Item 1.	Business.
(a)	General Development of Business
	Crown American Realty Trust (the "Company") was formed on May 14, 1993 as a Maryland real estate investment trust (a "REIT") to acquire and operate sub- stantially all of the enclosed shopping mall properties and two office build- ings (the "Properties") owned by Crown American Associates ("CAA" or "Crown Associates"), formerly Crown American Corporation. Crown Associates is a wholly-owned subsidiary of Crown Holding Company ("Crown Holding'). CAA, which was founded in 1950, was engaged principally in the development, acquisition, ownership and management of enclosed shopping malls and, to alesser extent, strip shopping centers, hotels and office buildings.
	On August 17, 1993, the Company consummated simultaneously the acquisition of the Properties (the "Acquisition") and an initial public offering (the "IPO") of 24,540,000 of its common shares of beneficial interest (the "Shares"). Eleven Properties were acquired by Crown American Properties, L.P., a Delaware limited partnership (the "Operating Partnership") which is controlled by the Company as the sole general partner, and 15 Properties were acquired by Crown American Financing Partnership, a Delaware general partnership (the "Financing Partnership") in which the Operating Partnership owns a 99.5% general partnership interest and in which the Company, through Crown American Financing Corporation, a wholly-owned corporate subsidiary of the Company (the "Financing Corporation"), owns a 0.5% general partnership interest. The net proceeds of the IPO were contributed by the Company to the Operating Partnership in exchange for the general partnership interest in the Operating Partnership. The Operating Partnership contributed a portion of the net proceeds from the IPO to the Financing Partnership in exchange for the 99.5% general partnership interest in the Financing Partnership. Concurrently with the transactions described above, the Financing Partnership consummated the borrowing of $300 million of loans (the "Mortgage Loans") secured by mortgages on the 15 Properties owned by the Financing Partnership. The Operating Partnership and the Financing Partnership (collectively, the "Partnerships") used the proceeds of the IPO and the Mortgage Loans to pay down existing mortgage debt on the Properties. On September 15, 1993, the Company sold an additional 978,500 Shares as a result of the underwriters of the IPO exercis- ing the over-allotment option granted to them in connection with the IPO.
	The consideration paid by the Company and the Partnerships for the Properties consisted of: (i) the issuance to CAA of 1,450,000 Shares (having a value of approximately $25.0 million, based on the initial public offering price), and a 22% limited partnership interest in the Operating Partnership, held by Crown Investments Trust ("CIT" or "Crown Investments"), an affiliate of CAA and the Initial Limited Partner of the Operating Partnership, (having a value of approximately $132 million based on the initial public offering price and the fact that each partnership unit is initially equivalent to one Share) and (ii) the issuance to Pasquerilla Partnership (a partnership comprised of Frank J. Pasquerilla, Chairman of the Board of Trustees and Chief Executive Officer of the Company, and members of his immediate family) of 150,000 Shares (having a value of approximately $2.6 million based on the initial public offering price). In addition, with the proceeds of the IPO, the Company paid off certain of the debt on the Properties, of which approximately $37 million was cross- collateralized debt that encumbered certain of the Properties as well as certain of the assets retained by CAA, and of which another approximately $67 million was construction debt that was recourse to CAA. Also, by virtue of acquiring certain of the Properties, which were subject to recourse construction loans,
the Operating Partnership assumed sole responsibility for $98 million of re- course debt. In addition to the transactions described above, all of the executive, property and asset management, leasing, construction, financial, legal services, development and administrative personnel of CAA relating to its regional mall and shopping center business became employees of the Operating Partnership.
At the time of the IPO, the Company held an initial 78.00% limited partnership interest in the Operating Partnership and Crown Investments held the remaining 22.00% interest. Subsequently, the ownership percentages have changed due to (a) Company shares issued for cash and under the dividend reinvestment plan (pro-ceeds then reinvested by the Company in the Operating Partnership in exchange for an equivalent number of additional limited partnership units) and (b) additional units issued as partial consideration for the purchase of Wyoming Valley Mall in 1995 (see below). The number of limited partnership units outstanding at December 31, 1996 were as follows: 	
	At the time of the Company's formation in 1993, each of CAA and First Union Real Estate Equity and Mortgage Investments ("First Union") an unrelated entity, owned an undivided fifty percent (50%) fee interest in each of the Wyoming Valley Mall and Middletown Mall properties (the "Acquisition Properties"). Each of CAA's and First Union's undivided interests were leased to subsidiaries of CAA pursuant to separate long-term ground leases. Based on the agreements between CAA and First Union relating to their co-ownership of the Acquisition Properties, which contained a right of first refusal with respect to any third- party offer to purchase either party's interest, First Union objected to the transfer of CAA's interests in the Acquisition Properties to the Operating Partnership pursuant to such purchase offer made shortly after the Company's formation.
	In September 1994, Crown Investments entered into a Purchase and Sales Agree- ment with First Union (the "PSA") to acquire First Union's interests in each of the Acquisition Properties for an aggregate purchase price of $33,500,000. The total consideration consisted of $27,500,000, payable in cash, for its interest in Wyoming Valley Mall, and $6,000,000, payable pursuant to a purchase money note in favor of First Union due January 31, 1998 with interest at the rate of 9% per annum of which 8% per annum is payable in current monthly installments (the "Middletown Note"), for its interest in Middletown Mall.
	On December 14, 1994, the independent members of the Company's Board of Trustees (the "Independent Trustees") unanimously approved the assignment by CIT to the Operating Partnership of the right to acquire First Union's interest in Wyoming Valley Mall pursuant to the PSA, and the assumption by the Operating Partnership of the obligation to purchase such interest from First Union, upon
the simultaneous contribution of the respective interests of CAA and its sub- sidiary in Wyoming Valley Mall to the Operating Partnership in exchange for the issuance to such entities of additional Partnership Units and cash in amounts to be determined by the Independent Trustees after receipt of an appraisal approved by an executive officer of the Company, but not less than 750,000 Partnership Units to CIT or a subsidiary of CIT and not less than $10,000,000 in cash to CAA.
	The Independent Trustees adopted a similar resolution regarding Middletown Mall (except that there was to be no cash payment by the Operating Partnership nor any specified minimum number of Partnership Units to be issued), subject to satisfaction of certain conditions. On January 27, 1995, the Independent Trustees unanimously approved the assignment by CIT or its immediate assignee to the Operating Partnership of the right to acquire First Union's interest in Middletown Mall pursuant to the PSA, upon the simultaneous contribution to the Operating Partnership of the respective interests of CAA and its subsidiary in Middletown Mall, in return for the assumption by the Operating Partnership of the existing first mortgage indebtedness on Middletown Mall (approximately $1,784,000 principal amount outstanding as of such date) and the Operating Partnership's agreement to take title subject to a second mortgage to be delivered to First Union to secure the Middletown Note (but without any recourse to the Operating Partnership or the Company, or its or their other assets, for the payment of the Middletown Note, which is guaranteed by a subsidiary of CIT and secured by 750,000 Operating Partnership units held by that subsidiary). In addition, the Independent Trustees approved the issuance to CAA, CAA's sub- sidiary and a subsidiary of CIT (as CIT's assignee), in exchange for the contri- bution of their respective interests in Middletown Mall, of an aggregate number of additional Partnership Units to be determined by the Independent Trustees at the time of the payment of the Middletown Note in full (retroactive to January 1 of the year in which such payment occurs).
	The total number of additional Partnership Units issued and to be issued in exchange for the respective contributions of such interests in Wyoming Valley Mall and Middletown Mall is determined by dividing the estimated annualized distribution of Funds from Operations by the Operating Partnership attributable to Wyoming Valley Mall or Middletown Mall, as the case may be (after taking into account adjustments to ground rent and debt service refinanced or assumed by the Operating Partnership), by the dividend distribution rate per Share in effect for the year ended prior to the year in which the units are issued.
	On May 3, 1995, the Independent Trustees made a final determination of the total number of additional Partnership Units to be issued in exchange for the contribution of the interests of CAA and CAA's subsidiary in Wyoming Valley Mall; 1,786,459 additional Partnership units were issued, effective as of January 31, 1995, to Crown American Investment Company, a new wholly-owned sub- sidiary of CIT (as successor by merger with CAA's subsidiary) in exchange for such contributions. The new units represented approximately 5.1% of the total units outstanding prior to the issuance of the new units.
	The Independent Trustees will not make a final determination of the total number of additional Partnership Units to be issued in exchange for the respect- ive contributions of CAA, CAA's subsidiary and CIT's subsidiary in Middletown Mall until the Middletown Note is paid in full. There is no assurance that the Operating Partnership will pay the Middletown Note in full or, if the Middletown Note is paid in full, how many additional Partnership Units, if any, will be issued in respect of Middletown Mall based on such formula.
