SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) May 30, 2003
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Pennsylvania Real Estate Investment Trust
(Exact Name of Registrant as Specified in Charter)
Pennsylvania 1-6300 23-6216339
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(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
The Bellevue, 200 S. Broad Street, Philadelphia, Pennsylvania 19102
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (215) 875-0700
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(Former Name or Former Address, if Changed Since Last Report)
Item 2. Acquisition or Disposition of Assets.
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On May 30, 2003, Pennsylvania Real Estate Investment Trust (together
with its subsidiaries and affiliated entities, "PREIT") completed the sale of 13
of its wholly-owned multifamily properties to MPM Acquisition Corp., an
affiliate of Morgan Properties, Ltd. (together, "Morgan") for a total sale price
of $314 million (approximately $151.5 million of which consisted of assumed
indebtedness). The sale was completed pursuant to a purchase and sale agreement
entered into by PREIT in March 2003 to sell all of the 19 properties and related
assets in its portfolio of multifamily properties to Morgan for $420 million,
which included the assumption of certain indebtedness by Morgan. The 19
properties in PREIT's multifamily portfolio (aggregating to a total of 7,242
apartment units), consisted of 15 properties that were wholly-owned by PREIT and
four multifamily properties in which PREIT held a 50% joint venture interest.
Prior to the closing on May 30, 2003, PREIT and Morgan amended the purchase and
sale agreement to exclude from the transaction PREIT's interests in the four
properties held in joint venture form, resulting in a reduction of approximately
$24.85 million, inclusive of $13.4 million in indebtedness that was to be
assumed, from the original sale price of $420 million.
The original purchase and sale agreement was also amended to reflect
(1) the deferral of the closing of two of the wholly-owned multifamily
properties, Emerald Point in Virginia Beach, Virginia and Regency Lakeside in
Omaha, Nebraska, until on or before July 31, 2003 (unless further extended for
90 days by both parties) pending receipt of a required consent from Fannie Mae
to Morgan's assumption of the loans secured by those properties and (2) the
addition of a purchase price credit of $3 million for Morgan toward its closing
costs upon the closing of the sale of all 15 of PREIT's wholly-owned multifamily
properties. If the sale of the two remaining wholly-owned properties occurs, the
aggregate purchase price for those two properties is expected to be
approximately $81 million, inclusive of $34 million in assumed indebtedness and
before giving effect to the $3 million purchase price credit. A cash deposit of
approximately $3.1 million by Morgan is being held pending the closing of the
two remaining wholly-owned properties. If the transaction does not close because
Fannie Mae fails to consent, the $3.1 million deposit will be returned to
Morgan. If the transaction does not close for any other reason (other than by
reason of a default caused by PREIT), PREIT will be entitled to keep the $3.1
million deposit.
With respect to its four joint venture multifamily properties, PREIT
has sold its 50% interest in the following two properties: (1) Cambridge Hall
Apartments in West Chester, Pennsylvania; sold on May 1, 2003 to Tree Farm Road,
L.P. (PREIT's joint venture partner) for $6.7 million, inclusive of
$2.5 million in assumed indebtedness and (2) Countrywood Apartments in
Tampa, Florida; sold on May 31, 2003 to Countrywood Apartments General
Partnership (PREIT's joint venture partner) for $9.1 million, inclusive of
$7.3 million in assumed indebtedness. The sale of PREIT's interests in the
other two joint venture properties is currently the subject of discussions
between PREIT and its joint venture partners.
The purchase price for each of these transactions was determined by
arm's length negotiations. PREIT has used the net proceeds of the sales of
approximately $164.8 million to pay down its unsecured acquisition credit
facility entered into in connection with PREIT's previously announced
acquisition of six malls from affiliated companies of The Rouse Company.
Approximately $10.2 million is currently outstanding under such credit facility.
PREIT's sale of its multifamily portfolio to Morgan has been designed
to meet the requirements of Section 1031 of the Internal Revenue Code for a
tax-deferred exchange for certain of the retail properties acquired from The
Rouse Company.
