Quarterly Funds from Operations of $7.7 Million Increases 54%;
FFO per Share $0.57 Before FASB EITF 98-9
FORT WASHINGTON, Pa., Aug. 13 /PRNewswire/ -- Pennsylvania Real Estate
Investment Trust (NYSE: PEI) announced today the results of its operations for
the second quarter ended June 30, 1998. Funds from operations (FFO) per
share, excluding the affect of the recently adopted accounting change EITF 98-
9, for the three months ended June 30, 1998, was $0.57 per share, compared to
$0.57 per share for the comparable three months ended May 31, 1997. Including
the EITF 98-9 change, FFO was reduced by $250,000 to $0.55 per share for the
second quarter, which will be used for comparative purposes in the following
analysis.
Accounting Changes
The Company is reporting a different comparable quarter ending period as a
result of the previously announced change in its fiscal year from August 31 to
December 31. Therefore, for comparative purposes, the 1998 second quarter is
the three-month period ended June 30, 1998 ("second quarter 1998") and the
1997 second quarter includes the three-month period ended May 31, 1997,
("second quarter 1997").
On May 21, 1998, The Emerging Issues Task Force (EITF) of the Financial
Accounting Standards Board (FASB) enacted a change in accounting rules that
affects the Company's reported earnings this quarter, but is not expected to
have a material impact on the Company's total earnings for 1998. Therefore,
effective April 1, 1998, the Company has prospectively adopted the provisions
of EITF 98-9, which changes the Company's method of recognizing revenues from
percentage and overage rents in quarterly periods within the year.
Prior to the adoption of EITF 98-9, the Company recognized revenue from
percentage and overage rents quarterly on an accrual basis based on estimated
annual amounts. Under the provisions of EITF 98-9, revenues from percentage
and overage rents are recognized in the quarterly periods in which the
specified target that triggers this type of rental income is achieved.
For the full calendar year there will be no material impact, just a shift
in revenues, earnings and FFO from earlier reported periods to later in the
year. As a result, the Company's reported revenues, earnings and FFO for the
quarter ended June 30, 1998, were reduced by approximately $250,000, or $0.02
per share, compared with what would have been reported if the accounting
changes described above had not been made.
Second Quarter Results
FFO for the three months ended June 30, 1998 totaled $7,699,000, a 54%
increase over the prior comparable three-month period ended May 31, 1997 FFO
of $4,960,000, driven primarily by the Company's 1997 acquisition of The Rubin
Organization and interests in four shopping centers. The Company's second
quarter 1998 FFO was $0.55 per share and operating partnership (OP) unit on
13,944,000 weighted average shares outstanding (including OP units), compared
to $0.57 per share on 8,678,000 weighted average shares for the three months
ended May 31, 1997.
The per share results reflect the fully diluted effect of the Company's
equity offering of 4.6 million shares completed on December 17, 1997. As
calculated by NAREIT, FFO is defined as net income excluding extraordinary and
unusual 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, including PREIT-RUBIN (the management and development company in
which the Company owns a 95% non-voting interest), increased 25.7% to
$12,370,000 for the three months ended June 30, 1998, from $9,838,000 for the
three months ended May 31, 1997.
On a fully diluted basis, net income for the three months ended June 30,
1998 was $0.47 per share on 13,297,000 total weighted average shares
outstanding, compared to $0.32 per share on 8,678,000 total weighted average
shares outstanding in the 1997 comparable period. Net income for the 1998
quarter includes the gain on the April sale of the Company's interest in
Charter Pointe Apartments, Altamonte Springs, Fla. of $1,766,000, or $0.13 per
share.
Six-Month Results
Funds from operations (FFO) for the six months ended June 30, 1998 totaled
$15,445,000, a 60% increase over FFO of $9,661,000 for the prior comparable
six-month period ended May 31, 1997. FFO for the six-month period totaled
$1.11 per share and OP unit on 13,941,000 weighted average shares outstanding
(including OP units), compared to $1.11 per share on 8,678,000 weighted
average shares for the six months ended May 31, 1997.
Net operating income before depreciation from wholly-owned properties and
the Company's proportionate share of partnerships and joint venture
properties, including PREIT-RUBIN, increased 28.4% to $24,894,000 for the six
months ended June 30, 1998, from $19,382,000 for the six months ended May 31,
1997.
