<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 March 31, 2000
---------------
[ ] 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)
Pennsylvania 23-6216339
- -------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
200 South Broad Street, Third Floor, Philadelphia, PA 19102-3803
- ------------------------------------------------------ -------------------
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code (215) 875-0700
----------------
N/A
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
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 May 10, 2000: 13,349,857
- -------------------------------------------------------------------------------
<PAGE>
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
CONTENTS
Page
----
Part I. Financial Information
Item 1. Financial Statements (Unaudited):
Consolidated Balance Sheets--March 31, 2000
and December 31, 1999 1-2
Consolidated Statements of Income--Three Months
Ended March 31, 2000 and March 31, 1999 3
Consolidated Statements of Cash Flows--Three Months
Ended March 31, 2000 and March 31, 1999 4
Notes to Unaudited Consolidated Financial Statements 5-11
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 12-15
Item 3. Quantitative and Qualitative Disclosures about Market Risk 17
Part II. Other Information 18
Item 1. Not Applicable -
Item 2. Not Applicable -
Item 3. Not Applicable -
Item 4. Not Applicable -
Item 5. Other Information 18
Item 6. Exhibits and Reports on Form 8-K 18
Signatures 19
Exhibits Index 20
<PAGE>
Part I. Financial Information
Item 1. Financial Statements
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
CONSOLIDATED BALANCE SHEETS
ASSETS
(In thousands)
<TABLE>
<CAPTION>
(Unaudited)
March 31, December 31,
2000 1999
---------- ------------
<S> <C> <C>
INVESTMENTS IN REAL ESTATE, at cost:
Multifamily properties $ 243,314 $ 236,859
Retail properties 296,410 294,945
Industrial properties 5,078 5,078
Properties under development 42,698 40,639
---------- ----------
Total investments in real estate 587,500 577,521
Less- Accumulated depreciation 88,144 84,577
---------- ----------
499,356 492,944
INVESTMENT IN PREIT-RUBIN, INC. 2,209 3,888
ADVANCES TO PREIT-RUBIN, INC. 7,303 6,200
INVESTMENTS IN PARTNERSHIPS AND JOINT VENTURES, at equity
17,833 17,873
---------- ----------
526,701 520,905
Less- Allowance for possible losses 528 528
---------- ----------
526,173 520,377
OTHER ASSETS:
Cash and cash equivalents 3,867 3,235
Rents and sundry receivables (net of allowance for doubtful
accounts of $1,006 and $559, respectively) 5,723 6,249
Deferred costs, prepaid real estate taxes and expenses, net 18,998 17,729
---------- ----------
$ 554,761 $ 547,590
========== ==========
</TABLE>
(Continued)
-1-
<PAGE>
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
CONSOLIDATED BALANCE SHEETS (CONTINUED)
LIABILITIES AND SHAREHOLDERS' EQUITY
(In thousands)
<TABLE>
<CAPTION>
(Unaudited)
March 31, December 31,
2000 1999
---------- ------------
<S> <C> <C>
LIABILITIES:
Mortgage notes payable $ 265,809 $ 266,830
Bank and other loans payable 97,700 91,000
Construction loan payable 10,145 6,804
Tenants' deposits and deferred rents 2,832 2,291
Accrued pension and retirement benefits 881 952
Accrued expenses and other liabilities 11,765 13,812
---------- ----------
389,132 381,689
---------- ----------
MINORITY INTEREST 31,915 32,489
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Shares of beneficial interest, $1 par; authorized unlimited; issued and
outstanding 13,349 shares at March 31, 2000 and 13,338 shares at
December 31, 1999 13,349 13,338
Capital contributed in excess of par 145,868 145,697
Distributions in excess of net income (25,503) (25,623)
---------- ----------
133,714 133,412
---------- ----------
$ 554,761 $ 547,590
========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
-2-
<PAGE>
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
(In thousands, except per share data)
Three Months Ended
-----------------------------
March 31, March 31,
2000 1999
--------- ---------
<S> <C> <C>
REVENUES:
Gross revenues from real estate $ 23,222 $ 21,578
Interest and other income 230 163
--------- ---------
23,452 21,741
--------- ---------
EXPENSES:
Property operating expenses 8,180 7,855
Depreciation and amortization 3,710 3,216
General and administrative expenses 1,035 853
Interest expense 5,844 5,105
--------- ---------
18,769 17,029
--------- ---------
Income before equity in unconsolidated entities, gains
on sales of interests in real estate and minority
interest in operating partnership 4,683 4,712
EQUITY IN LOSS OF PREIT-RUBIN, INC. (1,489) (1,092)
EQUITY IN INCOME OF PARTNERSHIPS AND JOINT VENTURES
1,672 1,466
GAINS ON SALES OF INTERESTS IN REAL ESTATE 2,263 1,346
--------- ---------
Income before minority interest in
operating partnership 7,129 6,432
MINORITY INTEREST IN OPERATING PARTNERSHIP (740) (562)
--------- ---------
NET INCOME $ 6,389 $ 5,870
========= =========
BASIC INCOME PER SHARE $ .48 $ .44
========= =========
DILUTED INCOME PER SHARE $ .48 $ .44
========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
-3-
<PAGE>
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
(In thousands)
Three Months Ended
---------------------------
March 31, March 31,
2000 1999
---------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 6,389 $ 5,870
Adjustments to reconcile net income to net cash
provided by operating activities-
Minority interest in operating partnership 740 562
Depreciation and amortization 3,710 3,216
Provision for doubtful accounts 426 326
Gains on sales of interests in real estate (2,263) (1,346)
Equity in loss of PREIT-RUBIN, Inc. 1,489 1,092
Decrease in allowance for possible losses -- (37)
Change in assets and liabilities-
Net change in other assets (1,312) (2,455)
Net change in other liabilities (579) (906)
---------- --------
Net cash provided by operating activities 8,600 6,322
---------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investments in wholly-owned real estate (8,577) (3,765)
Investments in property under development (2,867) (5,133)
Investment in and advances to PREIT-RUBIN, Inc. (1,102) (786)
Investments in partnerships and joint ventures (1,013) (300)
Cash proceeds from sale of interest in partnership 2,940 1,093
Cash distributions from partnerships and joint ventures
in excess of equity in income 376 267
---------- --------
Net cash used in investing activities (10,243) (8,624)
---------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal installments on mortgage notes payable (1,021) (729)
Proceeds from construction loans payable 3,341 --
Net (payment) borrowing from credit facility 6,700 7,700
Shares of beneficial interest issued 183 --
Payment of deferred financing and equity offering costs -- (888)
Distributions paid to shareholders (6,270) (6,258)
Distributions paid to OP Unit holders (658) (529)
Distributions to minority partners -- (131)
---------- --------
Net cash provided by (used in) financing activities 2,275 (835)
---------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 632 (3,137)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 3,235 6,135
---------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 3,867 $ 2,998
========== ========
</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 MARCH 31, 2000
(Unaudited)
(In thousands, except per share data)
1. BASIS OF PRESENTATION:
Pennsylvania Real Estate Investment Trust ("PREIT" or the "Company") prepared
the consolidated financial statements 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 we believe that the disclosures
are adequate to make the information presented not misleading. The consolidated
financial statements should be read in conjunction with the audited financial
statements and the notes thereto included in PREIT's latest annual report on
Form 10-K. In management's opinion, 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 prior period amounts have been reclassified to conform with current
period presentation.
