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Previous: PENNSYLVANIA REAL ESTATE INVESTMENT TRUST, 8-K/A, 1998-11-09 |
Next: PRICE T ROWE ASSOCIATES INC /MD/, SC 13G/A, 1998-11-09 |
<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) August 27, 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),
(b) and (C) of Item 7 of its Current Report on Form 8-K dated August 27, 1998,
filed on October 9, 1998, as set forth below:
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
-------------------------------------------------------------------
(a) Financial Statements
--------------------
(3) Report of Independent Public Accountants
Combined 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 Combined 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
(c) Exhibits
-2-
<PAGE>
2.1* Purchase and Sale Agreement dated as
of July 24, 1998 by and between Oaklands Limited
Partnership, a Pennsylvania limited partnership,
and PREIT Associates, L.P., a Delaware limited
partnership.
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 Agreement with Oaklands Limited Partnership
and to the Purchase and Sale Agreement with Project 126A Associates, L.P. are
omitted. Each Purchase and Sale 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>
FESTIVAL AT OAKLANDS SHOPPING CENTER
COMBINED STATEMENT OF REVENUE
AND CERTAIN EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1997
TOGETHER WITH AUDITORS' REPORT
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Pennsylvania Real Estate Investment Trust:
We have audited the combined statement of revenue and certain expenses of
Festival at Oaklands Shopping Center, described in Note 1, for the year ended
December 31, 1997. This financial statement is the responsibility of 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 statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
The combined 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 the 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 Festival at Oaklands Shopping Center'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 Festival at Oaklands
Shopping Center for the year ended December 31, 1997, in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Philadelphia, Pennsylvania,
August 28, 1998
<PAGE>
FESTIVAL AT OAKLANDS SHOPPING CENTER
COMBINED STATEMENTS OF REVENUE AND CERTAIN EXPENSES (NOTE 1)
<TABLE>
<CAPTION>
For the For the Six
Year Ended Months Ended
December 31, June 30,
1997 1998
------------ ------------
(Unaudited)
<S> <C> <C>
REVENUE:
Minimum rent (Notes 2 and 4) $1,854,000 $ 912,000
Tenant reimbursements 413,000 182,000
Other 17,000 --
---------- ----------
Total revenue 2,284,000 1,094,000
---------- ----------
CERTAIN EXPENSES:
Maintenance and other operating expenses (Note 3) 397,000 177,000
Utilities 51,000 25,000
Real estate taxes 154,000 79,000
--------- ----------
Total certain expenses 602,000 281,000
--------- ----------
REVENUE IN EXCESS OF CERTAIN EXPENSES $1,682,000 $ 813,000
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
FESTIVAL AT OAKLANDS SHOPPING CENTER
NOTES TO COMBINED STATEMENTS OF REVENUE AND CERTAIN EXPENSES
DECEMBER 31, 1997
1. BASIS OF PRESENTATION:
The combined statements of revenue and certain expenses reflect the operations
of Festival at Oaklands Shopping Center ("the Property") located in Exton,
Pennsylvania. The Property was acquired by PREIT Associates, L.P. (the
"Operating Partnership"), a limited partnership of which Pennsylvania Real
Estate Investment Trust (the "Company") is the sole general partner, from
Oaklands Limited Partnership ("Oaklands"), a Pennsylvania limited partnership,
on August 27, 1998 for a purchase price of approximately $18.4 million. The
purchase price also includes the acquisition of a separate parcel of land
adjacent to the Property which has been developed and is currently occupied. The
Property has an aggregate net rentable area of approximately 140,000 square
feet, excluding the separate parcel of land, and was 98% leased as of December
31, 1997.
The combined statements of revenue and certain expenses are 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 financial statements of the Property have been
prepared on an accrual basis 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 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 revenue and certain expenses of the Property for the six
months ended June 30, 1998 have been included. The results of the interim period
are not necessarily indicative of the results for the full year.
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 assets and liabilities which affect the reported
amounts of revenue and expenses during the reporting period. The ultimate
results could differ from those estimates.
<PAGE>
2. OPERATING LEASES:
Minimum rent includes straight-line adjustments for rental revenue increases in
accordance with generally accepted accounting principles. The aggregate rental
revenue increases resulting from the straight-line adjustments for the year
ended December 31, 1997 and the six months ended June 30, 1998 were $71,000 and
$24,000, (unaudited), respectively.
