 206,000 142,000
Payment of equity offering costs (1,076,000) 278,000
Distributions paid to shareholders (18,750,000) (12,238,000)
Distributions paid to OP Unit holders (963,000) --
------------- -------------
Net cash provided by (used in) financing activities 107,162,000 (5,831,000)
------------- -------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 10,000 (628,000)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 1,324,000 2,026,000
------------- -------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 1,334,000 $ 1,398,000
============= =============
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The accompanying notes are an integral part of these statements.
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 1998 AND AUGUST 31, 1997
1. BASIS OF PRESENTATION:
The consolidated financial statements have been prepared by the Registrant, without audit, except as to the balance sheet as of August 31, 1997, which has been prepared from audited data, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Registrant believes that the disclosures are adequate to make the information presented not misleading. It is suggested that these consolidated financial statements be read in conjunction with the audited financial statements and the notes thereto included in the Registrant's latest annual report on Form 10-K. In the opinion of the Registrant, all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the consolidated financial position and the consolidated results of its operations and its cash flows, have been included. The results of operations for such interim periods are not necessarily indicative of the results for the full year.
On October 14, 1997, the Registrant filed a Form 8-K announcing its intention to change its fiscal year-end from August 31 to December 31. On February 17, 1998, the Registrant filed a Transition Report on Form 10-Q for the transition period from September 1, 1997 to December 31, 1997. As such, the consolidated financial statements herein include the Registrant's new calendar quarter and most comparable prior fiscal quarter.
Certain reclassifications of prior period amounts have been made to conform with the current periods' presentation.
2. THE TRO TRANSACTION:
On September 30, 1997, the Registrant completed a series of related transactions pursuant to which the Registrant: (i) transferred substantially all of its real estate interests to a newly formed operating partnership (the "Operating Partnership"), of which the Registrant is the sole general partner; (ii) the Operating Partnership acquired all of the non-voting 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, for which construction is complete, and Northeast Tower Center, which is currently under construction,
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.
All of the acquisitions described above have been recorded by the Registrant using the purchase method of accounting. The Registrant accounts for its non-controlling investment in PREIT-RUBIN, Inc. using the equity method. The excess of purchase price of PREIT-RUBIN, Inc. over the fair value of net tangible assets acquired is being amortized over thirty-five 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
============= =========== ============= =========== ============
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3. INVESTMENT IN PREIT-RUBIN, INC.:
PREIT-RUBIN, Inc. is responsible for various activities including: management, leasing and real estate development of the Registrant's properties and for properties on behalf of third parties. Total management fees paid by the Registrant's properties to PREIT-RUBIN, Inc. are included in property operating expenses in the accompanying consolidated statements of income and amounted to $66,000 and $158,000 for the three and nine-month periods ended September 30, 1998, respectively.
Summarized unaudited financial information for PREIT-RUBIN, Inc., as of and for the three and nine-month periods ended September 30, 1998, is as follows:
For the Nine For the Three
Months Ended Months Ended
September 30, September 30,
1998 1998
-------------- -----------
Total assets $13,332,000 $13,332,000
----------- -----------
Management fees 3,663,000 1,186,000
Leasing commissions 6,736,000 4,235,000
Development fees 1,001,000 438,000
Other revenues 2,201,000 747,000
------------- -------------
Total revenue $13,601,000 $ 6,606,000
Net income $ 288,000 $ 1,193,000
----------- -----------
Registrant's share of net income $ 274,000 $ 1,133,000
=========== ===========
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4. INVESTMENTS IN PARTNERSHIPS AND JOINT VENTURES:
The following table presents summarized financial information as to the Registrant's equity in the assets and liabilities of 25 partnerships and joint ventures and 4 properties under development at September 30, 1998, and 22 partnerships and joint ventures at August 31, 1997, and the Registrant's equity in income for the nine months ended September 30, 1998 and August 31, 1997:
September 30, August 31,
1998 1997
------------- ----------
(Unaudited)
ASSETS
INVESTMENTS IN REAL ESTATE, AT COST:
Retail properties $ 169,151,000 $ 117,960,000
Multifamily properties 102,022,000 107,604,000
Industrial property 1,276,000 1,264,000
Properties under development 22,997,000 --
Land 4,446,000 4,446,000
------------- -------------
Total investments in real estate 299,892,000 231,274,000
Less- Accumulated depreciation 71,760,000 71,938,000
------------- -------------
228,132,000 159,336,000
CASH AND CASH EQUIVALENTS 6,345,000 6,031,000
DEFERRED COSTS, PREPAID REAL ESTATE TAXES AND EXPENSES, AND OTHER
ASSETS, NET 21,546,000 8,528,000
------------- -------------
Total assets $ 256,023,000 $ 173,895,000
============= =============
LIABILITIES AND PARTNERS' EQUITY
MORTGAGE NOTES PAYABLE $ 202,436,000 $ 162,097,000
BANK LOANS PAYABLE 6,827,000 8,770,000
DUE TO THE TRUST 3,498,000 3,118,000
OTHER LIABILITIES 7,535,000 4,341,000
------------- -------------
Total liabilities 220,296,000 178,326,000
------------- -------------
NET EQUITY (DEFICIT) 35,727,000 (4,431,000)
PARTNERS' SHARE (11,746,000) (5,470,000)
------------- -------------
INVESTMENT IN PARTNERSHIPS AND JOINT VENTURES
$ 23,981,000 $ 1,039,000
============= =============
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EQUITY IN INCOME OF PARTNERSHIPS AND JOINT VENTURES
Three Months Ended Nine Months Ended
--------------------------------- ---------------------------------
September 30, August 31, September 30, August 31,
1998 1997 1998 1997
------------- ---------- ------------- ----------
Gross revenues from real estate $ 13,703,000 $ 13,036,000 $ 41,750,000 $ 38,901,000
------------ ------------ ------------ ------------
Expenses:
Property operating expenses 4,917,000 5,214,000 15,021,000 15,572,000
Mortgage and bank loan interest 4,043,000 3,306,000 12,369,000 10,011,000
Refinancing prepayment penalty -- 800,000 -- 1,838,000
Depreciation and amortization 2,021,000 1,910,000 6,175,000 5,221,000
------------ ------------ ------------ ------------
10,981,000 11,230,000 33,565,000 32,642,000
------------ ------------ ------------ ------------
2,722,000 1,806,000 8,185,000 6,259,000
Partners' share (1,379,000) (956,000) (4,153,000) (3,248,000)
------------ ------------ ------------ ------------
Equity in income of partnerships
and joint ventures $ 1,343,000 $ 850,000 $ 4,032,000 $ 3,011,000
============ ============ ============ ============
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5. EARNINGS PER SHARE:
In 1997, the Registrant adopted Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share." The adoption of this statement had no impact on previously reported earnings per share for the nine months ended August 31, 1997.
