<PAGE>
- -------------------------------------------------------------------------------
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
For the quarterly period ended November 30, 1996
-------------------------
[ ] Transition Report Pursuant To Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the transition period from ______________________ to _______________________
Commission File Number 1-6300
-----------------------------------------
Pennsylvania Real Estate Investment Trust
------------------------------------------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Pennsylvania 23-6216339
- --------------------------------------------------------------- -------------------------------------
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
455 Pennsylvania Avenue, Suite 135, Ft. Washington, PA 19034
- --------------------------------------------------------------- -------------------------------------
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code (215) 542-9250
-------------------------------------
N/A
--------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last report)
</TABLE>
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.
Shares of beneficial interest outstanding at November 30, 1996: 8,678,098
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This report includes a total of 12 pages.
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<PAGE>
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
CONTENTS
Page
Part I. Financial Information
Financial Statements (Unaudited):
Consolidated Balance Sheets--November 30, 1996
and August 31, 1996 (Audited) 1-2
Consolidated Statements of Income--Three Months
Ended November 30, 1996 and 1995 3
Consolidated Statements of Cash Flows--Three Months
Ended November 30, 1996 and 1995 4
Notes to Consolidated Financial Statements 5-7
Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-10
Part II. Other Information
Item 6 (Items 1 through 5--not applicable) 11
Signatures 12
<PAGE>
Part I. Financial Information
Item 1. Financial Statements
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
CONSOLIDATED BALANCE SHEETS
(Note 1)
ASSETS
November 30, August 31,
1996 1996
------------- ------------
(Unaudited)
INVESTMENTS IN REAL ESTATE, at cost:
Apartment buildings $157,080,000 $156,102,000
Industrial properties 5,078,000 5,078,000
Shopping centers and retail stores 37,379,000 37,362,000
------------ ------------
Total investments in real estate 199,537,000 198,542,000
Less-Accumulated depreciation 46,172,000 44,693,000
------------ ------------
153,365,000 153,849,000
INVESTMENTS IN PARTNERSHIPS AND
JOINT VENTURES, at equity (Note 2) 1,246,000 16,995,000
NOTES RECEIVABLE 1,649,000 1,649,000
------------ ------------
156,260,000 172,493,000
LESS-Allowance for possible losses 1,998,000 2,042,000
------------ ------------
154,262,000 170,451,000
OTHER ASSETS:
Cash and cash equivalents 2,026,000 1,030,000
Rents and sundry receivables 617,000 608,000
Deferred costs, prepaid real estate
taxes and expenses, net 5,597,000 5,636,000
------------ ------------
$162,502,000 $177,725,000
============ ============
The accompanying notes are an integral part of these statements.
(Continued)
-1-
<PAGE>
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
CONSOLIDATED BALANCE SHEETS (CONTINUED)
(Note 1)
LIABILITIES AND BENEFICIARIES' EQUITY
<TABLE>
<CAPTION>
November 30, August 31,
1996 1996
------------ ----------
(Unaudited)
<S> <C> <C>
LIABILITIES:
Mortgage notes payable $ 84,484,000 $ 84,833,000
Bank loans payable 26,941,000 39,315,000
Tenants' deposits and deferred rents 1,199,000 1,422,000
Accrued pension and retirement benefits 1,071,000 1,207,000
Accrued expenses and other liabilities 3,083,000 3,901,000
------------- -------------
116,778,000 130,678,000
------------- -------------
MINORITY INTEREST IN CONSOLIDATED
PARTNERSHIP (Note 2) 626,000 542,000
------------- -------------
COMMITMENTS AND CONTINGENCIES (Note 5)
BENEFICIARIES' EQUITY (Note 3):
Shares of beneficial interest, $1 par; authorized unlimited; issued and
outstanding 8,678,098 shares at November 30, 1996, and 8,676,098
shares at August 31, 1996 8,678,000 8,676,000
Capital contributed in excess of par 53,164,000 53,133,000
Distributions in excess of net income (16,744,000) (15,304,000)
------------- -------------
45,098,000 46,505,000
------------- -------------
$ 162,502,000 $ 177,725,000
============= =============
</TABLE>
The accompanying notes are an integral part of these statements.