The following tenants had minimum rental payments greater than 10% of the total
minimum rent in 1997:
Sears Roebuck and Company $ 224,675
Clemens Market $ 399,996
The Property is leased to tenants under operating leases with expiration dates
extending to the year 2012. Future minimum rentals under noncancelable operating
leases, excluding tenant reimbursements of operating expenses as of December 31,
1997, are as follows:
1998 $ 1,716,000
1999 1,713,000
2000 1,656,000
2001 1,552,000
2002 1,120,000
2003 & Thereafter 7,002,000
-----------
$14,759,000
===========
Certain leases also include provisions requiring tenants to reimburse the
Property for management costs and other operating expenses up to stipulated
amounts.
3. RELATED PARTY TRANSACTIONS:
The Property paid total management fees of $86,000 and $43,000 (unaudited) for
the year ended December 31, 1997 and the six months ended June 30, 1998,
respectively, to Oaklands Business Parks, Inc., an affiliate of Oaklands, based
on 4% of gross rental revenue including tenant reimbursements. These management
fees are included within maintenance and other operating expenses in the
combined statements of revenue and certain expenses.
4. GROUND LEASE:
A ground lease agreement exists on the separate parcel of land adjacent to the
Property between Oaklands Business Parks, Inc., an affiliate of Oaklands, and
Ruby Tuesday Restaurant, a wholly owned subsidiary of Morrison Restaurants, Inc.
The ground lease commenced in February 1997 and has a term of fifteen years with
two five-year options to extend the lease agreement. During 1997, total rent
received from the lease agreement was $64,000 with scheduled rental increases of
approximately $9,000 for each five-year period thereafter remaining in the
lease. The aggregate rental revenue increases resulting from the straight-line
rent adjustments of this lease for the year ended December 31, 1997 and the six
months ended June 30, 1998 were $8,000 and $5,000, (unaudited), respectively.
Rent received from the ground lease has been included in minimum rent on the
combined 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>
Woods Festival at Prince Georges PREIT
PREIT Apartments Oaklands Plaza Pro Forma,
Historical Acquisition Acquisition Acquisition As Adjusted
---------- ----------- ------------ -------------- ------------
(A) (A) (A)
<S> <C> <C> <C> <C> <C>
Assets
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 TWELVE MONTHS ENDED AUGUST 31, 1997
(Unaudited)
(In thousands, except share and per share data)
<TABLE>
<CAPTION>
1997 Events 1998 Events
-------------------- ----------------------------------
Festival Prince
Woods at Georges
PREIT The TRO The Apartments Oaklands Plaza Pro Forma PREIT
Historical Transaction Offering Historical Historical Historical Adjustments Pro Forma
---------- ----------- -------- ---------- ---------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues
Gross revenues from real estate $40,231 $12,490(a) $-- $2,687 $2,216 $9,955 $-- $67,579
Interest and other income 254 234(b) -- 126 -- -- -- 614
------- ------- ------ ------ ------ ------ ------- -------
Total revenues 40,485 12,724 -- 2,813 2,216 9,955 -- 68,193
------- ------- ------ ------ ------ ------ ------- -------
Expenses
Property operating expenses 16,289 3,964(a) -- 1,116 527 3,606 -- 25,502
Depreciation and amortization 6,259 1,918(c) -- -- -- -- 2,092(h) 10,269
General and administrative expenses 3,324 -- -- -- -- -- -- 3,324
Mortgage and bank loan interest 9,086 6,183(d) (6,102)(g) -- -- -- 8,056(i) 17,223
Provisions for losses on investments 500 -- -- -- -- -- -- 500
------- ------- ------ ------ ------ ------ ------- -------
35,458 12,065 (6,102) 1,116 527 3,606 10,148 56,818
------- ------- ------ ------ ------ ------ ------- -------
Income before gains on sales of
interests in real estate, equity in
unconsolidated entities and minority
interest 5,027 659 6,102 1,697 1,689 6,349 (10,148) 11,375
Equity in income of PREIT-RUBIN, Inc. -- 192(e) -- -- -- -- -- 192
Equity in income of partnerships and
joint ventures 4,337 420(f) -- -- -- -- -- 4,757
Gains on sales of interests in real
estate 1,069 -- -- -- -- -- -- 1,069
------- ------- ------ ------ ------ ------ ------- -------
Income before minority interest 10,433 1,271 6,102 1,697 1,689 6,349 (10,148) 17,393
Minority interest (198) -- -- -- --- -- (1,035)(j) (1,233)
------- ------- ------ ------ ------ ------ ------- -------
