PREIT May Lose REIT Status

Pennsylvania Real Estate Investment Trust, Philadelphia, is at risk of losing its real estate investment trust status as a result of failing to opt for taxable REIT subsidiary status for a subsidiary company.The omission could prevent PREIT from qualifying for REIT status for the tax years 2001 through 2003, the REIT said. PREIT's "failure to qualify as a REIT and the resulting requirement to pay taxes and interest (and perhaps penalties) would cause it to default under various agreements to which it is a party, including under its credit facility, and would have a material adverse effect on its business, prospects, results of operations, earnings, financial condition and its ability to declare or pay dividends," the REIT said. PREIT could also be precluded from qualifying for REIT status until 2006. PREIT is seeking "discretionary retroactive relief" from the Internal Revenue Service and said it believes that the relief will be granted. Citing the REIT-status development, Fitch Ratings and Moody's Investors Service have placed PREIT's ratings on watch for possible downgrade. Meanwhile, PREIT has withdrawn a previously announced offering of 4.35 million shares of its common stock.