Quarterly Funds from Operations of $9.2 Million Increases 85%;
FFO per Share $0.68 Before FASB EITF 98-9
FORT WASHINGTON, Pa., Nov. 13 /PRNewswire/ -- Pennsylvania Real Estate
Investment Trust (NYSE: PEI) announced today the results of its operations for
the third quarter ended September 30, 1998. The Company has been 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 third quarter includes the three-month
period ended September 30, 1998, ("3rd quarter 1998") and the 1997 third
quarter includes the three-month period ended August 31, 1997, ("4th quarter
1997").
Third Quarter Highlights
-- Increased FFO to $0.65 per share on 14.1 million shares/OP units
outstanding for 3Q98 from $0.57 per share on 8.7 million shares
outstanding for 4Q97
-- Increased FFO 85% to $9.2 million in 1998 from $5.0 million in 1997
-- Increased combined net operating income 59% over 1997
-- Closed $109 million in acquisitions, including Prince Georges Plaza
Third Quarter Results
Funds from operations (FFO) for the three months ended September 30, 1998
totaled $9,162,000, an 85% increase over the prior comparable three-month
period ended August 31, 1997 FFO of $4,948,000, primarily as a result of the
Company's September 30, 1997 acquisition of The Rubin Organization and
interests in six shopping centers and one multi-family property. On a per
share basis, third quarter FFO was $0.65 per share(1) and operating
partnership (OP) unit on 14,111,000 weighted average share equivalents
outstanding (including OP units), compared to $0.57 per share on 8,679,000
weighted average shares for the three months ended August 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, increased 59% to $15,606,000 for the three
months ended September 30, 1998, from $9,829,000 for the three months ended
August 31, 1997. The increase is mainly due to the Company's acquisition of
The Rubin Organization and interests in six shopping centers and one
multi-family property.
Net income for the three months ended September 30, 1998 totaled
$7,016,000, or $0.53 per basic share on total weighted average shares
outstanding of 13,300,000 compared to $1,829,000, or $0.21 per share on
8,679,000 total weighted average shares outstanding for the three months ended
August 31, 1997. Net income for the 1998 period includes gain on the sale of
Punta Gorda Mall, Punta Gorda, Fla., and Ormond Beach Mall, Daytona Beach,
Fla., of $1,277,000, or $0.10 per share.
Nine-Month Results
Funds from operations (FFO) for the nine months ended September 30, 1998
totaled $24,606,000, a 68% increase over the prior comparable nine-month
period ended August 31, 1997 FFO of $14,610,000, primarily as a result of the
Company's September 30, 1997 acquisition of The Rubin Organization and
interests in six shopping centers and one multi-family property. On a per
share basis, nine-month FFO was $1.76 per share and operating partnership (OP)
unit on 13,998,000 weighted average share equivalents outstanding (including
OP units), compared to $1.68 per share on 8,678,000 weighted average shares
for the nine months ended August 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 41% to $41,029,000 for the nine
months ended September 30, 1998, from $29,211,000 for the nine months ended
August 31, 1997. The increase is mainly due to the Company's acquisition of
The Rubin Organization and interests in six shopping centers and one
multi-family property.
Net income for the nine months ended September 30, 1998 totaled
$17,812,000, or $1.34 per basic share on 13,296,000 total weighted average
shares outstanding, compared to $7,595,000, or $0.88 per share on 8,678,000
total weighted average shares outstanding for the nine months ended August 31,
1997. Net income for the 1998 period includes gain on the sale of Charter
Pointe Apartments, Altemonte Springs, Fla., Punta Gorda Mall, Punta Gorda,
Fla., and Ormond Beach Mall, Daytona Beach, Fla., of $3,043,000, or $0.23 per
share.
Comments From Management
Ronald Rubin, Chief Executive Officer of PREIT, said, "We are pleased with
the overall performance of the portfolio since the beginning of the year. The
properties acquired from The Rubin Organization, as well as those in the
original portfolio, continue to generate strong revenue and FFO growth.
