Filed by Pennsylvania Real Estate Investment Trust
Subject Company: Crown American Realty Trust
Pursuant to Rule 425 under the Securities Act of 1933
And Deemed Filed Pursuant to Rule 14a-12
Under the Securities Exchange Act of 1934
Commission File No.: 1-6300
Pennsylvania Real Estate Investment Trust issued the following press
release today:
[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
Toll Free: 866-875-0700
FOR FURTHER INFORMATION:
AT THE COMPANY AT KCSA PUBLIC RELATIONS WORLDWIDE
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Edward A. Glickman Todd Fromer Evan Smith, CFA
Executive Vice President and CFO (Investor Relations) (Media Relations)
(215) 875-0700 (212) 896-1215 (212) 896-1251
FOR IMMEDIATE RELEASE
---------------------
August 11, 2003
Pennsylvania Real Estate Investment Trust Reports
2003 Second Quarter & Six Month Results
Philadelphia, PA, August 11, 2003, Pennsylvania Real Estate Investment Trust
(NYSE: PEI) today announced the results for the second quarter and six months
ended June 30, 2003.
2003 Second Quarter Highlights
o Net income for the 2003 second quarter increased to $144.6 million from $4.4
million in the 2002 second quarter. Second quarter 2003 net income includes
income from discontinued operations of $137.8 million compared to $2.0
million in the second quarter of 2002.
o Net income per share for the 2003 second quarter increased to $8.70 from
$0.27 in the 2002 second quarter. Second quarter 2003 net income includes
income from discontinued operations of $8.29 per share compared to $0.12 per
share in the second quarter of 2002.
o Funds From Operations (FFO) for the 2003 second quarter increased 17.1% to
$14.8 million from $12.7 million in the 2002 second quarter.
o FFO per share for the 2003 second quarter increased by 14.3% to $0.80 from
$0.70 in the 2002 second quarter.
On March 6, 2003, PREIT announced the signing of a purchase and sale agreement
to sell its multifamily portfolio, which included fifteen wholly-owned
properties and four joint venture properties. On June 2, 2003, PREIT announced
the completion of the sale of thirteen wholly-owned and two joint venture
properties. The pending sale of the two remaining wholly-owned properties as of
June 30, 2003 results in a classification of these two properties as assets held
for sale on the consolidated balance sheet and the income and gain on sale of
all the wholly-owned multifamily properties are presented as discontinued
operations on the consolidated statements of income. The Company's presentation
of net operating income (NOI), investment in real estate and mortgage notes
within this press release for periods prior to the second quarter of 2003 have
been revised to reflect this classification.
PREIT Announces Second Quarter 2003 Results
August 11, 2003
Page 2
o Combined NOI for 2003 second quarter increased 34.2% to $27.4 million from
$20.5 million for the 2002 second quarter.
o Same store NOI for the Company's retail portfolio decreased by 2.4% from
the 2002 second quarter.
Second Quarter Results
Net income for the second quarter ended June 30, 2003 was $144,638,000, or $8.70
per share, on 16,616,000 weighted average shares of beneficial interest
outstanding, compared with $4,442,000, or $0.27 per share, on 16,216,000
weighted average shares of beneficial interest outstanding for the 2002 second
quarter. Net income for the second quarter of 2003 included a gain on sale of
$154,522,000 which includes $150,201,000 from the sale of thirteen wholly-owned
multifamily properties to affiliates of Morgan Properties of King of Prussia, PA
("Morgan") and $4,401,000 from the sale of the Company's interests in two joint
venture multifamily properties. A substantial portion of the gain on sale met
the requirements for a tax deferred exchange with the Rouse shopping malls
acquisition.
For the second quarter ended June 30, 2003, the Company's total FFO increased
17.1% to $14,843,000 from $12,676,000 for the comparable three-month period in
2002. FFO per share was $0.80 in the second quarter of 2003 as compared to $0.70
in the second quarter of 2002, an increase of 14.3%. This increase is a result
of the acquisition of six shopping malls from The Rouse Company offset by the
disposition of 15 of the 19 multifamily properties. A reconciliation of net
income to FFO can be found on page 10.
Weighted average shares of beneficial interest/Operating Partnership units
outstanding (collectively, shares) increased by 3.3% to 18,615,000 for the
quarter ended June 30, 2003 from 18,024,000 for the quarter ended June 30, 2002.
NOI from wholly-owned properties and the Company's proportionate share of
partnerships and joint venture properties increased 34.2% to $27,447,000 for the
second quarter of 2003 from $20,460,000 for the second quarter of 2002. This
increase is a result of the acquisition of six shopping malls from The Rouse
Company. A reconciliation of net income to net operating income can be found on
page 11.
