Two Independent Trustees of Pennsylvania Real Estate Investment Trust Issue Open Letter to Shareholders

Trustees Christopher Swann and Kenneth Hart Believe the Board’s Decision to Reject all Resignation Offers of Seven Trustees Who Received a Majority of Withhold Votes at the 2023 Annual Meeting of Shareholders Was Rushed and Unresponsive to Shareholder Concerns

Contend Shareholders Should Demand More Thoughtful and Meaningful Action by the Board in Light of the Trust’s Continued Underperformance

ATLANTA, June 15, 2023 (GLOBE NEWSWIRE) -- Two independent trustees of Pennsylvania Real Estate Investment Trust (OTC:PRET) (“PRET” or the “Trust”), Christopher Swann and Kenneth Hart (collectively, “we”), today issued an open letter to PRET shareholders following the decision by PRET’s Board of Trustees (the “Board”) to reject the offers of resignation delivered by each of George J. Alburger, Jr., Joseph F. Coradino, Michael J. DeMarco, JoAnne A. Epps, Mark E. Pasquerilla, Charles P. Pizzi and John J. Roberts (the “Affected Trustees”), who did not receive a majority of the votes cast by common shareholders at the Trust’s 2023 Annual Meeting of Shareholders held on June 1, 2023 (the “2023 Annual Meeting”) and were compelled to tender their resignations in accordance with the Trust’s majority vote policy. Messrs. Swann and Hart did not need to tender their resignations because they received a majority of the votes cast for their election by preferred shareholders.

In their letter to shareholders, Messrs. Swann and Hart contend that the Board should have taken more time to critically and thoughtfully assess the Board’s composition, skillsets and performance issues in light of the shareholder vote before determining – just 7 days after the 2023 Annual Meeting – to reject all resignation letters from the Affected Trustees. Messrs. Swann and Hart further note that had the Board followed its own governing documents and formed an independent committee of trustees who received a majority of the votes cast by shareholders, Messrs. Swann and Hart would have undertaken a careful review of the concerns identified by Institutional Shareholder Services (“ISS”), who had recommended withhold votes against each of the Affected Trustees other than Mr. Coradino. Mr. Swann and Mr. Hart believe that at this critical juncture, it was imperative that the independent committee be formed to solicit further shareholder feedback, before making a recommendation to the Board as to whether to accept or reject the resignation offers. Instead, the Affected Trustees chose to maintain the status quo.

The text of the full letter to shareholders is set forth below:

Dear Fellow Shareholders,

We are independent trustees of the Board. While elected by preferred shareholders, we represent all shareholders – both common and preferred – and have fiduciary duties to act in the best interest of all shareholders. In fact, Christopher beneficially owns over 2% of the outstanding common shares in addition to a significant amount of each of the classes of the preferred shares. We take our fiduciary duties seriously and endeavor to be responsive to shareholders, especially when shareholders make their concerns known, as they did at the 2023 Annual Meeting.

In our view, the voting results of common shareholders at the 2023 Annual Meeting was an unequivocal message from shareholders that they are dissatisfied with the performance of the Trust and desirous of change at the Board level. We suspect common shareholders fully appreciated the consequences of their vote and that a majority of the Board would need to tender their resignations.

Under the Trust’s majority vote policy, the Nominating and Governance Committee of the Board (the “Nominating Committee”), is to consider each resignation offer and make a recommendation to the Board as to whether to accept such resignation. The Board is then to act upon the recommendation of the Nominating Committee within 90 days following certification of the vote. However, pursuant to the policy, any trustee who tenders his or her resignation is not to participate in the Nominating Committee’s recommendation or any other Board action regarding whether to accept the resignation offer. Rather, the policy states that “if each member of the Nominating Committee received a Majority Withheld Vote at the same election, then the independent trustees who did not receive a Majority Withheld Vote are to appoint a committee amongst themselves (which may consist of some or all of them) to consider the resignation offers and recommend to the Board whether to accept them.” The policy does not distinguish between independent trustees elected by preferred shareholder and independent trustees elected by common shareholders.

On June 12, 2023, the Trust issued a Form 8-K (the “Relevant 8-K”) disclosing that on June 8, 2023, the Board determined to decline each offer of resignation, in each case with the applicable trustee not participating in the decision relating to his or her own offer of resignation. In making this determination, the Trust disclosed in the Relevant 8-K that the Board had determined that the resignations “would be detrimental to, and not in the best interests of, the Trust and its shareholders.” The Trust acknowledged that the Board as a whole, rather than the Nominating Committee, considered each resignation offer because each member of the Nominating Committee did not receive a majority of the votes cast at the same election by the common shareholders, but concluded that “no other independent trustees elected by the Common Shareholders were present on the Board to form a committee to offer a recommendation to the Board.”

To be clear, we are not in agreement with this Board’s decision to reject all resignation offers. We are raising our concerns today, not through any animosity toward our fellow trustees, but because of our concern about meeting our fiduciary obligation to the Trust and our fellow shareholders.

Had we been appointed to an independent committee of trustees to make a recommendation to the Board, we would have carefully considered several factors before making our recommendation as to accept or reject the resignation of the 7 trustees who received a majority of withhold votes, including:

  • Whether the Affected Trustees have been sufficiently responsive to the compensation issues raised by ISS and by shareholders through their significant Against votes against the Trust’s say-on-pay proposals last year and this year;
  • Whether the Board can better align its executive and director compensation programs with shareholders by tying pay for performance and using more performance-based equity awards over cash awards;
  • Whether there are more immediate ways to reduce the Trust’s operating costs, including potentially downsizing the Board, which will not only reduce director fees but also potentially make the Board more effective and efficient;
  • Whether the Board has the right skillsets, and whether new members should join with restructuring and strategic experience, in light of the Trust’s current financial situation; and
  • Whether the Board has taken sufficient steps to think outside the box to derive greater value from the Trust’s underlying assets, improve the Company’s operating performance and maximize shareholder value.
  • Whether the Board has sufficiently considered and evaluated ideas or concerns of Mr. Hart and Mr. Swann to effect change and reorganization of the Company’s cost structure and balance sheet.

While we tried to raise our concerns privately with our fellow trustees to undertake a more circumspect review of the Board’s composition, skillsets and performance, the Affected Trustees appeared to rush to reject all resignation letters within just a week of the 2023 Annual Meeting. We appreciate that each Affected Trustee abstained from voting on his or her own resignation offer, but incentives are not aligned if a vote by one trustee to accept a resignation of another could make such trustee vulnerable. Said more simply, the Affected Trustees appear to be doing nothing to react to the recent shareholder vote, other than using a legalistic interpretation of its Corporate Governance Guidelines to maintain the status quo. We believe the status quo is not appropriate given the difficult condition of the Company’s balance sheet.

As we stated at the outset of this letter, we strongly believe that our interests are aligned with all shareholders to improve the performance of the Trust and this Board. We do not believe our interests diverge or conflict with common shareholders simply because we were voted in by preferred shareholders. In our view, trustees need to hold themselves accountable and be meaningfully and actively engaging with their shareholders to be responsive, especially when shareholders make clear their dissatisfaction with the status quo.

We trust that shareholders who share our views will make their voices heard and hope that this letter sparks greater responsiveness and action by the Board.


Christopher Swann and Kenneth Hart


Christopher Swann