SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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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) April 4, 2002
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Pennsylvania Real Estate Investment Trust
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(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)
The undersigned registrant hereby amends the following item of its
Current Report on Form 8-K dated April 4, 2002, and filed on April 11, 2002, as
follows:
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
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(a) Financial Statements of Business Acquired:
The following financial statements are attached hereto:
(i) Report of Arthur Andersen LLP
(ii) Statement of Revenue and Certain Expenses of Beaver Valley Mall
for the year ended December 31, 2001
(iii) Notes to Statement of Revenue and Certain Expenses of Beaver
Valley Mall
Material factors that were considered by the Registrant in assessing
the acquisition of Beaver Valley Mall included (1) Beaver Valley Mall is
approximately 90% occupied, (2) the quality of the anchor tenants, namely
Kaufmann's, JC Penney, Sears and Boscov's, (3) the strength of other in-line
tenants such as American Eagle Outfitters, Gadzooks and Victoria's Secret, (4)
strong demographic factors for the mall's trade area and (5) the mall's
location, visibility and proximity to Pittsburgh. After reasonable inquiry, the
Registrant is not aware of any material factors relating to Beaver Valley Mall
that would cause the reported financial information not to be necessarily
indicative of future operating results.
(b) Pro Forma Financial Information:
The following unaudited pro forma combining financial information is
attached hereto:
(i) Pro Forma Combining Balance Sheet of the Registrant as of December
31, 2001
(ii) Pro Forma Combining Statement of Income of the Registrant for the
year ended December 31, 2001
(iii) Notes to Management's Assumptions to Unaudited Pro Forma
Combining Financial Information
(c) Exhibits:
23 Consent of Arthur Andersen LLP
99 Letter regarding Arthur Andersen LLP
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: April 30, 2002 By: /s/ Ronald Rubin
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Ronald Rubin
Chairman and Chief Executive Officer
EXHIBIT INDEX
Exhibit No. Description of Exhibit
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23 Consent of Arthur Andersen LLP
99 Letter regarding Arthur Andersen LLP
BEAVER VALLEY MALL
STATEMENT OF REVENUE
AND CERTAIN EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 2001
TOGETHER WITH AUDITORS' REPORT
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Pennsylvania Real Estate Investment Trust:
We have audited the accompanying statement of revenue and certain expenses of
Beaver Valley Mall for the year ended December 31, 2001, as described in Note 1.
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 auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statement is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statement. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
The statement of revenue and certain expenses was prepared for the purpose of
complying with the rules and regulations of the Securities and Exchange
Commission for inclusion in the Current Report on Form 8-K/A-1 of Pennsylvania
Real Estate Investment Trust, as described in Note 1, and is not intended to be
a complete presentation of Beaver Valley Mall'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 Beaver Valley Mall
for the year ended December 31, 2001, in conformity with accounting principles
generally accepted in the United States.
/s/ Arthur Andersen LLP
Philadelphia, Pennsylvania
April 12, 2002
BEAVER VALLEY MALL
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STATEMENT OF REVENUE AND CERTAIN EXPENSES (NOTE 1)
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FOR THE YEAR ENDED DECEMBER 31, 2001
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(in thousands)
REVENUE:
Minimum rent (Note 2) $ 8,013
Percentage rent 431
Tenant reimbursements 2,354
Other 89
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Total revenue 10,887
CERTAIN EXPENSES:
Property payroll and benefits 476
Real estate taxes 828
Utilities 279
Other operating expenses (Note 4) 1,320
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Total certain expenses 2,903
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REVENUE IN EXCESS OF CERTAIN EXPENSES $ 7,984
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The accompanying notes are an integral part of this financial statement.
BEAVER VALLEY MALL
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NOTES TO STATEMENT OF REVENUE AND CERTAIN EXPENSES
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DECEMBER 31, 2001
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1. BASIS OF PRESENTATION:
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The accompanying statement of revenue and certain expenses reflects the
operations of Beaver Valley Mall ("Beaver Valley Mall") located in Beaver
Valley, Pennsylvania. Beaver Valley Mall was acquired by PR Beaver Valley
Limited Partnership ("PR Beaver Valley") from the California Public Employees'
Retirement System ("CalPERS") in April 2002 for a purchase price of
approximately $60,750,000. PR Beaver Valley is indirectly wholly-owned by PREIT
Associates, L.P., of which Pennsylvania Real Estate Investment Trust (the
"Company") is the sole general partner.
This statement of revenue and certain expenses is to be included in the
Company's Current Report on Form 8-K/A-1 as the above described transaction has
been deemed significant pursuant to the rules and regulations of the Securities
and Exchange Commission.
Beaver Valley Mall has an aggregate gross leasable area of approximately
1,171,000 square feet, and was approximately 90% leased as of December 31, 2001.