-2-
<PAGE>
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
CONSOLIDATED STATEMENTS OF INCOME
(Note 1)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
November 30
----------------------------
1996 1995
------------ ------------
<S> <C> <C>
REVENUES:
Gross revenues from real estate $ 9,968,000 $ 9,638,000
Interest and other income 95,000 38,000
------------ ------------
10,063,000 9,676,000
------------ ------------
EXPENSES:
Property operating expenses 4,013,000 3,782,000
Depreciation and amortization 1,540,000 1,452,000
General and administrative expenses 748,000 671,000
Mortgage and bank loan interest 2,359,000 2,416,000
------------ ------------
8,660,000 8,321,000
------------ ------------
Income before minority interest and equity in
income of partnerships and joint ventures 1,403,000 1,355,000
MINORITY INTEREST (90,000) (76,000)
EQUITY IN INCOME OF PARTNERSHIPS AND
JOINT VENTURES (Note 2) 1,326,000 1,566,000
------------ ------------
NET INCOME $ 2,639,000 $ 2,845,000
============ ============
NET INCOME PER SHARE $ .30 $ .33
============ ============
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 8,678,098 8,676,098
============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
-3-
<PAGE>
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS
(NOTES 1 AND 4)
<TABLE>
<CAPTION>
Three Months Ended
November 30
-------------------------------
1996 1995
------------ ------------
(Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,639,000 $ 2,845,000
Adjustments to reconcile net income to net cash
provided by operating activities-
Minority interest in income of
consolidated partnership 90,000 76,000
Depreciation and amortization 1,540,000 1,452,000
Decrease in allowance for possible losses (44,000) (132,000)
Change in assets and liabilities-
Rents and sundry receivables (9,000) (28,000)
Deferred costs, prepaid real estate taxes and expenses (23,000) (728,000)
Accrued pension and retirement benefits (137,000) (108,000)
Accrued expenses and other liabilities (819,000) (672,000)
Tenants' deposits and deferred rents (221,000) (122,000)
------------ ------------
Net cash provided by operating activities 3,016,000 2,583,000
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investments in wholly owned real estate (995,000) (1,044,000)
Investments in partnerships and joint ventures (7,000) (146,000)
Increase in advances to partnerships and joint ventures (49,000) (60,000)
Cash distributions from partnerships and joint ventures
in excess of equity in income 15,805,000 569,000
Cash distributions to minority partners (6,000) (102,000)
------------ ------------
Net cash provided by (used in)
investing activities 14,748,000 (783,000)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal installments on mortgage notes payable (349,000) (283,000)
Repayment of bank loans payable (12,374,000) (5,182,000)
Increase in mortgage notes payable -- 8,800,000
Payment of deferred financing costs -- (704,000)
Shares of beneficial interest issued 33,000 --
Distributions paid to beneficiaries (4,078,000) (4,078,000)
------------ ------------
Net cash used in financing activities (16,768,000) (1,447,000)
------------ ------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 996,000 353,000
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 1,030,000 1,099,000
------------ ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 2,026,000 $ 1,452,000
============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
-4-
<PAGE>
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED NOVEMBER 30, 1996 AND 1995
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, 1996, 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.
Certain reclassifications of prior year amounts have been made to conform with
current year presentation.
2. INVESTMENTS IN PARTNERSHIPS AND JOINT VENTURES:
The following presents summarized financial information as to the Registrant's
equity in the assets and liabilities of the 27 partnerships and joint ventures
at November 30, 1996 and August 31, 1996, and the Registrant's equity in income
for the three months ended November 30, 1996 and 1995:
-5-
<PAGE>
<TABLE>
<CAPTION>
November 30, August 31,
ASSETS 1996 1996
------------- -------------
(Unaudited)
<S> <C> <C>
Investments in real estate, at cost:
Apartment buildings $ 106,207,000 $ 105,480,000
Industrial property 1,264,000 1,264,000
Shopping centers and retail stores 131,451,000 128,936,000
Land held for development 4,446,000 4,446,000
------------- -------------
Total investments in real estate 243,368,000 240,126,000
Less-accumulated depreciation 75,663,000 73,989,000
------------- -------------
167,705,000 166,137,000
Cash and cash equivalents 8,084,000 5,589,000
Other assets 6,223,000 6,020,000
------------- -------------
Total assets 182,012,000 177,746,000
------------- -------------
LIABILITIES AND PARTNERS' EQUITY
Mortgage notes payable 170,410,000 133,578,000
Bank loans payable 8,263,000 9,124,000
Other liabilities 4,277,000 4,436,000
------------- -------------
Total liabilities 182,950,000 147,138,000
------------- -------------
Total partners' equity (938,000) 30,608,000
Partners' share (2,184,000) (13,613,000)
------------- -------------
Investment in partnerships and joint ventures $ 1,246,000 $ 16,995,000
============= =============
EQUITY IN INCOME OF PARTNERSHIPS AND JOINT VENTURES
Three Months Ended
November 30
--------------------------------
1996 1995
------------ -------------
(Unaudited)
Gross revenues from real estate $ 13,545,000 $ 13,065,000
------------ -------------
Expenses:
Property operating expenses 5,202,000 4,992,000
Mortgage and bank loan interest 3,858,000 3,187,000
Depreciation and amortization 1,756,000 1,705,000
------------ -------------
10,816,000 9,884,000
------------ -------------
2,729,000 3,181,000
Partners' share (1,403,000) (1,615,000)
------------ -------------
Equity in income of partnerships and joint ventures $ 1,326,000 $ 1,566,000
============ =============
</TABLE>
-6-
<PAGE>
One partnership, in which the Registrant is a general partner and has control as
provided in the partnership agreement, has been consolidated for financial
statement presentation. All of the assets and liabilities of such partnership
are included in the consolidated financial statements at 100%. The minority
partner's interest is 35%.