2. INVESTMENT IN PREIT-RUBIN, INC.:
PREIT-RUBIN, Inc. ("PRI") is responsible for various activities, including
management, leasing and real estate development of certain of PREIT's properties
and for properties on behalf of third parties. Total management fees paid by
PREIT's properties to PRI are included in property operating expenses in the
accompanying consolidated statements of income and amounted to $194 and $98 for
the three-month periods ended March 31, 2000 and 1999, respectively. PREIT's
properties also paid leasing and development fees to PRI totaling $152 and $216
for the three-month periods ended March 31, 2000 and 1999.
Leasing and development fees paid by PREIT's properties to PRI are capitalized
and amortized to expense in accordance with PREIT's normal accounting policies.
Intercompany profits earned by PRI related to such activities are deferred and
will be amortized to income over these same periods in order to more properly
match revenues and expenses.
PRI also provides management, leasing and development services for partnerships
and other ventures in which certain officers of PREIT and PRI have either direct
or indirect ownership interests. Total revenues earned by PRI for such services
were $672 and $847 for the three-month periods ended March 31, 2000 and 1999,
respectively.
Summarized unaudited financial information for PRI as of and for the three-month
periods ended March 31, 2000 and 1999 is as follows:
For the Three For the Three
Months Ended Months Ended
March 31, 2000 March 31, 1999
-------------- --------------
Total assets $ 4,968 $ 10,644
========== =========
Management fees $ 990 $ 1,238
Leasing commissions 945 1,070
Development fees 63 242
Other revenue 389 488
---------- ---------
Total revenue $ 2,387 $ 3,038
========== =========
Net loss $ (1,565) $ (1,150)
========== =========
PREIT's share of net loss $ (1,489) $ (1,092)
========== =========
-5-
<PAGE>
3. INVESTMENTS IN PARTNERSHIPS AND JOINT VENTURES:
The following table presents summarized financial information as to PREIT's
equity in the assets and liabilities of 15 partnerships and joint ventures and 2
properties under development at March 31, 2000, and 16 partnerships and joint
ventures and 2 properties under development at December 31, 1999 and PREIT's
equity in income for the three months ended March 31, 2000 and 1999:
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
--------- ------------
<S> <C> <C>
ASSETS
Investments in real estate, at cost:
Multifamily properties $ 56,458 $ 56,112
Retail properties 348,428 212,238
Properties under development 48,205 38,766
--------- ---------
Total investments in real estate 453,091 307,116
Less- Accumulated depreciation 69,939 70,520
--------- ---------
383,152 236,596
Cash and cash equivalents 6,931 7,952
Deferred costs, prepaid real estate taxes and expenses, and other
assets, net 45,256 43,677
--------- ---------
Total assets $ 435,339 $ 288,225
--------- ---------
LIABILITIES AND PARTNERS' EQUITY
Mortgage notes payable $ 330,624 $ 231,611
Bank loans payable -- --
Construction loans payable 28,791 22,298
Other liabilities 19,064 16,707
--------- ---------
Total liabilities 378,479 270,616
--------- ---------
Net equity 56,860 17,609
Less: Partners' share 39,027 (264)
--------- ---------
Investment in partnerships and joint ventures $ 17,833 $ 17,873
========= =========
</TABLE>
-6-
<PAGE>
EQUITY IN INCOME OF PARTNERSHIPS AND JOINT VENTURES
<TABLE>
<CAPTION>
Three Months Ended
----------------------------
March 31, March 31,
2000 1999
--------- ---------
<S> <C> <C>
Gross revenues from real estate $ 16,423 $ 14,158
--------- ---------
Expenses:
Property operating expenses 5,468 4,852
Mortgage and bank loan interest 5,113 4,188
Depreciation and amortization 2,531 2,154
--------- ---------
13,112 11,194
--------- ---------
3,311 2,964
Partners' share (1,639) (1,498)
--------- ---------
Equity in income of partnerships and joint ventures $ 1,672 $ 1,466
========= =========
</TABLE>
In 2000, PREIT purchased, for $11 million, including the assumption of debt, its
partner's 35% interest in the Emerald Point Multifamily Community. PREIT now
owns 100% of the property.
In 2000, PREIT sold its 50% interest in the Park Plaza shopping center in
Pinellas Park, Florida for proceeds of $3 million, resulting in a gain of $2.3
million.
In 2000, PREIT and an unrelated third-party formed a partnership and purchased
the Willow Grove Park shopping center in Willow Grove, Pennsylvania for
approximately $140 million. Upon completion of certain requirements, including
the funding of an expansion of the shopping center, the Company's current 0.01%
interest in the partnership that owns the shopping center will increase to a
subordinated 50% interest.
4. EARNINGS PER SHARE:
Basic Earnings Per Share is based on the weighted average number of common
shares outstanding during the period. Diluted Earnings Per Share is based on the
weighted average number of shares outstanding during the year, adjusted to give
effect to common share equivalents. A reconciliation between basic and diluted
Earnings Per Share is shown below:
For the Three Months Ended
March 31, 2000
-------------------------------------
Per Share
Income Shares Amount
BASIC EARNINGS PER SHARE:
Net income $ 6,389 13,339,873 $ .48
======== ========== ======
DILUTED EARNINGS PER SHARE:
Net income $ 6,389 13,339,873
Common stock equivalents -- 464
-------- ----------
$ 6,389 13,340,337 $ .48
======== ========== ======
-7-
<PAGE>
For the Three Months Ended
March 31, 1999
---------------------------------------------
Per Share
Income Shares Amount
BASIC EARNINGS PER SHARE:
Net income $ 5,870 13,308,584 $ .44
======== ========== ======
DILUTED EARNINGS PER SHARE:
Net income $ 5,870 13,308,584
Common stock equivalents -- 7,052
-------- ----------
$ 5,870 13,315,636 $ .44
======== ========== ======
5. DISTRIBUTIONS:
The per-share amount declared at the date of this report and the per-share
amount declared in the comparable period for distribution are as follows:
Amount
Per
Date Declared Record Date Payment Date Share
------------- ----------- ------------ ------
May 10, 2000 May 31, 2000 June 15, 2000 $.47
April 29, 1999 May 28, 1999 June 15, 1999 $.47
6. CASH FLOW INFORMATION:
Cash paid for interest was $5,562 (net of capitalized interest of $821) and
$4,943 (net of capitalized interest of $419) for the three month periods ended
March 31, 2000 and March 31, 1999, respectively.