For the Three Months Ended For the Nine Months Ended
September 30, 1998 September 30, 1998
------------------------------------------- ------------------------------------------
Per Share Per Share
Income Shares Amount Income Shares Amount
------ ------ --------- ------ ------ ----------
BASIC EARNINGS PER SHARE:
Net income $ 7,016,000 13,299,723 $ .53 $ 17,812,000 13,296,405 $ 1.34
============= ============= ======= ============== ============= =======
DILUTED EARNINGS PER SHARE:
Net income $ 7,016,000 13,299,723 17,812,000 13,296,405
Effect of share options
issued -- 18,222 -- 23,548
------------- ------------- -------------- -------------
$ 7,016,000 13,317,945 $ .53 $ 17,812,000 13,319,953 $ 1.34
============= ============= ======= ============== ============= =======
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For the Three Months Ended For the Nine Months Ended
August 31, 1997 August 31, 1997
-------------------------------------------------------------------------------------------------
Per Share Per Share
Income Shares Amount Income Shares Amount
------ ------ --------- ------ ------ ---------
BASIC EARNINGS PER SHARE:
Net income $ 1,829,000 8,679,473 $ .21 $ 7,595,000 8,678,560 $ .88
============= ============= ======= ============== ============= =======
DILUTED EARNINGS PER SHARE:
Net income $ 1,829,000 8,679,473 7,595,000 8,678,560
Effect of share options
issued -- 20,209 -- 14,862
------------- ------------- -------------- -------------
$ 1,829,000 8,699,682 $ .21 $ 7,595,000 8,693,422 $ .87
============= ============= ======= ============== ============= =======
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6. DISTRIBUTIONS:
The per-share amount declared at the date of this report and the per-share amount declared in the comparable period for distribution are as follows:
Amount
Per
Date Declared Record Date Payment Date Share
----------------- ----------------- ----------------- ------
October 13, 1998 November 30, 1998 December 15, 1998 $.47
October 14, 1997 November 28, 1997 December 15, 1997 $.47
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7. CASH FLOW INFORMATION:
Cash paid for interest was $5,961,000 and $6,619,000, net of capitalized interest of $1,190,000, and $0 for the nine months ended September 30, 1998 and August 31, 1997, respectively.
8. COMMITMENTS AND CONTINGENCIES:
Environmental matters have arisen at certain properties in which the Registrant has an interest for which reserves have previously been established. In management's opinion, no material incremental cost will be incurred on these properties.
The Registrant has been named as a defendant in a suit brought by persons and their affiliates who are partners of the Registrant in three partnerships. The Registrant is vigorously defending the suit and has denied the plaintiffs' allegations. The Registrant also believes that it has viable claims against certain of the same partners (or their affiliates) which it is asserting. As the pleadings are not yet closed and discovery is ongoing, it is not possible to judge the ultimate outcome of these suits at this time. However, management does not believe that resolution of these matters will have a material adverse effect on the Registrant's financial condition or results of operations.
On July 15, 1998, PREIT-RUBIN, Inc. granted to certain key employees approximately 138,000 options to acquire shares of beneficial interest in the Registrant. Concurrent with this transaction, the Registrant sold an option to PREIT-RUBIN, Inc. to purchase the equivalent number of shares.
9. ACQUISITIONS:
On January 26, 1998, the Registrant 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 upon completion of construction based on a predetermined formula which calculates the agreed-upon value of the center.
On May 12, 1998, a partnership in which the Registrant owns a 50% interest acquired a shopping center in Springfield, Pennsylvania for $7.3 million in cash of which the Registrant's share is approximately $3.7 million.
On July 21, 1998, the Registrant 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 Registrant acquired all of the partnership interest in a partnership that owns The Woods 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 Registrant 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 Registrant 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.
The following unaudited pro forma financial information of the Registrant for the nine-month period ended September 30, 1998 and August 31, 1997 gives effect to the properties acquired through September 30, 1998 and the offering of Common Shares during 1997 as if the purchases and offering had occurred on December 1, 1996.
Nine Months Ended
--------------------------------------
September 30, 1998 August 31, 1997
------------------ ---------------
(In thousands, except per share data)
(unaudited)
Pro forma total revenues $53,290 $51,417
Pro forma net income $18,011 $11,930
Basic pro forma net income per
Common Share $ 1.35 $ .90
Diluted pro forma net income per
Common Share $ 1.35 $ .90
|
All acquisitions described above were accounted for by the purchase method. The results of operations for each of the acquired properties have been included from the respective purchase dates. All pro forma financial information presented within this footnote is unaudited and is not necessarily indicative of the results which actually would have occurred if the acquisitions had been consummated on the respective dates indicated, nor does the pro forma information purport to represent the results of operations for future periods.
10. RECENT ACCOUNTING PRONOUNCEMENTS:
In March 1998, the Emerging Issues Task Force ("EITF") reached consensus on Issue No. 97-11, "Accounting for Internal Costs Relating to Real Estate Property Acquisition." The EITF concluded that internal costs related to the acquisition of operating properties should be expensed as incurred. The adoption of this pronouncement had no impact on the Registrant as the Registrant had not previously capitalized internal costs relating to the acquisition of operating properties.
