<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
----------
FORM 8-K/A-1
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) September 17, 1998
---------------------
Pennsylvania Real Estate Investment Trust
- --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
Pennsylvania 1-6300 23-6216339
- --------------------------------------------------------------------------------
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
455 Pennsylvania Avenue, Suite 135, Fort Washington, Pennsylvania 19034
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (215) 542-9250
--------------------------
(Former Name or Former Address, if Changed Since Last Report)
<PAGE>
Item 2. Acquisition or Disposition of Assets.
-------------------------------------
The undersigned registrant hereby amends and restates subparagraphs (a)
and (b) of Item 7 of its Current Report on Form 8-K dated September 17, 1998,
filed on October 2, 1998, as set forth below:
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
------------------------------------------------------------------
(a) Financial Statements
--------------------
(3) Report of Independent Public Accountants
Statements of Revenue and Certain Expenses for the
Year ended December 31, 1997 (audited) and the Six
Months Ended June 30, 1998 (unaudited)
Notes to Statements of Revenue and Certain Expenses
(b) Pro Forma Financial Information
-------------------------------
(1) Unaudited Pro Forma Consolidating Financial
Information:
Pro Forma Consolidating Balance Sheet as of
June 30, 1998
Pro Forma Consolidating Statement of Income for the
Twelve Months Ended August 31, 1997
Pro Forma Consolidating Statement of Income for the
Four Months Ended December 31, 1997
Pro Forma Consolidating Statement of Income for the
Six Months Ended June 30, 1998
-2-
<PAGE>
(c) Exhibits
--------
2.1* Purchase and Sale and Contribution Agreement dated as
of September 17, 1998 by and among Edgewater
Associates #3 Limited Partnership, an Illinois
limited partnership, Equity-Prince George's Plaza,
Inc., an Illinois corporation, PREIT Associates,
L.P., a Delaware limited partnership and PR PG Plaza
LLC, a Delaware limited liability company.
23 Consent of Arthur Andersen LLP
Pursuant to Item 601(b)(2) of Regulation S-K, the schedules and
exhibits to the Purchase and Sale and Contribution Agreement are omitted. The
Purchase and Sale and Contribution Agreement identifies the contents of all
schedules and exhibits thereto, and the registrant agrees to furnish
supplementally copies of such schedules and exhibits to the Securities and
Exchange Commission upon request.
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
Date: November 6, 1998 By: /s/ Jonathan B. Weller
---------------------------------------
Jonathan B. Weller
President and Chief Operating Officer
-3-
<PAGE>
Exhibit Index
-------------
Number Exhibit Page Number
- ------ ------- -----------
23 Consent of Arthur Andersen LLP
-4-
<PAGE>
PRINCE GEORGE'S PLAZA
STATEMENT OF REVENUE
AND CERTAIN EXPENSES
AS OF DECEMBER 31, 1997
TOGETHER WITH AUDITORS' REPORT
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Pennsylvania Real Estate Investment Trust:
We have audited the statement of revenue and certain expenses of Prince George's
Plaza for the year ended December 31, 1997. This financial statement is the
responsibility of the Property's management. Our responsibility is to express an
opinion on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
The statement of revenue and certain expenses was prepared for the purpose of
complying with the rules and regulations of the Securities and Exchange
Commission for inclusion in a current report on Form 8-K of Pennsylvania Real
Estate Investment Trust, as described in Note 1, and is not intended to be a
complete presentation of the Property's revenue and expenses.
In our opinion, the financial statement referred to above presents fairly, in
all material respects, the revenue and certain expenses of Prince George's Plaza
for the year ended December 31, 1997, in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Philadelphia, Pennsylvania,
July 15, 1998
<PAGE>
PRINCE GEORGE'S PLAZA
---------------------
STATEMENTS OF REVENUE AND CERTAIN EXPENSES (NOTE 1)
---------------------------------------------------
<TABLE>
<CAPTION>
For the
Six Months
For the Year Ended
Ended June 30,
December 31, 1998
1997 (Unaudited)
----------- -----------
<S> <C> <C>
REVENUE:
Minimum rent (Note 2) $ 6,759,611 $ 3,418,745
Percentage rent (Note 2) 505,791 300,348
Tenant reimbursements 2,767,133 1,418,575
Other income 102,336 194,885
----------- -----------
Total revenue 10,134,871 5,332,553
----------- -----------
CERTAIN EXPENSES:
Maintenance and other operating expenses 2,795,330 1,193,496
Utilities 304,358 107,041
Real estate taxes 747,428 372,696
----------- -----------
Total certain expenses 3,847,116 1,673,233
----------- -----------
REVENUE IN EXCESS OF CERTAIN EXPENSES $ 6,287,755 $ 3,659,320
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
PRINCE GEORGE'S PLAZA
---------------------
NOTES TO STATEMENT OF REVENUE AND CERTAIN EXPENSES
--------------------------------------------------
DECEMBER 31, 1997
-----------------
1. BASIS OF PRESENTATION:
---------------------
The statement of revenue and certain expenses reflect the operations of Prince
George's Plaza, a regional mall located in Hyattsville, Maryland (the
"Property"). The Property is expected to be acquired by Pennsylvania Real Estate
Investment Trust (the "Company") from an entity affiliated with the principals
of Equity Properties and Development L.P. (the "Seller") in September 1998. The
Property has an aggregate net rentable area of 748,000 square feet and is
approximately 91% leased as of December 31, 1997. This statement of revenue and
certain expenses is to be included in the Company's current report on Form 8-K,
as the above described transaction has been deemed significant pursuant to the
rules and regulations of the Securities and Exchange Commission.
