Pennsylvania Real Estate Investment Trust (NYSE: PEI) announced today that it is adjusting its estimates for 2012 Funds From Operations ("FFO") and net loss per diluted share to reflect the recently signed executive employment agreements.
As previously announced, Joseph F. Coradino has been appointed by the Board of Trustees of PREIT to become chief executive officer of the Company as of the 2012 Annual Meeting of Shareholders scheduled for June 7, 2012. He will succeed Ronald Rubin, who will retire as chief executive officer and serve as executive chairman. In connection with these changing roles, on April 25, 2012, the Company entered into amended employment agreements with Mr. Coradino and Mr. Rubin effective June 7, 2012.
Under the amended employment agreement, if Mr. Rubin's employment is terminated for any reason other than by the Company for cause, he will be entitled to receive a lump sum founder's retirement payment of $3.5 million, except if he voluntarily terminates his employment without good reason prior to June 7, 2013. In addition, all time-based equity awards made to Mr. Rubin would vest and all outstanding performance-based equity awards would remain outstanding and would vest or be forfeited based on the terms of such awards as if Mr. Rubin's employment had not terminated. The Company will record a charge of $4.5 million related to these contractual provisions ratably over the twelve month service period starting June 7, 2012.
Additionally, upon Mr. Rubin's cessation of service as chief executive officer of the Company, and the beginning of Mr. Coradino's service in that position on June 7, 2012, Edward Glickman, President and Chief Operating Officer of the Company, will be contractually entitled to voluntarily terminate his employment for good reason during the period from December 4, 2012 to June 2, 2013. Mr. Glickman would be entitled to a cash payment, and all time-based equity awards made to him would vest and all outstanding performance-based equity awards would remain outstanding and would vest or be forfeited based on the terms of such awards as if Mr. Glickman's employment had not terminated. Mr. Glickman also would be entitled to receive other benefits as set forth in his employment agreement. The Company will record a charge of $4.0 million related to these contractual provisions ratably over the period from June 7, 2012 through December 4, 2012. To the extent Mr. Glickman does not terminate his employment prior to June 2, 2013, the Company will reverse such earnings charge.
Total compensation charges related to these contractual provisions are estimated to be $6.6 million in 2012 and $1.9 million in 2013. These charges affect the 2012 estimates previously provided. Therefore, the Company is adjusting its estimates as follows:
| Estimates Per Diluted Share | Â | Lower End | Â | Upper End | ||
| Previously provided FFO guidance | $ | 1.83 | $ | 1.90 | ||
| 2012 portion of reserves | Â | (0.11) | Â | (0.11) | ||
| FFO, as revised | 1.72 | 1.79 | ||||
| Depreciation and amortization (includes the Company's proportionate share of unconsolidated properties), net of other adjustments | Â | (2.44) | Â | (2.45) | ||
| Net loss attributable to PREIT, as revised | $ | (0.72) | $ | (0.66) | ||
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. Currently, the Company's portfolio of 49 properties comprises 38 shopping malls, eight community and power centers, and three development properties. The properties are located in 13 states in the eastern half of the United States, primarily in the Mid-Atlantic region, totaling approximately 33 million square feet of operating space. PREIT, headquartered in Philadelphia, Pennsylvania, is publicly traded on the NYSE under the symbol PEI. The Company's website can be found at www.preit.com.
Forward Looking Statements
This press release contains certain "forward-looking statements" within the meaning of the U.S. Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements relate to expectations, beliefs, projections, future plans, strategies, anticipated events, trends and other matters that are not historical facts. These forward-looking statements reflect our current views about future events, achievements or results and are subject to risks, uncertainties and changes in circumstances that might cause future events, achievements or results to differ materially from those expressed or implied by the forward-looking statements. In particular, our business might be materially and adversely affected by uncertainties affecting real estate businesses generally as well as the following, among other factors: our substantial debt and our high leverage ratio; constraining leverage, interest and tangible net worth covenants under our 2010 Credit Facility; our ability to refinance our existing indebtedness when it matures, on favorable terms or at all, due in part to the effects on us of dislocations and liquidity disruptions in the capital and credit markets; our ability to raise capital, including through the issuance of equity or equity-related securities if market conditions are favorable, through joint ventures or other partnerships, through sales of properties or interests in properties, or through other actions; our short- and long-term liquidity position; current economic conditions and their effect on employment, consumer confidence and spending and the corresponding effects on tenant business performance, prospects, solvency and leasing decisions and on our cash flows, and the value and potential impairment of our properties; general economic, financial and political conditions, including credit market conditions, changes in interest rates or unemployment; changes in the retail industry, including consolidation and store closings, particularly among anchor tenants; our ability to maintain and increase property occupancy, sales and rental rates, in light of the relatively high number of leases that have expired or are expiring in the next two years; increases in operating costs that cannot be passed on to tenants; risks relating to development and redevelopment activities; the effects of online shopping and other uses of technology on our retail tenants; concentration of our properties in the Mid-Atlantic region; changes in local market conditions, such as the supply of or demand for retail space, or other competitive factors; potential dilution from any capital raising transactions; possible environmental liabilities; our ability to obtain insurance at a reasonable cost; and existence of complex regulations, including those relating to our status as a REIT, and the adverse consequences if we were to fail to qualify as a REIT. Additional factors that might cause future events, achievements or results to differ materially from those expressed or implied by our forward-looking statements include those discussed in the section of our Annual Report on Form 10-K in the section entitled "Item 1A. Risk Factors." We do not intend to update or revise any forward-looking statements to reflect new information, future events or otherwise.
Contacts:
PREIT
Robert McCadden, 215-875-0735
EVP & CFO
or
Nurit
Yaron, 215-875-0735
VP, Investor Relations