In May 1998, the EITF reached consensus on Issue No. 98-9, "Accounting for Contingent Rent in Interim Financial Periods." EITF 98-9 requires a lessor to defer recognition of contingent rental income (primarily percentage rental
revenues) in interim periods until the specified target that triggers the contingent rental income is achieved. The Registrant adopted the provisions of this pronouncement during the second quarter.
During the three-month and nine-month periods ended September 30, 1998, the Registrant recorded $79,000 and $741,000, respectively, of percentage rental revenues. Had the Registrant accounted for percentage rental revenues on the same basis as in the prior fiscal year, the Registrant would have recorded $366,000 and $615,000 of additional rental revenues for the respective three-month and nine-month periods ended September 30, 1998.
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." The 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. The Statement requires that changes in the derivative's fair value be recognized currently in earnings unless specific hedge accounting criteria are met. Special accounting for qualifying hedges allows a derivative's gains and losses to offset related results on the hedged item in the income statement, and requires that a company must formally document, designate, and assess the effectiveness of transactions that receive hedge accounting. This Statement is effective for fiscal years beginning after June 15, 1999. A company may also implement the Statement as of the beginning of any fiscal quarter after issuance (that is, fiscal quarters beginning June 16, 1998 and thereafter). SFAS 133 cannot be applied retroactively. 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 (and, at the Registrant's election, before January 1, 1998).
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The TRO Transaction
On September 30, 1997, the Registrant acquired The Rubin Organization, Inc. ("TRO," renamed "PREIT-RUBIN, Inc."), a commercial property development and management firm, and certain related real estate interests (the "TRO Transaction").
As part of the TRO Transaction, the Registrant acquired Magnolia Mall, located in Florence, South Carolina, North Dartmouth Mall, located in North Dartmouth, Massachusetts and a 50% interest in the Court at Oxford Valley, located in Langhorne, Pennsylvania. The Registrant also acquired the development rights of certain affiliates of TRO ("TRO Affiliates"), subject to related obligations, in Christiana Power Center (Phases I and II), Red Rose Commons and Blue Route Metroplex. In addition, the Registrant agreed to acquire the interests of TRO Affiliates in Hillview Shopping Center, for which construction is substantially complete, and Northeast Tower Center, which is currently under construction, at prices based upon a pre-determined formula.
The TRO Transaction was financed through the issuance of 646,286 Class A Operating Partnership Units in PREIT Associates, L.P. (the "Operating Partnership"), assumption of mortgage indebtedness at Magnolia Mall of approximately $25.2 million, and $61.2 million of cash including transaction costs. The cash was obtained primarily from borrowings under a new $150 million Credit Facility entered into by the Operating Partnership coincident with the September 30, 1997 closing of the TRO Transaction with a group of banks. The obligations of the Operating Partnership under the new Credit Facility have been guaranteed by the Registrant.
Liquidity and Capital Resources
Borrowings under the Credit Facility increased from approximately $34 million at August 31, 1997 to approximately $90 million at September 30, 1997, following the consummation of the TRO Transaction. On December 23, 1997, the Registrant sold 4,600,000 shares of beneficial interest at a price of $22.375 per share. The net proceeds to the Registrant from the public offering, after deducting underwriting discounts and commissions were approximately $97 million. The Registrant used the net proceeds to prepay the $8.8 million mortgage loan (8.25%) secured by Cobblestone Apartments in Pompano Beach, Florida (the "Cobblestone Mortgage") and to repay approximately $88 million of amounts then outstanding under the Credit Facility.
As of September 30, 1997, the interest rate on the Credit Facility was set at a margin equal to 1.7% over 30-day LIBOR. As a result of the reduction in the Registrant's Leverage Ratio, following the December 1997 public offering, the interest rate was reduced by 30 basis points to a margin of 1.4% over 30-day LIBOR. In addition, the maturity date for the Credit Facility was extended from September 30, 1999 to December 31, 2000.
On March 20, 1998, the Registrant borrowed $33.7 million under the Credit Facility to repay the term loan outstanding which matured in March 1998. The term loan accrued interest at a fixed rate of 8.62% and was secured by three properties. At September 30, 1998, the interest rate on the Credit Facility was 6.93%.
As of September 30, 1998, $122.0 million of borrowings under the Credit Facility were outstanding ($116.0 million directly by the Operating Partnership and $6.0 million through partnerships and joint ventures) and, subject to the terms and conditions of the Credit Facility, up to $27.0 million was available to fund property acquisitions, scheduled debt maturities and other uses.
In addition to amounts due under the Credit Facility during the next three years, mortgage loans secured by properties owned by four partnerships in which the Registrant has an interest mature by their terms. Balloon payments on these loans total $17.0 million, of which the Registrant's proportionate share is $8.5 million.
The Registrant expects to meet its short-term liquidity requirements generally through its available working capital and net cash provided by operations. The Registrant believes that the net cash provided by operations will be sufficient to make distributions to continue to qualify as a REIT under the Code. The Registrant also believes that the foregoing sources of liquidity will be sufficient to fund its short-term liquidity needs for the foreseeable future, including capital expenditures, tenant improvements and leasing commissions.
Acquisitions and Dispositions
The Registrant is actively involved in pursuing and evaluating a number of individual property and portfolio acquisition opportunities. In addition, the Registrant has stated that a key corporate goal is to gain managerial control of all of its assets. In certain cases where existing joint venture assets are controlled by outside partners the Registrant is evaluating the possible acquisition of the outside interests. In certain cases where that opportunity does not exist, the Registrant is considering the disposition of its interests. There can be no assurance that the Registrant will consummate any such acquisition or disposition.