The accounting records of the Property are maintained on a modified cash basis.
Adjusting entries have been made to present the accompanying financial
statements in accordance with generally accepted accounting principles. The
accompanying financial statements exclude certain expenses such as interest,
depreciation and amortization, and other costs not directly related to the
future operations of the Property.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of revenues and expenses during the reporting period
and disclosure of contingent assets and liabilities at the date of the financial
statements. The ultimate results could differ from those estimates.
The statement of revenue and certain expenses for the six months ended June 30,
1998 is unaudited; however, in the opinion of management, all adjustments
(consisting solely of normal recurring adjustments) necessary for the fair
presentation of the statement of revenue and certain expenses for the interim
period have been included. The results of the interim periods are not
necessarily indicative of the results for the full year.
2. OPERATING LEASES:
----------------
Minimum rent presented for the year ended December 31, 1997, includes
straight-line adjustments for rental revenue increases in accordance with
generally accepted accounting principles. The aggregate rental revenue increase
resulting from the straight-line adjustments was $117,121 and $17,117
(unaudited) for the year ended December 31, 1997 and the six months ended June
30, 1998, respectively.
<PAGE>
The Property is leased to tenants under operating leases with expiration dates
extending to the year 2008. No individual tenant had annual minimum rent greater
than 10% of total annual minimum rent. Future minimum rentals under
noncancelable operating leases, excluding tenant reimbursements of operating
expenses as of December 31, 1997, are as follows:
1998 $ 5,812,746
1999 5,242,871
2000 4,339,839
2001 3,032,768
2002 2,424,706
Thereafter 5,203,741
Certain leases also include provisions requiring tenants to reimburse the
Property for management costs and other operating expenses up to stipulated
amounts.
Certain other leases also include provisions requiring additional contingent
rental amounts ("percentage rents") based upon the tenant's achieving certain
sales thresholds. In May 1998, the Emerging Issues Task Force reached a final
consensus on EITF Issue 98-9, "Accounting for Contingent Rent in Interim
Financial Periods," that lessors should defer recognition of contingent rental
income until the lessee's achievement of the specified target that triggers the
contingent rental amount. The Property has adopted the provisions of this
pronouncement for the six months ended June 30, 1998 and accordingly has
recorded only percentage rent in excess of the specified thresholds achieved
during this period.
3. RELATED PARTY TRANSACTIONS:
--------------------------
The Property paid management fees of $195,985 and $99,375 (unaudited) for the
year ended December 31, 1997 and the six months ended June 30, 1998,
respectively, to PREIT-RUBIN, Inc., a related party to the Company, based on
percentages as defined in the management agreement. These management fees are
included within maintenance and other operating expenses in the statements of
revenue and certain expenses.
<PAGE>
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
PRO FORMA CONSOLIDATING FINANCIAL INFORMATION
On February 17, 1998, the Registrant filed a Form 10-Q for the transition period
ended December 31, 1997. As such, the following sets forth the pro forma
consolidating balance sheet of the Registrant as of June 30, 1998 and the pro
forma consolidating statements of income for the year ended August 31, 1997, the
four-month transition period ended December 31, 1997, and the six-month period
ended June 30, 1998.
The unaudited pro forma consolidating financial information should be read in
conjunction with the historical financial statements of the Registrant, The
Rubin Organization, Inc. (subsequently renamed PREIT-RUBIN, Inc.), Magnolia
Mall, North Dartmouth Mall, Oxford Valley Road Associates, Prince Georges
Plaza, Festival at Oaklands and the Woods Apartments and the related notes
thereto. In management's opinion, all adjustments necessary to reflect the
effects of the transactions have been made.
The accompanying unaudited pro forma consolidating financial information is
presented as if the transactions described below had been consummated on June
30, 1998 for balance sheet purposes and September 1, 1996 for purposes of the
statements of income:
o The Registrant acquired Prince Georges Plaza located in Hyattsville,
Maryland on September 17, 1998 for a purchase price of approximately $65.0
million consisting of $19.0 million in cash, $3.0 million through the
issuance of OP Units and $43.0 million through the assumption of debt.
o The Registrant acquired The Festival at Oaklands located in Exton,
Pennsylvania on August 27, 1998 for a cash purchase price of approximately
$18.4 million.
o The Registrant acquired The Woods Apartments located in Ambler,
Pennsylvania on August 7, 1998 for a purchase price of approximately $21.2
million consisting of $12.2 million in cash, $1.7 million through the
issuance of OP Units and $7.3 million through the assumption of debt.
o The Registrant consummated an offering in December 1997 (the "Offering")
and applied the net proceeds therefrom as described below:
- The Company issued 4,600,000 shares of beneficial interest at
$22.375 per share of which 600,000 shares related to the
underwriter's exercise of the over-allotment option.
- The $8.8 million mortgage on Cobblestone Apartments was
prepaid in full.