Six Month Results
Net income for the six months ended June 30, 2003 was $149,615,000, or $9.02 per
share, on 16,579,000 weighted average shares of beneficial interest outstanding
compared to $8,169,000, or $0.51 per share, on 16,072,000 weighted average
shares of beneficial interest outstanding for the six months ended June 30,
2002. Net income for the six months ended June 30, 2003 included gains on sale
of $155,714,000 which included $150,201,000 from the sale of thirteen
wholly-owned multifamily properties, $4,401,000 from the sale of the Company's
interests in two joint venture multifamily properties and $1,112,000 from the
sale of land at Crest Plaza Shopping Center, Allentown, PA to Target.
FFO for the six months ended June 30, 2003 totaled $26,376,000, an increase of
13.1% over $23,318,000 for the comparable six-month period in 2002. FFO for the
six-month period totaled $1.43 per share on 18,461,000 weighted average shares
outstanding, compared to $1.30 per share on 17,934,000 weighted average shares
outstanding for the six months ended June 30, 2002. This increase is a result of
PREIT Announces Second Quarter 2003 Results
August 11, 2003
Page 3
the acquisition of six shopping malls from The Rouse Company offset by the
disposition of 15 of the 19 multifamily properties. A reconciliation of net
income to FFO can be found on page 10.
NOI from wholly-owned properties and the Company's proportionate share of
partnerships and joint venture properties totaled $45,726,000 for the six months
ended June 30, 2003, compared with $35,712,000 for the six months ended June 30,
2002. A reconciliation of net income to net operating income can be found on
page 11.
Portfolio Performance - Retail: Same Store NOI Growth & Occupancy Levels
In the second quarter of 2003, same store NOI for the Company's retail portfolio
decreased 2.4% or $277,000 compared to the second quarter of 2002. Lease
termination payments of $464,000 were included in same store NOI for the second
quarter of 2002. Lease termination payments in the second quarter of 2003 for
same store NOI were $0.
Occupancy in the Company's same store retail portfolio decreased to 94.7%, 130
basis points lower than the 96.0% occupancy rate in the second quarter of 2002.
The closing of the Ames store at Dartmouth Mall, Dartmouth, MA was the primary
cause of the decrease in the Company's same store occupancy level during the
second quarter of 2003. The Company's power centers and enclosed malls were
97.7% and 87.8% occupied, respectively, as of June 30, 2003. The Company's same
store mall properties reported sales of $380 per square foot in the trailing
twelve months ended June 30, 2003, which was unchanged from the comparable
period ended June 30, 2002.
Leasing Update
During the 2003 second quarter, the Company executed twenty-nine retail leases
encompassing 79,454 square feet at an average rent per square foot of $24.37.
New leases for previously leased space accounted for eight transactions totaling
20,062 square feet at an average rent of $31.77, or $3.87 higher than the
average prior rent. Eleven tenants renewed leases, representing 35,004 square
feet at an average renewal rent of $20.02 per square foot, an increase of $5.00
per square foot over the rent at expiration. The Company also executed
transactions for ten formerly vacant spaces totaling 24,388 square feet. The
average rent for these formerly vacant spaces was $24.53 per square foot.
The Company has executed a non-binding letter of intent for the sale of a pad
site including the former Ames store at Dartmouth Mall to the May Company for
the addition of a 140,000 square foot Filene's Department Store.
During the second quarter of 2003, Wal-Mart opened its 114,000 square foot store
in Northeast Tower Center, Philadelphia, PA. The center is now 100% leased and
occupied.
Portfolio Composition
The Company ended the 2003 second quarter with investments in real estate of
$1,172,937,000, an increase of $511,008,000 from $661,929,000 in the first
quarter of 2003. This increase is primarily due to of the acquisition of six
shopping malls from The Rouse Company.
PREIT Announces Second Quarter 2003 Results
August 11, 2003
Page 4
Strategic Update
Ronald Rubin, Chairman and Chief Executive Officer of PREIT, said, "During the
second quarter, we completed the purchase of six shopping centers from The Rouse
Company, making PREIT a leading shopping mall REIT in the Philadelphia market.
The addition of these centers, together with the sale of 15 of our multifamily
properties, firmly positions PREIT in the retail sector. As we move toward
completion of our proposed merger with Crown American Realty Trust, we will
continue to focus on the integration of the Rouse properties and maximizing the
value of our portfolio through our expertise in the redevelopment and
retenanting of properties. Furthermore, during the quarter, we welcomed John
Roberts as an independent member of our Board of Trustees. John brings a wealth
of corporate and financial experience to PREIT and we look forward to his
counsel as we execute on our strategy to expand our retail asset base beyond the
Philadelphia market and further into the Mid-Atlantic region."