	Prior to and through November 1994, Hess's Department Stores, Inc. ("Hess's") was an anchor tenant at 12 of the Company's malls, in the joint venture's en- closed shopping mall, at an anchor pad in which the Company holds a ground leasehold interest, and at the two malls purchased by the Company in January 1995 as described above. Hess's is a subsidiary of Crown Holding which is owned by Frank Pasquerilla and members of his immediate family. In 1994 all of Hess'sstore locations were transferred or sold to The Bon-Ton Stores, Inc. ("Bon-Ton") and to The May Department Stores Company ("May"); Hess's operations ceased at that time and it began to liquidate its remaining assets and lia- bilities. 	Management believes that the May and Bon-Ton transactions were consistent with, and in further-ance of, the Company's growth strategy of upgrading its existing properties. Refer to Note 7 of the Company's Consolidated Financial Statements in Item 8 hereto for additional information concerning these transactions as they affect the Company.
(b)	Financial Information About Industry Segments
	The Company is primarily engaged in the business of owning, operating, man- aging, leasing, acquiring, developing, redeveloping, expanding, renovating and financing enclosed shopping malls and, therefore, only operates in one seg- ment. See the Consolidated Financial Statements and Notes thereto referred to in Item 8 of this Annual Report on Form 10-K for certain financial information required by Item 1.
(c)	Narrative Description of Business
	General
	The Company conducts all of its business activities through the Partnerships. Through its ownership interests in the Partnerships, as of December 31, 1996 the Company owns the Properties, which consist of 25 enclosed shopping malls, which include a 50% partnership interest in Palmer Park Mall (an enclosed shopping mall) (collectively, the "Malls"), and an office building in Johnstown, Penn- sylvania with approximately 102,500 gross leasable square feet, which serves as the headquarters of the Company and also is leased to CAA's hotel division and third parties ("Pasquerilla Plaza"), a ground leasehold interest in a parcel of land with an approximate 107,000 square foot building sub-leased to an anchor department store at Westgate Mall, a mall owned by an unaffiliated third party (the "Anchor Pad"), and approximately 130 acres of outparcels and undeveloped land, the majority of which adjoins or is in the vicinity of certain of the Malls. As further described in Note 14 to the Consolidated Financial Statements, the Company also owned, until September 1996 when it was sold to a third party, an office building in Newport News, Virginia with approximately 102,000 gross square feet leased to third parties (the "Patrick Henry Corporate Center"). The Company, through its ownership interest in the Operating Partnership, manages 24 of the Malls (the "Managed Malls") and Pasquerilla Plaza while the Anchor Pad and Palmer Park Mall are managed by other third party property managers.
	The Company is self-administered and self-managed. The Company, together with the Partnerships, is a fully-integrated real estate company engaged in the own- ership, operation, management, leasing, acquisition, development, redevelop- ment, expansion, renovation and financing of enclosed shopping malls.
	The Company's executive offices are located at Pasquerilla Plaza, Johnstown, Pennsylvania 15901 and its telephone number is (814) 536-4441.
	Operating Strategies and Practices
	General. The Company's management believes that the shopping center business has evolved from primarily a development activity to an operating business. The Company's management believes that a shopping center company must be a fully in- tegrated real estate company with asset management, property management, leasing, expansion and renovation, acquisition, development and redevelopment, and financing expertise.
	Mall Management. The Operating Partnership performs all day-to-day property management functions for the Properties (except for Palmer Park Mall and the Westgate Mall Anchor Pad, which are managed by a third party manager). These functions include leasing, construction, management, accounting, finance, data processing, maintenance, marketing, promotion and security. The Company provides each Managed Mall with a general manager, who oversees the on-site staff, and a marketing director. In addition, each Managed Mall is further supported by regional group managers and multi-property operations, marketing and support personnel.
	Marketing Support. The Company has a Vice President of Marketing and a corporate marketing director who, in conjunction with Managed Mall marketing directors, develop customized marketing plans for each Managed Mall, includ- ing special events, direct mail and television, radio and newspaper advertising.
	Cost Controls. Management has developed a centralized program for purchasing selected supply items, which permits all Managed Malls to share in bulk purchase discounts. Management believes that effective control of operating expenses will reduce common area charges which may enable the Company to increase base rent levels.
	To preserve and increase the value of the Managed Malls over the long term, the Company has a program of preventive maintenance, renovations and expansion plans. The maintenance plans encompass paving, roofing, HVAC and general improvements to the Managed Mall common areas.
	Business Objectives and Policies
	The Company's business objective is to achieve long term capital appreciation through increases in cash flow and the value of the Company. The Company seeks to accomplish this objective through its direct and indirect ownership of the Properties, selective acquisitions of additional malls in the United States, improved operations of the Properties, lease-up of unleased space and any acquired shopping centers and, where deemed appropriate, renovations and expansions of these properties. The Company intends to pursue development activities as opportunities arise. A criterion for new investments will be that they offer the opportunity for growth in Funds from Operations. As used herein, "Funds from Operations" means net income before extraordinary items and non-recurring items, real estate depreciation and amortization, and additionally includes cash flow support earned from the Predecessor (See Note 7 to The Consolidated Financial Statements). The Company anticipates that new real estate investments will be located primarily in the Eastern United States, but it may also consider purchasing properties in other regions of the United States. All of the Company's activities will be conducted through the Partnerships, although the Company may hold temporary cash investments from time to time pending investment or distribution to shareholders.
	The Company may purchase or lease properties for long-term investment, expand and improve the Properties presently owned, or sell such properties, in whole or in part, when circumstances warrant. The Company may also participate with other entities in property ownership, through joint ventures or other types of co-ownership. The Company expects that any single investment in a property would not exceed 10% of the Company's assets. The Company's policy is to acquire assets primarily for income and long-term appreciation in value through the implementation of the Company's asset management and operating strategies.
	Disposition Objectives and Policies
	The Company will dispose of any of the Properties, if, based upon management's periodic review of the Company's portfolio, the Board of Trustees determines that such action would be in the best interests of the Company. As further described in Note 14 to the Company's Consolidated Financial Statements, in 1995 the Board of Trustees authorized management to pursue the sale of certain malls and other assets that were not considered at that time to be fully consistent with or essential to the Company's long-term strategies. As reported in the Company's Form 10-Q for the second quarter of 1996, the assets that had been held for sale in 1995 are no longer being offered due to potential new develop- ment opportunities that have arisen, current market conditions, and other reasons. Other than the Patrick Henry Corporate Center, an office building located in Newport News, Virginia, which was sold to a third party in September 1996, none of the properties have been sold to date or are under a sale agree- ment at this time.
	Financing
	The Company maintains working capital that, together with potential access to borrowings and other sources of funds, it believes is adequate for the current conduct of the Operating Partnership's business and investments in the ordinary course. As further described in Management's Discussion and Analysis of Financial Condition and Results of Operations in Item 7 hereto, during 1996 the Company arranged (1) $47.0 million of debt refinancings which raised an incremental $0.6 million after repayment of $46.4 million of existing debt and financing costs, (2) $5.4 million in a new construction loan facility for the renovation of Shenango Valley Mall in Sharon, Pennsylvania, and (3) a one year extension of the $5.6 million yearly renewable secured line of credit. In addition, during 1996 the Company drew $30.7 million in proceeds under a con- struction loan facility arranged in 1995 for the reconstruction and expansion of the fire damaged Logan Valley Mall. The Company also extended to 1998 and 1999 the repayment of $42.8 million in debt that was scheduled to come due in 1997. In December 1996 the Board of Trustees approved the terms of a $10 million unsecured line of credit with Crown Financing Company, a related party (see Note 7 to The Consolidated Financial Statements). This line of credit agreement was executed in January 1997; no amounts have been drawn under this line.
	If the Board of Trustees determines that additional funding is required, the Company or the Operating Partnership may raise such funds through additional in- fusions of equity (public or private and at the Company or the Operating Partnership level), debt financing or retention of additional cash flow by reducing the dividend amount per share (subject to considerations regarding the taxability of undistributed real estate investment trust income), or a com- bination of these methods. In August 1995 the Company reduced its quarterly dividend from $.35 per share to $.20 per share in order to reinvest more in- ternally-generated funds in various property expansions, improvements, and related investments. It is anticipated that any additional borrowings will be made through the Operating Partnership either directly or indirectly, although the Company may also incur indebtedness which may be re-loaned to the Operating Partnership. Indebtedness incurred by the Company may be in the form of bank borrowings, secured and unsecured, and publicly and privately placed debt. Indebtedness incurred by the Operating Partnership may be in the form of purchase money obligations to the sellers of properties, publicly or privately placed debt, financing from banks, institutional investors or other lenders, any of which indebtedness may be unsecured or may be secured by mortgages or other interests in the property owned by the Operating Partner- ship. Such indebtedness may be recourse to all or any part of the Properties to be owned by the Operating Partnership, or may be limited to the particular property to which the indebtedness relates.