3. DISTRIBUTIONS:
The per-share amount declared at the date of this report and the per-share
amount declared in the comparable period in fiscal 1996 for distribution are as
follows:
Amount
Per
Date Declared Record Date Payment Date Share
------------------ ---------------- ------------------ ------
December 20, 1996 January 31, 1997 February 18, 1997 $.47
December 15, 1995 January 31, 1996 February 15, 1996 $.47
4. CASH FLOW INFORMATION:
Cash paid for interest was $2,344,000 and $2,514,000 for the three months ended
November 30, 1996 and 1995, respectively.
5. COMMITMENTS AND CONTINGENCIES:
Environmental matters have arisen at certain properties in which the Registrant
has an interest for which reserves have previously been established. During the
three months ended November 30, 1996, the Registrant advanced funds totaling
$1,000 which were recorded against the previously established reserves.
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.
-7-
<PAGE>
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
In September 1996, Lehigh Valley Mall, which is owned by a partnership in which
the Registrant has a 50% interest, was refinanced in the amount of $54,000,000.
The new loan was sufficient to repay the existing debt of approximately
$22,000,000, fund renovations to the mall of $5,000,000, and provide excess
proceeds which were distributed to the owners. The Registrant's share of the
distribution was $13,000,000. The new ten-year mortgage loan bears interest at
7.9% with principal payments based on a twenty-five year amortization schedule.
The renovations to Lehigh Valley Mall were completed in November 1996 and
consist primarily of improvements to internal common areas.
In September 1996, a partnership in which the Registrant has a 50% interest
completed the refinancing of its 232-unit apartment community in West Chester,
Pennsylvania, with the placement of a $5,400,000 twenty-year mortgage maturing
in October 2016. The interest rate is 8.345% and amortization is based on a
thirty-year schedule. The Registrant received $2,400,000 of the net proceeds of
this refinancing while the Registrant's partners received the balance pursuant
to the terms of the Partnership Agreement.
Subsequent to the end of the first quarter, the Registrant sold its partnership
interests in three shopping centers in Lancaster, Waynesburg, and Beaver Falls,
Pennsylvania, to its partners for a cash consideration of $2,000,000 plus the
assumption of debt of $3,500,000. The Registrant realized a gain of
approximately $1,400,000.
-8-
<PAGE>
Funds from operations (FFO) increased by $92,000 for the three months ended
November 30, 1996, as compared to the same period in 1995 as follows:
<TABLE>
<CAPTION>
Three Months Ended
November 30
Funds from Operations(1) -----------------------------
- ------------------------------------------------------ 1996 1995
----------- -----------
<S> <C> <C>
Net income $ 2,639,000 $ 2,845,000
Add:
Depreciation and amortization-
Wholly owned and consolidated partnerships (2) 1,474,000 1,388,000
Unconsolidated partnerships and joint ventures 852,000 844,000
Refinancing prepayment penalty 214,000 --
Less:
Depreciation of non-real estate assets (51,000) (49,000)
Amortization of deferred financing costs (78,000) (70,000)
----------- -----------
Funds from operations $ 5,050,000 $ 4,958,000
=========== ===========
</TABLE>
(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 Trust's operating performance, or to cash flows
from operating activities (as determined in accordance with GAAP) as a measure
of liquidity.
(2) Net of minority interest of $66,000 in 1996 and $64,000 in 1995.
Net cash provided by operating activities increased to $3,016,000 from
$2,583,000 for the three months ended November 30, 1996, as compared to the
three months ended November 30, 1995. The increase is a result of the
non-recurring prepayment of real estate taxes and other expenses of $484,000 for
Boca Palms Apartments and normal timing-related prepayments of approximately
$150,000 for the three months ended November 30, 1995. This increase is offset
by the decrease in net income of $206,000, the components of which are discussed
below in results of operations.