Jonathan B. Weller, PREIT's President and Chief Operating Officer, commented,
"Our strong second quarter performance reflects the successful execution of our
retail strategy to date. We are pleased to have expanded the square footage of
our retail property portfolio by 47% since the beginning of this year with the
acquisition of six shopping malls from The Rouse Company. Currently, PREIT now
owns 28 retail properties totaling approximately 17.5 million square feet. We
look forward to further expanding our retail portfolio with the proposed Crown
merger, scheduled for completion in the fourth quarter of 2003."
Other Events
The Rouse Acquisitions
During the second quarter 2003, the Company acquired six shopping malls from The
Rouse Company (NYSE: RSE). PREIT acquired The Gallery at Market East, Moorestown
Mall, Exton Square Mall, Echelon Mall, Plymouth Meeting Mall and a 73%
partnership interest in New Castle Associates. New Castle Associates, which
acquired Cherry Hill Mall in a transaction that immediately preceded the
Company's acquisition of the New Castle associates partnership interest, is
consolidated for accounting purposes. The Gallery at Market East, Moorestown
Mall, Exton Square Mall and the interest in New Castle Associates were acquired
on April 28, 2003. Echelon Mall and Plymouth Meeting were acquired on June 5,
2003. The acquisitions totaled approximately 5.6 million square feet of retail
space, for an aggregate purchase price of approximately $549.4 million.
As of June 30, 2003, The Gallery at Market East, Philadelphia, PA, has 0.19
million square feet with an in-line occupancy rate of 93.9% and in-line tenant
sales of $411 per square foot; Moorestown Mall, Moorestown, NJ, has 1.06 million
square feet with an in-line occupancy rate of 91.0% and in-line tenant sales of
$331 per square foot; Exton Square Mall, Exton, PA, has 1.09 million square feet
with an in-line occupancy rate of 90.8% and in-line tenant sales of $360 per
square foot; Echelon Mall, Voorhees, NJ, has 1.14 million square feet with an
in-line occupancy rate of 70.6% and in-line tenant sales of $241 per square
foot; Plymouth Meeting Mall, Plymouth Meeting, PA, has 0.81 million square feet
with an in-line occupancy rate of 89.0% and in-line tenant sales of $265 per
square foot; and Cherry Hill Mall, Cherry Hill, NJ, has 1.28 million square feet
with an in- line occupancy rate of 93.8% and in-line tenant sales of $391 per
square foot;
PREIT financed the acquisition of the Rouse portfolio through a combination of
the assumption of $277 million of existing non-recourse mortgage debt, the
issuance of $35.0 million of OP units, a $175 million acquisition term loan and
$62.4 million from the refinancing of PREIT portfolio assets. PREIT obtained the
$175 million acquisition term loan and a $25 million unsecured line of credit
PREIT Announces Second Quarter 2003 Results
August 11, 2003
Page 5
from Wells Fargo Bank. Approximately $17.8 million of the $35.0 million OP units
are expected to be issued in the second quarter of 2004 to acquire the remaining
27% interest in New Castle Associates. As of June 30, 2003, the Company had
approximately $10.2 million outstanding on the acquisition term loan and $10.0
million outstanding on the unsecured line of credit. These balances were
subsequently paid off with the proceeds from the sale of the remaining two
wholly-owned multifamily properties in July 2003.
Crown Merger Agreement
During the second quarter of 2003, PREIT and Crown American Realty Trust (NYSE:
CWN) announced that they entered into a definitive merger agreement in which
Crown will merge into PREIT. The merger will position PREIT as a leading
shopping mall REIT in the Mid-Atlantic region. The boards of trustees of both
companies have unanimously approved the merger.
PREIT expects to file a registration statement on Form S-4 containing a joint
proxy statement/prospectus relating to the merger.
Following completion of the merger, PREIT will own interests in 54 retail
properties with 33.7 million square feet in 14 states. Approximately 85% of the
portfolio is located in the Mid-Atlantic states of PA, NJ, DE and MD. Included
in the combined portfolio are interests in 40 regional malls and 14 power and
strip centers. The merged company will have a total market capitalization of
approximately $2.7 billion based on PREIT's closing share price on May 13, 2003.
Under the terms of the agreement, PREIT will issue to Crown shareholders 0.3589
PREIT common shares for each outstanding share of Crown in a tax-free,
share-for-share transaction. The exchange ratio was determined based on the
trailing 20 day average closing prices as of May 12, 2003, and is not subject to
change and there is no "collar" or minimum trading price for the shares. The
transaction includes a $20 million termination fee payable to either PREIT or
Crown, if the merger is not completed in certain specified circumstances.