Net income (loss) $10,235 $1,271 $6,102 $1,697 $1,689 $6,349 $(11,183) $16,160
======= ======= ====== ====== ====== ====== ======== =======
Basic Net Income Per Share $1.18 $1.22
======= =======
Diluted Net Income Per Share $1.18 $1.22
======= =======
Weighted Average Number of Shares
Outstanding:
Basic 8,679 13,279
======= =======
Diluted 8,691 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
-------------------- ------------------------------------
Prince
Woods Festival At Georges PREIT
PREIT The TRO The Apartments Oaklands Plaza Pro Forma Pro
Historical Transaction Offering Acquisition Acquisition Acquisition Adjustments Forma
----------- ----------- -------- ----------- ----------- ----------- ----------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues
Gross revenues from real estate $17,170 $1,008(k) $-- $915 $799 $3,470 $-- $23,362
Interest and other income 82 32(l) -- 38 -- -- -- 152
------- ------ ------ ---- ---- ------ ------- -------
Total revenues 17,252 1,040 -- 953 799 3,470 -- 23,514
------- ------ ------ ---- ---- ------ ------- -------
Expenses
Property operating expenses 6,835 291(k) -- 384 227 1,398 -- 9,135
Depreciation and amortization 2,695 160(m) -- -- -- -- 697(r) 3,552
General and administrative expenses 1,088 -- -- -- -- -- -- 1,088
Mortgage and bank loan interest 4,349 515(n) (1,906)(q) -- -- -- 2,692(s) 5,650
------- ------ ------ ---- ---- ------ ------- -------
14,967 966 (1,906) 384 227 1,398 3,389 19,425
------- ------ ------ ---- ---- ------ ------- -------
Income before equity in unconsolidated
entities, gains on sales of interest in
real estate and minority interest 2,285 74 1,906 569 572 2,072 (3,389) 4,089
Equity in income of PREIT-RUBIN, Inc. 260 751(o) -- -- -- -- -- 1,011
Equity in income of partnerships and joint
ventures 2,101 29(p) -- -- -- -- -- 2,130
Gains on sales of interests in real estate 2,090 -- -- -- -- -- -- 2,090
------- ------ ------ ---- ---- ------ ------- -------
Income before minority interest and
extraordinary item 6,736 854 1,906 569 572 2,072 (3,389) 9,320
Minority interest (474) -- -- -- -- -- (162)(t) (636)
Extraordinary loss on early extinguishment
of debt (300) -- -- -- -- -- -- (300)
------- ------ ------ ---- ---- ------ ------- -------
$5,962 $854 $1,906 $569 $572 $2,072 $(3,551) $8,384
======= ====== ====== ==== ==== ====== ======= =======
</TABLE>
<TABLE>
<CAPTION>
Net income
<S> <C> <C> <C>
BASIC INCOME PER SHARE: BASIC INCOME PER SHARE:
Income before extraordinary Income before extraordinary
item per share $0.69 item per share $0.64
Extraordinary loss on early Extraordinary loss on early
extinguishment of debt (0.03) extinguishment of debt (0.02)
------ ------
Net Income Per Share $0.66 Net Income per share $ 0.62
====== ======
Weighted Average Number of Weighted Average Number of
Shares Outstanding 9,025 Shares Outstanding 13,625
====== ======
DILUTED INCOME PER SHARE: DILUTED INCOME PER SHARE:
Income before extraordinary Income before extraordinary
item per share $0.69 item per share $0.64
Extraordinary loss on early Extraordinary loss on early
extinguishment of debt (0.03) extinguishment of debt (0.02)
------ ------
Net Income Per Share $0.66 Net Income Per Share $0.62
====== ======
Weighted Average Number of Weighted Average Number of
Shares Outstanding 9,049 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>
Prince
Woods Festival at 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>
(b) To record additional interest and other income as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
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
=========
</TABLE>
(c) To record additional depreciation expense as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
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
=========
</TABLE>
(d) To record additional interest expense as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
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
=========
</TABLE>
(e) To record equity in income of PREIT-RUBIN, Inc. as follows:
<TABLE>
<CAPTION>
TRO Pro Forma
Historical Adjustments Pro Forma
---------- ----------- ---------
<S> <C> <C> <C>
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
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Provision for income taxes -- (211) (211)(4)
----- ----- -------
Net income $335 $(18) $317
===== =====
Amortization of excess purchase price over net assets acquired recorded in
consolidation (115)(5)
-----
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.