	Strategy for Growth
	The Company was formed to provide a public vehicle for the further growth of CAA's enclosed shopping mall business. It is the objective of the Company's management to achieve growth in Funds from Operations by maximizing cash flow from existing Malls through increased occupancy and increased rent, expanding and/or renovating existing Malls, acquiring and, to a lesser extent, developing new enclosed shopping malls, and by selling properties that are not consistent with or essential to the Company's long-term growth strategies.
	The Company follows a program of renovation and expansion in circumstances where management believes that higher rental rates and occupancy levels can be achieved. The Company intends to continue to monitor opportunities for expan- sion and reconfiguration and to capitalize on such opportunities in part through utilizing its relationships with existing tenants and its extensive con- tacts with the retailing community. The Company, through the Operating Partnership, intends to undertake development activities as opportunities arise. The Company's primary acquisition strategy is to purchase under- performing shopping centers in desirable areas and to improve their performance through a comprehensive program of renovation, expansion, reconfiguration, and re-merchandising. The Company may acquire shopping centers in different regional markets to facilitate geographic diversification of its real estate holdings. The acquisition of larger properties, or a group of properties, may be undertaken with an institutional or joint venture partner.
	Because the Company's revenues are subject to a variety of factors, many of which (such as local and national economic conditions, interest rates and the financial performance of the Company's tenants) are beyond the Company's con- trol, there can be no assurance that the Company's management, leasing and acquisition strategies will achieve the Company's growth objectives.
	Competitive Position
	The Malls are generally located in middle markets where there are relatively few other enclosed malls, making most of them the dominant enclosed mall in their respective trade areas; 21 Malls are the largest enclosed malls in their trade areas, of which 13 are the only enclosed mall in their trade areas.
	Sixteen Malls are located in the state of Pennsylvania and one is located on the New Jersey-Pennsylvania border, approximately 25 miles from Allentown. Two of the Malls are located in Virginia, one in Maryland, two in West Virginia, two in eastern Tennessee and one in northwestern Georgia.
	CAA had continually expanded and renovated its Malls to maintain their com- petitive position. 19 of the Malls have undergone an expansion or renovation since they were completed, and 16 of the Malls have been expanded more than once. Management of the Company intends to utilize the approximately 2.0 million square feet of remaining expansion capacity to maintain and enhance the quality of the Malls and their competitive position in their trade areas.
	Although management believes the Malls can compete effectively within their trade areas, the Company must also compete with other owners, managers and developers of retail shopping centers and malls. Many of its competitors may be at an advantage to the extent they can utilize working capital and retained earnings to finance projects while the Company is required to satisfy the REIT qualification requirements under the Internal Revenue Code of 1986 (the "Code"), which include a requirement to distribute specified amounts of its annual taxable income, as defined in the Code (See Income Taxes section following for additional information). In addition, retailers at the Malls face increasing competition from discount shopping centers, outlet malls, shopping clubs, direct mail, telemarketing, and home shopping television networks.
	Employees
	At the time of the initial public offering, all of the executive, property and asset management, leasing, construction, financial, legal services, development and administrative personnel of CAA relating to its regional mall and shop- ping center business became employees of the Operating Partnership. As of December 31, 1996, the Operating Partnership has approximately 417 full-time employees in the following operational areas:
		 	 Number of 	Employees
Asset and property management (including on-site) 	292			 Leasing and lease administration 	 24	 Development and construction services 	 25	 Financial and legal services 		 55			 Executive management and corporate administration 		21	 			Total 417 					 	None of the Operating Partnership's employees are currently represented by any union. The Company and the Financing Partnership do not have any paid employees, but officers of the Operating Partnership are also officers of the Company and the Financing Partnership. The Company's management considers its relations with the employees of the Operating Partnership to be satisfactory.
	The Mortgage Loans
	Concurrently with the Acquisition and the IPO, the Financing Partnership borrowed $300 million aggregate principal amount of Mortgage Loans through Kidder Peabody Mortgage Capital Corporation (the "Lender"). The net proceeds together with a portion of the offering proceeds were used to retire existing indebtedness with respect to the 15 Malls owned by the Financing Partnership at that time.
	As described in Item 2(a), in December 1994 a fire destroyed a portion of the Logan Valley Mall, one of the 15 malls then owned by the Financing Partnership. In connection with obtaining a construction loan from banks in order to re- build and expand Logan Valley Mall, $19.4 million of the $300 million Mortgage Loans was repaid without penalty in December 1995. In connection therewith, the Logan Valley Mall property was released from the $300 million Mortgage Loans and was transferred to the Operating Partnership in 1995. Accordingly, the Financing Partnership now owns 14 properties.
	The Mortgage Loans are non-recourse to the Financing Partnership and are evidenced by 14 separate notes requiring aggregate principal payments of $80.6 million in August 1998, and $100 million in August of 2000 and 2003, subject to optional prepayment. The notes bear fixed interest, payable monthly, at rates of 6.55%, 7.20% and 7.85% for the loans due in August of 1998, 2000, and 2003, respectively, for an average annual rate of 7.24% for the year ended December 31, 1996 and 7.20% for the years ended December 31, 1995 and 1994 and for the period from August 17, 1993 through December 31, 1993. The rates were determined based on a specified spread over U.S. Treasury Securities having comparable maturities and reflect the average prevailing market rate at the time the Mortgage Loans were made, applicable to securitized debt having a AA rating. Repayment of the Mortgage Loans is secured by separate first mortgage liens and second mortgage liens (each a "Mortgage") on the 14 malls owned by the Financing Partnership (the "Mortgaged Properties") and by assignments of all of the Financing Partnership's interest in the rents and leases at each of such Mortgaged Properties. Approximately $250 million of the Mortgage Loan indebt- edness is guaranteed by Crown Investments, an affiliate of CAA and a princi- pal shareholder of the Company and the Operating Partnership. Each Mortgage
contains a cross-default provision allowing the Lender to declare a default under any or all of the Mortgages if the Financing Partnership fails to make any payment of principal, interest, premium or any other sum due under any Mortgage Loan or another event of default occurs under the mortgage documents. The Mortgage Loans allow the Financing Partnership to borrow up to $10 million from other parties, either unsecured or secured by a qualifying subordinate lien, provided the proceeds are used solely to finance tenant im- provements or leasing costs. No such amounts are borrowed as of December 31, 1996.
	Principal of the Mortgage Loans is subject to prepayment, in whole or in part, at the option of the Financing Partnership, on any monthly interest payment date after August 1998; provided, however, that the $80.6 million of mandatory principal payments due in August 1998 may be made at any time after August 1997. The first $80.6 million tranche can be prepaid after August 1997, subject to the payment of a yield maintenance charge; after February 1998 prepayment of this tranche would not be subject to the yield maintenance charge. After August 1998 voluntary prepayments of the remaining two tranches would be subject to the payment of a yield maintenance charge; however, six months prior to the due date of the remaining two tranches, prepayment may be made without penalty. Principal of the Mortgage Loans is subject to mandatory prepayment as a result of certain events of casualty or condemnation at the Mortgaged Properties as provided in the respective Mortgages.
	The mortgage documents contain various representations, covenants and events of default and a recourse environmental indemnification. They also require that the Financing Partnership and the Financing Corporation comply with certain affirmative and negative covenants, including covenants restricting the incur- rence of certain additional indebtedness and prohibiting such entities from acquiring any other property or conducting any other business, and covenants which limit the ability of the Financing Partnership to file for voluntary bankruptcy.
	Pursuant to the mortgage documents, the Financing Partnership has been required to make payments into restricted cash accounts for capital expenditures, pro- perty renovations, storage tank remediation work and the funding of certain commitments to tenants. Amounts paid into the reserves can be withdrawn to reimburse the Company for qualifying expenditures made at the 14 malls. Currently the Financing Partnership is required to deposit $450,000 each quarter into the capital expenditure and renovation reserve. The total amount held in restricted cash deposits at December 31, 1996 was $0.8 million.
	Business Issues
	As the owner of real estate, the Company is subject to risks arising in con- nection with the underlying real estate, including defaults under or non-renewal of tenant leases, bankruptcy of tenants, competition, inability to rent unleased space, failure to generate sufficient income to meet operating expenses, as well as debt service, capital expenditures and tenant improvements, environmental matters, financing availability and changes in real estate and zoning laws. The success of the Company also depends upon certain key person- nel, the Company's ability to maintain its qualification as a REIT, compliance with the terms and conditions of the Mortgage Loans and other indebtedness, and trends in the national and local economy, including income tax laws, governmental regulations and legislation and population trends.