Net cash provided by investing activities was $14,748,000 for the three months
ended November 30, 1996 as compared to net cash used in investing activities of
$783,000 in the same period last year. The increase is attributable to aggregate
partnership distributions of $15,400,000 the Registrant received from the
refinancing of Lehigh Valley Mall and Cambridge Hall Apartments discussed above.
Net cash used in financing activities was $16,768,000 for the three months ended
November 30, 1996 as compared to $1,447,000 used in the same period last year.
Financing activities in the three months ended November 30, 1996 included a
reduction in bank loans payable of $12,373,000 and distributions paid to
beneficiaries of $4,079,000. Financing activities in the three months ended
November 30, 1995 included a reduction in bank loans payable of $5,182,000, an
increase in mortgage notes payable of $8,800,000 on Shenandoah Apartments, and
distributions paid to beneficiaries of $4,078,000.
-9-
<PAGE>
Results of Operations
Three Month Periods Ended November 30, 1996 and 1995
Gross revenues from real estate increased by $330,000 to $9,968,000 for the
three month period ended November 30, 1996 as compared to the same period in the
prior year. The 1996 period included $195,000 of revenues attributable to
Forestville Plaza which the Registrant acquired in the prior fiscal year. The
1995 period included $127,000 of revenues attributable to Chateau Apartments
which the Registrant sold in the prior fiscal year. Revenues from properties
owned during both periods increased by $262,000 primarily as a result of
increases in apartment revenues.
Operating expenses increased by $232,000 to $4,012,000. The 1996 period included
$80,000 of expenses attributable to Forestville Plaza which the Registrant
acquired in the prior fiscal year. The 1995 period included $80,000 of expenses
attributable to Chateau Apartments which the Registrant sold in the prior year.
Operating expenses from properties owned during both periods increased by
$232,000.
Depreciation and amortization increased by $88,000 to $1,540,000 primarily as a
result of the addition of the Forestville property and the deletion of the
Chateau property.
General and administrative expenses increased by $77,000 to $748,000 due to
normal increases in this expense.
Mortgage and bank loan interest expense decreased $57,000 to $2,359,000 as a
result of decreased borrowing against the Registrant's credit facility.
Equity in income of partnerships and joint ventures decreased by $240,000 to
$1,326,000 primarily as a result of an increase in mortgage interest expense of
$327,000 primarily due to the refinancing of Lehigh Valley Mall and Cambridge
Hall Apartments during the three months ended November 30, 1996. Mortgage
interest expense includes a prepayment penalty in the amount of $214,000 due to
the Lehigh Valley Mall refinancing.
Net income for the quarter ended November 30, 1996 decreased to $2,639,000 from
$2,845,000 as reported in the comparable period in the prior year.
-10-
<PAGE>
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits--(27)--Financial Data Schedule (included in electronic
filing format)
(b) Reports on Form 8-K--None
-11-
<PAGE>
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 on its behalf by the undersigned thereunto duly authorized.
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
-----------------------------------------
Registrant
By /s/ Jonathan B. Weller
----------------------------------------------------
Jonathan B. Weller,
President and Chief Operating Officer
By /s/ Dante J. Massimini
----------------------------------------------------
Dante J. Massimini,
Senior Vice President and Treasurer
Date: January 14, 1997
-12-
<PAGE>
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 on its behalf by the undersigned thereunto duly authorized.
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
-----------------------------------------
Registrant
By
----------------------------------------------------
Jonathan B. Weller,
President and Chief Operating Officer
By
----------------------------------------------------
Dante J. Massimini,
Senior Vice President and Treasurer
Date: January 14, 1997
-12-
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000077281
<NAME> PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
<CURRENCY> DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-START> SEP-01-1996
<PERIOD-END> NOV-30-1996
<EXCHANGE-RATE> 1
<CASH> 2,026,000
<SECURITIES> 0
<RECEIVABLES> 9,109,000
<ALLOWANCES> 1,998,000
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 199,537,000
<DEPRECIATION> 46,172,000
<TOTAL-ASSETS> 162,502,000
<CURRENT-LIABILITIES> 5,979,000
<BONDS> 111,425,000
0
0
<COMMON> 8,678,000
<OTHER-SE> 36,420,000
<TOTAL-LIABILITY-AND-EQUITY> 162,502,000
<SALES> 9,968,000
<TOTAL-REVENUES> 11,299,000
<CGS> 0
<TOTAL-COSTS> 6,301,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,359,000
<INCOME-PRETAX> 2,639,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,639,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,639,000
<EPS-PRIMARY> $.30
<EPS-DILUTED> $.30
</TABLE>