Multifamily Disposition
During the second quarter of 2003, the Company completed the sale of thirteen of
its wholly-owned multifamily properties to Morgan. The sale price of $314
million included assumed debt of approximately $151 million. The net proceeds of
the sale of approximately $158 million was used to pay down the acquisition term
loan used in connection with the acquisition of six malls from The Rouse
Company. The Company recorded a gain on sale of $150.2 million in the second
quarter of 2003.
The Company also sold to its joint venture partners its 50% interests in (i)
Cambridge Hall Apartments in West Chester, PA for $6.7 million, including
approximately $2.5 million of assumed debt and (ii) Countrywood Apartments in
Tampa, FL for $9.1 million, including approximately $7.3 million of assumed
debt. The Company recorded a gain on sale of $4.4 million in the second quarter
of 2003 and deferred a gain of approximately $4.5 million related to Countrywood
Apartments.
PREIT Announces Second Quarter 2003 Results
August 11, 2003
Page 6
Subsequent Events
Multifamily Disposition
During the third quarter of 2003, the Company completed the sale of its
remaining two wholly-owned multifamily properties, Emerald Point in Virginia
Beach, VA and Regency Lakeside in Omaha, NE, to Morgan. The purchase price was
approximately $81.4 million, including assumed debt of $33.8 million, with net
proceeds of $44.3 million. The net proceeds reflect a purchase price credit of
$3.0 million to Morgan awarded upon the closing of the sale of all fifteen of
PREIT's wholly-owned multifamily properties.
PREIT has now completed the sale of 17 of its 19 multifamily properties. With
this most recent closing, the Company has received approximately $408 million of
the expected purchase price of approximately $417 million for all 19 multifamily
properties. The Company has entered into agreements to sell its two remaining
joint venture multifamily properties, Fox Run, Warminster, PA, and Will-O-Hill,
Reading, PA, to its joint venture partners and expects to complete the
transactions in the third quarter of 2003. The Company applied a substantial
portion of the net proceeds of the multifamily transactions to pay off the
balance of the acquisition term loan secured in connection with the Rouse
transaction and to pay down the outstanding balance under the $25 million
unsecured line of credit.
Line of Credit
As of June 30, 2003, the Company had approximately $118,574,000 outstanding
under the Company's $200,000,000 secured revolving line of credit facility. The
Company also had $10,200,000 outstanding under the acquisition term loan and
$10,000,000 outstanding under the unsecured line of credit. On June 30, 2003 the
Company had $1,623,000 of available borrowing capacity remaining under its
secured line of credit with the existing property collateral pool and
$15,000,000 available under the unsecured line of credit.
Capital Resources
Edward Glickman, Chief Financial Officer of PREIT commented, "With the closing
of our last two wholly-owned multifamily properties, PREIT paid off the
remaining $10.2 million outstanding under the $175 million acquisition term
loan, paid down the outstanding balance under the $25 million unsecured line of
credit from Wells Fargo and applied the remaining proceeds to reduce the
Company's line of credit balance. We believe that PREIT has the ability to
obtain additional capital and has positioned itself with sufficient liquidity to
meet its operational and investment needs."
2003 and 2004 Forecast
For modeling purposes, PREIT has revised its assumption of the Crown merger
closing date from the beginning of the fourth quarter of 2003 to the mid-point
of the fourth quarter of 2003, with the first full year of combined operations
in calendar year 2004. After giving effect to the actual dates of the closing of
the multifamily and the Rouse transactions and the new estimated date of the
Crown merger, PREIT now estimates FFO for the calendar year 2003 to be $3.18 to
$3.30 per share inclusive of a one-time non-recurring charge of approximately
$6.75 million, or $0.30 per share. Assuming completion of the Crown merger, the
Company reaffirms its estimate for calendar year 2004 FFO to be $4.26 to $4.38
per share.
PREIT Announces Second Quarter 2003 Results
August 11, 2003
Page 7
Dividend Declaration
On July 29, 2003, PREIT announced that its Board of Trustees has approved a
quarterly cash dividend of $0.51 per share. The dividend will be paid on
September 15, 2003 to shareholders and unitholders of record on August 29, 2003.
The September 15, 2003 dividend payment will be PREIT's 106th consecutive
distribution since its initial dividend paid in August of 1962. Throughout its
history, the Company has never omitted or reduced a shareholder dividend.
A copy of the Company's Distribution Reinvestment and Share Purchase Plan
prospectus, enrollment forms and other information is available on the Company's
web site at www.preit.com under Investor Information or by calling American
Stock Transfer & Trust Company at (800) 278-4353, or the Company at (215)
875-0735. You should read the prospectus carefully before making any investment.