	 Income Taxes
	The Company elected to be taxed as a Real Estate Investment Trust (REIT) under Sections 856 through 860 of the Code, commencing with its first taxable year ended December 31, 1993, and intends to conduct its operations so as to continue to qualify as a REIT under the Code. As a REIT, the Company generally will not be subject to Federal and state income taxes on its net taxable income that it currently distributes to shareholders. Qualification and taxation as a REIT depends on the Company's ability to meet certain dividend distribution tests, share ownership requirements and various qualification tests prescribed in the Code.
	The Company's taxable income (before the dividends paid deduction) for the years ended December 31, 1996, 1995 and 1994 was approximately $3.6 million, $2.8 million and $7.4 million, respectively. These amounts differ signifi- cantly from net income (loss) as reported in the Company's consolidated financial statements for the same periods. Primarily due to this difference and to the availability in 1996 of $16.5 million excess dividend distributions carryforward, which arose prior to 1996, the Company was not required to make any dividend distri-butions in 1996 in order to satisfy the dividend distribu- tion test required to maintain REIT status for that year. In 1996 the Company continued to follow its practice of paying regular quarterly dividends to its shareholders in the amount of $.20 per share per quarter. The Company estimates it will have approxi-mately $22.5 million in excess dividend distribution carryforwards at December 31, 1996, which can be used to satisfy the dividend distribution test in 1997 or subsequent years.
	If the Company fails to qualify as a REIT in any taxable year, the Company will be subject to Federal and state income taxes (including any applicable altern- ative minimum tax) on its taxable income at regular corporate rates. Even if the Company qualifies for taxation as a REIT, the Company may be subject to certain state and local taxes on its income and property and to Federal income and excise taxes on its undistributed income.
	Environmental Matters
	The Company believes that the Properties are in compliance in all material re- spects with all federal, state and local ordinances and regulations regarding hazardous or toxic substances. The Company is not aware of any environmental condition which the Company believes would have a material adverse effect on the Company's business, assets or results of operations (before consideration of any potential insurance coverage).
Nevertheless, it is possible that there are material environmental liabilities of which the Company is unaware. Moreover, no assurances can be given that (i) future laws, ordinances or regulations will not impose any material environ- mental liability or (ii) the current environmental condition of the Properties have not been or will not be affected by tenants and occupants of the Properties, by the condition of properties in the vicinity of the Properties or by third parties unrelated to the Company, the Operating Partnership or the Financing Partnership.
	Many of the Malls contain, or at one time contained, underground and/or above ground storage tanks used to store waste oils or other petroleum products pri- marily related to the operation of auto service center establishments at such Malls, and one Mall was constructed on a site, a portion of which had been pre- viously used as a municipal landfill. In some cases, underground storage tanks have been abandoned in place, filled in with inert materials or removed and re- placed with above ground tanks. Historical records indicate that soil and
groundwater contamination from underground tanks and, in one case, a hydraulic lift, requiring remediation has occurred at five of the Properties, and subsurface investigations (Phase II assessments) and remediation work are either ongoing or scheduled to be conducted by the Company at such Properties. The costs of remediation with respect to such matters have not been and are not expected to be material.
	There are also minor amounts of asbestos-containing materials ("ACM") in most of the Properties, primarily in the form of floor tiles, mastics and roofing materials, which are generally in good condition. Fireproofing and insulation containing asbestos is also present in certain Properties in non-public areas, such as mechanical rooms. The Company believes that the presence of these ACM does not violate current law. In addition, the Company has an ongoing program of reviewing spaces that have been vacated by tenants and occupants of the Properties for the presence of ACM, and removing any ACM dis- covered in such spaces before reletting the same to new tenants or occupants.
	Two Malls also contain waste water treatment facilities which treat waste water at the Malls before discharge into local streams. Operation of such facilities is subject to federal and state regulation. All necessary permits have been obtained and the Company's management believes such facilities are in compliance with current law.
Item 2.
Item 2.	Properties.
(a)	The Malls
	Through its ownership interests in the Partnerships, the Company owns the Malls, which consist of 25 enclosed shopping malls, which include a 50% partner- ship interest in Palmer Park Mall (an enclosed shopping mall). All of the Malls have department stores as anchor tenants (the "Anchors"), as described in the table on the following pages. All of the Malls have numerous diversified retail store tenants (the "Mall Stores") which are located along enclosed malls connecting the Anchors. Additional freestanding retail stores (the "Freestanding Stores") are located along the perimeter of the parking areas at 17 of the Malls. Unless otherwise indicated, the information provided in this Item 2 is stated as of December 31, 1996.
	The Company, through the Partnerships, owns all of the Malls in fee, except Palmer Park Mall, Shenango Valley Mall and Uniontown Mall. Palmer Park Mall Venture, in which the Company has a 50% general partnership interest, holds title in fee to Palmer Park Mall. Shenango Valley Mall is subject to a third party ground lease, and Uniontown Mall is subject to two third party ground leases.
	The total gross leasable area ("GLA") of all 25 Malls is approximately 14.3 million square feet, including Anchors, Mall Stores and Freestanding Stores. As used herein, GLA of a Mall includes the GLA attributable to all Anchors, includ- ing seven anchor locations owned by their occupants or other entities. Anchors, Mall Stores and Freestanding Stores account for approximately 58%, 37% and 5%, respectively, of the total GLA of the Malls. Excluding Freestanding Stores, the Malls range in size from approximately 300,000 to 830,000 square feet of GLA with an average size of approximately 545,000 square feet of GLA. Each Mall has ample surface parking with 19 of the Malls having parking ratios above 5.0 per 1,000 square feet of GLA.
	At December 31, 1996, 99% of the Company owned anchor GLA was leased. At December 31, 1996, one anchor store at Carlisle Mall and one anchor store at North Hanover Mall, both formerly occupied by Kmart, were both vacant and unleased. During 1996 these leases were terminated in exchange for $1.4 million cash consideration from Kmart, of which $0.7 million is to be paid in
March 1997; the $1.4 million was recorded as lease buyout income (part of minimum rents). Replacement tenants are being pursued for both locations. Six of the seven anchor stores owned by their occupants or others were occupied at December 31, 1996. One of the non-owned anchor stores, the former Clover store at Palmer Park Mall, was closed during 1996 and the land and building was sold to another real estate development company. The Palmer Park Mall Venture is currently negotiating the purchase of this land and building.
	 On January 31, 1996, the temporary leases for Bon-Ton stores at Chambersburg and Uniontown (See Note 7 to the Company's Consolidated Financial Statements in Item 8 hereto) expired and the stores became vacant. The Chambersburg location has been leased to J.C. Penney for the same rent; the J.C. Penney store is expected to open in March 1997. The Uniontown location is leased to a furniture store under a two year lease that expires in April 1998. On January 31, 1997, the temporary leases for Bon-Ton stores at Franklin Mall, Schuylkill Mall and Middletown Mall also expired. The Company is in discussions with department store chains and other tenants as replacements for these anchor store locations. Mall Store GLA is approximately 76% leased at December 31, 1996. All references herein to occupancy rates and to leased space for mall shop tenants include signed leases with tenants that have not yet taken occupancy.
	On December 16, 1994 a fire occurred at the Logan Valley Mall located in Altoona, Pennsylvania. The fire destroyed 44 small shops aggregating 148,800 square feet of gross leasable space as well as affecting three additional small shops containing approximately 18,000 square feet of gross leasable space. The net book value of the destroyed assets approximated $3.5 million. The Company settled the property damage insurance claim with its insurance company in the third quarter of 1995 for $15.9 million. The difference between the amount received and the net book value of destroyed assets and the related demolition and clean up costs is $11.2 million, which has been recorded as an extra- ordinary gain in 1995. During 1995 and 1996 the Company also recorded $1.9 million and $0.8 million, respectively, in business interruption insurance, which is included in revenues. Because of the business interruption insurance coverage, the fire had no material impact on 1996, 1995 and 1994 results of operations. During 1995 the Company started the reconstruction and expansion of the fire-damaged mall; the entire construction project is expected to be completed in August 1997 and to cost approximately $68 million, including capitalized interest and tenant allowances for new tenants. Construction financing has been arranged with the expected total borrowings ranging from $53 million to $54 million with the remaining project costs being funded from the Company's internal cash flows. The total amount that may be drawn on the construction loan is dependent on costs incurred, level of leasing achieved, and other factors.
	There are several types of retail shopping centers, varying primarily by size and marketing strategy. Retail shopping centers of 100,000 square feet to 400,000 square feet of GLA, are considered "community" shopping centers, those in excess of 400,000 square feet of GLA are considered "regional" shopping centers, while those having in excess of 800,000 square feet of GLA are con- sidered "super-regional" shopping centers. Twenty of the Malls are considered regional shopping centers and five are community shopping centers.
