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) June 28, 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)
Item 5. Other Events.
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On June 28, 2002, the capital interest of Pennsylvania Real Estate
Investment Trust (together with its subsidiaries and affiliated entities,
"PREIT") in the partnership (the "Partnership") that owns Willow Grove Park Mall
(the "Mall") was increased to 30% and PREIT became the managing general partner
of the Partnership. The increase in PREIT's partnership interest was made
effective retroactive to November 2001. PREIT's partner in the Partnership is
the Pennsylvania State Employee Retirement System ("PaSERS"). The Mall is a 1.2
million square foot enclosed regional shopping center located 12 miles north of
Philadelphia in Willow Grove, Pennsylvania.
On February 28, 2000, the Partnership acquired the Mall for $140
million pursuant to a Purchase and Sale Agreement between The Equitable Life
Assurance Society of the United States and the Partnership. The purchase price
was funded in part by a six-year loan to the Partnership at an interest rate of
8.39% in the principal amount of $100 million from The Equitable Life Assurance
Society of the United States and Connecticut General Life Insurance Company.
Pursuant to the terms of the financing, an additional $10 million has been
funded as a result of the completion of the expansion and renovation of the Mall
and the opening of Macy's.
At the time of purchase in 2000, PREIT acquired a 0.01% limited
partnership interest in the Partnership. In November of 2001, pursuant to a
development agreement and ground lease between PREIT and the Partnership, PREIT
completed the redevelopment of the Mall, including renovations and the addition
of a 225,000 square foot, three-level, full-line Macy's department store.
PREIT's investment attributable to the redevelopment project was approximately
$16 million. Having completed its obligations related to the redevelopment of
the Mall, PREIT became entitled to become the managing general partner of the
Partnership. For its management and leasing services, PREIT continues to receive
compensation under a management and leasing agreement consisting of a percentage
of Mall revenues for management services and a leasing commission for new and
renewal tenants.
In addition, upon completion of the redevelopment, PREIT became
entitled to increase its interest in the Partnership. With respect to the
Partnership's quarterly cash flow, PaSERS is first entitled to a 9% cumulative
return on its 70% interest in the Partnership, and PREIT is then entitled to a
9% cumulative return on its 30% interest in the Partnership. Any remaining cash
flow is divided equally between PaSERS and PREIT. PREIT will receive retroactive
distributions from the Partnership attributable to PREIT's share of the cash
flows generated by the Partnership between November 5, 2001 and June 28, 2002.
Upon a refinancing, sale of the Partnership's assets or dissolution of
the Partnership, the proceeds are first allocated between PREIT and PaSERS in
proportion to their capital accounts until each party receives its adjusted
capital balance. Any remaining funds are distributed first to PaSERS until it
has received a 12% internal rate of return on its investment, and then to PREIT
until it has received a 12% internal rate of return on its investment. Any
further remaining funds in the case of a refinancing or sale of the
Partnership's assets are shared equally between PREIT and PaSERS or, in the case
of a dissolution, are shared by PREIT and PaSERS according to their respective
positive capital account balances in the Partnership.
PREIT has an option to acquire PaSERS's interest in the Partnership in
2003 at a price equal to a 12% internal rate of return on PaSERS's investment in
the Partnership. If PREIT does not elect to acquire PaSERS's interest in 2003,
PaSERS will have an option to exchange its interest in the Partnership for
PREIT's interest in Paxton Towne Centre, a shopping center located in
Harrisburg, Pennsylvania. If PaSERS exercises this option, the value of (i) the
net operating income of Paxton Towne Centre for the preceding twelve months
capitalized at 9% will be compared with (ii) the amount required to achieve a
12% internal rate of return on PaSERS's investment in the Partnership. If (i) is
greater than (ii), then PaSERS will pay the difference to PREIT in cash. If (ii)
is greater than (i), then PREIT will pay the difference to PaSERS in cash.
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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: July 24, 2002 By: /s/ Jonathan B. Weller
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Jonathan B. Weller
President and Chief Operating Officer
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