PREIT's acquisition cost is estimated at about $1.3 billion, which includesapproximately $619.1 million in assumed mortgage debt on Crown properties.Under the terms, PREIT will issue Crown stockholders a 0.3895-share of itsstock for each outstanding Crown American share in a tax-free,share-for-share transaction. The exchange ratio will be based on thetrailing 20-day average closing prices as of May 12 when PREIT stock traded at $28per share and Crown's traded at $10.75 a share.
Of the assumed mortgage debt, approximately $589.1 million is fixed-ratewith a weighted average interest rate of 7.4%. It includes a $449-millionfirst-mortgage loan secured by 15 Crown properties. That loan has aninterest rate of 7.5% and matures in Sept. 2008. PREIT plans to restructure the debtat a more currently favorable rate.
The Crown portfolio contains 26 regional malls and a 50%-interest in PalmerPark Mall in Easton, PA, which is already 50%-owned by PREIT. At year-end2002, the occupancy rate in the Crown portfolio was 89.1%, and in-line storesales averaged $274 per sf. PREIT plans to reposition and sell six Crownnon-core assets, with an overall occupancy rate of 72.6% and average in-linestore sales of $218 per sf.
PREIT will remain headquartered here. It will retain operations andunspecified finance functions at Crown's headquarters in Johnstown at leastthrough first-quarter 2004. Mark Pasquerilla, Crown's chairman and CEO,along with another principal of PREIT's choosing, will join the PREIT board.
The Crown purchase comes on top of PREIT's agreement to acquire six mallsfrom Columbia, MD-based Rouse Co. Four of those sales have closed and theremaining two are expected to close this quarter.
The Crown deal is expected to close in the fourth quarter of this year. Themerger agreement includes a $20-million termination fee payable to eitherPREIT or Crown if the merger is not completed according to conditionsspecified in the agreement.
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