	The Malls generally are located in middle markets where there are relatively few other enclosed shopping malls. The Company's management believes that the Malls have strong competitive positions because 21 are the largest, of which 13 are the only, enclosed regional shopping malls in their respective trade areas. No one Mall accounted for more than 6.5% of the total GLA of the Malls or 7.6% of total revenues for the year ended December 31, 1996.
	A substantial portion of the income from the Malls consists of rent received under long-term leases. Generally, the leases provide for tenants to pay rent comprised of two elements. The first element is fixed base rent, often subject to increases according to a schedule agreed upon at the time of lease inception. The second element is percentage rent, which is based on a percent- age of gross sales in excess of a specified minimum annual amount. In some cases tenants only pay fixed base rent and, in a few cases, tenants only pay percentage rent.
	Virtually all of the leases for Mall Stores contain provisions allowing the Malls to recover certain costs for common area maintenance, property taxes and other expenditures related to the day-to-day operations of the Malls. In addition, most of the Mall Store leases include provisions that allow the Malls to recover costs associated with roof and parking lot repairs and other capital expenditures. All Anchors also contribute to certain of these costs.
Item 6.
Item 6.	Selected Financial Data
	The following table sets forth selected consolidated financial data for the company and its majority-owned subsidiary, the Operating Partnership (74.5% owned by the Company), the combined financial data of Crown American Realty Properties (the "Predecessor") which includes all the assets, liabilities and results of operations identified with the Properties and pro forma consolidated data as if the formation of the Company had occurred on February 1, 1992, and January 1, 1993, respectively. The financial data should be read in conjunction with the financial statements and notes thereto and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in Item 7
Item 8 hereto.
	1996 Cash Flows
	During 1996 the Company generated $44.8 million in cash from operating activities including changes in accounts receivables, other assets, and accounts payable, $9.5 million in proceeds from asset sales, $1.3 million from issu- ance of new shares under the Dividend Reinvestment Plan, and $25.9 million in borrowings net of repayments and debt issuance costs. The Company invested $51.5 million in its properties which included $31.9 million for the Logan Valley Mall reconstruction and expansion project and related tenant allowances, $4.4 million for anchor allowances and expansions and $5.6 million for mall shop tenant allowances other than Logan Valley, $2.2 million for leasing costs and commissions, and $7.4 million for other capitalized costs. The company also paid $29.6 million in dividends and distributions on its outstanding common shares and Operating Partnership units at an annual rate of $0.80 per share or OP unit. The $25.9 million of net borrowings in 1996 was comprised of $30.7 million in borrowings under the Logan Valley Mall construction loan that was obtained in 1995, $53.8 million in three refinancings, and $3.9 million in draws under other loan or line of credit facilities; these increases were offset by $3.2 million in scheduled debt amortization, $51.3 million repayments on the refinanced debt, and $6.2 million of debt repaid related to the sale of Patrick Henry Corporate Center and certain land out-parcels. 	 	1995 Cash Flows
	During 1995, the Company invested $109.0 million in income-producing proper- ties. This includes: (1) $62.0 million for two malls (see Note 13 to the Company's consolidated financial statements) of which $8.1 million related to the assigned value of approximately 1.8 million of Operating Partnership units
issued in connection with the purchase of Wyoming Valley Mall; (2) $10.5 million for mall shop tenant allowances, which includes $2.8 million at Viewmont Mall in connection with the 90,000 square foot expansion that opened in 1995; (3) $4.9 million in anchor allowances, which includes $3.0 million for The May Company store at West Manchester Mall; (4) $2.4 million for leasing and related costs; (5) $16.2 million for the reconstruction of Logan Valley Mall; and (6) $13.0 million for other expansion and renovation projects, including the Viewmont Mall expansion and the West Manchester Mall renovation. These in- vestments were funded by $96.1 million of issued and assumed debt, $8.1 million in Operating Partnership units issued for Wyoming Valley Mall, and the remainder from net operating and other net financing cash flows. As further described under "Liquidity and Capital Resources", in 1995 the Company reduced its quarterly dividend and retained on an annual basis an additional $22 million for investment purposes.
	The other major uses of cash during 1995 were (1) repayment of $35.1 million in debt, of which $14.8 million was funded by fire insurance proceeds related to Logan Valley Mall, and (2) $39.6 million in dividends and distributions on the outstanding shares and on the minority interest in the Operating Partnership. The Company also sold 250,000 shares for $3.0 million in 1995 and received $0.7 million under its dividend reinvestment plan. The Company also received an advance from an affiliate of $4.4 million (see Note 7).
	1994 Cash Flows
	During 1994, the Company invested $42.7 million in income-producing assets, which includes $4.7 million of tenant allowances funded by Crown Investments Trust under the support agreements described in Note 7 to the consolidated financial statements. This total investment in income-producing properties during 1994 consisted of $31.7 million in land site costs and buildings and im- provements, of which $17.9 million relates to the Viewmont Mall expansion, $9.1 million in capitalized tenant allowances, and $1.9 million in lease acquisition costs. The net $38.0 million funded by the Company was done through (1) $24.9 million in new borrowings under secured bank term loan arrangements, whose use is limited to selected capital project expenditures, (2) other cash sources, including the $17.4 million net proceeds received on the sale of three anchor stores to The May Company in the fourth quarter of 1994, as also described in Note 7. The other major uses of cash during 1994 were $12.6 million in repayment of outstanding debt and $48.7 million in dividends and distributions on the outstanding shares and on the minority interest in the Operating Partnership. During 1994, the Company implemented a Dividend Re- investment Plan and $125,000 was received in 1994 under the plan for purchase of approximately 9,600 additional shares.
	Liquidity and Capital Resources
	The Company believes that its cash generated from property operations and funds obtained from property financings and general corporate borrowings will provide the necessary funds on a short-term and long-term basis for its operating expenses, interest expense on outstanding indebtedness and recurring capital expenditures and tenant allowances, and all dividends to the shareholders necessary to satisfy the REIT dividend distribution requirements under the Internal Revenue Code (see Note 2). The Company intends to pay regular quarterly dividends to its shareholders. However, the Company's ability to pay dividends is affected by several factors, including cash flow from operations, capital expenditures, and its ability to refinance its maturing debt as described in the third following paragraph. Dividends by the Company will be at the discretion of the Board of Trustees and will depend on the cash available to the Company, its financial condition, capital and other requirements, and such other factors as the Trustees may consider. During 1995 the Board of Trustees determined that the Company should retain more of its internally gen- erated cash flows to supplement other expected financing sources in order to make investments in certain mall expansion and renovations (including the Logan Valley Mall reconstruction) and in various other investment opportunities. Accordingly, the Company's quarterly dividend of $.35 per share was reduced to $.20 per share beginning with the dividend paid in September 1995. The annual amount of additional cash retained is approximately $22 million.
	 Sources of capital for non-recurring capital expenditures, such as major building renovations and expansions, as well as for scheduled principal pay- ments, including balloon payments on the outstanding indebtedness, are expected to be obtained from additional Company or property financings and re- financings, sale of non-strategic assets, additional equity raised in the public or private markets, and from retained internally generated cash flows, or from combinations thereof. 	 				On December 16, 1994 a fire occurred at the Logan Valley Mall located in Altoona, Pennsylvania. The fire destroyed 44 small shops aggregating 148,800 square feet of gross leasable space and also affected three additional small shops containing approximately 18,000 square feet of gross leasable space. The net book value of the destroyed assets approximated $3.5 million. The Company settled the property damage insurance claim with its insurance company in the third quarter of 1995 for $15.9 million. The difference between the amount received and the net book value of destroyed assets and the related demolition and clean up costs is $11.2 million, which has been recorded as an extraordinary gain in 1995. During 1995 the Company also recorded $1.9 million in business interruption insurance, which is included in other revenues. The business interruption insurance coverage expired in May 1996. Because of the business interruption insurance coverage, the fire had no material impact on 1996, 1995 and 1994 results of operations. During 1995 the Company started the reconstruction and expansion of the fire-damaged mall; the entire construc- tion project is expected to be completed in late 1997 and to cost approximately $68 million, including tenant allowances for new tenants; construction financing has been arranged with the expected total borrowings ranging from $53 million to $54 million, and with the remaining project costs funded from the Company's internal cash flows. 	 	As of December 31, 1996 the scheduled principal payments on all debt are as follows: $85.2 million; $144.8 million; $16.9 million; $190.1 million; and $18.2 million in the years ended December 31, 1997 through 2001, respect- ively, and $113.6 million thereafter. The Company expects to refinance or extend the majority of the maturities over the next five years through add- itional Company financings and mortgage loans on those properties having the maturing loans. The Company's ability to refinance or extend these loans on or before their due dates depends on the level of income generated by the prop- erties, prevailing interest rates, credit market trends, and other factors that may be in affect at the time of such refinancings or extensions and there is no assurance that such refinancings or extensions will be executed. The ratios of the Company's EBITDA to cash interest costs for the years ended December 31, 1996, 1995, and 1994 were 2.08 to 1, 2.13 to 1, and 2.34 to 1, respectively.