Definitions
NAREIT defines FFO as income before gains (losses) on property sales and
extraordinary items (computed in accordance with GAAP); plus real estate
depreciation and similar adjustments for unconsolidated joint ventures after
adjustments for non-real estate depreciation and amortization of financing
costs. The Company computes FFO in accordance with standards established by
NAREIT, which may not be comparable to FFO reported by other REITs that do not
define the term in accordance with the current NAREIT definition, or that
interpret the current NAREIT definition differently than the Company. FFO does
not represent cash generated from operating activities in accordance with GAAP
and should not be considered to be an alternative to net income (determined in
accordance with GAAP) as an indication of the Company's financial performance or
to be an alternative to cash flow from operating activities (determined in
accordance with GAAP) as a measure of the Company's liquidity, nor is it
indicative of funds available for the Company's cash needs, including its
ability to make cash distributions. The Company believes that net income is the
most directly comparable GAAP measurement to FFO. The Company believes that FFO
is helpful to investors as a measure of operating performance because it
excludes various items included in net income that do not relate to or are not
indicative of operating performance, such as various non-recurring items, gains
on sales of real estate and depreciation and amortization of real estate.
NOI is derived from real estate revenues (determined in accordance with GAAP)
minus property operating expenses (determined in accordance with GAAP). NOI does
not represent cash generated from operating activities in accordance with GAAP
and should not be considered to be an alternative to net income (determined in
accordance with GAAP) as an indication of the Company's financial performance or
to be an alternative to cash flow from operating activities (determined in
accordance with GAAP) as a measure of the Company's liquidity; nor is it
indicative of funds available for the Company's cash needs, including its
ability to make cash distributions. The Company believes that net income is the
most directly comparable GAAP measurement to NOI. The Company believes that NOI
is helpful to investors as a measure of operating performance because it is an
indicator of the return on investment on the properties, and provides a
comparison measurement of the properties over time. NOI excludes general and
administrative expenses, management company revenues, interest income, interest
expense, depreciation and amortization, income from discontinued operations and
gains on sales of interest in real estate.
PREIT Announces Second Quarter 2003 Results
August 11, 2003
Page 8
EBITDA is earnings before interest, taxes, depreciation and amortization. On a
property level, EBITDA and NOI are equivalent; however, certain corporate
revenues and expenses are added and deducted to/from NOI to derive EBITDA on a
company wide basis. Specifically, management company revenues and interest
income are added to NOI while corporate payroll and other General and
Administrative expenses are deducted from NOI to calculate EBITDA. The Company
believes that net income is the most directly comparable GAAP measurement to
EBITDA. The Company believes that EBITDA helps the Company and its investors
evaluate the ongoing operating performance of its properties and facilitate
comparisons with other REITs and real estate companies. These measures assist
management by providing a baseline to assess property-level results,
particularly as the Company acquires or sells assets. The EBITDA measures
presented by the Company may not be comparable to other similarly titled
measures of other companies.
Conference Call Information
Management has scheduled a conference call for 2:00 pm Eastern Daylight Time on
August 11, 2003 to review the Company's second quarter results. To listen to the
call, please dial (800) 406-5345 or (913) 981-5571 at least five minutes before
the scheduled start time. Investors can also access the call in a "listen only"
mode via the Internet on the Company website at www.preit.com or at
www.vcall.com. Please allow extra time prior to the call to visit the site and
download the necessary software to listen to the Internet broadcast. Financial
and statistical information expected to be discussed on the call will be
available on the Company's website at www.preit.com.
For interested individuals unable to join the conference call, a replay of the
call will be available through August 26, 2003 at (888) 203-1112 or (719)
457-0820 (Passcode: 649623). The online archive of the webcast will be available
over the same period.
About Pennsylvania Real Estate Investment Trust
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 retail shopping
malls and power centers (approximately 17.5 million square feet) located in the
eastern United States. PREIT's portfolio currently consists of 34 properties in
7 states. PREIT's portfolio includes two multifamily properties that are held
for sale, 14 shopping malls, 14 strip and power centers and four industrial
properties. In addition, there are two retail properties under development,
which PREIT expects will add approximately 0.8 million square feet to its
portfolio. PREIT is headquartered in Philadelphia, Pennsylvania. PREIT's
corporate web site can be found at www.preit.com.
This press release contains certain "forward-looking statements" within the
meaning of Section 21E of the Securities Exchange Act of 1934 and the U.S.
Private Securities Litigation Reform Act of 1995. 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 remaining joint
venture multifamily properties on favorable terms, if at all, and may not be
able to consummate the merger with Crown, 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 such transactions include, without limitation, the
PREIT Announces Second Quarter 2003 Results
August 11, 2003
Page 9
satisfaction of closing conditions applicable to such transactions (some of
which are beyond PREIT's control). 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
the properties proposed to be acquired 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 or industry information set forth in this press release to reflect
new information, future events or otherwise.