Copies of the principal agreements relating to the transactions are
attached hereto and incorporated by reference herein. The description contained
herein of these agreements does not purport to be complete and is qualified in
its entirety by reference to the provisions of these agreements.
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This report contains certain "forward-looking statements" within the
meaning of Section 21E of the Securities Exchange Act of 1934. Forward-looking
statements relate to expectations, beliefs, projections, future plans and
strategies, anticipated events or trends and other matters that are not
historical facts. These forward-looking statements reflect PREIT's current views
about future events and are subject to risks, uncertainties, assumptions and
changes in circumstances that may cause future events, achievements or results
to differ materially from those expressed by the forward-looking statements. In
particular, PREIT may not be able to consummate the sale of its two wholly-owned
multifamily properties or its interests in the two remaining multifamily joint
ventures on previously announced terms, favorable terms to PREIT, or at all, or
if such transactions are consummated, PREIT's actual results may differ
significantly from those expressed in any forward-looking statement. Certain
factors that could cause PREIT not to consummate the transactions include,
without limitation, the inability to agree on terms for the sale of the two
joint venture properties to PREIT's joint venture partners, the satisfaction of
closing conditions applicable to the transactions (some of which are beyond
PREIT's control), and other economic, business or competitive factors. In
addition, PREIT's business is subject to uncertainties regarding the revenues,
operating expenses, leasing activities, occupancy rates, and other competitive
factors relating to PREIT's portfolio and changes in local market conditions as
well as general economic, financial and political conditions, including the
possibility of outbreak or escalation of war or terrorist attacks, any of which
may cause future events, achievements or results to differ materially from those
expressed by the forward-looking statements. PREIT does not intend to and
disclaims any duty or obligation to update or revise any forward-looking
statements set forth in this report to reflect new information, future events or
otherwise.
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Item 7. Financial Statements and Exhibits.
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(b) Pro forma Financial Information:
The following unaudited pro forma financial information is attached
hereto:
(i) Pro Forma Balance Sheet of PREIT as of March 31, 2003.
(ii) Pro Forma Statement of Income of PREIT for the Year Ended
December 31, 2002.
(iii) Pro Forma Statement of Income of PREIT for the Three Months
Ended March 31, 2003.
(iv) Notes to Management's Assumptions to Unaudited Pro Forma
Financial Information.
(c) Exhibits
2.1+ Purchase and Sale Agreement between PREIT Associates, L.P., et
al. and MPM Acquisition Corp., dated as of March 3, 2003,
filed as Exhibit 2.1 to PREIT's Current Report on Form 8-K
dated March 3, 2003 and filed March 6, 2003, is incorporated
herein by reference.
2.2 First Amendment to Purchase and Sale Agreement between PREIT
Associates, L.P., et al. and MPM Acquisition Corp., dated as
of March 3, 2003, filed as Exhibit 2.2 to PREIT's Current
Report on Form 8-K dated March 3, 2003 and filed March 6,
2003, is incorporated herein by reference.
2.3 Second Amendment to Purchase and Sale Agreement between PREIT
Associates, L.P., et al. and MPM Acquisition Corp., dated as
of April 4, 2003 filed as Exhibit 2.1 to PREIT's Current
Report on Form 8-K dated April 4, 2003 and filed April 10,
2003, is incorporated herein by reference.
2.4+* Third Amendment to Purchase and Sale Agreement between PREIT
Associates, L.P., et al. and MPM Acquisition Corp., dated as
of May 27, 2003.
2.5* Letter Agreement between PREIT Associates, L.P., et al. and
MPM Acquisition Corp, dated May 30, 2003.
2.6+* Purchase and Sale Agreement between Mid-Island Properties,
Inc. and PREIT Associates, L.P. dated May 1, 2003.
2.7* Assignment and Assumption of Purchase and Sale Agreement
between Mid-Island Properties, Inc. and Tree Farm Road, L.P.
dated May 1, 2003.
2.8* Partnership Assignment Agreement between PREIT Associates,
L.P. and Tree Farm Road, L.P. dated May 1, 2003.