7. COMMITMENTS AND CONTINGENCIES:
Environmental matters have arisen at certain properties in which PREIT has an
interest for which reserves have previously been established. No additional
material incremental cost is expected to be incurred on these properties.
As part of the merger with PRI, PREIT entered into a contribution agreement (the
"Contribution Agreement") which includes a provision for PREIT Associates, L.P.,
(PREIT's operating partnership) to issue up to 800,000 additional Class A
Operating Partnership ("OP") units over the five-year period beginning October
1, 1997 and ending September 30, 2002 according to a formula based upon PREIT's
adjusted funds from operations per share during the five-year period. The
Contribution Agreement establishes "hurdle" and "target" levels for PREIT's
adjusted funds from operations per share during specified earn-out periods to
determine whether, and to what extent, the contingent OP units will be issued.
As of March 31, 2000, 330,000 of the 800,000 OP units for the period covering
October 1, 1997 to December 31, 1999 had been earned. These OP units earned
resulted in an additional purchase price of approximately $5.7 million. PREIT
intends to account for the further issuance of contingent OP units as additional
purchase price when such additional amounts are determinable.
At March 31, 2000, PREIT had approximately $66 million committed to complete
current development and redevelopment projects. In connection with certain
development properties, PREIT Associates, L.P. may be required to issue
additional OP units upon the achievement of certain financial results.
-8-
<PAGE>
8. SEGMENT INFORMATION:
PREIT has four reportable segments: (1) retail properties, (2) multifamily
properties, (3) other, and (4) corporate. The retail segment includes the
operation and management of 23 regional and community shopping centers (13
wholly owned and 10 owned in joint venture form). The multifamily segment
includes the operation and management of 19 apartment communities (14 wholly
owned and 5 owned in joint venture form). The other segment includes the
operation and management of 5 retail properties under development (3 wholly
owned and 2 owned in joint venture form) and 5 industrial properties (all wholly
owned). The corporate segment is responsible for cash and investment management
and certain other general support functions.
The accounting policies for the segments are the same as those PREIT uses for
its consolidated financial reporting, except that for segment reporting
purposes, PREIT uses the "proportionate-consolidation method" of accounting (a
non-GAAP measure) for joint venture properties instead of the equity method of
accounting. PREIT calculates the proportionate-consolidation method by applying
its percentage ownership interest to the historical financial statements of its
equity method investments.
-9-
<PAGE>
(In thousands)
<TABLE>
<CAPTION>
Adjustments
to Equity Total
Three Months Ended Retail Multifamily Other Corporate Total Method Consolidated
- ------------------- --------- ----------- --------- --------- --------- ----------- ------------
March 31, 2000
- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Real estate operating revenues $ 16,689 $ 13,462 $ 379 -- $ 30,530 $ (7,308) $ 23,222
Real estate operating expense 5,197 5,348 5 -- 10,550 (2,370) 8,180
-------- -------- -------- --------- -------- --------- --------
Net operating income 11,492 8,114 374 -- 19,980 (4,938) 15,042
-------- -------- -------- --------- -------- --------- --------
General and administrative expenses
-- -- -- (1,035) (1,035) -- (1,035)
Interest income -- -- -- 230 230 -- 230
PRI net operating loss -- -- -- (1,129) (1,129) 1,129 --
-------- -------- -------- --------- -------- --------- --------
EBIDTA 11,492 8,114 374 (1,934) 18,046 (3,809) 14,237
-------- -------- -------- --------- -------- --------- --------
Interest expense (4,392) (3,553) -- (228) (8,173) 2,329 (5,844)
Depreciation and amortization (2,666) (2,020) (24) (297) (5,007) 1,297 (3,710)
Gains on sales of interests in real
estate 2,263 -- -- -- 2,263 -- 2,263
Minority interest in operating
partnership -- -- -- (740) (740) -- (740)
Equity in interest of partnerships
and joint ventures
-- -- -- -- -- 1,672 1,672
Equity in loss of PRI -- -- -- -- -- (1,489) (1,489)
-------- -------- -------- --------- -------- --------- --------
Net income $ 6,697 $ 2,541 $ 350 $ (3,199) $ 6,389 $ -- $ 6,389
-------- -------- -------- --------- -------- --------- --------
Investments in real estate, at cost $401,747 $271,793 $ 83,638 $ -- $757,178 $(169,678) $587,500
-------- -------- -------- --------- -------- --------- --------
Total assets $383,304 $213,003 $ 80,713 $ 14,772 $691,792 $(137,031) $554,761
-------- -------- -------- --------- -------- --------- --------
Recurring capital expenditures $ 119 $ 704 $ -- $ -- $ 823 $ (161) $ 622
-------- -------- -------- --------- -------- --------- --------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Adjustments
to Equity Total
Three Months Ended Retail Multifamily Other Corporate Total Method Consolidated
- ------------------- --------- ----------- --------- --------- --------- ----------- ------------
March 31, 1999
- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Real estate operating revenues $ 15,354 $ 12,804 $ 396 $ -- $ 28,554 $ (6,976) $ 21,578
Real estate operating expense 5,030 5,205 4 -- 10,239 (2,384) 7,855
-------- -------- -------- --------- -------- --------- --------
Net operating income 10,324 7,599 392 -- 18,315 (4,592) 13,723
-------- -------- -------- --------- -------- --------- --------
General and administrative expenses
-- -- -- (853) (853) -- (853)
Interest income -- -- -- 163 163 -- 163
PRI net operating loss -- -- -- (800) (800) 800 --
-------- -------- -------- --------- -------- --------- --------
EBIDTA 10,324 7,599 392 (1,490) 16,825 (3,792) 13,033
-------- -------- -------- --------- -------- --------- --------
Interest expense (4,542) (2,304) (119) (380) (7,345) 2,240 (5,105)
Depreciation and amortization (2,326) (1,839) (26) (307) (4,498) 1,282 (3,216)
PRI income taxes -- -- -- 104 104 (104) --
Gains on sales of interests in real
estate 445 -- 901 -- 1,346 -- 1,346
Minority interest in operating
partnership -- -- -- (562) (562) -- (562)
Equity in interest of partnerships
and jt. ventures -- -- -- -- -- 1,466 1,466
Equity in loss of PRI -- -- -- -- (1,092) (1,092)
-------- -------- -------- --------- -------- --------- --------
Net income $ 3,901 $ 3,456 $ 1,148 $ (2,635) $ 5,870 $ -- $ 5,870
-------- -------- -------- --------- -------- --------- --------
Investments in real estate, at cost
$360,047 $259,587 $ 37,821 $ -- $657,455 $(141,615) $515,840
-------- -------- -------- --------- -------- --------- --------
Total assets $348,305 $203,715 $ 34,812 $ 15,777 $602,609 $(115,770) $486,839
-------- -------- -------- --------- -------- --------- --------
Recurring capital expenditures $ 137 $ 815 $ -- $ -- $ 952 $ (140) $ 812
-------- -------- -------- --------- -------- --------- --------
</TABLE>
-10-
<PAGE>
9. RECENT ACCOUNTING PRONOUNCEMENTS:
The Financial Accounting Standards Board has issued SFAS No. 133, "Accounting
for Derivative Instruments and Hedging Activities." The Statement establishes
accounting and reporting standards requiring that every derivative instrument
(including certain derivative instruments embedded in other contracts) be
recorded in the balance sheet as either an asset or liability measured at its
fair value. PREIT will be required to adopt this statement effective as of
January 1, 2001. PREIT does not expect the adoption of this statement to have a
material impact on its financial position or results of operations.