	As further described in Note 7 to the Consolidated Financial Statements, Crown Investments and its subsidiary have been granted rights, subject to certain re- strictions, whereby they may redeem part or all of their partnership units for shares, on a one-to-one basis, or cash at a price equal to the value of the Company's common shares. Crown Investments has pledged a portion of its limited partnership units as collateral for a loan it has received from an unrelated third party.
(g)	Economic Trends
	Because inflation has remained relatively low during the last three years it has had little impact on the operations of the Company during this period. Tenant leases also provide, in part, a mechanism to help protect the Company during highly inflationary periods. As operating costs increase, leases permit a pass-through of the common area maintenance and other operating costs, including real estate taxes and insurance, to the tenants and there- fore, the tenants will absorb part of this increased operating cost. Most
of the leases provide for percentage rent after a certain minimum sales level is achieved. Thus, during highly inflationary periods, when retail sales at the Malls increase, the Company should receive additional rental income through percentage rent increases, partially offsetting the effect of inflation.
(h)	Forward Looking Statements
	Certain of the preceding comments in this section contain forward looking statements that involve risk and uncertainties, including overall economic con- ditions, the impact of competition, consumer buying trends, weather conditions, financial market conditions, and other factors.
Item 8.		Financial Statements and Supplementary Data
	REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Trustees and Shareholders of Crown American Realty Trust:
We have audited the accompanying consolidated balance sheets of Crown American Realty Trust (a Maryland real estate investment trust) and subsidiaries as of December 31, 1996 and 1995, and the related consolidated statements of income, shareholders' equity and cash flows for each of the three years in the period ended December 31, 1996. These consolidated financial statements and the schedules referred to below are the responsibility of the management of Crown American Realty Trust. Our responsibility is to express an opinion on these financial statements and schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing stan- dards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and sig- nificant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Crown American Realty Trust and subsidiaries, as of December 31, 1996 and 1995, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1996, in conformity with generally accepted accounting principles.
Our audit of Crown American Realty Trust and subsidiaries was made for the purpose of forming an opinion on the basic financial statements taken as a whole. The schedules listed in the index of financial statements are presented for purposes of complying with the Securities and Exchange Com- mission's rules and are not part of the basic financial statements. These schedules have been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, are fairly stated in all material respects in relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Washington, D.C. February 18, 1997
CROWN AMERICAN REALTY TRUST Notes to Consolidated Financial Statements
NOTE 1 - ORGANIZATION, NATURE OF OPERATIONS, AND BASIS OF PRESENTATION
Organization
Crown American Realty Trust (the "Company") was formed on May 14, 1993 as a Maryland real estate investment trust (a "REIT") to acquire and operate sub- stantially all of the enclosed shopping mall properties and two office buildings (the "Properties") owned by Crown American Associates ("Crown Associates"), formerly Crown American Corporation. Crown Associates is a wholly-owned subsidiary of Crown Holding Company ("Crown Holding"). Crown Associates, which was founded in 1950, was engaged principally in the develop- ment, acquisition, ownership and management of enclosed shopping malls and, to a lesser extent, strip shopping centers, hotels and office buildings. The Company raised approximately $405 million in equity through an initial public offer- ing of approximately 25.5 million shares, which occurred on August 17, 1993, and used the proceeds to purchase an initial 78% general partnership interest in Crown American Properties, L.P. (the "Operating Partnership"), a partnership which was formed just prior to consummation of the offering to own and operate the Properties. The proceeds were used by the Operating Partnership to retire debt related to the Properties.
Simultaneously with the public offering, Crown Associates and an affiliate transferred the Properties and the management operations into either the Company, the Operating Partnership, or Crown American Financing Partnership (the "Financing Partnership"), a partnership which is 99.5% owned by the Operat- ing Partnership and 0.5% owned by the Company.
The limited partnership interest in the Operating Partnership and the 1.6 million shares in the Company received for two malls transferred in 1993 are currently held by Crown Investments Trust ("Crown Investments"), by Crown American Investment Company (a subsidiary of Crown Investments), and by members of the Pasquerilla family. As described in Note 13, two additional malls were acquired by the Company in 1995.
Simultaneously with the above transactions, the Financing Partnership borrowed approximately $300 million of mortgage debt (the "Mortgage Loans") secured by its 15 enclosed shopping malls (see Note 5). The $300 million of mortgage debt together with the proceeds of the equity offering were used to retire existing debt contributed with the Properties.
Nature of Operations
The Company is a fully-integrated real estate company primarily engaged in the ownership, operation, management, leasing, acquisition, development, redevelop- ment, expansion, renovation and financing of enclosed shopping malls. The Company's revenues are primarily derived under real estate leases with national, regional and local department store and other retailing companies. The Company's top five tenants in terms of total revenues are as follows:
			Percent of 1996 			 Total Revenues	 			 Sears Roebuck and Co. 	6.6% The Limited Stores, Inc.	 4.5%	 J C Penney, Inc.	 4.1% F. W. Woolworth	 3.7% The Bon-Ton Stores, Inc.	 3.1%
Amounts for The Bon-Ton Stores, Inc. ("Bon-Ton") exclude $1.1 million of revenues for 5 locations under temporary leases - see Note 7.
The Properties currently consist of: (1) 24 enclosed shopping malls located in Pennsylvania, New Jersey, Maryland, Tennessee, West Virginia, Virginia and Georgia, (2) a 50% general partnership interest in Palmer Park Mall Venture, which owns Palmer Park Mall located in Easton, Pennsylvania, (3) Pasquerilla Plaza, an office building in Johnstown, Pennsylvania, which serves as the head- quarters of the Company and is partially leased to other parties, and (4) a parcel of land and building improvements located in Pennsylvania (under ground lease with a purchase option) sub-leased to a department store chain. The Company also owns approximately 130 acres of land adjacent to a number of the mall properties which are held for development, ground lease, or sale to third parties.
As the owner of real estate, the Company is subject to risks arising in connect- ion with the underlying real estate, including defaults under or non-renewal of tenant leases, tenant bankruptcies, competition, inability to rent unleased space, failure to generate sufficient income to meet operating expenses, as well as debt service, capital expenditures and tenant improvements, environmental matters, financing availability and changes in real estate and zoning laws. The success of the Company also depends upon certain key personnel, the Company's ability to maintain its qualification as a REIT, compliance with the terms and conditions of the Mortgage Loans and other debt instruments, and trends in the national and local economy, including income tax laws, govern- mental regulations and legislation, and population trends.
Basis of Presentation
The accompanying consolidated financial statements of the Company include all accounts of the Company and its majority-owned subsidiary, the Operating Part- nership (74.5% owned by the Company), which in turn includes the Financing Partnership (99.5% owned by the Operating Partnership and 0.5% by the Company). All significant intercompany amounts have been eliminated.
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of con- tingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
Income-Producing Properties
Income-producing properties are recorded at the lower of cost or net realizable value. Included in such costs are acquisition, development, construction, tenant improvements, interest incurred during construction, certain capital- ized improvements and replacements and certain allocated overhead. Allocated overhead is computed primarily on the basis of time spent by certain departments in various operations and represents costs which meet the definition of "indirect costs" in Statement of Financial Accounting Standards No. 67, "Accounting for Costs and Initial Rental Operations of Real Estate Projects."
Depreciation on buildings and improvements is provided utilizing the straight- line method over estimated useful lives of 10 to 45 years resulting in an average composite life of approximately 30 years. Depreciation on tenant improvements is provided utilizing the straight-line method over the life of the related leases.
Certain improvements and replacements are capitalized when they extend the useful life, increase capacity, or improve the efficiency of the asset. All other repair and maintenance items are expensed as incurred. Total repairs and maintenance expenses were $9.2 million, $9.3 million and $8.5 million for the years ended December 31, 1996, 1995 and 1994, respectively.
Leasing charges, including tenant construction allowances and direct costs incurred by the Company to obtain a lease, are deferred and amortized over the related leases or terms appropriate to the expenditure.
Substantially all of the income-producing properties have been pledged to secure the Company's debt.
Interest Costs
Interest costs are capitalized related to income-producing properties under con- struction, to the extent such assets qualify for capitalization. Total interest capitalized was $2.9 million, $2.6 million, and $3.0 million for the years ended December 31, 1996, 1995 and 1994, respectively. Interest expense includes costs of any financings that are not completed, amortization of deferred financ- ing costs related to completed financings (see Note 3) and is net of miscellaneous interest income on cash and escrow deposit balances.
