Pennsylvania Real Estate Investment Trus (PEI, Financial) filed Quarterly Report for the period ended 2009-03-31.
PENNSYLVANIA R.E. INVEST. TR. is a real estate investment trust engaged in acquiring and holding for investment interests in real estate. Pennsylvania Real Estate Investment Trus has a market cap of $254.5 million; its shares were traded at around $6.46 with a P/E ratio of 1.9 and P/S ratio of 0.5. The dividend yield of Pennsylvania Real Estate Investment Trus stocks is 18%. Pennsylvania Real Estate Investment Trus had an annual average earning growth of 9.7% over the past 10 years. GuruFocus rated Pennsylvania Real Estate Investment Trus the business predictability rank of 5-star.
In connection with the redevelopment and the ground-up development projects listed above and other projects ongoing at our other properties, we have made contractual and other commitments in the form of tenant allowances, lease termination amounts and contracts with general contractors and other professional service providers. As of March 31, 2009, the unaccrued remainder to be paid against these contractual and other commitments was $37.9 million. The projects on which these commitments have been made have total expected remaining costs of $97.0 million. While we expect that the expenditures related to our redevelopment and development projects listed in this report will continue over the next several quarters, we believe that our construction in progress balance has peaked. Construction in progress represents the aggregate expenditures on projects less amounts placed in service. Generally, assets are placed in service upon substantial completion or when tenants begin occupancy and rent payments commence.
The acquisition of the Office Building was financed in part by a mortgage loan with a principal amount of $8.0 million. Approximately $7.4 million of the proceeds from the loan was applied toward the repayment of mortgage debt on the office building transferred by BCA in exchange for the Office Building.
We lease our principal executive offices from Bellevue Associates (the Landlord). Ronald Rubin and George F. Rubin, collectively with members of their immediate families and affiliated entities, own approximately a 50% interest in the Landlord. The office lease has a 10 year term that commenced on November 1, 2004. Our base rent is $1.4 million per year during the first five years of the office lease and $1.5 million per year during the second five years. Total rent expense under this lease was $0.4 million for each of the three months ended March 31, 2009 and 2008.
Real estate revenue decreased by $2.0 million, or 2%, in the three months ended March 31, 2009 compared to the three months ended March 31, 2008. Real estate revenue in the three months ended March 31, 2009 was significantly affected by tenant bankruptcies and store closings, resulting in lower occupancy and expense reimbursements and higher bad debt expense compared to the three months ended March 31, 2008. Real estate revenue from properties that were owned by us prior to January 1, 2008 decreased by $3.0 million, primarily due to lower occupancy. This resulted in decreases of $1.4 million in base rent, which is comprised of minimum rent, straight line rent and rent from tenants that pay a percentage of sales in lieu of minimum rent, $0.6 million in percentage rent, $0.5 million in lease termination revenue, $0.3 million in other revenue and $0.2 million in expense reimbursements. Real estate revenue from one property that was under development during 2008 that is now placed in service increased by $0.9 million and real estate revenue from One Cherry Hill Plaza (office building acquired in February 2008) increased by $0.1 million.
Base rent decreased by $1.4 million in the three months ended March 31, 2009 compared to the three months ended March 31, 2008. Base rent decreased by $1.5 million due to 67 store closings and liquidations associated with eleven tenant bankruptcy filings during 2008. Also impacting base rent was a $0.5 million decrease in temporary leasing revenue (leases with a term of less than one year) and a $0.4 million decrease in straight line rent. Partially offsetting these decreases, base rent at Voorhees Town Center and Plymouth Meeting Mall, two of our current redevelopment projects, increased by $0.6 million and $0.5 million, respectively, due to increased occupancy from newly opened tenants. Percentage rent decreased by $0.6 million due to a decrease in tenant sales compared to the three months ended March 31, 2008. This decrease was also partially due to a trend in certain leases toward slightly higher minimum rent and higher thresholds at which percentage rent begins. Lease termination revenue decreased by $0.5 million, primarily due to $0.4 million received from one tenant in the three months ended March 31, 2008 that did not recur. Other revenue decreased by $0.3 million, primarily due to a $0.2 million timing variance in seasonal photo commissions associated with the Easter holiday. Expense reimbursements decreased by $0.2 million in the three months ended March 31, 2009 as compared to the three months ended March 31, 2008. At many of our malls, we have continued to recover a lower proportion of common area maintenance and real estate tax expenses. In addition to being affected by store closings, our properties are experiencing a trend towards more gross leases (leases that provide that tenants pay a higher base rent amount in lieu of contributing toward common area maintenance costs and real estate taxes) as well as more leases that provide for the rent amount to be determined on the basis of a percentage of sales in lieu of minimum rent, and they are experiencing rental concessions made to tenants affected by the redevelopment activities and to tenants experiencing financial difficulties, and by conditions in the economy. We expect the lower recovery rates at the redevelopment properties to improve as construction is completed, tenants take occupancy and our leasing leverage improves, and as conditions in the economy improve.