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2.9*+ Purchase and Sale Agreement by and among Countrywood
Apartments Limited Partnership, Countrywood Apartments General
Partnership, PR Countrywood LLC and PREIT Associates, L.P.
dated May 30, 2003.
+ Pursuant to Item 601(b)(2) of Regulation S-K, certain exhibits
and schedules have been omitted, copies of which will be
furnished to the SEC upon request.
* Filed herewith.
-5-
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: June 16, 2003 By: Jonathan B. Weller
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Jonathan B. Weller
President and Chief Operating Officer
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Exhibit Index
2.1+ Purchase and Sale Agreement between PREIT Associates, L.P., et
al. and MPM Acquisition Corp., dated as of March 3, 2003,
filed as Exhibit 2.1 to PREIT's Current Report on Form 8-K
dated March 3, 2003 and filed March 6, 2003, is incorporated
herein by reference.
2.2 First Amendment to Purchase and Sale Agreement between PREIT
Associates, L.P., et al. and MPM Acquisition Corp., dated as
of March 3, 2003, filed as Exhibit 2.2 to PREIT's Current
Report on Form 8-K dated March 3, 2003 and filed March 6,
2003, is incorporated herein by reference.
2.3 Second Amendment to Purchase and Sale Agreement between PREIT
Associates, L.P., et al. and MPM Acquisition Corp., dated as
of April 4, 2003 filed as Exhibit 2.1 to PREIT's Current
Report on Form 8-K dated April 4, 2003 and filed April 10,
2003, is incorporated herein by reference.
2.4+* Third Amendment to Purchase and Sale Agreement between PREIT
Associates, L.P., et al. and MPM Acquisition Corp., dated as
of May 27, 2003.
2.5* Letter Agreement between PREIT Associates, L.P., et al. and
MPM Acquisition Corp, dated May 30,
2003.
2.6+* Purchase and Sale Agreement between Mid-Island Properties,
Inc. and PREIT Associates, L.P.
dated May 1, 2003.
2.7* Assignment and Assumption of Purchase and Sale Agreement
between Mid-Island Properties, Inc.
and Tree Farm Road, L.P. dated May 1, 2003.
2.8* Partnership Assignment Agreement between PREIT Associates,
L.P. and Tree Farm Road, L.P. dated May 1, 2003.
2.9*+ Purchase and Sale Agreement by and among Countrywood
Apartments Limited Partnership, Countrywood Apartments General
Partnership, PR Countrywood LLC and PREIT Associates, L.P.
dated May 30, 2003.
+ Pursuant to Item 601(b)(2) of Regulation S-K, certain exhibits
and schedules have been omitted, copies of which will be
furnished to the SEC upon request.
* Filed herewith.
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PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
PRO FORMA BALANCE SHEET AND
STATEMENTS OF INCOME
This pro forma information should be read in conjunction with the
historical financial statements and notes of PREIT included in its annual report
on Form 10-K for the year ended December 31, 2002 and its quarterly report filed
on Form 10-Q for the three months ended March 31, 2003.
The following unaudited pro forma information sets forth the pro
forma balance sheet of PREIT as of March 31, 2003 and the pro forma statements
of income for the year ended December 31, 2002 and the three months ended March
31, 2003 to give effect to the disposition or planned disposition of PREIT's
multifamily properties as described above in Item 2.
The following unaudited pro forma balance sheet presents information
as if the dispositions had taken place on March 31, 2003. The following
unaudited pro forma statement of income for the year ended December 31, 2002
presents information as if the dispositions had taken place on January 1, 2002
and as if the properties that PREIT now intends to sell were "held for sale" as
of that date. Pursuant to SFAS No. 144 "Accounting for the Impairment or
Disposal of Long-Lived Assets," PREIT reflects the operating results of
properties "held for sale" in discontinued operations. There is no pro forma
impact from the dispositions or planned dispositions in the income statement for
the three months ended March 31, 2003 because the multifamily portfolio was
classified as discontinued operations in that income statement.
The pro forma financial information is unaudited and prepared for
informational purposes only and is not necessarily indicative of future results
or of actual results that would have been achieved had the dispositions of the
properties been consummated as of the dates noted in the prior paragraph.