Furthermore, during the third quarter, we completed several accretive
acquisitions that will significantly enhance performance for the fourth
quarter of 1998 and fiscal 1999."
Mr. Rubin continued, "As a result, we have surpassed our original
acquisition goal of $90 million for 1998, having actually completed
$110 million by the end of the third quarter, with an additional $180 million
in projects under construction or in predevelopment. However, the closing of
our acquisitions, most notably Prince Georges Plaza, took place later than
expected, reducing the full financial impact for the quarter by $0.02 per
share."
Edward Glickman, Chief Financial Officer, said, "The total impact of the
new FASB ruling for the second and third quarters of 1998 was $0.05, of which
a reduction of $0.02 per share was recognized last quarter and $0.03 in the
third quarter. Of that $0.05, we expect $0.04 will be recovered in the fourth
quarter of this year and $0.01 in the first quarter of 1999. Again, it is
important to note that this is a change in the timing of revenue recognition
only and not in the amount of annual income or cash flow."
Same Store NOI Growth -- Apartment & Shopping Center Portfolios
Same store net operating income for the Company's portfolio of multifamily
properties increased by 4.5% over the prior comparable three-month period
ended August 31, 1997, primarily driven by an increase in revenues. Same
store net operating income for the third quarter of 1998 for the Company's
shopping center portfolio increased by 0.7% and, after adjusting for the
effect of the accounting change for the percentage rents, increased by 4.3%.
Portfolio Update
During the third quarter of 1998, the Company closed the previously
announced acquisitions of Prince Georges Plaza, Brandywood Plaza (formerly
Foulk Plaza), Festival at Exton, and The Woods for a total of nearly
$109 million, adding 1,046,000 square feet of retail and 320 apartment units
to the portfolio.
-- Prince Georges Plaza (Hyattsville, Md.) was closed on September 17 for
a purchase price of approximately $65 million, consisting of
$18 million in cash, $3.0 million to be paid through the issuance of OP
units, and including the assumption of approximately $44 million of
debt.
-- Festival at Exton (Exton, Pa.) was closed on August 27 for
approximately $18.4 million in cash.
-- Brandywood Plaza (Wilmington, Del.) was closed on July 21 for a
purchase price of $4.3 million, including $3 million in OP units.
Brandywood is undergoing redevelopment and is expected to come on line
in the second quarter of 1999.
-- The Woods (Ambler, Pa.) was closed on August 7 for a purchase price of
$21.2 million, including $7.3 million in assumed debt and $1.7 million
in OP units.
Jonathan Weller, PREIT's President and Chief Operating Officer, stated,
"With the completion of these recent acquisitions, we are turning our
attention to the funding of our acquisition and development plan through 1999.
We are confident that the Company will have sufficient resources to execute
its business plan. As has always been our practice, we will continue to
explore opportunities to increase our access to capital as necessary,
including the expansion of our current line of credit. Furthermore, the
majority of the transactions we have executed to date have included the
issuance of OP units, which we believe demonstrates the desirability of those
units as currency."
Line of Credit
As of September 30, 1998, the Company had $122 million outstanding under
its $150 million unsecured line of credit, compared with $61 million at
June 30, 1998. The increase in the credit facility was primarily due to
acquisitions and investments in properties under development.
Quarterly Dividend Declared
The Company declared a quarterly dividend of $0.47 per share payable on
December 15, 1998 to shareholders and unitholders of record as of November 30,
1998. The December 15, 1998 dividend payment will be PREIT's 87th consecutive
distribution since its initial dividend paid in August of 1962. Throughout
its history, the Company has never omitted or reduced a shareholder dividend.
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 (6.1 million square feet) and apartment communities (7,243 units)
located primarily in the eastern United States. The Company's portfolio
currently consists of 46 properties in 10 states. In addition, there are 7
properties under development. PREIT is headquartered in Fort Washington, Pa.,
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.