</TABLE>
(f) To record the Registrant's 50% share of income from The Court
at Oxford Valley:
<TABLE>
<CAPTION>
<S> <C>
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
=====
</TABLE>
(g) To record the interest expense savings associated with the
paydown of the following debt amounts:
<TABLE>
<CAPTION>
<S> <C>
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>
(h) To record depreciation on acquisitions as follows:
<TABLE>
<CAPTION>
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
======
</TABLE>
(i) To record interest expense on acquisitions as follows:
<TABLE>
<CAPTION>
Interest on
Rate on Credit Credit
Assumed Assumed Interest on Facility Facility Total
Debt Debt Assumed Debt Borrowings Rate 7.43% Interest
------------ ------------ ------------- ---------------- --------------- -------------
<S> <C> <C> <C> <C> <C> <C>
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
======
</TABLE>
(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:
<TABLE>
<CAPTION>
Magnolia N. Dartmouth Shopping
Mall Mall Centers
Historical Historical Pro Forma
---------- ------------ ---------
<S> <C> <C> <C>
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>
(m) To record additional depreciation expense as follows:
<TABLE>
<CAPTION>
<S> <C>
Magnolia Mall - depreciable basis of $45,998 over 40-year
useful life $ 96
North Dartmouth Mall - depreciable basis of $30,709 over
40-year useful life 64
-----
$ 160
=====
</TABLE>
(n) To record additional interest expense as follows:
<TABLE>
<CAPTION>
<S> <C>
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
=====
</TABLE>
(o) To record equity in income of PREIT-RUBIN, Inc. as
follows:
<TABLE>
<CAPTION>
TRO Pro Forma
Historical Adjustments Pro Forma
---------- ----------- ---------
<S> <C> <C> <C>
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>
(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.
</TABLE>
(p) To record the Registrant's 50% share of income from The
Court at Oxford Valley:
<TABLE>
<CAPTION>
<S> <C> <C>
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
=======
</TABLE>
(q) To record the interest expense savings associated with
the paydown of the following debt amounts:
<TABLE>
<CAPTION>
<S> <C> <C>
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
=======
</TABLE>
(r) To record depreciation expense on acquisitions as
follows:
<TABLE>
<CAPTION>
Purchase Depreciable
Price Building Portion (80%) Life In Years Depreciation
-------------------- ---------------------- ----------------- ------------------
<S> <C> <C> <C> <C>
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
======
</TABLE>
(s) To record interest expense on acquisitions as follows:
<TABLE>
<CAPTION>
Interest on
Rate on Credit Credit
Assumed Assumed Interest on Facility Facility Total
Debt Debt Assumed Debt Borrowings Rate 7.47% Interest
------------ ------------- ----------------- -------------- --------------- -------------------
<S> <C> <C> <C> <C> <C> <C>
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>
(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:
<TABLE>
<CAPTION>
Purchase Depreciable
Price Building Portion (80%) Life In Years Depreciation
----- ---------------------- ------------- ------------
<S> <C> <C> <C> <C>
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
======
</TABLE>
(v) To record interest expense on acquisitions as follows:
<TABLE>
<CAPTION>
Interest on
Rate on Credit Credit
Assumed Assumed Interest on Facility Facility Total
Debt Debt Assumed Debt Borrowings Rate 7.22% Interest
------------ ------------- ----------------- -------------- --------------- -------------------
<S> <C> <C> <C> <C> <C> <C>
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
======
</TABLE>
(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)
======
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
report dated August 28, 1998 included in this Form 8-K/A No. 1 dated
August 27, 1998 on the combined statement of revenue and certain expenses of
Festival at Oaklands Shopping Center 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
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