On a fully diluted basis, net income for the six months ended June 30,
1998 was $0.81 per share on 13,295,000 total weighted average shares
outstanding. Net income for the 1998 period includes gain on the sale of
Charter Pointe Apartments, Altemonte Springs, Fla. of $1,766,000, or $0.13 per
share. Net income for the 1997 period was $0.66 per share and included gains
on the sales of three joint venture shopping centers in Lancaster, Beaver
Falls and Waynesburg, Pa. of $1,461,000 or $0.17 per share.
Comments From Management
PREIT's Chief Executive Officer, Ronald Rubin, commented, "Looking back
over the last six months, we are very pleased with the Company's continued
ability to generate increasing growth in FFO, both internally and externally.
Since the beginning of the year, we have purchased or placed under contract
1,350,000 s.f. of properties which were immediately accretive, or are expected
to be accretive upon the completion of certain development or remerchandising
activities."
Mr. Rubin continued, "We are on track for 1998 to be an excellent year for
PREIT. The real estate transactions announced to date have put the Company
well ahead of plan, and the pipeline of potential acquisitions and
developments -- both through our third-party development arm PREIT-RUBIN and
externally -- shows no signs of slowing."
Edward Glickman, Chief Financial Officer of PREIT, added, "We are very
positive about the financial prospects for the Company and the impact of our
growth strategies. In analyzing the Company it is important to note that the
new FASB ruling affects only the timing of income recognition, not the amount
of annual income or cash flow. Our greatest challenge in the coming months
will be to determine the Company's optimal capital structure in light of our
rapid growth, the ready availability of low cost debt financing and the recent
softness in the equity market."
Same Store NOI Growth -- Apartment & Shopping Center Portfolios
Same store net operating income growth for the Company's portfolio of
apartment properties increased 3.8% over the second quarter of 1997, primarily
driven by an increase in revenues and by expense reduction. While net
revenues were up 1.6%, expenses were reduced by 1.3%. Same store net
operating income growth for the second quarter of 1998 for the Company's
shopping center portfolio decreased by 2% after adjusting for the effect of
the EITF 98-9 accounting change for percentage rents.
Line of Credit
As of June 30, 1998, the Company had $61 million outstanding under its
$150 million unsecured line of credit, compared with $10.3 million at December
31, 1997. The Company used $33.6 million of its line of credit for the payoff
of a secured term loan. The balance of the increase in the credit facility
was due to investments in properties under development.
Quarterly Dividend Declared
The Company declared a quarterly dividend of $0.47 per share payable on
September 15, 1998 to shareholders and unitholders of record as of August 31,
1998. The September 15, 1998 dividend payment will be PREIT's 86th consecutive
distribution since its initial dividend paid in August of 1962. Throughout
its history, the Company has never omitted or reduced a shareholder dividend.
Portfolio Highlights
In June 1998, the Company entered into a purchase and sale agreement to
acquire Prince Georges Plaza, an 850,000 square foot regional shopping center
in Hyattsville, Maryland (suburban Washington, DC) for $65 million. The
center is currently anchored by Hecht's, J.C. Penney and G.C. Murphy, the
latter of which is expiring in 1999. The Company expects to significantly
strengthen the growth potential of the center by re-leasing the G.C. Murphy
space to a leading national or regional anchor tenant. The acquisition is
expected to close later this month.
In July 1998, the Company sold its 25% interests in Punta Gorda Mall
located in Punta Gorda, Florida and Ormond Beach Mall located in Daytona
Beach, Florida and realized an approximate gain of $1.2 million, or $0.09 per
share.
Jonathan Weller, President and Chief Operating Officer, commented, "Since
the end of the first quarter, we have continued to pursue opportunistic
acquisitions and divestitures in keeping with our strategy to build both the
retail and apartment sides of PREIT's portfolio, while reducing our
participation in joint ventures where prudent. To that end, we sold minority
interests in two non-core shopping centers which freed capital to reinvest in
new development projects or acquisitions that offer the potential of more
promising profitability."
In August 1998, the Company announced pending and completed acquisitions
of three properties totaling $44 million, which will add 431,000 square feet
to the portfolio:
-- Foulk Plaza (Wilmington, Del.): PREIT completed the acquisition in
early August of a 56,000 s.f. neighborhood shopping center that will be
redeveloped for a new 47,000 s.f. Genuardi's Family Market, a well-
known and rapidly growing chain in the Delaware Valley region.
-- Festival at Oaklands (Exton, Pa.): PREIT expects to close in late
August the acquisition of a 140,000 s.f. community shopping center in
Chester County, one of the fastest growing communities in the greater
Delaware Valley. The center's anchor tenants include Clemens Markets,
Sears Hardware and Rite-Aid.