(1) Effective April 1, 1998, the Company has prospectively adopted the
provisions of Issue No. 98-9 ("EITF 98-9"), Accounting For Contingent Rent in
Interim Financial Periods, which was issued on May 21, 1998, by the Financial
Accounting Standards Board Emerging Issues Task Force, and 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 funds from operations ("FFO") from earlier reported
periods. For the third quarter ended September 30, 1998, the effect of the
adoption of EITF 98-9 has been to lower revenues, earnings and FFO by
approximately $366,000, or $.03 per share.
** A supplemental quarterly financial package is available on the
Company's web site at http://www.preit.com. **
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
Selected Financial Data
FUNDS FROM OPERATIONS
Three Months Ended Nine Months Ended
Sep 30, 1998 Aug 31, 1997 Sep 30, 1998 Aug 31, 1997
Income before
minority interest
in operating
partnership $7,448,000 $1,829,000 $18,773,000 $7,595,000
Less: (Gains) loss
on sales of
interests in real
estate (1,277,000) 392,000 (3,043,000) (1,069,000)
Provision for losses
on investments --- --- --- 500,000
Add:
Wholly owned &
consolidated
partnership, net 2,151,000 1,528,000 6,328,000 4,515,000
Unconsolidated
partnerships &
joint ventures 985,000 926,000 2,992,000 2,528,000
Excess purchase
price over net
asset required 29,000 --- 87,000 ---
Refinancing
prepayment fees --- 400,000 --- 919,000
Less: Depreciation of
non-real estate
assets (57,000) (57,000) (171,000) (170,000)
Amortization of
deferred financing
assets (117,000) (70,000) (360,000) (208,000)
FUNDS FROM
OPERATIONS $9,162,000(A) $4,948,000 $24,606,000(A) $14,610,000
FUNDS FROM
OPERATIONS PER
SHARE & OP
UNITS $0.65 $0.57 $1.76 $1.68
Weighted average
number of shares
outstanding 13,299,723 8,679,473 13,296,405 8,678,560
Weighted average
effect of full
conversion of
OP units 811,465 --- 701,951 ---
Total weighted
average shares
of outstanding
incl. OP units 14,111,188 8,679,473 13,998,356 8,678,560
(A) Includes the non-cash effect of straight-line rents of $280,000 and
$711,000 for the three and nine months ended September 30, 1998,
respectively
OPERATING RESULTS
Three Months Ended Nine Months Ended
Sep 30, 1998 Aug 31, 1997 Sep 30, 1998 Aug 31, 1997
REVENUES
Gross revenues
from real estate $14,768,000 $10,115,000 $42,076,000 $30,263,000
Interest and other
income 145,000 36,000 400,000 159,000
14,913,000 10,151,000 42,476,000 30,422,000
EXPENSES
Property operating
expenses 5,678,000 4,069,000 15,820,000 12,385,000
Depreciation and
amortization 2,231,000 1,598,000 6,482,000 4,718,000
General &
administrative
expenses 852,000 891,000 2,458,000 2,575,000
Interest expense 2,457,000 2,222,000 6,292,000 6,729,000
Provision for losses
on investments --- --- --- 500,000
11,218,000 8,780,000 31,052,000 26,907,000
Income before equity
in unconsolidated
entities, gains
on sales of
interests in real
estate and minority
interest in
operating
partnership 3,695,000 1,371,000 11,424,000 3,515,000
Equity in income of
PREIT-RUBIN 1,133,000 --- 274,000 ---
Equity in income of
partnerships and
joint ventures 1,343,000 850,000 4,032,000 3,011,000
Gains (loss)
on sales of
interests in
real estate(B)(C)1,277,000(B) (392,000)(C) 3,043,000(B) 1,069,000(C)
Income before
minority
interest in
operating
partnership 7,448,000 1,829,000 18,773,000 7,595,000
Minority interest
in operating
partnership (432,000) --- (961,000) ---
NET INCOME $7,016,000 $1,829,000 $17,812,000 $7,595,000
PER SHARE DATA
Net income before
gains (loss) on
sales of
interests in
real estate $0.43 $0.26 $1.11 $0.76
Gains (loss) on
sales of interests
in real estate(B)(C) 0.10(B) (0.05)(C) 0.23(B) 0.12(C)
BASIC INCOME PER SHARE $0.53 $0.21 $1.34 $0.88
DILUTED INCOME
PER SHARE $0.53 $0.21 $1.34 $0.87
Weighted average
number of shares
outstanding 13,299,723 8,679,473 13,296,405 8,678,560
(B) In the 3rd quarter 1998, gains on sale of interests in Punta Gorda
Mall, Punta Gorda, Fla. and Ormond Beach Mall, Daytona Beach, Fla. Year-
to-date 1998 includes gains on the sale of interests in Charter Pointe
Apartments in Altemonte Springs, Fla.