- The remaining net proceeds of the Offering were used to repay
amounts outstanding on the Registrant's revolving credit
facility (the "Credit Facility").
o The Registrant acquired The Rubin Organization ("TRO") on September 30,
1997 (the "TRO Transaction") which involved a number of related
transactions, the combined effect of which was to form and capitalize an
Operating Partnership and to transfer ownership of the Registrant's direct
and indirect interests in its existing properties, or the economic benefits
thereof, to the Operating Partnership, and to effect the acquisitions
described below:
- TRO Acquisition. The Operating Partnership acquired all of the
non-voting common shares of TRO, constituting 95% of all of
the total equity of TRO, in exchange for the issuance of
200,000 Class A OP Units and a contingent obligation to issue
up to 800,000 additional Class A OP Units over the following
five-year period if the Registrant achieves certain specified
levels of funds from operations, on a per share basis, over
such period.
- Existing Retail Properties Acquisition. The Operating
Partnership acquired the interests of certain affiliates of
TRO ("TRO Affiliates") in four existing shopping centers, or
portions of shopping centers (the "Existing Retail
Properties").
Two of the properties (Magnolia Mall and North Dartmouth Mall)
were purchased from Equity Properties and Development Limited
Partnership ("EPDLP") for aggregate consideration, excluding
transaction costs, of approximately $80.0 million, of which
(i) $25.2 million represents an assumable mortgage, (ii) $5.0
million was paid through the issuance of approximately 213,000
Class B Operating Partnership ("OP") units to EPDLP for their
interest in Magnolia Mall; and (iii) the balance was financed
with borrowings under the Credit Facility.
<PAGE>
The Operating Partnership issued approximately 233,000
additional Class A OP units to TRO Affiliates in respect of
their 50% equity interest in the Court at Oxford Valley.
- Development Properties Acquisition. The Operating Partnership
became obligated to acquire, upon completion of construction,
for Class A OP Units, the interests of certain TRO Affiliates
in two shopping centers currently under construction, at
prices based upon a pre-determined formula.
o The Operating Partnership also acquired the rights of certain TRO
Affiliates with respect to three potential shopping center sites in
exchange for (i) a loan of cash to TRO in the amount of $3.4 million
representing actual out-of-pocket expenditures of TRO incurred with respect
of such properties through the Closing Date, and (ii) an obligation to
issue, upon completion of any property subsequently developed, Class A OP
Units for one-half of the difference between the aggregate value of all
such properties at the time of completion and the all-in-cost of all such
properties.
As these transactions are expected to occur in the future at amounts that
are not currently determinable, the financial impact of such future events
has not been reflected in the accompanying pro forma financial statements.
All of the acquisitions described above have been recorded by the Registrant
using the purchase method of accounting.
The pro forma consolidating financial information is unaudited and is not
necessarily indicative of what the actual financial position or results of
operations of the Registrant would have been had the transactions described
above been consummated as of the dates indicated, nor does it purport to
represent the future financial position and the results of operations of the
Registrant.
<PAGE>
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
PRO FORMA CONSOLIDATING BALANCE SHEET
AS OF June 30, 1998
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Festival
Woods at Prince Georges PREIT
PREIT Apartments Oaklands Plaza Pro Forma,
Historical Acquisition Acquisition Acquisition As Adjusted
---------- ----------- -------- ----------- -----------
Assets (A) (A) (A)
<S> <C> <C> <C> <C> <C>
Investments in Real Estate, at cost:
Multifamily properties .................................... $ 162,920 $ 21,200 $ -- $ -- $ 184,120
Industrial properties ..................................... 5,078 -- -- -- 5,078
Retail properties ......................................... 120,369 -- 18,400 65,000 203,769
Properties under development .............................. 13,499 -- -- -- 13,499
---------------------------------------------------------------
Total investments in real estate .......................... 301,866 21,200 18,400 65,000 406,466
Less - accumulated depreciation ........................ 57,204 -- -- -- 57,204
---------------------------------------------------------------
244,662 21,200 18,400 65,000 349,262
Investment in PREIT-RUBIN, Inc. ........................... 4,113 -- -- -- 4,113
Investments in partnerships and joint ventures, at equity . 20,271 -- -- -- 20,271
Advances to PREIT-RUBIN, Inc. ............................. 3,613 -- -- -- 3,613
---------------------------------------------------------------
272,659 21,200 18,400 65,000 377,259
Less - allowance for possible losses ...................... 1,672 -- -- -- 1,672
---------------------------------------------------------------
270,987 21,200 18,400 65,000 375,587
Other Assets:
Cash and cash equivalents ................................. 1,113 -- -- -- 1,113
Rents and sundry receivables .............................. 1,219 -- -- -- 1,219
Deferred costs, prepaid real estate taxes and expenses, net 6,754 -- -- -- 6,754
---------------------------------------------------------------
$ 280,073 $ 21,200 $ 18,400 $ 65,000 $ 384,673
===============================================================
Liabilities and Shareholders' Equity
Mortgage notes payable .................................... $ 64,766 $ 7,340 $ -- $ 43,000 $ 115,106
Bank and other loans payable .............................. 55,126 12,160 18,400 19,000 104,686
Construction cost payable ................................. 1,090 -- -- -- 1,090
Tenants' deposits and deferred rents ...................... 1,096 -- -- -- 1,096
Accrued pension and retirement benefits ................... 977 -- -- -- 977
Accrued expenses and other liabilities .................... 4,148 -- -- -- 4,148
---------------------------------------------------------------
127,203 19,500 18,400 62,000 227,103
---------------------------------------------------------------
Minority interest ......................................... 15,837 1,700 -- 3,000 20,537
---------------------------------------------------------------
Shareholders' Equity
Shares of beneficial interest ............................. 13,300 -- -- -- 13,300
Capital contributed in excess of par ...................... 144,942 -- -- -- 144,942
Distributions in excess of net income ..................... (21,209) -- -- -- (21,209)
---------------------------------------------------------------
137,033 -- -- -- 137,033
---------------------------------------------------------------
$ 280,073 $ 21,200 $ 18,400 $ 65,000 $ 384,673
===============================================================
</TABLE>
The accompanying notes and management's assumptions are
an integral part of this statement.