10. SUBSEQUENT EVENT:
On April 19, 2000, PREIT sold a 294,000 square foot industrial property in
Alexandria, Virginia, for total proceeds of approximately $12 million including
the sale price of $8 million and a lease termination fee with the building's
sole tenant for approximately $4 million. The sale of the property resulted in a
gain of approximately $6.6 million which will be recognized in the second
quarter of 2000.
-11-
<PAGE>
Item 2.
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
PREIT expects to meet its short-term liquidity requirements generally through
its available working capital and net cash provided by operations. PREIT
believes that the net cash provided by operations will be sufficient to make
distributions to continue to qualify as a REIT under the Internal Revenue Code.
PREIT also believes that the foregoing sources of liquidity will be sufficient
to fund its short-term liquidity needs for the foreseeable future, including
capital expenditures, tenant improvements and leasing commissions.
PREIT expects to meet certain long-term liquidity requirements such as property
acquisitions, scheduled debt maturities, renovations, expansions and other
non-recurring capital improvements through long-term secured and unsecured
indebtedness and the issuance of additional equity securities. PREIT also
expects to use the remaining funds available under its $150 million credit
facility (the "Credit Facility") to fund acquisitions, development activities
and capital improvements on an interim basis.
The Credit Facility
At March 31, 2000, PREIT had borrowed $97.7 million against its Credit Facility
and had pledged $5.7 million as collateral for several letters of credit. Of the
unused portion of the Credit Facility of approximately $46.6 million, as of
March 31, 2000, the Company's loan covenant restrictions allow the Company to
borrow approximately an additional $16.2 million (based on the existing property
collateral pool) to fund property acquisitions, scheduled debt maturities and
other uses. At March 31, 2000, the interest rate on the Credit Facility was
7.81%.
Mortgage Notes
In addition to amounts due under the Credit Facility during the next three
years, construction and mortgage loans, secured by properties owned by 2
partnerships in which PREIT has an interest, mature by their terms. Balloon
payments on these loans total $29.4 million of which PREIT's proportionate share
is $15.0 million. Construction and mortgage loans on properties wholly-owned by
PREIT also mature by their terms. Balloon payments on these loans total $25.1
million ($15.0 million in 2000 and $10.1 million in 2001).
-12-
<PAGE>
Funds from Operations
Funds from operations (FFO) increased by $0.4 million for the three months ended
March 31, 2000, as compared to the three months ended March 31, 1999, as
follows:
<TABLE>
<CAPTION>
(In thousands)
Three Months Ended
March 31
--------------------------------
Funds from Operations(1) 2000 1999
- ---------------------------------------------------------------- ------- --------
<S> <C> <C>
Income before minority interest in operating partnership $ 7,129 $ 6,432
Less: Gains on sales of interests in real estate (2,263) (1,346)
Add:
Depreciation and amortization-
Wholly-owned and consolidated partnerships 3,710 3,156
Unconsolidated partnerships and joint ventures 1,122 1,059
Excess purchase price over net assets acquired 54 53
Less:
Depreciation of non-real estate assets (65) (60)
Amortization of deferred financing costs (163) (139)
------- --------
Funds from operations $ 9,524 $ 9,155
======= ========
Weighted average number of shares outstanding 13,340 13,308
Weighted average effect of full conversion of OP Units 1,541 1,274
------- --------
14,881 14,582
======= ========
</TABLE>
(1) Funds from operations ("FFO") is defined as income before gains (losses) on
investments, excluding gains (losses) on sale of depreciable operating real
estate 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 PREIT's operating performance, or to cash flows from
operating activities (as determined in accordance with GAAP) as a measure of
liquidity. In addition, PREIT's measure of FFO as presented may not be
comparable to similar measures reported by other companies.
Cash Flows
During the three months ended March 31, 2000, PREIT generated $8.6 million in
cash flow from operating activities. Investing activities during the three
months ended March 31, 2000 used cash of $10.2 million including (i) $2.9
million in investments in property under development, (ii) $8.6 million in
investments in wholly-owned real estate assets, (iii) $2.1 million in
investments in the affiliated management company and partnerships, offset by
(iv) cash proceeds from the sale of a partnership interest of $2.9 million and
(v) distributions from partnerships in excess of equity in income of $0.4
million. Financing activities provided cash flow of $2.3 million and included
(i) $3.3 construction loans payable and a net borrowing of (ii) $6.7 million
under the Company's Credit Facility, offset by (iii) $6.9 million of
distributions to shareholders, OP unit holders and minority interests, and (iv)
principal installments on mortgages of $1.0 million.
Contingent Liabilities
At March 31, 2000, PREIT had approximately $66.0 million committed to complete
current development and redevelopment projects. In connection with certain
development properties, PREIT Associates, L.P., may be required to issue
additional OP units upon the achievement of certain financial results.