The gross leasable area includes stores with an aggregate gross leasable area of
277,000 square feet that are not owned by PR Beaver Valley, some of which have
ground lease agreements with PR Beaver Valley.
The accompanying financial statement excludes certain expenses such as interest,
depreciation and amortization and other costs not directly related to the future
operations of Beaver Valley Mall.
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of revenue and expenses during
the reporting period. The actual results could differ from those estimates.
2. OPERATING LEASES:
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Minimum rent includes straight-line adjustments for rental revenue increases in
accordance with generally accepted accounting principles. The aggregate rental
revenue increase resulting from the straight-line adjustment for the year ended
December 31, 2001 was $58,000.
One tenant, Boscov's, had minimum rental payments greater than 10% of the total
minimum rent in 2001 totaling $800,000.
Beaver Valley Mall is leased to tenants under operating leases with expiration
dates extending to the year 2018. Future minimum rentals under noncancelable
operating leases, excluding tenant reimbursements of operating expenses as of
December 31, 2001, are as follows:
2002 $ 7,681,000
2003 7,141,000
2004 6,900,000
2005 6,535,000
2006 5,411,000
2007 and thereafter 28,218,000
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$61,886,000
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Certain leases also include provisions requiring tenants to reimburse Beaver
Valley Mall for management costs and other operating expenses up to stipulated
amounts.
3. RELATED PARTY TRANSACTIONS:
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In 2001, Beaver Valley Mall paid management fees of $498,000 to PREIT-RUBIN,
Inc., the Company's wholly-owned property management affiliate. Beaver Valley
Mall and PREIT-RUBIN, Inc. were not related parties prior to PR Beaver Valley's
acquisition of Beaver Valley Mall in 2002. Such management fees have been
excluded from this statement because they will not be incurred by Beaver Valley
Mall in the future.
4. COMMITMENTS:
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As of December 31, 2001, Beaver Valley Mall was obligated under a ground lease
agreement extending to 2066 for a portion of the land on which Beaver Valley
Mall is situated. This agreement provided for annual payments of $28,000.
Concurrent with its acquisition of Beaver Valley Mall, PR Beaver Valley also
purchased this portion of the land for an additional $500,000. As a result of
this purchase, subsequent to the acquisition date, there will be no further
payments due under the ground lease agreement. Accordingly, the ground lease
rent expense for 2001 was excluded from operating expenses in the accompanying
financial statement.
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
PRO FORMA COMBINING BALANCE SHEET AND
COMBINING STATEMENT OF INCOME
The following sets forth the pro forma combining balance sheet of
Pennsylvania Real Estate Investment Trust (the "Company" or "Registrant") as of
December 31, 2001 and the pro forma combining income statement for the year
ended December 31, 2001 to give effect to the acquisition of Beaver Valley Mall
on April 4, 2002.
The unaudited pro forma combining financial statements should be read
in conjunction with the historical financial statements of the Registrant and
Beaver Valley Mall and the related notes thereto. In management's opinion, all
adjustments necessary to reflect the effects of the transaction have been made.
The pro forma combining balance sheet as of December 31, 2001 presents
combined financial information as if the acquisition of Beaver Valley Mall had
taken place on December 31, 2001. The pro forma combining statement of income
for the year ended December 31, 2001 presents combined financial information as
if the acquisition of Beaver Valley Mall had taken place on January 1, 2001. PR
Beaver Valley Limited Partnership, which is wholly-owned by PREIT Associates,
L.P., of which the Registrant is the sole general partner, purchased Beaver
Valley Mall on April 4, 2002 for a purchase price of $60,750,000. The purchase
price was financed through mortgage and bank loan borrowings of $48,000,000 and
$10,000,000, respectively, and the remainder was paid in cash. This acquisition
was accounted for using the purchase method of accounting.
The pro forma combining financial information is unaudited and is not
necessarily indicative of what the actual combined financial position or
combined results of operations of the Registrant would have been had the
transaction 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.