In addition to acquisitions previously disclosed in Footnote 9 of the Consolidated Financial Statements, the following is a summary of the completed acquisition transactions through the date of this report (in thousands):
Completed Acquisitions
Capital Resources
Property Location -----------------------------
Acquisition Property --------------------- Purchase Credit Assumed OP
Date Type City State Price Facility Debt Units Reference
----------- ----------------- ------------ -------- -------- --------- ------- --------- -------------
7/21/98 Shopping Center Wilmington DE $ 4,300 $ 1,300 $ -- $ 3,000 See Footnote 9
8/07/98 Apartments Ambler PA 21,200 12,200 7,300 1,700 See Footnote 9
8/27/98 Shopping Center Exton PA 17,700 17,700 -- -- See Footnote 9
9/17/98 Regional Mall Hyattsville MD 65,000 19,000 43,000 3,000 See Footnote 9
--------- -------- --------- ---------
Total Completed Acquisitions $ 108,200 $ 50,200 $ 50,300 $ 7,700
========= ======== ========= =========
|
The combined impact of the Registrant's normal working capital requirements and the completion of the acquisitions detailed above reduced the availability under the line of credit to $27.0 million.
Management believes those amounts available under the Credit Facility together with amounts, which may be acquired through public and private offerings of debt and/or equity securities will be sufficient to finance acquisitions and developments. However, there can be no assurance that these sources of financing will be available and the inability to obtain this capital could an adverse impact on the Registrant's ability to fund its acquisition and development activities.
Dispositions
Consistent with management's long-term strategic plan to review and evaluate all joint venture real estate holdings, on July 24, 1998 the Registrant sold its 25% partnership interest in Punta Gorda Mall in Punta Gorda, Florida and Ormond Beach Mall in Daytona Beach, Florida. The total gain on the sales of these properties was approximately $1.3 million. These proceeds were applied to reduce the Registrant's line of credit.
Development, Expansions and Renovations
The Registrant is involved in a number of ongoing development and redevelopment projects which will call upon the capital resources of the Registrant. In each case, the Registrant will evaluate the financing opportunities available to it at the time the project requires funding. In cases where the project is undertaken with a joint venture partner, the Registrant's flexibility in funding the project may be constrained by the joint venture agreement or the covenants existing in its line of credit which limit the use of borrowed funds in joint venture projects.
Funds from operations ("FFO") increased by $9,996,000 for the nine months ended September 30, 1998, as compared to the nine months ended August 31, 1997, as follows:
Three Months Ended Nine Months Ended
-------------------------- ----------------------------
September 30, August 31, September 30, August 31,
Funds from Operations(1) 1998 1997 1998 1997
---------------------------------------------------- ------------- ------------ -------------- ------------
Income before minority interest in operating
partnership $ 7,448,000 $ 1,829,000 $ 18,773000 $ 7,595,000
Less- (Gains) loss on sales of interests in real estate (1,277,000) 392,000 (3,043,000) (1,069,000)
Add- Provision for losses on investments -- -- -- 500,000
Depreciation and amortization-
Wholly owned and consolidated partnerships,
net 2,151,000 1,528,000 6,328,000 4,515,000
Unconsolidated partnerships and joint ventures 985,000 926,000 2,992,000 2,528,000
Refinancing prepayment fees -- 400,000 -- 919,000
Excess purchase price over net assets acquired 29,000 -- 87,000 --
Less- Depreciation of non-real estate assets (57,000) (57,000) (171,000) (170,000)
Amortization of deferred financing costs (117,000) (70,000) (360,000) (208,000)
----------- ----------- ------------ -----------
Funds from operations $ 9,162,000 $ 4,948,000 $ 24,606,000 $14,610,000
=========== =========== ============ ===========
Weighted average number of shares outstanding 13,299,723 8,679,473 13,296,405 8,678,560
Weighted average effect of full conversion of OP Units 811,465 -- 701,951 --
----------- ----------- ------------ ------------
14,111,188 8,679,473 13,998,356 8,678,560
=========== =========== ============ ============
|
(1) Funds from operations ("FFO") is defined as income before gains (losses) on investments and extraordinary items (computed in accordance with generally accepted accounting principles "GAAP") plus real estate depreciation and similar adjustments for unconsolidated joint ventures after adjustments for non-real estate depreciation and amortization of financing costs. FFO should not be construed as an alternative to net income (as determined in accordance with GAAP) as an indicator of the Registrant's operating performance, or to cash flows from operating activities (as determined in accordance with GAAP) as a measure of liquidity. In addition, the Registrant's measure of FFO as presented may not be comparable to similar measures reported by other companies.
Net cash provided by operating activities increased to $20,020,000 from $12,202,000 for the nine months ended September 30, 1998, as compared to the nine months ended August 31, 1997. The increase is primarily attributable to additional net operating income, provided by Magnolia Mall and North Dartmouth Mall which the Registrant acquired on September 30, 1997 and the acquisitions described in footnote 9 of the consolidated financial statements.
Net cash used in investing activities was $127,172,000 for the nine months ended September 30, 1998, as compared to $6,999,000 for the nine months ended August 31, 1997. Investing activities in the 1998 period include the acquisitions described in footnote 9 of $97.0 million and payment of costs related to properties under development of $19,435,000 and investments in partnerships and joint ventures of $9,938,000 and includes $3 million proceeds from the sale of Charter Pointe Apartments in Altemonte Springs, Punta Gorda Mall in Punta Gorda, Florida and Ormond Beach Mall in Daytona Beach, Florida. Investing activities in the 1997 period include deposits to acquire real estate of $5.3 million and invested $5.5 million in real estate and joint ventures and includes proceeds from sales of real estate and note receivable collection of $3.7 million.
Net cash provided by financing activities was $107,162,000 for the nine months ended September 30, 1998, as compared to net cash used of $5,831,000 for the nine months ended August 31, 1997. Financing activities in the 1998 period include proceeds from the Registrant's Credit Facility in the amount of $111.7 million of which $33.7 million was used to repay bank mortgage notes payable and proceeds from mortgage loans payable of $51.0 million, dividends paid to shareholders and OP unit holders of approximately $19.7 million and payment of equity offering costs of $1 million. Financing activities in the 1997 period include dividends paid to shareholders in the amount of $12.2 million.