-13-
<PAGE>
PREIT along with certain of its joint venture partners has guaranteed debt
totaling $6.1 million.
Also, PREIT and its joint venture partner have jointly and severally guaranteed
the construction loan payable on a development project. The balance of the loan
at March 31, 2000 was $28.8 million and the remaining commitment from the lender
was $37.2 for a total credit line of $66.0 million.
Interest Rate Protection
In order to reduce exposure to variable interest rates, PREIT entered into a
six-year interest rate swap agreement with First Union, on $20 million of
indebtedness which fixes a rate of 6.12% per annum versus 30-day LIBOR until
June 2001.
Results of Operations
Three Month Periods Ended March 31, 2000 and 1999
Gross revenues from real estate increased by $1.6 million to $23.2 million for
the three-month period ended March 31, 2000, as compared to the corresponding
period in 1999. Retail property revenues increased by $1.0 million. Of this
amount $0.8 million is attributable to 1999 acquisitions and a property under
development in 1999 now placed in service. The remaining $0.2 million represents
an increase for properties owned during both periods. Multifamily revenues
increased by $0.6 million for properties owned during both periods due to rental
rate increases and higher occupancy rates.
Property operating expenses increased by $0.3 million to $8.2 million for the
three months ended March 31, 2000 as compared to the three months ended March
31, 1999. Retail property operating expenses increased by $0.2 million with $0.1
million attributable to 1999 acquisitions and a property under development in
1999 now placed in service. Operating expenses for properties owned during both
periods increased by $0.1 million for both retail and multifamily properties.
Depreciation and amortization increased by $0.5 million to $3.7 million for the
three months ended March 31, 2000 as compared to the three months ended March
31, 1999. Retail property depreciation increased by $0.3 million, of which $0.2
million is the result of 1999 acquisitions and the new development property
placed in service. Retail depreciation increased by $0.1 million for properties
owned during both periods because of a higher asset base. Multifamily
depreciation increased by $0.2 million for properties owned during both periods
also due to a higher asset base.
Interest expense increased by $0.7 million to $5.8 million for the three months
ended March 31, 2000 as compared to the three months ended March 31, 1999.
Interest expense incurred on the newly placed multifamily mortgages resulted in
a $1.8 million increase. Interest expense on the credit facility decreased by
$0.9 million because of the reduced weighted-average amount outstanding for the
2000 period of $94.5 million as compared to $140.2 million for the 1999 period.
Interest expense on the retail segment decreased by $0.1 million for properties
owned during both periods based on lower principal balances in 2000.
Equity in income of partnerships and joint ventures increased by $0.2 million to
$1.7 million for the three months ended March 31, 2000 as compared to the three
months ended March 31, 1999. This is primarily attributable to an increased
income from Whitehall Mall which was under redevelopment in the 1999 period.
Equity in net loss of PREIT-RUBIN, Inc. for the 2000 period was $1.5 million as
compared to $1.1 million in the 1999 period. The 1999 period included
non-recurring brokerage commissions of $0.1 million and one-time development
fees of $0.2 million. Net income from the third-party management business
decreased by $0.1 million.
Minority interest in the operating partnership increased by $0.2 million to $0.7
million for the three months ended March 31, 2000 as compared to the three
months ended March 31, 1999 primarily as a result of 167,500 additional
contingent OP units earned under the Contribution Agreement related to the
acquisition of The Rubin Organization in 1997.
-14-
<PAGE>
Gains from the sale of interests in real estate increased by $0.9 million for
the three months ended March 31, 2000 as compared to the three months ended
March 31, 1999. The 2000 period reflects a gain on the sale of interest in Park
Plaza Shopping Center in Pinellas Park, FL. The 1999 period includes gains on
the sale of interests in 135 Commerce Drive, Ft. Washington, PA and an
undeveloped land parcel at Crest Plaza in Allentown, PA.
Net income for the quarter ended March 31, 2000 increased to $6.4 million from
$5.9 million as reported in the comparable period in the prior year.
Acquisitions and Dispositions
PREIT is actively involved in pursing and evaluating a number of individual
property and portfolio acquisition opportunities. In addition, PREIT has stated
that a key strategic goal is to obtain managerial control of all of its assets.
In certain cases where existing joint venture assets are managed by outside
partners, PREIT is considering the possible acquisition of these outside
interests. In certain cases where that opportunity does not exist, PREIT is
considering the disposition of its interests. There can be no assurance that
PREIT will consummate any such acquisition or disposition.
In 2000, PREIT purchased, for $11 million, including the assumption of debt, its
partner's 35% interest in the Emerald Point Multifamily Community. PREIT now
owns 100% of the property.
In 2000, PREIT and an unrelated third-party formed a partnership and purchased
the Willow Grove Park shopping center in Willow Grove, Pennsylvania for
approximately $140 million. Upon completion of certain investment requirements,
including the funding of an expansion of the shopping center, the Company's
current 0.01% interest in the partnership that owns the shopping center will
increase to a subordinated 50% interest.
In 2000, PREIT sold its 50% interest in the Park Plaza shopping center in
Pinellas Park, Florida for proceeds of $3 million, resulting in a gain of $2.3
million.
In 2000, PREIT sold a 294,000 square foot industrial property in Alexandria,
Virginia, for total proceeds of approximately $12 million including the sale
price of $8 million and a lease termination fee with the building's sole tenant
for approximately $4 million. The sale of the property resulted in a gain of
approximately $6.6 million which will be recognized in the second quarter of
2000.
Development, Expansions and Renovations
PREIT is involved in a number of development and redevelopment projects, that
may require equity funding by PREIT or third-party debt or equity financing. In
each case, PREIT will evaluate the financing opportunities available to it at
the time a project requires funding. In cases where the project is undertaken
with a joint venture partner, PREIT's flexibility in funding the project may be
governed by the joint venture agreement or the covenants existing in its line of
credit which limit the use of borrowed funds in joint venture projects.
At March 31, 2000, PREIT had approximately $66 million committed to complete
current development and redevelopment projects. In connection with certain
development properties, PREIT Associates, L.P. may be required to issue
additional OP units upon the achievement of certain financial results.
Year 2000 Issue
PREIT expended approximately $0.2 million in connection with hardware, software
and equipment upgrades and repairs relating to the Year 2000 issue. The Company
did not incur any significant interruption of services in connection with the
Year 2000, nor does the Company expect to incur any in the future.
