The Herald, Sharon, PA Published Thursday, May 15, 2003

Pa. firm

Price tag placed

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at $321.6 million

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By Michael Roknick
Herald Business Editor

A company has gone shopping for the owner of the Shenango Valley Mall.

Philadelphia-based Pennsylvania Real Estate Investment Trust said Wednesday it has reached a definitive deal to buy Crown American Realty Trust, owner of the Hermitage mall, for $321.6 million. The deal is expected to be completed in the fourth quarter.

Plans call for the combined company to keep the Pennsylvania Real Estate Investment Trust name. PREIT will own 40 shopping malls in 12 states.

After the sale, PREIT said, it plans to place six of the Crown American assets in a "special purpose entity designed to ease their repositioning and disposition.''

"That tells me they have some properties they feel aren't valued properly,'' said David DeForest, a stockbroker with Butler Wick & Co.'s Sharon office. "I would suspect they would sell them, or, at the very least, have the properties re-valued asset-wise on somebody's balance sheet.''

It wasn't immediately known which of the six properties were identified. Calls to the Shenango Valley Mall office and to Crown American's Johnstown, Pa., office weren't returned Wednesday.

Terms of the deal call for PREIT to pay Crown American shareholders 0.3589 shares of PREIT stock for each Crown American share. Based on PREIT's closing stock price of $28 on Tuesday, the deal would value Crown American at about $10.05 a share, a discount to Crown American's closing New York Stock Exchange price on Tuesday of $10.75.

However, PREIT said the exchange ratio was determined based on the trailing 20-day average closing price as of Monday and is not subject to change. Crown American's stock is up 4 percent in the last four weeks and 14.6 percent in the last 13 weeks.

PREIT also will assume Crown's mortgage debt of $619 million. Crown's chief executive, Mark Pasquerilla, and another member of Crown's board of trustees who will be determined later will join the PREIT board. The deal is subject to shareholder and regulatory approvals.

In a news release issued Wednesday, PREIT said the deal includes a $20 million termination fee payable to either company if the sale isn't completed in certain specified circumstances.

The two companies own the bulk of their malls in Pennsylvania, New Jersey, Delaware and Maryland, but two-thirds of Crown American malls are in Pennsylvania. Crown American owns 26 malls outright and has a 50 percent stake in Palmer Park Mall, Easton, Pa.

The combined company will be worth $2.7 billion and have 33.5 million square feet of shopping space at 54 retail properties.

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