-- The Woods (Ambler, Pa.): PREIT completed the acquisition in early
August of a 320-unit apartment community located in a Philadelphia
suburb. The Woods is optimally located and has consistently achieved
occupancy rates in excess of 95%.
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 (6.0 million square feet) and apartment communities (7,244 units)
located principally in the eastern United States. The Company's portfolio
currently consists of 45 properties in 10 states. In addition, there are
currently six shopping centers under development. PREIT is headquartered in
Fort Washington, Pennsylvania, a suburb of Philadelphia.
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 and 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, 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.
Pennsylvania Real Estate Investment Trust
Selected Financial Data
FUNDS FROM OPERATIONS
Three Months Ended
June 30, May 31,
1998 1997
Income before
minority interest $6,578,000 $2,876,000
Less: Gains on sales
of interests
in real estate (1,766,000) --
Minority interest
in consolidated
partnerships (70,000) (91,000)
Provisions for
losses on
investments -- --
Add: Wholly owned &
consolidated
partnership(A) 2,089,000 1,498,000
Unconsolidated
partnerships &
joint ventures 1,009,000 804,000
Excess purchase
price over net
asset required 29,000 --
Refinancing
prepayment fees -- --
Less: Depreciation of
non-real estate
assets (57,000) (57,000)
Amortization of
deferred
financing
assets (113,000) (70,000)
FUNDS FROM
OPERATIONS $7,699,000(B) $4,960,000
FUNDS FROM OPERATIONS
PER SHARE AND OP UNITS $0.55 $0.57
Weighted average number
of shares outstanding 13,297,470 8,678,098
Weighted average effect
of full conversion of
OP units 646,286 --
Total weighted average
shares outstanding
including OP units 13,943,756 8,678,098
Six Months Ended
June 30, May 31,
1998 1997
Income before
minority interest $11,448,000 $5,941,000
Less: Gains on sales
of interests
in real estate (1,766,000) (1,461,000)
Minority interest
in consolidated
partnerships (123,000) (174,000)
Provisions for
losses on
investments -- 500,000
Add: Wholly owned &
consolidated
partnership(A) 4,178,000 2,986,000
Unconsolidated
partnerships &
joint ventures 2,007,000 1,602,000
Excess purchase
price over net
asset required 58,000 --
Refinancing
prepayment fees -- 519,000
Less: Depreciation of
non-real estate
assets (114,000) (114,000)
Amortization of
deferred
financing
assets (243,000) (138,000)
FUNDS FROM OPERATIONS $15,445,000(B) $9,661,000
FUNDS FROM OPERATIONS
PER SHARE AND OP UNITS $1.11 $1.11
Weighted average number
of shares outstanding 13,294,718 8,678,098
Weighted average effect
of full conversion of
OP units 646,286 ---
Total weighted average
shares outstanding
including OP units 13,941,004 8,678,098
(A) Net of minority interest
(B) Includes the non-cash effect of straight-line rents of $206,000 and
$431,000 for the three and six months ended June 30, 1998,
respectively.
OPERATING RESULTS
Three Months Ended Six Months Ended
June 30, May 31, June 30, May 31,
1998 1997 1998 1997
REVENUES
Gross revenues from
real estate $13,783,000$10,031,000 $27,308,000 $20,148,000
Interest and other
income 133,000 54,000 255,000 122,000
13,916,000 10,085,000 27,563,000 20,270,000
EXPENSES
Property operating
expenses 4,980,000 3,967,000 10,019,000 8,142,000
Depreciation and
amortization 2,113,000 1,565,000 4,251,000 3,120,000
General & administrative
expenses 868,000 860,000 1,607,000 1,685,000
Interest expense 1,855,000 2,259,000 3,834,000 4,505,000
Provision for losses
on investments --- --- --- 500,000
9,816,000 8,651,000 19,711,000 17,952,000
Income before equity
in unconsolidated
entities, gains on
sales of interests
in real estate and
minority interest 4,100,000 1,434,000 7,852,000 2,318,000
Equity in loss
of PREIT-RUBIN (501,000) -- (859,000) --
Equity in income of
partnerships and
joint ventures 1,214,000 1,442,000 2,689,000 2,161,000
Gains on sales of interests
in real estate (C)(D) 1,766,000(C) -- 1,766,000(C) 1,461,000(D)
Income before
minority interest 6,579,000 2,876,000 11,448,000 5,940,000
Minority interest (374,000) (91,000) (652,000) (174,000)
NET INCOME $6,205,000 $2,785,000 $10,796,000 $5,766,000
PER SHARE DATA
Net income before
gains on sales of
interests in real estate $0.34 $0.32 $0.68 $0.49
Gains on sales of
interests in real
estate (C) 0.13(C) -- 0.13(C) 0.17(D)
BASIC INCOME PER SHARE $0.47 $0.32 $0.81 $0.66
DILUTED INCOME PER SHARE $0.47 $0.32 $0.81 $0.66
Weighted average number
of shares outstanding 13,297,470 8,678,098 13,294,718 8,678,098
(C) In 1998, gain on sale of Charter Pointe Apartments in Altemonte
Springs, Fla.