Results of Operations
Three-Month Periods Ended September 30, 1998 and August 31, 1997
Gross revenues from real estate increased by $4,653,000 to $14,768,000 for the three-month period ended September 30, 1998, as compared to the three-month period ended August 31, 1997. The 1998 period included $4,475,000 of revenues attributable to Magnolia Mall and North Dartmouth Mall, which the Registrant acquired on September 30, 1997 and the acquisition of The Woods Apartments, Festival at Exton and Prince Georges Plaza which were acquired during the third quarter. Revenues from properties owned during both periods increased by $178,000 primarily as a result of an increase in apartment revenues of $263,000. During the second quarter, the Registrant adopted the provisions of Emerging Issues Task Force Issue No. 98-9, "Accounting for Contingent Rent in Interim Financial Periods." This pronouncement requires a lessor to defer recognition of contingent rental income in interim periods until all specified targets or thresholds which trigger additional rental amounts are achieved.
During the three-month and nine-month periods ended September 30, 1998, the Registrant recorded $79,000 and $741,000, respectively, of percentage rental revenues. Had the Registrant accounted for percentage rental revenues on the same basis as in the prior fiscal year, the Registrant would have recorded $366,000 and $615,000 of additional rental revenues for the respective three-month and nine-month periods ended September 30, 1998.
Property operating expenses increased by $1,609,000 to $5,678,000. The 1998 period included $1,419,000 of expenses attributable to Magnolia Mall and North Dartmouth Mall which the Registrant acquired on September 30, 1997 and the acquisition of The Woods Apartments, Festival at Exton and Prince Georges Plaza. Operating expenses from properties owned during both periods increased by $68,000 primarily due to increases in operating costs for apartments.
Depreciation and amortization increased by $633,000 to $2,231,000 primarily as a result of depreciation of $558,000 on the addition of the Magnolia Mall and North Dartmouth Mall properties and the acquisition of The Woods Apartments, Festival at Exton and Prince Georges Plaza and increased amortization of financing costs. Depreciation and amortization during both periods increased by $75,000.
Interest expense increased by $235,000 to $2,457,000. Interest expense attributable to properties increased by $581,000 due to the acquisition of Magnolia Mall, which the Registrant acquired on September 30, 1997 and the acquisition of The Woods Apartments and Prince Georges Plaza offset by the repayment of the mortgage on Cobblestone Apartments in December 1997. Interest
expense incurred against the Registrant's Credit Facility decreased by $346,000 as a result of interest savings from the repayment of amounts borrowed under the Credit Facility from proceeds of a public offering in December 1997.
Equity in income of partnerships and joint ventures increased by $493,000 to $1,343,000 as a result of the Registrant's purchase of a 50% interest in Oxford Valley Road Associates on September 30, 1997 and Springfield Mall, acquired during the second quarter, which contributed $208,000 for the period. Equity in the income of properties owned during both periods increased by $285,000. This increase is net of $191,000 which is the result of lower net income from Whitehall Mall and Palmer Park Mall, both properties which are currently being redeveloped.
Equity in net income of PREIT-RUBIN for the 1998 period was $1,133,000.
The gains on the sale of interest in real estate of $1,277,000 in the 1998 period relates to the sale of the Registrant's interest in Punta Gorda Mall located in Punta Gorda, Florida and Ormond Beach Mall located in Daytona Beach, Florida.
Minority interest in the operating partnership increased $432,000 as a result of the Class A OP units issued in connection with the TRO Transaction and OP units issued in connection with three 1998 acquisitions.
Net income for the quarter ended September 30, 1998 increased to $7,016,000 from $1,829,000 as reported in the comparable period in the prior year.
Results of Operations
Nine-Month Periods Ended September 30, 1998 and August 31, 1997
Gross revenues from real estate increased by $11,813,000 to $42,076,000 for the nine-month period ended September 30, 1998, as compared to the nine-month period ended August 31, 1997. The 1998 period included $11,443,000 of revenues attributable to Magnolia Mall and North Dartmouth Mall, which the Registrant acquired on September 30, 1997 and the acquisitions of The Woods Apartments, Festival at Exton and Prince Georges Plaza. Revenues from properties owned during both periods increased by $370,000 primarily as a result of an increase in apartment revenues of $442,000. During the second quarter, the Registrant adopted the provisions of Emerging Issues Task Force Issue No. 98-9, "Accounting for Contingent Rent in Interim Financial Periods." This pronouncement requires a lessor to defer recognition of contingent rental income in interim periods until all specified targets or thresholds which trigger additional rental amounts are achieved. As a result of the adoption of this pronouncement, the Registrant did not accrue approximately $616,000 of additional percentage rental revenue in the current interim period.
Property operating expenses increased by $3,435,000 to $15,820,000. The 1998 period included $3,573,000 of expenses attributable to Magnolia Mall and North Dartmouth Mall which the Registrant acquired on September 30, 1997 and the acquisitions of The Woods Apartments, Festival at Exton and Prince Georges Plaza. Operating expenses from properties owned during both periods decreased by $209,000 primarily due to decreases in utilities for apartments.
Depreciation and amortization increased by $1,764,000 to $6,482,000 primarily as a result of depreciation of $1,526,000 on the addition of the Magnolia Mall and North Dartmouth Mall properties and the acquisitions of The Woods Apartments, Festival at Exton and Prince Georges Plaza and increased amortization of financing costs. Depreciation from properties owned during both periods increased by $238,000.
Interest expense decreased by $437,000 to $6,292,000. Interest expense attributable to properties increased by $1,768,000 due to the acquisition of Magnolia Mall, which the Registrant acquired on September 30, 1997 and the acquisitions of The Woods Apartments and Prince Georges Plaza offset by the repayment of the mortgage on Cobblestone Apartments in December 1997.
Equity in income of partnerships and joint ventures increased by $1,021,000 to $4,032,000 The Registrant's purchase of a 50% interest in Oxford Valley Road Associates on September 30, 1997, and Springfield Mall acquired in the second quarter contributed additional income of $484,000, while the non-recurrence in the 1997 period of a prepayment penalty due to the refinancing of debt at Regency Apartments increased income by $919,000. Equity in the income of properties owned during both periods decreased by $382,000, as the result of a decrease of $674,000 in net income from Whitehall Mall and Palmer Park Mall, both properties which are currently being redeveloped, which decrease was partially offset by an increase in net income from the remaining properties owned during both periods of $292,000.