(C) In the 3rd quarter 1997, loss on sale of interest in property in
Margate, Fla. Year to date August 1997, includes gains on sales in three
joint venture shopping centers in Lancaster, Beaver Falls, and Waynesburg,
Pa., offset by loss on sale of interest in property in Margate, Fla.
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
Selected Financial Data
EQUITY IN INCOME OF PARTNERSHIPS AND JOINT VENTURES
Three Months Ended Nine Months Ended
Sep 30, 1998 Aug 31, 1997 Sep 30, 1998 Aug 31, 1997
Gross revenues
from real estate $13,703,000 $13,036,000 $41,750,000 $38,901,000
Expenses:
Property operating
expenses 4,917,000 5,214,000 15,021,000 15,572,000
Mortgage and bank
loan interest 4,043,000 3,306,000 12,369,000 10,011,000
Refinancing
prepayment fee (A) --- 800,000 --- 1,838,000
Depreciation and
amortization 2,021,000 1,910,000 6,175,000 5,221,000
10,981,000 11,230,000 33,565,000 32,642,000
2,722,000 1,806,000 8,185,000 6,259,000
Partner's Share (1,379,000) (956,000) (4,153,000) (3,248,000)
EQUITY IN INCOME
OF PARTNERSHIPS
AND JOINT
VENTURES $1,343,000 $850,000 $4,032,000 $3,011,000
(A) The Company's share for nine months is $919,000.
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 Nine Months Ended
Sep 30, 1998 Aug 31, 1997 Sep 30, 1998 Aug 31, 1997
Gross Revenues $14,768,000 $10,115,000 $42,076,000 $30,263,000
Operating expenses (5,678,000) (4,069,000) (15,820,000) (12,385,000)
Net operating
income:
Wholly-owned
properties 9,090,000 6,046,000 26,256,000 17,878,000
Company's
proportionate
share of
partnerships and
joint ventures
net operating
income 4,320,000 3,783,000 13,083,000 11,333,000
Company's
proportionate
share of
PREIT-RUBIN net
operating income 2,196,000 --- 1,690,000 ---
Combined net
operating income 15,606,000 9,829,000 41,029,000 29,211,000
Interest income 145,000 36,000 400,000 159,000
General and
administrative
expenses (852,000) (891,000) (2,458,000) (2,575,000)
EBITDA $14,899,000 $8,974,000 $38,971,000 $26,795,000
MORTGAGE NOTES AND
BANK LOANS PAYABLE
Wholly-Owned
Properties
Mortgage notes payable $115,423,000 $83,528,000
Bank Loans payable 116,261,000 33,884,000
231,684,000 117,412,000
Company's Proportionate
Share of Partnerships
and Joint Ventures
Mortgage notes payable 99,045,000 77,751,000
Bank loans payable 4,212,000 5,184,000
Total mortgage notes
and bank loans
payable $334,941,000 $200,347,000
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 Real Estate Investment Trust,
215-875-0700; or Julie Gottlieb, General Info, Pamela King,
Analyst Info, or Judith Sylk-Siegel, Media Info, all of The
Financial Relations Board, 212-661-8030
NOTE TO EDITORS: To receive additional information on
Pennsylvania Real Estate Investment Trust via fax at no charge,
please dial 1-800-PRO-INFO and enter the ticker symbol PEI
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