Pennsylvania Real Estate Investment Trust
Pro Forma Combining Balance Sheets
As of December 31, 2001
(Unaudited)
(In thousands, except per share amounts)
Beaver Valley Company
Company Mall Pro Forma
Historical Acquisition (A) As Adjusted
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Assets
Investments in real estate, at cost:
Retail properties $ 347,269 $ 61,326 $ 408,595
Multifamily properties 254,138 - 254,138
Industrial properties 2,504 - 2,504
Land & properties under development 46,549 - 46,549
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Total investments in real estate 650,460 61,326 711,786
Less: Accumulated depreciation 112,424 - 112,424
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538,036 61,326 599,362
Investments in and advances to partnerships and joint
ventures, at equity 13,680 - 13,680
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551,716 61,326 613,042
Other assets:
Cash and cash equivalents 10,258 (5,949) 4,309
Rents and sundry receivables (net of allowance for doubtful
accounts of $727) 10,293 - 10,293
Deferred costs, prepaid real estate taxes and expenses, net 30,361 2,623 32,984
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$ 602,628 $ 58,000 $ 660,628
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Liabilities and Shareholders' Equity
Mortgage notes payable $ 257,873 $ 48,000 $ 305,873
Bank loans payable 98,500 10,000 108,500
Construction loan payable 4,000 - 4,000
Tenants' deposits and deferred rents 3,908 - 3,908
Accrued expenses and other liabilities 21,294 - 21,294
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385,575 58,000 443,575
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Minority interest 36,768 - 36,768
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Shareholders' equity:
Shares of beneficial interest, $1 par; authorized
unlimited; issued and outstanding 15,876 15,876 - 15,876
Capital contributed in excess of par 198,398 - 198,398
Deferred compensation (1,386) - (1,386)
Accumulated other comprehensive loss (3,520) - (3,520)
Distributions in excess of net income (29,083) - (29,083)
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Total shareholders' equity 180,285 - 180,285
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$ 602,628 $ 58,000 $ 660,628
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The accompanying notes and management's assumptions are an integral part of this
statement.
Pennsylvania Real Estate Investment Trust
Pro Forma Combining Statements Of Income
For the year ended December 31, 2001
(Unaudited)
(In thousands, except per share amounts)
Beaver Valley Pro
Company Mall Forma Company
Historical Historical (A) Adjustments Pro Forma
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Revenues
Real estate revenue
Base rent $ 84,689 $ 8,013 $ - $ 92,702
Percentage rent 1,787 431 - 2,218
Expense reimbursements 10,215 2,354 - 12,569
Lease termination revenue 1,162 - 1,162
Other real estate revenue 4,032 89 - 4,121
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Total real estate revenue 101,885 10,887 112,772
Management fees 11,336 - - 11,336
Interest and other income 361 - - 361
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Total revenues 113,582 10,887 124,469
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Expenses
Property operating expenses:
Property payroll and benefits 7,077 476 - 7,553
Real estate and other taxes 7,750 828 - 8,578
Utilities 4,201 279 - 4,480
Other operating expenses 14,374 1,320 - 15,694
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Total property operating expenses 33,402 2,903 - 36,305
Depreciation and amortization 17,974 - 1,594(B) 19,568
General and administrative expenses:
Corporate payroll and benefits 13,286 - - 13,286
Other general and administrative
expenses 10,291 - - 10,291
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Total general and administrative
expenses 23,577 - - 23,577
Interest expense 24,963 - 4,123(C) 29,086
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Total expenses 99,916 2,903 5,717 108,536
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Income before equity in
unconsolidated entities, gains on
sales in real estate and minority
interest 13,666 7,984 (5,717) 15,933
Equity in income of partnerships and
joint ventures 6,540 - - 6,540
Gains on sales of interests in real
estate 2,107 - - 2,107
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Income before minority interest 22,313 7,984 (5,717) 24,580
Minority interest in operating
partnership (2,524) (903) 647(B, C) (2,780)
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Net income $ 19,789 $ 7,081 $ (5,070) $ 21,800
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Basic income per share $ 1.35 $ 1.49
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Diluted income per share $ 1.35 $ 1.49
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Weighted average number of shares
outstanding:
Basic 14,657 14,657
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Diluted 14,684 14,684
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The accompanying notes and management's assumptions are an integral part of this
statement.
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
NOTES TO MANAGEMENT'S ASSUMPTIONS TO
UNAUDITED PRO FORMA COMBINING FINANCIAL INFORMATION
1. Basis of Presentation
Pennsylvania Real Estate Investment Trust (the "Registrant") is a fully
integrated, self-administered and self-managed real estate investment trust
which acquires, rehabilitates, develops and operates retail and multifamily
properties. The Registrant's interest in its real estate properties is held
through PREIT Associates, L.P. (the "Operating Partnership").
2. Adjustments to Pro Forma Combining Balance Sheet
(A) To record the acquisition of Beaver Valley Mall as follows:
Purchase price(1) $61,326,000
Escrows and other credits received at settlement $ 2,623,000
Mortgage borrowing $48,000,000
Bank loan borrowing $10,000,000
Cash payment $ 5,949,000
(1) Includes the purchase price of Beaver Valley Mall of $60,750,000, the
purchase price of a portion of land on which the mall is situated of
$500,000 and estimated closing costs of $76,000.
2. Adjustments to Pro Forma Combining Statement of Income
(A) To record the revenue and certain operating expenses associated with the
operations of Beaver Valley Mall.
(B) To record additional depreciation expense based on a depreciable basis of
$47,809,000 and an estimated useful life of 30 years.
(C) To record additional interest expense as follows:
Mortgage borrowing of $48,000,000 at 7.36% $3,518,000
Bank borrowing of $10,000,000 at 5.84% 584,000
Amortization of deferred financing costs related to the
borrowings noted above 21,000
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$4,123,000
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