Financing Costs
Financing costs are based on actual costs incurred in obtaining the financing and are deferred and amortized as part of interest expense over the term of the related debt instrument. Costs incurred for financings which are not completed are expensed as part of interest costs. Unamortized financing costs related to debt that is extinguished early is written off as an extraordinary item.
Revenue Recognition
The Company, as a lessor, has retained substantially all of the risks and bene- fits of ownership and accounts for its leases as operating leases. Minimum rents are recognized on a straight-line basis; as such, the rental revenues for leases which contain rent abatements and contractual increases are recognized on a straight-line basis over the initial term of the related lease. Property operating cost recoveries from tenants of common area maintenance, real estate taxes, and other recoverable costs are recognized in the period the expenses are incurred. These recoveries also include certain capital expend- itures that are recovered from the tenants in the period the depreciation is recognized.
Income Taxes
The Company elected to be taxed as a Real Estate Investment Trust (REIT) under Sections 856 through 860 of the Internal Revenue Code of 1986 (the "Code"), commencing with its first taxable year ended December 31, 1993, and intends to conduct its operations so as to continue to qualify as a REIT under the Code. As a REIT, the Company generally will not be subject to Federal or state income tax on its net income that it currently distributes to shareholders. Qualification and taxation as a REIT depends on the Company's ability to meet certain dividend distribution tests, share ownership requirements, and various qualification tests prescribed in the Code.
The Company's taxable income (before the dividends paid deduction) for the years ended December 31, 1996, 1995 and 1994 was approximately $3.6 million, $2.8 million and $7.4 million, respectively. These amounts differ significantly from net income (loss) as reported in the Company's consolidated financial statements for the same periods. Primarily due to this difference and to the availability in 1996 of $16.5 million excess distributions carryforward, which arose in prior years, the Company was not required to make any dis- tributions in 1996 in order to satisfy the dividend distribution test required to maintain REIT status for that year. In 1996 the Company continued to follow its practice of paying regular quarterly dividends to its shareholders in the amount of $.20 per share. The Company estimates it will have approximately $22.5 million in excess dividend distribution carryforwards at December 31, 1996, which can be used to satisfy the dividend distribution test in 1997 or subsequent years.
If the Company fails to qualify as a REIT in any taxable year, the Company will be subject to Federal and state income taxes (including any applicable alter- native minimum tax) on its taxable income at regular corporate rates. Even if the Company qualifies for taxation as a REIT, the Company may be subject to certain state and local taxes on its income and property and to Federal income and excise taxes on its undistributed income.
The allocation of dividends paid was as follows:
Investment in Joint Venture 	 The Company's 50% joint venture investment in an enclosed mall (managed by the other non-related 50% owner) is accounted for under the equity method. As such, earnings of the joint venture are reflected in miscellaneous income in the period earned and distributions of the joint venture are reflected as a reduc- tion in the carrying amount of the investment. The investment amount in excess of the underlying net assets, net of accumulated amortization, is $5.0 million at December 31, 1996, with a remaining amortization period of approxi- mately 14 years. The Company and the other 50% owner have guaranteed $1.2 million of debt owed by the joint venture.
Cash and Cash Equivalents
Cash and cash equivalents includes all cash and cash equivalent investments with original maturities of three months or less.
Net Income (Loss) Per Share
The computation of net income (loss) per share is based on net income (loss) of the Company and the weighted average number of shares outstanding during the years ended December 31, 1996, 1995 and 1994, which were 27,515,000, 27,372,000, and 27,119,000 shares, respectively. The Crown Rights (Note 7) to convert a portion of Crown Investments' interest into shares of beneficial interest and the share incentive plans (Note 9) were not dilutive in 1994, 1995, or 1996.
New Accounting Pronouncements
Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of" and SFAS No. 123, "Accounting for Stock-Based Compensation" became effective for the Company's 1996 fiscal year. SFAS No. 121 establishes standards for measuring and accounting for impairment of long-lived assets; it also requires that long-lived assets to be disposed of be valued at estimated fair value less costs to sell. SFAS No. 123 establishes a fair value method for accounting for stock-based compensation, such as option plans, but does not require that the new method be adopted. The Company has elected to continue following the methodology in APB Opinion No. 25 with fair value of options disclosed in the footnotes in accordance with SFAS No. 123. Implementation of the new pronounce- ments had no material effect on the Company's reported results of operations in 1996.
NOTE 3 - DEFERRED CHARGES AND OTHER ASSETS
Deferred charges, net of amortization, and other assets are summarized as follows (in thousands):
		 Deferred Operating Covenant Costs
During fiscal year 1991, approximately $23 million was paid to three anchor tenants with respect to leases at ten of the malls and in 1992 an additional $4 million was paid in order to obtain operating covenants (a covenant requiring the anchor, among other things, to maintain operations in certain of the Properties for the duration of the lease period) and to extend the terms of their leases beyond fiscal year 2000. In April 1993, an additional $0.2 million was paid to another tenant to obtain similar rights. These costs were capitalized and are being amortized over the life of the operating covenants with the amortization recorded as a reduction of minimum rent. Amortization was $2.6 million, $2.7 million, and $2.6 million, for the years ended December 31, 1996, 1995 and 1994, respectively.
In addition, one of these tenants has exercised its option to require the Company to expand and renovate certain of the leased premises, at the Company's expense, and to reimburse the tenant for fixtures allowances, which together aggregate approximately $9.0 million. As of December 31, 1996, $7.4 million of these costs have been incurred and capitalized in the finan- cial statements at that date with the remainder expected to be incurred in 1997 and 1998.
Deferred Financing Costs
Deferred financing costs, net of accumulated amortization, at December 31, 1996, consists of approximately $8.4 million incurred in obtaining the $300 million mortgage debt secured as part of the organization of the Company, $0.3 million related to debt contributed with the Properties and not retired by the Company, and $2.2 million for new debt obtained after the formation of the Company. Amortization of deferred financing costs was $3.9 million, $3.6 million, and $3.2 million for the years ended December 31, 1996, 1995 and 1994, respectively. Deferred financing costs written off as part of extraordinary losses on early extinguishment of debt were $0.4 million, $0.8 million, and $0.0 million for the years ended December 31, 1996, 1995, and 1994, respect- ively. Deferred financing costs incurred and capitalized were $1.8 million, $1.6 million, and $1.6 million for the years ended December 31, 1996, 1995 and 1994, respectively.
NOTE 4 - INSURED FIRE AT MALL
On December 16, 1994 a fire occurred at the Logan Valley Mall located in Altoona, Pennsylvania. The fire destroyed 44 small shops aggregating 148,800 square feet of gross leasable space and also affected three additional small shops containing approximately 18,000 square feet of gross leasable space. The net book value of the destroyed assets approximated $3.5 million. The Company settled the property damage insurance claim with its insurance company in the third quarter of 1995 for $15.9 million. The difference between the amount re- ceived and the net book value of destroyed assets and the related demolition and clean up costs was $11.2 million, which was recorded as an extraordinary gain in 1995. During 1996 and 1995 the Company has also recorded $0.8 million and $1.9 million in business interruption insurance, which is included in revenues. Because of the business interruption insurance coverage, the fire had no material impact on 1996, 1995 and 1994 results of operations. During 1995 the Company started the reconstruction and expansion of the fire-damaged mall; the entire construction project is expected to be completed in late 1997 and to cost approximately $68 million, including tenant allowances for new tenants, of which $49.6 million has been incurred through December 31, 1996. Con- struction financing up to approximately $53 to $54 million has been arranged, with the remaining project costs being funded from the Company's internal cash flows. Refer to Note 12 - Commitments and Contingencies, for informa- tion concerning litigation against the Company from certain tenants or their insurance companies related to the fire.
NOTE 5 - DEBT ON INCOME-PRODUCING PROPERTIES
Debt on income-producing properties consisted of the following (in thousands):
			 Mortgage Loans
Concurrently with the offering of Shares of the Company in 1993, the Financing Partnership borrowed an aggregate principal amount of $300 million (collect- ively, the "Mortgage Loans") through Kidder Peabody Mortgage Capital Corporation (the "Lender").
In connection with obtaining a construction loan for rebuilding and expanding Logan Valley Mall, in December 1995 the Company repaid $19.4 million of the Mortgage Loans in order to release the Logan Valley Mall from the Mortgage Loans and Financing Partnership. No prepayment penalty was required.