Forward-Looking Statements
The matters discussed in this report, as well as news releases issued from time
to time by PREIT include use of forward-looking terminology such as "may,"
"will," "should," "expect," "anticipate," "estimate," "plan," or "continue" or
-15-
<PAGE>
the negative thereof or other variations thereon, or comparable terminology
which constitute "forward-looking statements." Such forward-looking statements
(including without limitation, information concerning PREIT's planned
acquisition, development and divestiture activities, short- and long-term
liquidity position, ability to raise capital through public and private
offerings of debt and/or equity securities, availability of adequate funds at
reasonable cost, revenues and operating expenses for some or all of the
properties, leasing activities, occupancy rates, changes in local market
conditions or other competitive factors) involve known and unknown risks,
uncertainties and other factors that may cause the actual results, performance
or achievements of PREIT's results to be materially different from any future
results, performance or achievements expressed or implied by such
forward-looking statements. PREIT disclaims any obligation to update any such
factors or to publicly announce the result of any revisions to any of the
forward-looking statements contained herein to reflect future events or
developments.
-16-
<PAGE>
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There has been no material change in the net financial instrument position or
sensitivity to market risk since December 31, 1999 as reported by PREIT in its
Form 10-K for the year ended December 31, 1999.
-17-
<PAGE>
PART II
OTHER INFORMATION
Item 5. Other Information
PREIT issued a press release on May 9, 2000 containing financial
information for the quarter ended March 31, 2000. A copy of the press release is
attached hereto as Exhibit 99.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27 Financial Data Schedule
99 Press Release, issued May 9, 2000 containing financial
information for the quarter ended March 31, 2000.
(b) Reports on Form 8-K
Current report on Form 8-K dated February 28, 2000 and filed on
February 29. 2000.
-18-
<PAGE>
SIGNATURE OF REGISTRANT
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
By /s/ Ronald Rubin
------------------------------------
Ronald Rubin
Chief Executive Officer
By /s/ Edward A. Glickman
------------------------------------
Edward A. Glickman
Executive Vice President and
Chief Financial Officer
By /s/ Dante J. Massimini
------------------------------------
Dante J. Massimini
Senior Vice President and Treasurer
(Principal Accounting Officer)
-19-
<PAGE>
Exhibit Index
Exhibit
Number Description
- ------ -----------
27 Financial Data Schedule
99 Press Release, issued May 9, 2000, containing financial information for
the period ended March 31, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<CIK> 0000077281
<NAME> PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
<MULTIPLIER> 1
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-1-2000
<PERIOD-END> MAR-31-2000
<EXCHANGE-RATE> 1
<CASH> 3,867,000
<SECURITIES> 0
<RECEIVABLES> 52,066,000
<ALLOWANCES> 528,000
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 587,500,000
<DEPRECIATION> 88,144,000
<TOTAL-ASSETS> 554,761,000
<CURRENT-LIABILITIES> 47,393,000
<BONDS> 373,654,000
0
0
<COMMON> 13,349,000
<OTHER-SE> 120,365,000
<TOTAL-LIABILITY-AND-EQUITY> 554,761,000
<SALES> 23,222,000
<TOTAL-REVENUES> 25,158,000
<CGS> 12,925,000
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,844,000
<INCOME-PRETAX> 6,389,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 6,389,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,389,000
<EPS-BASIC> .48
<EPS-DILUTED> .48
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
[GRAPHIC OMITTED] [GRAPHIC OMITTED] Pennsylvania Real Estate Investment Trust
200 South Broad Street
Philadelphia, PA 19102
www.preit.com
Phone: 215-875-0700
Fax: 215-546-7311
FOR FURTHER INFORMATION:
AT THE COMPANY AT THE FINANCIAL RELATIONS BOARD
Edward A. Glickman Joe Calabrese Pamela Belfor Judith Sylk-Siegel
Executive Vice President and CFO (General Info) (Analyst Info) (Media Info)
(215) 875-0700 (212) 661-8030 (212) 661-8030 (212) 661-8030
FOR IMMEDIATE RELEASE
May 9, 2000
</TABLE>
Pennsylvania Real Estate Investment Trust Reports
First Quarter 2000 Results
Philadelphia, PA, May 9, 2000-- Pennsylvania Real Estate Investment Trust
(NYSE:PEI) announced today the results of its operations for the first quarter
ended March 31, 2000.
2000 First Quarter Highlights
o FFO increased 1.6% to $0.64 per share on 14.9 million shares/OP units
outstanding from $0.63 per share on 14.6 million shares/OP units during the
first quarter of 1999.
o FFO for the first quarter of 2000 increased 4.0% to $9.5 million from $9.2
million in the 1999 first quarter.
o Increased combined net operating income 9.1% to $20.0 million from $18.3
million in the 1999 first quarter.
o Same store multifamily net operating income increased 5.5% from the
1999 first quarter.
o Same store retail net operating income increased 4.0% from the 1999
first quarter.
First Quarter Results
Funds from operations (FFO) for the three months ended March 31, 2000 totaled
$9,524,000, a 4.0% increase over FFO of $9,155,000 for the comparable
three-month period in 1999. The growth was driven by acquisitions and
development projects completed in 1999 and improved operating results in the
Company's portfolio. First quarter FFO was $0.64 per share on 14,880,708
weighted average share equivalents outstanding (including Operating Partnership
[OP] units), compared to $0.63 per share on 14,582,099 weighted average share
equivalents for the three months ended March 31, 1999. As calculated by NAREIT,
FFO is defined as net income, excluding extraordinary items, gain (or loss) on
the sale of property, plus depreciation and amortization.
Net operating income before depreciation from wholly-owned properties and the
Company's proportionate share of partnerships and joint venture properties
increased 9.1% to $19,980,000 for the three months ended March 31, 2000, from
$18,316,000 for the three months ended March
<PAGE>
PREIT Announces First Quarter 2000 Results
May 9, 2000
Page 2
31, 1999. The increase is mainly due to acquisitions and development projects
completed in 1999 and improved operating results in the Company's portfolio.
Net income for the three months ended March 31, 2000 was $6,389,000, or $0.48
per basic share, on total weighted average shares outstanding of 13,339,873
compared to $5,870,000, or $0.44 per basic share, on 13,308,584 total weighted
average shares outstanding for the three months ended March 31, 1999. Net income
for the first quarter of 2000 includes a gain on the sale of the Company's
interest in Park Plaza shopping center in Pinellas Park, Florida totaling $2.3
million or $0.17 per share. Net income for the first quarter of 1999 includes
gains on the sale of the Company's interest in 135 Commerce Drive, Fort
Washington, PA and a land parcel at Crest Plaza in Allentown, PA totaling $1.3
million or $0.10 per share.