<PAGE>
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
PRO FORMA CONSOLIDATING STATEMENT OF INCOME
FOR THE TWELEVE MONTHS ENDED AUGUST 31, 1997
(Unaudited)
(In thousands, except share and per share data)
<TABLE>
<CAPTION>
1997 Events 1998 Events
-------------------------------- -----------
Woods
PREIT The TRO The Apartments
Historical Transaction Offering Historical
---------- ----------- -------- ----------
<S> <C> <C> <C> <C>
Revenues
Gross revenues from real estate ..... $ 40,231 $ 12,490 (a) $ -- $ 2,687
Interest and other income ........... 254 234 (b) -- 126
------------------------- ----------------------------
Total revenues ...................... 40,485 12,724 -- 2,813
------------------------- ----------------------------
Expenses
Property operating expenses ......... 16,289 3,964 (a) -- 1,116
Depreciation and amortization ....... 6,259 1,918 (c) -- --
General and administrative expenses . 3,324 -- -- --
Mortgage and bank loan interest ..... 9,086 6,183 (d) (6,102) (g) --
Provisions for losses on investments. 500 -- -- --
------------------------- ----------------------------
35,458 12,065 (6,102) 1,116
------------------------- ----------------------------
Income before gains on sales of
interests in real estate, equity in
unconsolidated entities and minority
interest ............................ 5,027 659 6,102 1,697
Equity in income of PREIT-RUBIN, Inc. -- 192 (e) -- --
Equity in income of partnerships and
joint ventures ...................... 4,337 420 (f) -- --
Gains on sales of interests in real
estate............................... 1,069 -- -- --
------------------------- ----------------------------
Income before minority interest ..... 10,433 1,271 6,102 1,697
Minority interest ................... (198) -- -- --
------------------------- ----------------------------
Net income (loss) ..................... $ 10,235 $ 1,271 $ 6,102 $ 1,697
------------------------- ----------------------------
Basic Net Income Per Share .......... $ 1.18
--------
Diluted Net Income Per Share ........ $ 1.18
--------
Weighted Average Number of Shares
Outstanding:
Basic ............................. 8,679
--------
Diluted ........................... 8,691
--------
</TABLE>
<PAGE>
RESTUBBED TABLE
<TABLE>
<CAPTION>
1998 Events
--------------------------
Prince
Festival at Georges
Oaklands Plaza Pro Forma PREIT
Historical Historical Adjustments Pro Forma
---------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Revenues
Gross revenues from real estate ..... $ 2,216 $ 9,955 $ -- $ 67,579
Interest and other income ........... -- -- -- 614
------------------------------------------- ---------
Total revenues ...................... 2,216 9,955 -- 68,193
------------------------------------------- ---------
Expenses
Property operating expenses ......... 527 3,606 -- 25,502
Depreciation and amortization ....... -- -- 2,092 (h) 10,269
General and administrative expenses . -- -- -- 3,324
Mortgage and bank loan interest ..... -- -- 8,056 (i) 17,223
Provisions for losses on investments. -- -- -- 500
------------------------------------------- ---------
527 3,606 10,148 56,818
------------------------------------------- ---------
Income before gains on sales of
interests in real estate, equity in
unconsolidated entities and minority
interest............................. 1,689 6,349 (10,148) 11,375
Equity in income of PREIT-RUBIN, Inc. -- -- -- 192
Equity in income of partnerships and
joint ventures ...................... -- -- -- 4,757
Gains on sales of interests in real
estate............................... -- -- -- 1,069
------------------------------------------- ---------
Income before minority interest ..... 1,689 6,349 (10,148) 17,393
Minority interest ................... -- -- (1,035) (j) (1,233)
------------------------------------------- ---------
Net income (loss) ..................... $ 1,689 $ 6,349 $(11,183) $ 16,160
------------------------------------------- ---------
Basic Net Income Per Share .......... $ 1.22
---------
Diluted Net Income Per Share ........ $ 1.22
---------
Weighted Average Number of Shares
Outstanding:
Basic ............................. 13,279
---------
Diluted ........................... 13,291
---------
</TABLE>
The accompanying notes and management's assumptions are
an integral part of this statement.