In connection with the proposed merger between PREIT and Crown American Realty
Trust referenced in the press release, PREIT and Crown American Realty Trust
intend to file a joint proxy statement/prospectus on Form S-4 and other
materials with the Securities and Exchange Commission. SECURITY HOLDERS ARE
URGED TO READ THESE MATERIALS WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL
CONTAIN IMPORTANT INFORMATION. Investors and security holders may obtain a free
copy of these materials when they become available, as well as other materials
filed with the Securities and Exchange Commission concerning PREIT and Crown
American Realty Trust, at the Securities and Exchange Commission's website at
http://www.sec.gov. In addition, these materials and other documents filed by
PREIT may be obtained for free by directing a request to Pennsylvania Real
Estate Investment Trust at The Bellevue, 200 S. Broad Street, Philadelphia, PA
19102; Attn: Investor Relations. These materials and other documents filed by
Crown American Realty Trust may be obtained for free by directing a request to
Crown American Realty at Pasquerilla Plaza, Johnstown, Pennsylvania 15901; Attn:
Investor Relations.
PREIT and Crown American Realty Trust, and their respective trustees and
executive officers and other members of their management and employees, may be
deemed to be participants in the solicitation of proxies from the shareholders
of PREIT and Crown American Realty Trust in connection with the merger.
Information about the trustees and executive officers of PREIT and their
ownership of PREIT shares is set forth in the proxy statement for PREIT's 2003
Annual Meeting of Shareholders, which was filed with the Securities and Exchange
Commission on April 30, 2003. Information about the trustees and executive
officers of Crown American Realty Trust and their ownership of Crown American
Realty Trust stock is set forth in the Crown American Realty Trust's Annual
Report on Form 10-K and the amendment to its Form 10-K filed with the Securities
and Exchange Commission on March 31, 2003 and April 22, 2003, respectively.
Investors may obtain additional information regarding the interests of such
participants by reading the joint proxy statement/prospectus when it becomes
available.
[Financial Tables Follow]
# # #
** A supplemental quarterly financial package ** will
be available on the Company's web site at
www.preit.com.
PREIT Announces Second Quarter 2003 Results
August 11, 2003
Page 10
Pennsylvania Real Estate Investment Trust
Selected Financial Data
------------------------------------------------------ ---------------------------------- -------------------------------
FUNDS FROM OPERATIONS Three Months Ended Six Months Ended
------------------------------------------------------ ---------------------------------- -------------------------------
(In thousands, except per share results) June 30, 2003 June 30, 2002 June 30, 2003 June 30, 2002
-------------- --------------- -------------- --------------
Net income $ 144,638 $ 4,442 $ 149,615 $ 8,169
Minority interest in operating partnership
continuing operations 823 307 1,110 465
Minority interest in operating partnership
discontinued operations 15,650 191 15,886 482
Gains on sales of interests in real estate (4,321) - (5,513) -
Gains on dispositions of discontinued operations (150,201) - (150,201) -
Depreciation and amortization:
Wholly owned & consolidated partnership, net 6,929 (a) 3,202 (a) 9,579 (a) 5,912 (a)
Unconsolidated partnerships & joint ventures 1,325 (a) 2,347 (a) 3,591 (a) 3,844 (a)
Discontinued operations - 2,187 2,309 4,369
Prepayment Refinancing Fee - - - 77
------------- --------------- ------------- -------------
FUNDS FROM OPERATIONS $ 14,843 (b) $ 12,676 (b) $ 26,376 (b) $ 23,318 (b)
============= =============== ============= =============
FUNDS FROM OPERATIONS PER SHARE AND OP UNITS $0.80 $0.70 $1.43 $1.30
============= =============== ============= =============
Weighted average number of shares outstanding 16,616 16,216 16,579 16,072
Weighted average effect of full conversion of
OP units 1,999 1,808 1,882 1,862
------------- --------------- ------------- -------------
Total weighted average shares outstanding, including
OP units 18,615 18,024 18,461 17,934
------------- --------------- ------------- -------------
a) Excludes depreciation of non-real estate assets, amortization of deferred
financing costs and discontinued operations.
b) Includes the non-cash effect of straight-line rents of $612 and $228 for the
2nd quarter 2003 and 2002; and $985 and $482 for the year to date 2003,
respectively.