Same Store NOI Growth -- Multifamily and Shopping Center Portfolios
Same store net operating income for the Company's portfolio of multifamily
properties increased 5.5% over the first quarter of 2000, primarily driven by a
5.1% increase in revenues. Same store net operating income for the first quarter
of 2000 for the Company's shopping center portfolio increased by 4.0% over the
comparable quarter in 1999 primarily driven by a 3.2% increase in revenues.
Comments from Management
Commenting on the quarter, Ronald Rubin, Chief Executive Officer of PREIT, said,
"We are pleased with the overall performance of our core portfolio during the
first quarter of 2000 reflecting the effectiveness of our business plan. In the
quarters ahead, PREIT will continue to concentrate on our strengths in retail
power centers, malls and multifamily while maintaining the growth of our
development pipeline which currently includes 5 power centers, one entertainment
center and one enclosed mall. We are optimistic that 2000 will be another year
of solid achievement and are very positive about the impact of our long-term
growth strategies on the financial prospects for the Company."
Portfolio Highlights
Acquisitions
o Willow Grove Park (Willow Grove, PA) - In February, a partnership of PREIT
and Pennsylvania State Employee Retirement System (PaSERS) purchased Willow
Grove Park, a 981,000 square foot regional shopping center for $140
million. In conjunction with the acquisition, it was announced that a
225,000 square foot Macy's department store would be added to the complex
in the Fall of 2001.
o Emerald Point (Virginia Beach, VA) -- In January, PREIT completed the
purchase for $11 million, including assumption of debt, of its partner's
35% interest in 862 apartment units at the Emerald Point multifamily
community. The property is now 100% owned and operated by PREIT.
Development Pipeline
o Paxton Towne Centre (Harrisburg, PA) - Construction of the 695,000 square
foot power center is on schedule and as of March 31, 2000, 61% complete and
75% leased. Initial occupancy is expected in the third quarter of 2000.
<PAGE>
PREIT Announces First Quarter 2000 Results
May 9, 2000
Page 3
o Metroplex Shopping Center (Plymouth Meeting, PA) - Construction of the
780,000 square foot power center is on schedule and as of March 31, 2000,
53% complete and 90% leased. Initial occupancy is expected in the fourth
quarter of 2000.
o Pavilion at Market East (Philadelphia, PA) - Plans for the site continue to
undergo reconfiguration and redesign, and the recommencement of
construction is dependent upon the completion of leasing and financing
arrangements.
o Creekview (Warrington, PA) - Construction of the 419,000 square foot
shopping center is on schedule and as of March 31, 2000, 52% complete and
84% leased. Target and Lowe's have opened at Creekview and the Company
recently signed a lease with Genuardis Supermarkets, Inc. Occupancy of
additional tenants is expected in the third quarter of 2001 with completion
in the fourth quarter of 2001.
Dispositions
o Park Plaza Shopping Center (Pinellas Park, FL) -- Consistent with the
Company's disposition strategy of selling non-core properties, PREIT
completed the sale of its 50% interest in Park Plaza Shopping Center to its
joint venture partner. The Company realized total proceeds of approximately
$3.0 million and a gain on the sale totaling $2.3 million or $0.17 per
share.
Second Quarter 2000 Activity
o CVS Building (Alexandria, VA) - As previously announced, in April, PREIT
sold a 294,000 square foot industrial property for total proceeds of
approximately $12.0 million. In connection with the sale, the Company
terminated the lease with the building's sole tenant, CVS Drug Co., which
otherwise would have expired on April 30, 2002. The sale of the property
will result in a gain of approximately $6.6 million ($0.45 per share and OP
Unit) in the second quarter of 2000. The lease termination payment of
approximately $4 million will be recorded as income in the second quarter
of 2000 in accordance with Generally Accepted Accounting Principles (GAAP).
o Northeast Tower Center (Philadelphia, PA) -- PREIT also announced today the
termination of a ground lease by General Cinema at Northeast Tower Center,
a 479,498 square foot power center. The lease termination payment of one
year's rent totals $650,000 and will be recorded as income in the second
quarter of 2000 in accordance with GAAP.
The Company also announced today that is has entered into a 20-year lease
agreement with Bradlees Stores for a 114,270 square foot store at Northeast
Tower Center. Under the lease agreement, which commences on February 1,
2001 or earlier if the store is open, the tenant will pay initial annual
rent of $1.1 million. Bradlees anticipates the opening of its store in
November of 2000.
o Mandarin Corners (Jacksonville, FL) - The Company also announced today an
agreement in principle to terminate a lease with Uptons. Uptons, which has
vacated the Mandarin Corners strip center, will make a lease termination
payment of approximately $1.0 million. The agreement is expected to be
finalized during the second quarter. The lease was scheduled to expire on
October 31, 2007 and annual rent was $375,550.
<PAGE>
PREIT Announces First Quarter 2000 Results
May 9, 2000
Page 4
Capital Resources
As of March 31, 2000, the Company had approximately $103.0 million outstanding,
including letters of credit, under its line of credit.
Edward Glickman, Chief Financial Officer of PREIT, added, "Our objective in 2000
is to provide the Company with additional capital to fund its development
projects and other value-added opportunities. We continue to be prudent in
choosing our opportunities and expect to fund our development pipeline with a
combination of retained cash, non-core asset dispositions, debt financing and
potential strategic partnerships. Towards this end, we have maintained our
strategy of opportunistically selling non-core properties at favorable prices
and reinvesting the proceeds in assets with higher cash flows and better
appreciation prospects. Of note, we continue to work with Eastdil Realty to sell
several non-core supermarket and drugstore strip centers."
Pennsylvania Real Estate Investment Trust, founded in 1960 and one of the first
equity REITs in the U.S., has a primary investment focus on shopping centers
(approximately 9.5 million square feet) and apartment communities (7,242 units)
located primarily in the eastern United States. The Company's portfolio
currently consists of 46 properties in 10 states. In addition, there are 7
retail properties under development, which will add approximately 3.4 million
square feet to the portfolio. Pennsylvania Real Estate Investment Trust is
headquartered in Philadelphia, Pennsylvania.
With the exception of the historical information contained in the release, the
matters described herein contain forward-looking statements that are made
pursuant to the Safe Harbor provisions of the Private Securities Litigation
Reform Act of 1995. Such statements involve various risks which may cause actual
results to differ materially. These risks include, but are not limited to, the
ability of the Company to grow internally or by acquisition and to integrate
acquired businesses, the availability of adequate funds at reasonable cost,
changing industry and competitive conditions, and other risks outside the
control of the company referred to in the Company's registration statement and
periodic reports filed with the Securities and Exchange Commission.