<PAGE>
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
PRO FORMA CONSOLIDATING STATEMENT OF INCOME
FOR THE FOUR MONTHS ENDED DECEMBER 31, 1997
(Unaudited)
(In Thousands, except Per Share Data)
<TABLE>
<CAPTION>
1997 Events 1998 Events
---------------------------------- -----------
Woods
PREIT The TRO The Apartments
Historical Transaction Offering Acquisition
---------- ----------- -------- -----------
Revenues
<S> <C> <C> <C> <C>
Gross revenues from real estate .......... $ 17,170 $ 1,008 (k) $ -- $ 915
Interest and other income ................ 82 32 (l) -- 38
--------------------------------------------------------------
Total revenues ........................... 17,252 1,040 -- 953
--------------------------------------------------------------
Expenses
Property operating expenses .............. 6,835 291 (k) -- 384
Depreciation and amortization ............ 2,695 160 (m) -- --
General and administrative expenses ...... 1,088 -- -- --
Mortgage and bank loan interest .......... 4,349 515 (n) (1,906) (q) --
--------------------------------------------------------------
14,967 966 (1,906) 384
--------------------------------------------------------------
Income before equity in unconsolidated
entities, gains on sales of interest in
real estate and minority interest......... 2,285 74 1,906 569
Equity in income of PREIT-RUBIN, Inc. .... 260 751 (o) -- --
Equity in income of partnerships and joint
ventures.................................. 2,101 29 (p) -- --
Gains on sales of interests in real estate 2,090 -- -- --
--------------------------------------------------------------
Income before minority interest and
extraordinary item........................ 6,736 854 1,906 569
Minority interest ........................ (474) -- -- --
Extraordinary loss on early extinguishment
of debt .................................. (300) -- -- --
--------------------------------------------------------------
Net income $5,962 $ 854 $ 1,906 $ 569
==============================================================
BASIC INCOME PER SHARE:
Income before extraordinary item per share
Extraordinary loss on early extinguishment $ 0.69
of debt ................................... (0.03)
---------
Net Income Per Share ...................... $ 0.66
=========
Weighted Average Number of Shares Outstanding 9,025
=========
DILUTED INCOME PER SHARE:
Income before extraordinary item per share. $ 0.69
Extraordinary loss on early extinguishment
of debt.................................... (0.03)
---------
Net Income Per Share....................... $ 0.66
=========
Weighted Average Number of Shares
Outstanding................................ 9,049
=========
</TABLE>
<PAGE>
RESTUBBED TABLE
<TABLE>
<CAPTION>
1998 Events
------------------------------
Prince
Festival At Georges
Oaklands Plaza Pro Forma PREIT
Acquisition Acquisition Adjustments Pro Forma
----------- ----------- ----------- ---------
Revenues
<S> <C> <C> <C> <C>
Gross revenues from real estate .......... $ 799 $ 3,470 $ -- $ 23,362
Interest and other income ................ -- -- -- 152
-----------------------------------------------------------------
Total revenues ........................... 799 3,470 -- 23,514
-----------------------------------------------------------------
Expenses
Property operating expenses .............. 227 1,398 -- 9,135
Depreciation and amortization ............ -- -- 697 (r) 3,552
General and administrative expenses ...... -- -- -- 1,088
Mortgage and bank loan interest .......... -- -- 2,692 (s) 5,650
-----------------------------------------------------------------
227 1,398 3,389 19,425
-----------------------------------------------------------------
Income before equity in unconsolidated
entities, gains on sales of interest in
real estate and minority interest......... 572 2,072 (3,389) 4,089
Equity in income of PREIT-RUBIN, Inc. .... -- -- -- 1,011
Equity in income of partnerships and joint
ventures.................................. -- -- -- 2,130
Gains on sales of interests in real estate -- -- -- 2,090
-----------------------------------------------------------------
Income before minority interest and
extraordinary item ....................... 572 2,072 (3,389) 9,320
Minority interest ........................ -- -- (162) (t) (636)
Extraordinary Loss on early extinguishment -- -- -- (300)
-----------------------------------------------------------------
of debt .................................. $ 572 $ 2,072 $ (3,551) $ 8,384
=================================================================
Net income
BASIC INCOME PER SHARE:
Income before extraordinary item per share $ 0.64
Extraordinary loss on early extinguishment
of debt .................................. (0.02)
--------
Net Income Per Share ..................... $ 0.62
========
Weighted Average Number of Shares Outstanding 13,625
========
DILUTED INCOME PER SHARE:
Income before extraordinary item per share $ 0.64
Extraordinary loss on early extinguishment
of debt .................................. (0.02)
--------
Net Income Per Share ..................... $ 0.62
========
Weighted Average Number of Shares
Outstanding .............................. 13,649
========
</TABLE>
The accompanying notes and management's assumptions
are an integral part of this statement.