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PENNSYLVANIA R.E. INVEST. TR. is a real estate investment trust engaged in acquiring and holding for investment interests in real estate. Pennsylvania Real Estate Investment Trus has a market cap of $254.5 million; its shares were traded at around $6.46 with a P/E ratio of 1.9 and P/S ratio of 0.5. The dividend yield of Pennsylvania Real Estate Investment Trus stocks is 18%. Pennsylvania Real Estate Investment Trus had an annual average earning growth of 9.7% over the past 10 years. GuruFocus rated Pennsylvania Real Estate Investment Trus the business predictability rank of 5-star.
Highlight of Business Operations:
Net loss was $11.5 million for the three months ended March 31, 2009, compared to net loss of $3.1 million for the three months ended March 31, 2008. For the three months ended March 31, 2009, net loss was affected by decreased revenue and occupancy as a result of tenant bankruptcies and store closings in 2008 and 2009, increased depreciation and amortization as a result of redevelopment and development assets having been placed in service, increased interest expense as a result of a higher aggregate debt balance and properties placed in service and increased property operating expenses compared to the three months ended March 31, 2008.In connection with the redevelopment and the ground-up development projects listed above and other projects ongoing at our other properties, we have made contractual and other commitments in the form of tenant allowances, lease termination amounts and contracts with general contractors and other professional service providers. As of March 31, 2009, the unaccrued remainder to be paid against these contractual and other commitments was $37.9 million. The projects on which these commitments have been made have total expected remaining costs of $97.0 million. While we expect that the expenditures related to our redevelopment and development projects listed in this report will continue over the next several quarters, we believe that our construction in progress balance has peaked. Construction in progress represents the aggregate expenditures on projects less amounts placed in service. Generally, assets are placed in service upon substantial completion or when tenants begin occupancy and rent payments commence.
The acquisition of the Office Building was financed in part by a mortgage loan with a principal amount of $8.0 million. Approximately $7.4 million of the proceeds from the loan was applied toward the repayment of mortgage debt on the office building transferred by BCA in exchange for the Office Building.
We lease our principal executive offices from Bellevue Associates (the Landlord). Ronald Rubin and George F. Rubin, collectively with members of their immediate families and affiliated entities, own approximately a 50% interest in the Landlord. The office lease has a 10 year term that commenced on November 1, 2004. Our base rent is $1.4 million per year during the first five years of the office lease and $1.5 million per year during the second five years. Total rent expense under this lease was $0.4 million for each of the three months ended March 31, 2009 and 2008.
Real estate revenue decreased by $2.0 million, or 2%, in the three months ended March 31, 2009 compared to the three months ended March 31, 2008. Real estate revenue in the three months ended March 31, 2009 was significantly affected by tenant bankruptcies and store closings, resulting in lower occupancy and expense reimbursements and higher bad debt expense compared to the three months ended March 31, 2008. Real estate revenue from properties that were owned by us prior to January 1, 2008 decreased by $3.0 million, primarily due to lower occupancy. This resulted in decreases of $1.4 million in base rent, which is comprised of minimum rent, straight line rent and rent from tenants that pay a percentage of sales in lieu of minimum rent, $0.6 million in percentage rent, $0.5 million in lease termination revenue, $0.3 million in other revenue and $0.2 million in expense reimbursements. Real estate revenue from one property that was under development during 2008 that is now placed in service increased by $0.9 million and real estate revenue from One Cherry Hill Plaza (office building acquired in February 2008) increased by $0.1 million.
Base rent decreased by $1.4 million in the three months ended March 31, 2009 compared to the three months ended March 31, 2008. Base rent decreased by $1.5 million due to 67 store closings and liquidations associated with eleven tenant bankruptcy filings during 2008. Also impacting base rent was a $0.5 million decrease in temporary leasing revenue (leases with a term of less than one year) and a $0.4 million decrease in straight line rent. Partially offsetting these decreases, base rent at Voorhees Town Center and Plymouth Meeting Mall, two of our current redevelopment projects, increased by $0.6 million and $0.5 million, respectively, due to increased occupancy from newly opened tenants. Percentage rent decreased by $0.6 million due to a decrease in tenant sales compared to the three months ended March 31, 2008. This decrease was also partially due to a trend in certain leases toward slightly higher minimum rent and higher thresholds at which percentage rent begins. Lease termination revenue decreased by $0.5 million, primarily due to $0.4 million received from one tenant in the three months ended March 31, 2008 that did not recur. Other revenue decreased by $0.3 million, primarily due to a $0.2 million timing variance in seasonal photo commissions associated with the Easter holiday. Expense reimbursements decreased by $0.2 million in the three months ended March 31, 2009 as compared to the three months ended March 31, 2008. At many of our malls, we have continued to recover a lower proportion of common area maintenance and real estate tax expenses. In addition to being affected by store closings, our properties are experiencing a trend towards more gross leases (leases that provide that tenants pay a higher base rent amount in lieu of contributing toward common area maintenance costs and real estate taxes) as well as more leases that provide for the rent amount to be determined on the basis of a percentage of sales in lieu of minimum rent, and they are experiencing rental concessions made to tenants affected by the redevelopment activities and to tenants experiencing financial difficulties, and by conditions in the economy. We expect the lower recovery rates at the redevelopment properties to improve as construction is completed, tenants take occupancy and our leasing leverage improves, and as conditions in the economy improve.
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