[Financial Tables Follow]
# # #
** A supplemental quarterly financial package **
is available on the Company's web site at www.preit.com.
To receive additional information on Pennsylvania Real Estate Investment Trust
via fax at no charge, please dial 1-800-PRO-INFO and enter the ticker symbol
PEI.
<PAGE>
PREIT Announces First Quarter 2000 Results
May 9, 2000
Page 5
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
EQUITY IN INCOME OF PARTNERSHIPS
AND JOINT VENTURES
- ------------------------------------------------------------------------------------------------------------------------------------
Three Months Ended
March 31, 2000 March 31, 1999
------------------ --------------
<S> <C> <C>
Gross revenues from real estate $ 16,423,000 $ 14,158,000
============ ============
Expenses:
Property operating expenses 5,468,000 4,852,000
Mortgage and bank loan interest 5,113,000 4,188,000
Depreciation and amortization 2,531,000 2,154,000
------------ ------------
13,112,000 11,194,000
------------ ------------
3,311,000 2,964,000
Partner's Share (1,639,000) (1,498,000)
------------ ------------
EQUITY IN INCOME OF PARTNERSHIPS
AND JOINT VENTURES $ 1,672,000 $ 1,466,000
============ ============
</TABLE>
Supplemental Information for Wholly Owned Properties
and the Company's Proportionate Share of Partnerships and Joint Ventures
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION
AND AMORTIZATIONS ("EBITDA")
- ------------------------------------------------------------------------------------------------------------------------------------
Three Months Ended
March 31, 2000 March 31, 1999
------------------ --------------
<S> <C> <C>
Gross Revenues $ 23,222,000 $ 21,578,000
Operating expenses (8,180,000) (7,855,000)
------------ ------------
Net operating income: Wholly-owned properties 15,042,000 13,723,000
Company's proportionate share of partnerships and
joint ventures net operating income 4,938,000 4,593,000
------------ ------------
Combined net operating income 19,980,000 18,316,000
Interest income 230,000 163,000
Company's proportionate share of PREIT-RUBIN, Inc.
net operating income (loss) (1,129,000) (800,000)
General and administrative expenses (1,035,000) (853,000)
------------ ------------
EBITDA $ 18,046,000 $ 16,826,000
============ ============
MORTGAGE NOTES, BANK AND CONSTRUCTION LOANS PAYABLE
Wholly-Owned Properties
Mortgage notes payable $ 265,809,000 $ 166,274,000
Bank Loans payable 97,700,000 142,973,000
Construction Loan Payable 10,145,000 --
------------- -------------
373,654,000 309,247,000
Company's Proportionate Share of
Partnerships and Joint Ventures
Mortgage notes payable 113,195,000 108,861,000
Bank loans payable 14,396,000 2,482,000
------------- -------------
Total mortgage notes and bank loans payable $ 501,245,000 $ 420,590,000
============= =============
</TABLE>
<PAGE>
Pennsylvania Real Estate Investment Trust
Selected Financial Data
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
FUNDS FROM OPERATIONS
- ------------------------------------------------------------------------------------------------------------------------------------
Three Months Ended
March 31, 2000 March 31, 1999
------------------ --------------
<S> <C> <C>
Income before minority interest in operating partnership $ 7,129,000 $ 6,432,000
Less: Gains on sales of interests in real estate (2,263,000) (1,346,000
Add:
Wholly owned and consolidated partnership, net 3,710,000 3,156,000
Unconsolidated partnerships and joint ventures 1,122,000 1,059,000
Excess purchase price over net asset acquired 54,000 53,000
Less: Depreciation of non-real estate assets (65,000) (60,000)
Amortization of deferred financing assets (163,000) (139,000)
----------- -----------
FUNDS FROM OPERATIONS $ 9,524,000(1) $ 9,155,000(1)
=========== ===========
FUNDS FROM OPERATIONS PER SHARE AND OP UNITS $0.64 $0.63
=========== ===========
Weighted average number shares outstanding 13,339,873 13,308,584
Weighted average effect of full conversion of OP units 1,540,835 1,273,515
----------- -----------
Total weighted average shares of outstanding including OP units 14,880,708 14,582,099
=========== ===========
1) Includes the non-cash effect of straight-line rents of $296,000 and $295,000 for the 1st quarter 2000 and 1999,
respectively.
- ------------------------------------------------------------------------------------------------------------------------------------
OPERATING RESULTS
- ------------------------------------------------------------------------------------------------------------------------------------
Three Months Ended
March 31, 2000 March 31, 1999
------------------ --------------
<S> <C> <C>
REVENUES
Gross revenues from real estate $23,222,000 $21,578,000
Interest and other income 230,000 163,000
----------- -----------
23,452,000 21,741,000
----------- -----------
EXPENSES
Property operating expenses 8,180,000 7,855,000
Depreciation and amortization 3,710,000 3,216,000
General and administrative expenses 1,035,000 853,000
Interest expense 5,844,000 5,105,000
----------- -----------
18,769,000 17,029,000
----------- -----------
Income before equity in unconsolidated entities,
gains on sales of interests in real estate and
minority interest in operating partnership 4,683,000 4,712,000
Equity in loss of PREIT-RUBIN, Inc. (1,489,000) (1,092,000)
Equity in income of partnerships and joint ventures 1,672,000 1,466,000
Gains on sales of interests in real estate 2,263,000(1) 1,346,000(2)
----------- -----------
Income before minority interest in operating partnership 7,129,000 6,432,000
Minority interest in operating partnership (740,000) (562,000)
----------- -----------
NET INCOME $ 6,389,000 $ 5,870,000
=========== ===========
PER SHARE DATA
Net income before gains on sales of interests in real estate $0.31 $0.34
Gains on sales of interests in real estate 0.17(1) 0.10(2)
----------- -----------
BASIC INCOME PER SHARE $0.48 $0.44
=========== ===========
DILUTED INCOME PER SHARE $0.48 $0.44
=========== ===========
Weighted average number shares outstanding 13,339,873 13,308,584
----------- -----------
1) 2000 includes a gain on sale of interest in Park Plaza shopping center in Pinellas Park, Florida.
2) 1999 includes gains on sale of interests in 135 Commerce Drive, Fort Washington, PA, and land parcel at Crest Plaza,
Allentown, PA.
</TABLE>