<PAGE>
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
PRO FORMA CONSOLIDATING STATEMENT OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 1998
(Unaudited)
(In Thousands, except Per Share Data)
<TABLE>
<CAPTION>
Woods Festival at Prince Georges
PREIT Apartments Oaklands Plaza Pro Forma PREIT
Historical Historical Historical Historical Adjustments Pro Forma
---------- ---------- ---------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Revenues
Gross revenues from real estate ......................... $ 27,308 $ 1,449 $ 1,094 $ 5,332 $ -- $ 35,183
Interest and other income ............................... 255 -- 255
--------------------------------------------------------------------
27,563 1,449 1,094 5,332 -- 35,438
--------------------------------------------------------------------
Expenses`
Property operating expenses ............................. 10,019 558 281 1,673 -- 12,531
Depreciation and amortization ........................... 4,251 -- -- -- 1,046 (u) 5,297
General and administrative expenses ..................... 1,607 -- -- -- -- 1,607
Mortgage and bank loan interest ......................... 3,834 -- -- -- 3,976 (v) 7,810
--------------------------------------------------------------------
19,711 558 281 1,673 5,022 27,245
--------------------------------------------------------------------
Income before equity in unconsolidated entities, gains on
sales of interests in real estate, and minority interest 7,852 891 813 3,659 (5,022) 8,193
Equity in loss of PREIT-RUBIN, Inc. ..................... (859) -- -- -- -- (859)
Equity in income of partnerships and joint ventures ..... 2,689 -- -- -- -- 2,689
Gains on sales of interests in real estate income before
minority interest ....................................... 1,766 -- -- -- -- 1,766
--------------------------------------------------------------------
Income before minority interest ......................... 11,448 891 813 3,659 (5,022) 11,789
Minority interest ....................................... (652) -- -- -- (172)(w) (824)
--------------------------------------------------------------------
Net income ................................................ $ 10,796 $ 891 $ 813 3,659 $ (5,194) $10,965
====================================================================
Basic Net Income Per Share ............................. $ 0.81 $ 0.82
======== =======
Diluted Net Income Per Share $ 0.81 $ 0.82
======== =======
Weighted Average Number of Shares Outstanding
Basic 13,297 13,297
======== =======
Diluted 13,324 13,324
======== =======
</TABLE>
The accompanying notes and management's assumptions are
an integral part of this statement.
<PAGE>
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
NOTES AND MANAGEMENT'S ASSUMPTIONS TO
UNAUDITED PRO FORMA CONSOLIDATING FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
1. BASIS OF PRESENTATION:
Pennsylvania Real Estate Investment Trust (the "Registrant") is a
self-administered equity real estate investment trust engaged,
directly and through subsidiaries and joint ventures, in owning and
managing income producing real estate, with an emphasis on shopping
centers and apartment complexes. As of November 9, 1998 the
Registrant owned 53 properties of which 7 properties are currently
under development. The Registrant's interest in all of the
Properties is held through PREIT Associates LP (the "Operating
Partnership").
2. ADJUSTMENTS TO PRO FORMA CONSOLIDATING BALANCE SHEET:
(A) Reflects the Registrant's recent property acquisitions as
follows:
<TABLE>
<CAPTION>
Woods Festival at Prince Georges
Apartments Oaklands Plaza
---------- -------- -----
<S> <C> <C> <C>
Purchase price $21,200 $18,400 $65,000
Consideration:
Mortgage indebtedness assumed 7,340 -- 43,000
Borrowings under revolving line of credit 12,160 18,400 19,000
Issuance of Class A OP Units *1,700 --- **3,000
--------------------------------------------------
$21,200 $18,400 $65,000
==================================================
</TABLE>
* 72,592 Class A OP Units at $23.425 per unit
** 131,504 Class A OP Units at $22.813 per unit
3. ADJUSTMENTS TO PRO FORMA CONSOLIDATING STATEMENT OF INCOME FOR THE
TWELVE MONTHS ENDED AUGUST 31, 1997:
(a) To record the income and expenses associated with the
acquisition of wholly owned shopping center properties as
follows:
<TABLE>
<CAPTION>
Magnolia N.Dartmouth Shopping
Mall Mall Centers
Historical Historical Pro Forma
--------------- ------------------ ------------------
<S> <C> <C> <C>
Revenues
Gross revenues from real estate $6,222 6,268 $12,490
Interest and other income 17 15 32
--------------- ------------------ ------------------
6,239 6,283 12,522
Expenses
Property operating expenses 1,728 2,236 3,964
----- ----- -----
EBITDA $4,511 $4,047 $8,558
====== ====== ======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
(b) To record additional interest and other income as follows:
Interest and other income of Magnolia Mall and North Dartmouth Mall $32
Accrual of interest income on note receivable from PREIT-RUBIN, Inc.
based on intercompany advances at a rate of 12.5% 202
--------------
$234
==============
(c) To record additional depreciation expense as follows:
Magnolia Mall - depreciable basis of $45,998 over 40-year useful life $1,150
North Dartmouth Mall - depreciable basis of $30,709 over 40-year useful life 768
--------------
$1,918
==============
(d) To record additional interest expense as follows:
Magnolia Mall $25,200 mortgage note payable assumed at 8.20% $2,066
Magnolia Mall bank borrowings of $10,165 to fund remaining
purchase price 737
North Dartmouth Mall bank borrowings of $35,000 to fund purchase price 2,538
Deposit of $5,000 on Magnolia Mall 363
Bank borrowings of $11,482 to fund the cash portion of transaction costs 832
Less capitalized interest on bank borrowings for property under development (605)
Net increase in amortization of financing costs related to Credit Facility 252
--------------
$6,183
==============
(e) To record equity in income of PREIT-RUBIN, Inc. as follows:
TRO Pro Forma
Historical Adjustments Pro Forma
---------- ----------- ---------
Revenues
Management fees $6,171 $--- $6,171
Leasing commissions 9,605 --- 9,605
Consulting fees 1,763 --- 1,763
Development fees 581 --- 581
Publication income 2,201 --- 2,201
Other income 147 --- 147
----------------------------------------------------
Total revenues $20,468 $--- $20,468
====================================================
Operating Expenses
Salaries, commissions,
temporary services, payroll
taxes and employee benefits 11,781 300 (1) 12,081
Rent expense 784 --- 784
Other operating expenses 3,744 --- 3,744
Depreciation and amortization 961 --- 961
Non-recurring expenses associated
with the TRO transaction 890 --- 890
Expenses for start-up of EPDLP
management contracts 951 --- 951
----------------------------------------------------
Total operating expenses 19,111 300 19,411
----------------------------------------------------
Income from operations 1,357 (300) 1,057
Interest expense (891) 362 (2) (529)
Equity in loss from partnership
investments (131) 131 (3) ---
----------------------------------------------------
Pre-tax loss 335 193 528
Provision for income taxes - (211) (211) (4)
----------------------------------------------------
Net income $335 $ (18) $317
====================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Amortization of excess purchase price over net assets acquired recorded in (5)
consolidation (115)
--------
Net income after intangible amortization $202
=========
Operating Partnership's interest (95%) in income of PREIT-RUBIN, Inc.