-----------------------------------------------------
OPERATING RESULTS Three Months Ended Six Months Ended
----------------------------------------------------- ------------------------------- ---------------------------------
June 30, June 30,
(In thousands, except per share results) June 30, 2003 2002(1) June 30, 2003 2002(1)
------------- ------------ --------------- --------------
REAL ESTATE REVENUES
Base rent $ 21,568 $ 11,726 $ 33,493 $ 21,221
Percent rent 205 227 478 589
Expense reimbursement 8,933 3,177 12,835 5,798
Lease termination - 496 259 502
Other real estate revenue 787 301 1,121 572
------------ ----------- -------------- -------------
Total real estate revenue 31,493 15,927 48,186 28,682
------------ ----------- -------------- -------------
Management company revenue 3,792 2,152 5,973 4,325
Interest and other income 193 355 335 375
------------ ----------- -------------- -------------
35,478 18,434 54,494 33,382
------------ ----------- -------------- -------------
EXPENSES
Property payroll and benefits 1,622 824 2,635 1,744
Real estate and other taxes 2,916 1,090 4,211 1,948
Utilities 1,214 245 1,492 420
Other operating expenses 4,779 1,673 7,093 3,077
------------ ----------- -------------- -------------
Total property operating expenses 10,531 3,832 15,431 7,189
------------ ----------- -------------- -------------
Depreciation and amortization 6,994 3,267 10,507 6,042
Corporate payroll and benefits 3,948 3,536 7,584 7,046
Other general and administrative expenses 3,569 2,611 6,259 5,080
------------ ----------- -------------- -------------
Total general & administrative expenses 7,517 6,147 13,843 12,126
------------ ----------- -------------- -------------
Interest expense 9,097 4,325 13,143 7,003
------------ ----------- -------------- -------------
34,139 17,571 52,924 32,360
------------ ----------- -------------- -------------
Income before equity in partnerships and joint ventures,
minority interest and gains on sales of interests in
real estate 1,339 863 1,570 1,022
Equity in income of partnerships and joint ventures 2,023 1,893 3,800 3,459
Gains on sales of interests in real estate 4,321 (2) - 5,513 (2) -
------------ ----------- -------------- -------------
Income before minority interest, discontinued operations 7,683 2,756 10,883 4,481
Minority interest in operating partnership (823) (307) (1,110) (465)
------------ ----------- -------------- -------------
Income from continuing operations 6,860 2,449 9,773 4,016
------------ ----------- -------------- -------------
Discontinued Operations:
Income from discontinued operations 3,227 2,184 5,527 4,635
Equity in income of partnerships and joint ventures
Minority interest in discontinued operations (15,650) (191) (15,886) (482)
Gains on dispositions of discontinued operations 150,201 (3) - 150,201 (3) -
------------ ----------- -------------- -------------
Income from Discontinued Operations 137,778 1,993 139,842 4,153
------------ ----------- -------------- -------------
NET INCOME $ 144,638 $ 4,442 $ 149,615 $ 8,169
============ =========== ============== =============
BASIC EARNINGS PER SHARE
From continuing operations $ 0.41 $ 0.15 $ 0.59 $ 0.25
From discontinued operations 8.29 0.12 8.43 0.26
------------ ----------- -------------- -------------
TOTAL BASIC EARNINGS PER SHARE $ 8.70 $ 0.27 $ 9.02 $ 0.51
============ =========== ============== =============
DILUTED EARNINGS PER SHARE
From continuing operations $ 0.40 $ 0.15 $ 0.58 $ 0.25
From discontinued operations 8.14 0.12 8.29 0.26
------------ ----------- -------------- -------------
TOTAL DILUTED EARNINGS PER SHARE $ 8.54 $ 0.27 $ 8.87 $ 0.51
============ =========== ============== =============
Weighted average number of shares outstanding 16,616 16,216 16,579 16,072
------------ ----------- -------------- -------------
1) Prior periods' revenues and expenses were adjusted for discontinued
operations, which consist of disposed real estate assets.
2) 2nd quarter 2003 includes gain on sale of Cambridge Hall Apartments, West
Chester, PA and year to date 2003 includes sale of a parcel of land at Crest
Plaza Shopping Center in Allentown, PA .
3) 2nd quarter 2003 and year to date 2003 includes gain on sale of multifamily
discontinued properties.