(D) In 1997, gains on sales of three joint venture shopping centers in
Lancaster, Beaver Falls and Waynesburg, Pa.
Pennsylvania Real Estate Investment Trust
Selected Financial Data
EQUITY IN INCOME OF PARTNERSHIPS
AND JOINT VENTURES
Three Months Ended Six Months Ended
June 30, May 31, June 30, May 31,
1998 1997 1998 1997
Gross revenues from
real estate $13,312,000 $12,907,000 $28,047,000 $25,865,000
Expenses:
Property operating
expenses 4,702,000 4,983,000 10,104,000 10,359,000
Mortgage and bank
loan interest
expense 4,093,000 3,326,000 8,326,000 6,705,000
Refinancing
prepayment
fee (a) -- -- -- 1,038,000
Depreciation and
amortization 2,083,000 1,660,000 4,154,000 3,311,000
10,878,000 9,969,000 22,584,000 21,413,000
2,434,000 2,938,000 5,463,000 4,452,000
Partner's Share (1,220,000) (1,496,000) (2,774,000) (2,291,000)
EQUITY IN INCOME OF
PARTNERSHIPS AND
JOINT VENTURES $1,214,000 $1,442,000 $2,689,000 $2,161,000
(a) The Company's share for six months is $519,000
Note: One partnership in which the Company is a general partner, and has
control as provided in the partnership agreement, has been consolidated
for financial presentation. All of these assets and liabilities are
included in the consolidated financial statements at 100%. The minority
partner's interest is 35%.
Supplemental Information for Wholly Owned Properties
and the Company's Proportionate Share of Partnerships and Joint Ventures
EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION
AND AMORTIZATION ("EBITDA")
Three Months Ended Six Months Ended
June 30, May 31, June 30, May 31,
1998 1997 1998 1997
Gross revenues $13,783,000 $10,031,000 $27,308,000 $20,148,000
Operating expenses (4,980,000) (3,967,000) (10,019,000) (8,142,000)
Minority interest (374,000) (91,000) (652,000) (174,000)
Net operating
income: Wholly-
owned properties 8,429,000 5,973,000 16,637,000 11,832,000
Company's proportionate
share of partnerships
and joint ventures net
operating income 4,226,000 3,865,000 8,763,000 7,550,000
Company's proportionate
share of PREIT-RUBIN
net operating loss (285,000) -- (506,000) --
Combined net
operating income 12,370,000 9,838,000 24,894,000 19,382,000
Interest income 133,000 54,000 255,000 122,000
General and
administrative
expenses (868,000) (860,000) (1,607,000) (1,685,000)
EBITDA $11,635,000 $9,032,000 $23,542,000 $17,819,000
MORTGAGE NOTES AND BANK LOANS PAYABLE
Wholly-Owned Properties
Mortgage notes
payable $64,766,000 $83,844,000
Bank loans payable 55,126,000 28,623,000
119,892,000 112,467,000
Company's Proportionate
Share of Partnerships
and Joint Ventures
Mortgage notes
payable 99,999,000 78,211,000
Bank loans payable 4,189,000 6,406,000
Total mortgage notes
and bank loans
payable $224,080,000 $197,084,000
SOURCE Pennsylvania Real Estate Investment Trust
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Related links:
http://www.preit.com
CONTACT:
Edward A. Glickman, Executive Vice President
and CFO of Pennsylvania REIT, 215-875-0700; or General Info,
Julie Gottlieb, Analyst Info, Pamela King, or Media Info, Judith
Sylk-Siegel, all of The Financial Relations Board, 212-661-8030
NOTE TO EDITORS: To receive additional information, including an
expanded financial summary, on Pennsylvania Real Estate
Investment Trust via fax at no charge, please dial 1-800-PRO-INFO
and enter the ticker symbol PEI. The financial summary, in
addition to other information, is also available by visiting the
Company's web site at http://www.preit.com
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