$192 (6)
=========
(1)To record additional compensation expense in accordance with existing
employment contracts
(2) To adjust interest expense as follows:
Elimination of interest on debt not assumed $564
Accrual of interest on $1,613 note payable ($3,613 note less $2,000 related
to development properties for which interest is capitalized) to PREIT at
12.5% (202)
---------
$362
=========
(3) To eliminate equity in loss of partnerships and joint ventures
not being acquired.
(4) Estimated tax requirements calculated using 40% effective tax
rate.
(5) To record amortization of excess purchase price over net assets
acquired over 35-year amortization period.
(6) Represents 95% of PREIT-RUBIN, Inc.'s net income after
intangible amortization.
(f) To record the Registrant's 50% share of income from The Court
at Oxford Valley:
Equity in the net income of The Court at Oxford Valley $605
Less amortization of the excess purchase price over the net
book value of assets acquired (185)
---------------
$420
===============
(g) To record the interest expense savings associated with the paydown
of the following debt amounts:
Payment of the mortgage loan on Cobblestone Apartments $690
Payment of bank borrowings incurred in connection with the
TRO Transaction
4,469
Payment of other bank borrowings 943
===============
$6,102
===============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
(h) To record depreciation on acquisitions as follows:
Purchase Depreciable
Price Building Portion (80%) Life In Years Depreciation
----------- --------------------- ----------------- ------------------
<S> <C> <C> <C> <C>
Woods Apartments $21,200 $16,960 40 $424
Prince Georges Plaza 65,000 52,000 40 1,300
Festival at Oaklands 18,400 14,720 40 368
----------
Pro Forma Depreciation $2,092
==========
(i) To record interest expense on acquisitions as follows:
Interest on
Rate on Credit Credit
Assumed Assumed Interest on Facility Facility Total
Debt Debt Assumed Debt Borrowings Rate 7.43% Interest
------------ ------------ ------------- ---------------- --------------- -------------
Woods Apartments 8.625% $ 7,340 $ 633 $12,160 $ 903 $ 1,536
Prince Georges Plaza 8.700% 43,000 3,741 19,000 1,412 5,153
Festival at Oaklands --- --- --- 18,400 1,367 1,367
------------
$ 8,056
============
(j) To adjust the minority interest's share of income in the
Operating Partnership to reflect the issuance of 72,592
Class A OP units at $23.425 per unit and approximately
131,504 Class A OP units at $22.813 for the Woods Apartments
and Prince Georges Plaza acquisitions, respectively.
$(1,035)
============
4. ADJUSTMENTS TO PRO FORMA CONSOLIDATING STATEMENT OF INCOME
FOR THE FOUR MONTHS ENDED DECEMBER 31, 1997:
(k) To record the income and expenses associated with the
acquisition of wholly-owned shopping center properties as
follows:
Magnolia N. Dartmouth Shopping
Mall Mall Centers
Historical Historical Pro Forma
---------- ---------- ---------
Revenues
Gross revenues from real estate $548 $460 $1,008
Interest and other income 2 12 14
---------------- ------------------ ----------------
550 472 1,022
Expenses
Property Operating Expenses 132 159 291
---------------- ------------------ ----------------
Net operating income $418 $313 $731
================ ================== ================
(l) To record additional interest and other income as follows:
Interest and other income of Magnolia Mall and North Dartmouth Mall $14
Accrual of interest income on Note Receivable from PREIT-RUBIN, Inc. based on
inter-company advances at a rate of 12.5% 18
-------------------
$32
===================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
(m) To record additional depreciation expense as follows:
Magnolia Mall - depreciable basis of $45,998 over 40-year
useful life North Dartmouth Mall - depreciable basis of $96
$30,709 over 40-year useful life 64
-------------------
$160
===================
(n) To record additional interest expense as follows:
Magnolia Mall $25,200 mortgage note payable assumed at 8.20% $172
Magnolia Mall bank borrowings of $10,165 to fund remaining purchase price 61
North Dartmouth Mall bank borrowings of $35,000 to fund purchase price 211
Deposit of $5,000 on Magnolia Mall 30
Bank borrowings of $11,482 to fund the cash portion of transaction costs 70
Less capitalized interest on bank borrowings for property under development (50)
Net increase in amortization of financing costs related to Credit Facility 21
-------------------
$515
===================
(o) To record equity in income of PREIT-RUBIN, Inc. as follows:
TRO Pro Forma
Historical Adjustments Pro Forma
---------- ----------- ---------
Revenues
Management fees $410 $- $410
Leasing commissions 3,474 - 3,474
Consulting fees 104 - 104
Development fees 661 - 661
Publication income 555 - 555
Other income 142 - 142
------------------------------------------------------
Total revenues $5,346 $- $5,346
======================================================
Operating Expenses
Salaries, commissions, temporary
services, payroll taxes and
employee benefits 2,554 25 (1) 2,579
Rent expense 77 - 77
Other operating expenses 1,268 - 1,268
Depreciation and amortization 69 - 69
------------------------------------------------------
Total operating expenses 3,968 25 3,993
------------------------------------------------------
Income from operations 1,378 (25) 1,353
Interest expense -- (18) (2) (18)
Equity in loss from partnership
investments (146) 146 (3) --
------------------------------------------------------
Income before income taxes 1,232 103 1,335
Provision for income taxes - (534) (534) (4)
------------------------------------------------------
Net income $1,232 $(431) $801
======================================================
Intangible amortization recorded in consolidation
10
--------------
Net income after intangible amortization $791 (5)
==============
Operating Partnership's interest (95%) in income of PREIT-RUBIN,
Inc.