PREIT Announces Second Quarter 2003 Results
August 11, 2003
Page 11
Pennsylvania Real Estate Investment Trust
Selected Financial Data
(In thousands)
--------------------------------------------------- ---------------------------------- ------------------------------
EQUITY IN INCOME OF PARTNERSHIPS Three Months Ended Six Months Ended
AND JOINT VENTURES -------------------------------- ------------------------------
--------------------------------------------------- June 30, June 30, June 30, June 30,
2003 2002 2003 2002
------------ --------------- -------------- -------------
Gross revenues from real estate $ 22,916 $ 24,268 $ 46,626 $ 48,064
=========== =============== ============= ============
Expenses:
Property operating expenses 7,373 8,111 15,790 16,437
Mortgage and bank loan interest 7,286 7,920 14,790 15,816
Depreciation and amortization 3,990 4,705 8,233 8,818
----------- --------------- ------------- ------------
Total Expenses 18,649 20,736 38,813 41,071
----------- --------------- ------------- ------------
Net Revenues from real estate 4,267 3,532 7,813 6,993
Partner's share 2,244 1,639 4,013 3,534
----------- --------------- ------------- ------------
EQUITY IN INCOME OF PARTNERSHIPS
AND JOINT VENTURES $ 2,023 $ 1,893 $ 3,800 $ 3,459
=========== =============== ============= ============
Supplemental Information for Wholly Owned Properties
and the Company's Proportionate Share of Partnerships and Joint Ventures
(In thousands)
----------------------------------------------------- --------------------------------- -------------------------------
EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION Three Months Ended Six Months Ended
AND AMORTIZATIONS ("EBITDA") --------------------------------- --------------------------------
----------------------------------------------------- June 30, June 30, June 30, June 30,
2003 2002 (1) 2003 2002 (1)
------------- ------------- ------------- -------------
Gross revenues $ 31,493 $ 15,927 $ 48,186 $ 28,682
Operating expenses (10,531) (3,832) (15,431) (7,189)
------------- ------------- ------------- -------------
Net operating income: wholly-owned properties 20,962 12,095 32,755 21,493
Company's proportionate share of partnerships and
joint ventures net operating income 6,485 8,365 12,971 14,219
------------- ------------- ------------- -------------
Combined net operating income 27,447 (2) 20,460 (2) 45,726 (2) 35,712 (2)
Interest income 193 355 335 375
Management company revenue 3,792 2,152 5,973 4,325
Total general & administrative expenses (7,517) (6,147) (13,843) (12,126)
------------- ------------- ------------- -------------
EBITDA $ 23,915 (3) $ 16,820 (3) $ 38,191 (3) $ 28,286 (3)
============= ============= ============= =============
1) Prior periods' revenues and expenses were adjusted for discontinued
operations, which consist of disposed real estate assets.
2) NOI including the impact of disposed real estate assets was $32,416 and
$28,114 for the 3 months ended 6/30/03 and 6/30/02 respectively; and was
$58,604 and $51,243 for the 6 months ended 6/30/03 and 6/30/02,
respectively.
3) EBITDA including the impact of disposed real estate assets for the 3 months
ended 6/30/03 and 6/30/02 was $28,883 and $24,474, respectively, and was
$51,068 and $43,817 for the 6 months ended 6/30/03 and 6/30/02,
respectively.
------------------------------------------------------- -------------------------------- -----------------------------
RECONCILIATION OF NET INCOME TO PROPERTY LEVEL EBITDA Three Months Ended Six Months Ended
AND TO PROPERTY LEVEL NET OPERATING INCOME --------------------------------- ------------------------------
------------------------------------------------------- June 30, June 30, June 30, June 30,
2003 2002 2003 2002
------------- -------------- ------------- -----------
Net Income $ 144,638 $ 4,442 $ 149,615 $ 8,169
Minority interest in operating partnership 823 307 1,110 465
Income from partnerships and joint ventures (2,023) (1) (1,893) (1) (3,800) (1) (3,459) (1)
Company's proportionate share of partnerships and
joint ventures net operating income 6,485 (1) 8,365 (1) 12,971 (1) 14,219 (1)
Gains on sales of interests in real estate (4,321) - (5,513) -
Income from discontinued operations (137,778) (1,993) (139,842) (4,153)
Depreciation and amortization: 6,994 3,267 10,507 6,042
Interest expense 9,097 4,325 13,143 7,003
-------------- -------------- ------------- -----------
Property Level EBITDA 23,915 16,820 38,191 28,286
Interest income (193) (355) (335) (375)
Management company revenue (3,792) (2,152) (5,973) (4,325)
Total general & administrative expenses 7,517 6,147 13,843 12,126
-------------- -------------- ------------- -----------
PROPERTY LEVEL NET OPERATING INCOME $ 27,447 $ 20,460 $ 45,726 $ 35,712
============== ============== ============= ===========
1) Reference SEC Form 10K Notes to Consolidated Financial Statements 12.
Segment Information; Adjustments to Equity Method, Equity in income of
partnerships and joint ventures.
(In thousands)
---------------------------------------------------------- -------------------- --------------------
MORTGAGE NOTES, BANK June 30, December 31,
AND CONSTRUCTION LOANS PAYABLE 2003 2002
---------------------------------------------------------- -------------------- --------------------
Wholly-owned properties
Mortgage notes payable $ 509,589 $ 126,778
Bank loans payable 117,900 130,800
Acquisition term loan & Unsecured line of credit 20,250 -
-------------------- --------------------
647,739 257,578
Company's proportionate share of
partnerships and joint ventures
Mortgage notes payable 155,488 166,728
-------------------- --------------------
Total mortgage notes and bank loans payable $ 803,227 $ 424,306
==================== ====================