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Pennsylvania Real Estate Investment Trust
Pro Forma Balance Sheet
As of March 31, 2003
(Unaudited)
(In thousands, except per share amounts)
Company
Company Multifamily Pending Pro Forma
Historical Disposition (A) Transactions (B)(C) As Adjusted
--------------- --------------- -------------- -------------
Assets:
Investments in real estate, at cost:
Retail properties $ 426,428 $ - $ - $ 426,428
Construction in progress 19,232 - - 19,232
Industrial properties 2,504 - - 2,504
------------ ------------ ------------ -----------
Total investments in real estate 448,164 - - 448,164
Less accumulated depreciation (44,036) - - (44,036)
------------ ------------ ------------ -----------
404,128 - - 404,128
Investments in and advances to partnerships and
joint ventures, at equity 25,556 2,712 - 28,268
------------ ------------ ------------ -----------
429,684 2,712 - 432,396
Other assets:
Assets held for sale 205,021 (155,482) (49,539) -
Cash and cash equivalents 8,115 164,750 41,211 214,076
Rents and sundry receivables (net of allowance for
doubtful accounts of $1,084) 9,829 - - 9,829
Deferred costs and other assets, net 46,598 - 3,100 49,698
------------ ------------ ------------ -----------
$ 699,247 $ 11,980 $ (5,228) $ 705,999
============ ============ ============= ===========
Liabilities:
Mortgage notes payable $ 126,193 $ - $ - $ 126,193
Bank loans payable 146,900 - - 146,900
Liabilities related to assets held for sale 190,679 (155,857) (34,822) -
Tenants' deposits and deferred rents 1,633 - - 1,633
Accrued expenses and other liabilities 16,172 - 2,472 18,644
------------ ------------ ------------ -----------
Total liabilities 481,577 (155,857) (32,350) 293,370
------------ ------------ ------------ -----------
Minority interest 32,236 - - 32,236
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Shareholders' equity:
Shares of beneficial interest, $1 par; 100,000
authorized; issued and outstanding 16,754 shares 16,754 - - 16,754
Capital contributed in excess of par 218,158 - - 218,158
Deferred compensation (3,579) - - (3,579)
Accumulated other comprehensive loss (3,845) - - (3,845)
Distributions in excess of net income (42,054) 167,837 27,122 152,905
------------ ------------ ------------ -----------
Total shareholders' equity 185,434 167,837 27,122 380,393
------------ ------------ ------------ -----------
$ 699,247 $ 11,980 $ (5,228) $ 705,999
============ ============ ============== ===========
The accompanying notes are an integral part of the pro forma financial statements.
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Pennsylvania Real Estate Investment Trust
Pro Forma Statement of Income
For the Year Ended December 31, 2002
(Unaudited)
(In thousands, except per share amounts)
Company Pro
Company Multifamily Forma As
Historical Disposition Adjusted
------------ ------------ (A) -----------
Revenues:
Real estate revenue
Base rent $ 94,636 $ (48,614) $ 46,022
Expense reimbursements 13,068 (109) 12,959
Percentage rent 1,948 - 1,948
Lease termination revenue 1,034 (280) 754
Other real estate revenues 3,913 (2,255) 1,658
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Total real estate revenues 114,599 (51,258) 63,341
Management company revenue 11,003 - 11,003
Interest and other income 711 - 711
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Total revenues 126,313 (51,258) 75,055
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Expenses:
Property operating expenses 37,548 (21,283) 16,265
Depreciation and amortization 21,411 (8,442) 12,969
General and administrative expenses:
Corporate payroll and benefits 14,138 - 14,138
Other general and administrative expenses 10,609 - 10,609
----------- ---------- ----------
Total general and administrative expenses 24,747 - 24,747
Interest expense 28,000 (12,622) 15,378
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Total expenses 111,706 (42,347) 69,359
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14,607 (8,911) 5,696
Equity in income of partnerships and joint ventures 7,449 (1,064) 6,385
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Income before minority interest and discontinued 22,056 (9,975) 12,081
operations
Minority interest in operating partnership (2,194) 992 (1,202)
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Income from continuing operations $ 19,862 $ (8,983) $ 10,879
=========== ========== ==========
Basic income from continuing operations per share $ 1.23 $ 0.67
=========== ==========
Diluted income from continuing operations per share $ 1.21 $ 0.66
=========== ==========
Weighted average number of shares outstanding:
Basic 16,162 16,162
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Diluted 16,388 16,388
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The accompanying notes are an integral part of the pro forma financial statements.