Equity in net income of PREIT-RUBIN for the 1998 period was $274,000.
The gains on the sale of interest in real estate of $3,043,000 in the 1998 period relates to the sale of the Registrant's interest in Charter Pointe Apartments in Altemonte Springs, Florida. Punta Gorda Mall in Punta Gorda, Florida and Ormond Beach Mall located in Daytona Beach, Florida.
Minority interest in the operating partnership increased to $961,000 as a result of the Class A OP units issued in connection with the TRO Transaction and OP units issued in connection with three 1998 acquisitions.
Net income for the nine months ended September 30, 1998 increased to $17,812,000 from $7,595,000 as reported in the comparable period in the prior year.
Year 2000 Issue
Many existing computer programs use only two digits to identify a year in the date field. Those programs were designed and developed at a time when data storage was expensive, and the impact of the upcoming century change was not considered. If not corrected, many programs may fail or provide inaccurate results at the turn of the century. The Registrant uses information systems and control systems which may be affected by the two digit date.
The Registrant has established a Year 2000 Remediation Plan consisting of the following phases: inventorying systems and devices (including information technology ("IT") and non-IT systems) that are vulnerable to the Year 2000 problem, assessment of the criticality of the inventoried items, remediation of the non compliant items, and testing of the corrections that have been applied. The Registrant has completed the first phase of its Remediation Plan for IT
systems and has determined that all mission critical systems are Year 2000 compliant. In addition, the Registrant has begun the first phase of its Remediation Plan for its non-IT systems (such as elevators, HVAC and lighting systems) and is currently completing an inventory of non-IT systems and assessing the potential risks of noncompliance. Business partners, suppliers and tenants are also being surveyed relative to their Year 2000 compliance to mitigate the potential impact of Year 2000 issues. The amount of remediation effort is not anticipated to be extensive due to the Registrant's use of readily available, off-the-shelf software and hardware products that are supported by the manufacturers. After evaluating the Registrant's required compliance efforts, appropriate contingency plans will be developed based on the outcome of the assessment phase and the survey of its major suppliers. The Registrant expects to complete the Year 2000 Remediation Plan, including final testing by the beginning of the fourth quarter of 1999.
Management has determined the approximate total cost of its Year 2000 Remediation Plan and the potential related impact on operations. Amounts incurred to date have been less than $100,000 and the estimated remaining expenses of Year 2000 remediation are also expected to be less than $100,000. All costs related to Year 2000 remediation are expensed as incurred.
Although the Registrant believes its Year 2000 Remediation Plan is adequate to address the Year 2000 issue, there can be no assurance to that effect. If the required remediation efforts are not made, or are not completed timely, the Year 2000 issue could have a material impact on the operations of the Registrant.
Forward-Looking Statements
The matters discussed in this report, as well as news releases issued from time to time by the Registrant include use of forward-looking terminology such as "may," "will," "should," "expect," "anticipate," "estimate," "plan," or "continue" or the negative thereof or other variations thereon, or comparable terminology which constitute "forward-looking statements." Such forward-looking statements (including without limitation, information concerning the Registrant's planned acquisition, development and divestiture activities, short- and long-term liquidity position, ability to raise capital through public and private offerings of debt and/or equity securities, revenues and operating expenses for some or all of the properties, leasing activities, occupancy rates, changes in local market conditions or other competitive factors) involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Registrant's results to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The Registrant disclaims any obligation to update any such factors or to publicly announce the result of any revisions to any of the forward-looking statements contained herein to reflect future events or developments.
Part II. Other Information
Item 1. Legal Proceedings
Reference is made to the litigation between the Registrant and affiliates of the Registrant and Daniel Berman and Robert Berman and/or entities owned or controlled by them (collectively, the "Bermans") most recently described in Item 3 of the Registrant's Report on Form 10-K for its fiscal year ended August 31, 1997, filed with the Securities and Exchange Commission on November 28, 1997.
In December 1997, the court in the Delaware Litigation issued an opinion
granting partial summary judgment in favor of the Registrant and certain of its
affiliates on certain counterclaims of the Bermans in that action (which
counterclaims are substantially similar to the claims made by the Bermans as
plaintiffs in the Pennsylvania Litigation). Under the court's decision: the
Bermans would be liable for one-half of (i) the costs incurred at Eagles' Nest
and in respect of the 14 acre undeveloped tract in Coral Springs, Florida, and
(ii) reasonable environmental clean-up costs at Fox Run; and the counterclaims
of the Bermans relating to Eagles' Nest and Fox Run were dismissed. The court
did not dismiss counterclaims by the Bermans in the Delaware Litigation alleging
that (i) there had been an oral modification of the management agreement
relating to Fox Run (and the court therefore permitted the Bermans to continue
to manage that project until that claim is resolved), and (ii) the environmental
clean up costs incurred by certain of the Registrant's affiliates at Fox Run
were excessive.
The Registrant intends to continue to vigorously defend plaintiffs' claims in the Pennsylvania Litigation and the defendants' remaining counterclaims in the Delaware Litigation and to pursue the claims asserted by the Registrant in the Delaware Litigation. Management does not believe that resolution of these matters will have a material adverse effect on the Registrant's financial position or results of operations.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
4.1 First Amendment to First Amended and Restated Agreement of Limited Partnership of PREIT Associates, L.P. dated as of July 15, 1998.
4.2 Second Amendment to First Amended and Restated Agreement of Limited Partnership of PREIT Associates, L.P. dated as of July 15, 1998.
4.3 Third Amendment to First Amended and Restated Agreement of Limited Partnership of PREIT Associates, L.P. dated as of October 13, 1998.
27 Financial Data Schedule
(b) Reports on Form 8-K:
(i) Report on Form 8-K dated August 7, 1998 and filed on August 13, 1998, as amended by Form 8-K/A dated August 7, 1998 and filed on September 29, 1998.