$751 (6)
==============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
(1) To record additional compensation expense in accordance with existing
employment contracts
(2) To accrue interest on $1,613 note payable ($3,613 note less $2,000
related to development properties for which interest is capitalized) to
PREIT at 12.5%. $18
===============
(3) To eliminate equity in loss of partnerships and joint
ventures not being acquired.
(4) Estimated tax requirements calculated using 40% effective tax rate.
(5) To record amortization of excess purchase price over net
assets acquired over 35-year amortizable period.
(6) Represents 95% of PREIT-RUBIN, Inc.'s net income after
intangible amortization.
(p) To record the Registrant's 50% share of income from The
Court at Oxford Valley:
Equity in the net income of The Court at Oxford Valley $44
Less amortization of the excess purchase price over the net book
value of assets acquired (15)
--------------
$29
==============
(q) To record the interest expense savings associated with the
paydown of the following debt amounts:
Payment of the mortgage loan on Cobblestone Apartments $216
Payment of bank borrowings incurred in connection with
the TRO Transaction 1,396
Payment of other bank borrowings 294
--------------
$1,906
==============
(r) To record depreciation expense on acquisitions as follows:
Purchase Depreciable
Price Building Portion (80%) Life In Years Depreciation
--------------------------------------------------------------------------------------
Woods Apartments $21,200 $16,960 40 $141
Prince Georges Plaza 65,000 52,000 40 433
Festival at Oaklands 18,400 14,720 40 123
---------------
$697
===============
(s) To record interest expense on acquisitions as follows:
Interest on
Rate on Credit Credit
Assumed Assumed Interest on Facility Facility Total
Debt Debt Assumed Debt Borrowings Rate 7.47% Interest
------------ ------------- ----------------- -------------- --------------- -------------------
Woods Apartments
8.625% $7,340 $211 $12,160 $303 $ 514
Prince Georges
Plaza 8.700% 43,000 1,247 19,000 473 1,720
Festival at
Oaklands --- --- --- 18,400 458 458
-------------------
$2,692
===================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
(t) To adjust the minority interest's share of income in the
Operating Partnership to reflect the issuance of 72,592
Class A OP units at $23.425 per unit and approximately
131,504 Class A OP units at $22.813 for the Woods
Apartments and Prince Georges Plaza acquisitions,
respectively.
$(162)
===================
5. ADJUSTMENTS TO PRO FORMA CONSOLIDATING STATEMENT OF INCOME FOR THE SIX
MONTHS ENDED JUNE 30, 1998:
(u) To record depreciation expense on acquisitions as follows:
Purchase Depreciable
Price Building Portion (80%) Life In Years Depreciation
----- --------------------- ------------- ------------
Woods Apartments $21,200 $16,960 40 $212
Prince Georges Plaza 65,000 52,000 40 650
Festival at Oaklands 18,400 14,720 40 184
----------------
Pro Forma Depreciation Adjustment $1,046
================
(v) To record interest expense on acquisitions as follows:
Interest on
Rate on Credit Credit
Assumed Assumed Interest on Facility Facility Total
Debt Debt Assumed Debt Borrowings Rate 7.22% Interest
------------ ------------- ----------------- -------------- --------------- -------------------
Woods Apartments
8.625% $ 7,340 $ 317 $12,160 $ 439 $ 756
Prince Georges
Plaza 8.700% 43,000 1,870 19,000 686 2,556
Festival at
Oaklands --- --- --- 18,400 664 664
-------------------
Pro Forma Interest Adjustment $3,976
===================
(w) To adjust the minority interest's share of income in the Operating Partnership to
reflect the issuance of 72,592 Class A OP units at $23.425 per unit and
approximately 131,504 Class A OP units at $22.813 for the Woods Apartments and
Prince Georges Plaza acquisitions, respectively. $(172)
===================
</TABLE>
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
report dated July 15, 1998 included in this Form 8-K/A dated September 17, 1998
on the statement of revenue and certain expenses of Prince Georges Plaza into
the Registrant's previously filed Registration Statements on Forms S-3 (File
No. 33-61115 and File No. 333-49817) and Forms S-8 (File No. 33-59771, File
No. 33-59773 and File No. 33-59767).
/s/ ARTHUR ANDERSEN LLP
Philadelphia, Pa.,
November 9, 1998