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Pennsylvania Real Estate Investment Trust
Pro Forma Statement of Income
For the Three Months Ended March 31, 2003
(Unaudited)
(In thousands, except per share amounts)
Company Pro
Company Multifamily Forma As
Historical Disposition Adjusted
------------ ------------ (A) -----------
Revenues:
Real estate revenue
Base rent $ 11,924 $ - $ 11,924
Expense reimbursements 3,902 - 3,902
Percentage rent 273 - 273
Lease termination revenue 259 - 259
Other real estate revenue 334 - 334
---------- ----------- -----------
Total real estate revenue 16,692 - 16,692
Management company revenue 2,181 - 2,181
Interest and other income 142 - 142
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Total revenues 19,015 - 19,015
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Expenses:
Property operating expenses 4,899 - 4,899
Depreciation and amortization 3,513 - 3,513
General and administrative expenses:
Corporate payroll and benefits 3,636 - 3,636
Other general and administrative expenses 2,690 - 2,690
---------- ----------- -----------
Total general and administrative expenses 6,326 - 6,326
Interest expense 4,046 - 4,046
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Total expenses 18,784 - 18,784
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231 - 231
Equity in income of partnerships and joint ventures 1,593 - 1,593
Gains on sales of interests in real estate 1,191 - 1,191
---------- ----------- -----------
Income before minority interest and discontinued
operations 3,015 - 3,015
Minority interest in operating partnership (287) - (287)
---------- ----------- -----------
Income from continuing operations $ 2,728 $ - $ 2,728
========== =========== ===========
Basic income from continuing operations per share $ 0.16 $ 0.16
========== ===========
Diluted income from continuing operations per share $ 0.16 $ 0.16
========== ===========
Weighted average number of shares outstanding:
Basic 16,545 16,545
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Diluted 16,818 16,818
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The accompanying notes are an integral part of the pro forma financial statements.
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Pennsylvania Real Estate Investment Trust
Notes to Management's Assumptions to
Unaudited Pro Forma Financial Information
1. Basis of Presentation
Pennsylvania Real Estate Investment Trust, (collectively with its
subsidiaries, the "Company") is a fully integrated, self-administered and
self-managed real estate investment trust that acquires, develops, redevelops
and operates retail, multifamily and industrial properties. The Company's
interest in its properties is held through PREIT Associates, L.P.
2. Adjustments to Pro Forma Balance Sheet
(A) To record the disposition of certain multifamily properties. The
wholly-owned multifamily properties were classified as held for sale in the
historical March 31, 2003 balance sheet. The two multifamily joint ventures that
have been sold were reflected in the investment in joint ventures balance in the
historical March 31, 2003 balance sheet. The combined investment in those joint
ventures was a deficit of ($2.7 million).
(B) To illustrate the pro forma effect of the completion of the pending
sale of the two remaining wholly-owned multifamily properties upon the
satisfaction of the conditions to closing.
(C) The Company has not yet entered into a definitive agreement to sell
its interests in the two remaining multifamily joint venture properties, Fox Run
Apartments in Warminister, Pennsylvania and Willow-O-Hill Apartments in Reading,
Pennsylvania. The combined investment in those joint ventures was a deficit of
($1.2 million) and is reflected in the investment in joint ventures balance and
accordingly no pro forma balance sheet adjustment has been presented.
3. Adjustments to Pro Forma Statements of Income
(A) To remove the income statement impact of all of the multifamily
properties from the historical income statement for the year ended December 31,
2002. There is no pro forma impact to the historical income statement for the
three months ended March 31, 2003 because the multifamily portfolio was
classified as assets held for sale at March 31, 2003 and all operations were
included in discontinued operations in that income statement.