(ii) Report on Form 8-K dated August 27, 1998 and filed on October 9, 1998, as amended by Form 8-K/A-1 dated August 27, 1998 and filed on November 9, 1998.
(iii) Report on Form 8-K dated September 17, 1998 and filed on October 2, 1998, as amended by Form 8-K/A dated September 17, 1998 and filed on November 9, 1998.
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
SIGNATURE OF REGISTRANT
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
Registrant
By /s/ Ronald Rubin
-------------------------------------
Ronald Rubin
Chief Executive Officer
By /s/ Edward A. Glickman
-------------------------------------
Edward A. Glickman
Executive Vice President and
Chief Financial Officer
By /s/ Dante J. Massimini
-------------------------------------
Dante J. Massimini
Senior Vice President and Treasurer
Date: November 13, 1998
|
Exhibit Index
-------------
Exhibit
Number Description
------- -----------
4.1 First Amendment to First Amended and Restated Agreement
of Limited Partnership
4.2 Second Amendment to First Amended and Restated Agreement
of Limited Partnership
4.3 Third Amendment to First Amended and Restated Agreement
of Limited Partnership
27 Financial Data Schedule
|
FIRST AMENDMENT TO FIRST AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
This First Amendment to First Amended and Restated Agreement of Limited Partnership (the "Amendment") is made as of the 15th day of July, 1998, by Pennsylvania Real Estate Investment Trust, a Pennsylvania business trust ("PREIT").
Background
PREIT is the general partner of PREIT Associates, L.P., a Delaware limited partnership (the "Limited Partnership").
Pursuant to Sections 16.15(A) and 16.15(C) of the First Amended and Restated Agreement of Limited Partnership of PREIT Associates, L.P., dated as of September 30, 1997 (as previously amended, the "Partnership Agreement"), PREIT is authorized to amend certain sections of the Partnership Agreement in its sole discretion and without the consent of any other partner of the Limited Partnership, unless a partner in the Limited Partnership would be adversely affected by such amendment.
PREIT has determined that this Amendment will not adversely affect any partner of the Limited Partnership.
NOW, THEREFORE, PREIT, acting as the sole general partner of the Limited Partnership, hereby agrees as follows:
1. Section 9.5(K) of the Partnership Agreement is hereby amended and restated in its entirety as follows:
"K. Except as otherwise expressly provided in this Agreement
or in a writing executed by the Partners, at any time after the six (6)
month period following the Effective Date, or, if not then permitted
pursuant to the provisions of the Pennsylvania Securities Act and the
rules and regulations thereunder, then at any time after the first
anniversary of the Effective Date, a Qualifying Party or the Assignee
of any Qualifying Party shall have the right to redeem all or a portion
of the Class A Units issued on the Effective Date to the persons listed
on Schedule VI hereto, subject to the terms and conditions set forth in
Section 9.5(A) (other than the time periods prior to exercisability set
forth therein) and the other provisions hereof."
2. Section 6.1(A) of the Partnership Agreement is hereby amended to add a new subsection (5), to read in its entirety as follows:
"(5) Notwithstanding anything to the contrary herein, except as may be otherwise specifically provided in any subscription
agreement, contribution agreement or other document governing the
issuance of Units after the date hereof, the first distribution that is
otherwise payable pursuant to Section 6.1 hereof in respect of each
Unit following its issuance (the "First Distribution") shall be an
amount equal to the product of (i) the distribution otherwise payable
in respect of such Unit in the absence of this Section 6.1(A)(5) and
(ii) a fraction whose numerator equals the number of days between the
date of issuance of such Unit and the date on which the First
Distribution is payable, and whose denominator equals the number of
days between the date on which the distribution immediately preceding
the date of issuance of such Unit was paid and the date on which the
First Distribution is payable; provided that this Section 6.1(A)(5)
shall not apply to Units to be issued pursuant to the Hillview
Contribution Agreement, the Northeast Contribution Agreement, the
Predevelopment Properties Contribution Agreement, the subscription
agreement with Albert H. Marta, dated January 26, 1998 or the TRO
Contribution Agreement.
3. The Partnership Agreement, as amended hereby, is hereby ratified and confirmed in all respects.
IN WITNESS WHEREOF, PREIT has caused this Amendment to be executed by its duly authorized representative as of the date first written above.
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
By /s/ Jonathan B. Weller ------------------------------------- Name: Jonathan B. Weller Title: President |
SECOND AMENDMENT TO FIRST AMENDED AND RESTATED AGREEMENT OF
LIMITED PARTNERSHIP
This Second Amendment to First Amended and Restated Agreement of Limited Partnership (the "Amendment") is made as of this 15th day of July, 1998, by Pennsylvania Real Estate Investment Trust, a Pennsylvania business trust ("PREIT").
Background
PREIT is the general partner of PREIT Associates, L.P., a Delaware limited partnership (the "Limited Partnership").
Pursuant to Section 16.15(A) and 16.15(C) of the First Amended and Restated Agreement of Limited Partnership of PREIT Associates, L.P. dated as of September 30, 1997 (as previously amended, the "Partnership Agreement"), PREIT is authorized to amend certain sections of the Partnership Agreement in its sole discretion and without the consent of any other partner of the Limited Partnership, unless a partner in the Limited Partnership would be adversely affected by such amendment.
PREIT has determined that this Amendment will not adversely affect any partner of the Limited Partnership.
