PREIT Buys Crown American for $1.3B in Stock and Assumed Debt

PHILADELPHIA-Johnstown, PA-based Crown American Realty Trust will be mergedinto locally based Pennsylvania Real Estate Investment Trust, expandingPREIT’s retail portfolio to ownership in 54 properties, including 40 mallsand 14 power and strip centers, with an aggregate 33.5 million sf over 12states. Approximately 82% of the portfolio is in PA, NJ, DE and MD, firmlypositioning PREIT as the leading shopping center REIT in the Mid-Atlanticregion.

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.