NOW, THEREFORE, PREIT, acting as the sole general partner of the Limited Partnership, hereby amends the Partnership Agreement by amending and restating Section 12.3.A. thereof in its entirety as follows:
"A. GENERAL. Prior to the first anniversary of the Issuance Date, no Limited Partner shall Transfer all or any portion of its Limited Partner Units to any Person without the consent of the General Partner, which consent may be withheld in its sole discretion; except for (i) Transfers to a Family Member pursuant to the laws of descent or devise or to either a trust established for the benefit of such Partner or such Partner's Family Members or to any entity all of the beneficial interests of which are owned by such Partner or such Partner's Family Members, (ii) Transfers by partnerships and other entities owning interests in Units to Limited Partners or other beneficial owners of such entities; and the transferees in each such case described in this subpart (ii) or in subpart (i) shall be admitted as Additional Limited Partners simultaneously with such transfer and (iii) pledges by any Limited Partner of all or any portion of its Limited Partner Units to financial institutions as collateral or security for a bona fide loan or other obligations ("Pledges"), and Transfers of such pledged Limited Partner Units to such lending institutions in connection with the exercise of remedies under such loan or other obligations (any such Transfer, a "Permitted Transfer"); provided, that, in each and every case, such Transfers shall comply with all other provisions of this Article XII. Except as limited by the preceding sentence or any other agreement among the pertinent parties, each holder of record of Limited Partner Units shall have the
right to Transfer all or any portion of such Units to any Person, subject to the provisions of Section 12.6 hereof and to satisfaction of each of the conditions set forth herein."
The Partnership Agreement, as amended hereby, is hereby ratified and confirmed in all respects.
IN WITNESS WHEREOF, PREIT has caused this Amendment to be executed by its duly authorized representative as of the date first written above.
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
By /s/ Jonathan B. Weller ------------------------------------- Name: Jonathan B. Weller Title: President |
THIRD AMENDMENT TO FIRST AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
This Third Amendment to First Amended and Restated Agreement of Limited Partnership (the "Amendment") is made as of the 13th day of October, 1998, by Pennsylvania Real Estate Investment Trust, a Pennsylvania business trust ("PREIT").
Background
PREIT is the general partner of PREIT Associates, L.P., a Delaware limited partnership (the "Limited Partnership").
Pursuant to Sections 16.15(A) and 16.15(C) of the First Amended and Restated Agreement of Limited Partnership of PREIT Associates, L.P., dated as of September 30, 1997 (as previously amended, the "Partnership Agreement"), PREIT is authorized to amend certain sections of the Partnership Agreement in its sole discretion and without the consent of any other partner of the Limited Partnership, unless a partner in the Limited Partnership would be adversely affected by such amendment.
PREIT has determined that this Amendment will not adversely affect any partner of the Limited Partnership.
NOW, THEREFORE, PREIT, acting as the sole general partner of the Limited Partnership, hereby agrees as follows:
1. Section 6.1(A) of the Partnership Agreement is hereby amended to add a new subsection (6), to read in its entirety as follows:
"(6) Notwithstanding anything to the contrary herein, except
as may be otherwise specifically provided in any subscription
agreement, contribution agreement or other document governing the
issuance of Units after the date hereof, the first distribution that is
otherwise payable pursuant to Section 6.1 hereof in respect of each
Unit following its issuance (the "First Distribution") shall be an
amount equal to the product of (i) the distribution otherwise payable
in respect of such Unit in the absence of this Section 6.1(A)(6) and
(ii) a fraction whose numerator equals the number of days between the
date of issuance of such Unit and the record date for the First
Distribution, and whose denominator equals the number of days between
the record date for the last distribution made prior to the date of
issuance of such Unit and the record date for the First Distribution;
provided that this Section 6.1(A)(6) shall not apply to Units to be
issued pursuant to the Hillview Contribution Agreement, the Northeast
Contribution Agreement, the Predevelopment Properties Contribution
Agreement, the subscription agreement with Albert H. Marta, dated
January 26, 1998, the TRO Contribution Agreement, the Purchase and Sale
and Contribution Agreement dated as of September 17, 1998 among the
Partnership, Edgewater Associates #3 Limited Partnership and certain
other parties or to any Units issued prior to October 13, 1998."
2. Section 6.1(A)(5) of the Partnership Agreement is hereby amended by inserting the words "or any definitive written agreement entered into on or after October 13, 1998" after the words "TRO Contribution Agreement" at the end of such subsection.
3. The Partnership Agreement, as amended hereby, is hereby ratified and confirmed in all respects.
IN WITNESS WHEREOF, PREIT has caused this Amendment to be executed by its duly authorized representative as of the date first written above.
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
By /s/ Jonathan B. Weller ------------------------------------- Name: Jonathan B. Weller Title: President |
| ARTICLE 5 |
| CIK: 0000077281 |
| NAME: PENNSYLVANIA REAL ESTATE INVESTMENT TRUST |
| CURRENCY: U.S.DOLLARS |
| PERIOD TYPE | 9 MOS |
| FISCAL YEAR END | DEC 31 1998 |
| PERIOD START | JAN 01 1998 |
| PERIOD END | SEP 30 1998 |
| EXCHANGE RATE | 1 |
| CASH | 1,333,000 |
| SECURITIES | 0 |
| RECEIVABLES | 45,525,000 |
| ALLOWANCES | 1,626,000 |
| INVENTORY | 0 |
| CURRENT ASSETS | 0 |
| PP&E | 418,208,000 |
| DEPRECIATION | 59,333,000 |
| TOTAL ASSETS | 404,107,000 |
| CURRENT LIABILITIES | 34,624,000 |
| BONDS | 231,684,000 |
| PREFERRED MANDATORY | 0 |
| PREFERRED | 0 |
| COMMON | 13,300,000 |
| OTHER SE | 124,499,000 |
| TOTAL LIABILITY AND EQUITY | 404,107,000 |
| SALES | 42,076,000 |
| TOTAL REVENUES | 48,685,000 |
| CGS | 0 |
| TOTAL COSTS | 24,581,000 |
| OTHER EXPENSES | 0 |
| LOSS PROVISION | 0 |
| INTEREST EXPENSE | 6,292,000 |
| INCOME PRETAX | 17,812,000 |
| INCOME TAX | 0 |
| INCOME CONTINUING | 17,812,000 |
| DISCONTINUED | 0 |
| EXTRAORDINARY | 0 |
| CHANGES | 0 |
| NET INCOME | 17,812,000 |
| EPS PRIMARY | 1.34 |
| EPS DILUTED | 1.34 |