The Mortgage Loans are non-recourse to the Financing Partnership and are evidenced by 14 separate notes requiring aggregate principal payments of $80.6 million in August 1998 and $100 million each in August of 2000 and 2003, subject to optional prepayment. The notes bear fixed interest, payable monthly, at rates of 6.55%, 7.20% and 7.85% for the loans due in 1998, 2000, and 2003, respectively, for an average rate of 7.24% in 1996 and 7.20% during
1995 and 1994. The average rate as of December 31, 1996 is 7.24%. Repayment of the Mortgage Loans is secured by separate first mortgage liens and second mortgage liens (each a "Mortgage") on the 14 malls owned by the Financing Part- nership and by assignments of all of the Financing Partnership's interest in the rents and the leases at each of such mortgaged properties. In order to maintain certain tax bases, Crown Investments guaranteed approximately $250 million of such indebtedness. Each Mortgage contains a cross-default provision allowing the Lender to declare a default under any or all of the Mortgages if the Financing Partnership fails to make any payment of principal, interest, premium or any other sum due under any Mortgage Loan or another event of default occurs under the mortgage documents. The Mortgage Loans allow the Financing Partnership to borrow up to $10 million from other parties, either unsecured or secured by a qualifying subordinate lien, provided the proceeds are used solely to finance tenant improvements or leasing costs. No such amounts are borrowed as of December 31, 1996.
The $80.6 million mandatory principal payment due in August 1998 may be prepaid at any time after August 1997, subject to the payment of a yield maintenance charge; after February 1998 such prepayment would not be subject to the yield maintenance charge. After August 1998 voluntary prepayments of the remaining two tranches can be made in whole or in part on any monthly interest payment date, subject to the payment of a yield maintenance charge; however, six months prior to the due dates of the remaining two tranches, prepayment of that tranche may be made without penalty. Principal of the Mortgage Loans is subject to mandatory prepayment as a result of certain events of casualty or condemnation at the Mortgaged Properties as provided in the respective Mortgages.
The Company is currently required to deposit $450,000 each quarter to a re- stricted cash account for capital plan reserves and renovation reserves. Amounts may be withdrawn from this account to reimburse the Company for incurred qualifying expenditures. As of December 31, 1996, $0.8 million of restricted cash was held for this purpose and is included in deferred charges and other assets.
Permanent Loans
At December 31, 1996, permanent loans consisted of nine loans secured by seven properties held by the Operating Partnership with various maturities from December 1997 through January 2008. Included in permanent loans is a $3.1 million interest free Urban Development Action Grant loan with the City of Johnstown, Pennsylvania, secured by an office building and due October 2006. A $1.3 million loan related to Carlisle Plaza Mall is an Industrial Development Bond secured with a $1.3 million letter of credit, which expires in April 1999. Crown Holding has guaranteed one of the permanent loans with a current outstand- ing balance of $11.7 million.
Construction Loans
At December 31, 1996, the Company had construction loans on four malls. The loans bear interest at variable interest rates indexed to the LIBOR rate. Crown Investments has guaranteed one loan with a current balance of $17.2 million. The loans have certain restrictive covenants including minimum coverage ratios and limitations on investments and borrowings without the prior consent of the lenders.
Secured Term Loans and Lines of Credit
At December 31, 1996, the Company had two secured term loan arrangements totaling $35.6 million, of which $5.6 million is a revolving loan ($5.6 million and $2.6 million outstanding at December 31, 1996 and 1995, respectively)
used for general corporate purposes and is renewable annually on April 30. The loans have certain restrictive covenants including the maintenance of certain coverage ratios and limitations on investments and borrowings without the prior consent of the lenders. As further disclosed in Note 7, in January 1997 the Company entered into a $10 million unsecured line of credit with a related party. No amounts are currently outstanding under this line.
Interest Rates
The Mortgage Loans on the Financing Partnership properties and eight of the per- manent loans related to six of the Operating Partnership properties with an ag- gregate principal balance of $395.8 million at December 31, 1996 have fixed interest rates ranging from 0% to 9.79%. The weighted average interest rate on this fixed-rate debt at December 31, 1996 and 1995 was 7.82% and 7.90%, respect- ively. The weighted average interest rate during the years ended December 31, 1996, 1995 and 1994 was 7.87%, 7.77%, and 7.74%, respectively.
All of the remaining loans with an aggregate principal balance of $173.0 million at December 31, 1996 have variable interest rates based on spreads ranging from 1.75% to 3.50% above 30 day LIBOR, except for one loan which is based on the prime rate plus 5/8%. The weighted average interest rate on the variable rated debt at December 31, 1996 and 1995 was 8.14% and 8.44%, respectively. The weighted average interest rate during the years ended December 31, 1996, 1995 and 1994 was 7.93%, 8.48%, and 7.04%, respectively.
Debt Maturities
As of December 31, 1996, the scheduled principal payments on all debt, including extensions available at the Company's option provided the debt is not in default at the extension dates, are as follows (in thousands):
		Year Ending December 31,		
			 1997	 $	85,222		 			 1998		 144,760	 		 	1999		 16,880 		 	2000		 190,133 			 2001		 18,240 			 Thereafter		 113,550 				 Total $	568,785		 			 NOTE 6 - LEASING ACTIVITIES
The Company is primarily a lessor of shopping malls with some office space included in its portfolio. However, the concentration of tenants are in the retail industry. Leases are generally noncancelable and expire on various dates through approximately the year 2021. The future minimum lease payments to be received under existing leases as of December 31, 1996, are as follows (in thousands):		
	 	Year Ending 		 December 31, 		 				 	 1997	 $ 	77,011				 		1998 		70,653		 	 		 1999	 	64,386			 	 		 2000 	 	58,187		 	 		 2001	 	50,321				 	 		 	Thereafter	 	192,422 			 Total $	512,980				
			 The future minimum lease payments above do not include payments from tenants which are due based upon a percentage of their gross sales or payments for the tenants' share of common area maintenance costs and real estate taxes.
Total direct costs incurred by the Company to obtain leases, which are deferred and amortized over the life of the lease, are as follows (in thousands):
[CAPTION]
NOTE 7 - RELATED PARTY TRANSACTIONS
Crown Rights
Pursuant to the Operating Partnership Agreement, Crown Investments and its sub- sidiary, Crown American Investment Company, received certain rights (the "Crown Rights"), which enable them to require the Operating Partnership to redeem part or all of their partnership units for a price equal to the equivalent value of the shares of the Company (on a one-for-one basis). Crown Investments cur- rently owns 7,652,500 limited partnership units and Crown American Investment Company owns 1,786,459 limited partnership units. The obligation to redeem these partnership units may be assumed by the Company in exchange for, at the Company's election, either shares (on a one-for-one basis) or the cash equivalent thereof, provided that the Company may not pay for such redemption with shares to the extent that it would result in Crown Investments and its affiliates beneficially or constructively owning more than 9.8% of the outstand- ing shares. Crown Investments and its affiliates may require the Company to assume the obligation to pay for such redemption with shares to the extent that Crown Investments and its affiliates own less than 9.8% of the outstanding shares. Crown Investments has pledged substantially all its limited partner- ship units (the "Pledged Units") as collateral for a loan made by an unrelated third party. In June 1995 the Company filed a Registration Statement on Form S-3 with the Securities and Exchange Commission relating to the Pledged Units. If at the time of any such permitted exchange the Shelf Registration is not effective, the Company is obligated to purchase a specified portion of the Pledged Units. The Company also has the right to purchase the Pledged Units in lieu of effecting an exchange.
Management Agreements
Crown Associates retained certain properties that the Company has agreed to manage pursuant to a management agreement. Certain of these properties were transferred to an affiliate of Crown Associates in 1995 and 1996. For its services, the Company receives a fee of 5% of revenues for management and $5.50 per square foot for new leases signed and $3.50 per square foot for renewal leases signed. In addition, the Company receives 15% of temporary and seasonal leasing revenues. Total management and leasing fees earned were $0.1 million, $0.2 million, and $1.4 million for the years ended December 31, 1996, 1995 and 1994, respectively.
In addition, Crown Investments, Crown Associates, and their affiliates have agreed to pay the Company sales commissions up to 15% of the net sales price for its services in selling certain land and other assets owned by these parties. Total commissions earned were $0.4 million, $0.7 million, and $1.2 million for the years ended December 31, 1996, 1995 and 1994, respectively, and are included in miscellaneous income.
Support Agreement
In connection with the Company's formation and the consummation of the offer- ings, Crown Investments entered into a cash flow support agreement (the "Support Agreement"), which was subsequently amended in 1994, with the Operating Partnership and the Financing Partnership with respect to Mount Berry Square, Martinsburg Mall, Oak Ridge Mall and Bradley Square, all of which were opened in 1991 and were in various stages of initial lease-up, with mall store occupancy rates below 75%.
The Support Agreement provides that Crown Investments will guarantee, on a quarterly basis, up to a maximum of $1.0 million per quarter, that each of these four malls will generate a stipulated aggregate amount of base rents from each such mall. The quarterly amounts due under the Support Agreement are cal- culated as the difference between the aggregate amount of actual base rents earned in the quarter at each mall and the stipulated aggregate amount of base rents. Crown Investments was also obligated to fund any tenant improvement and leasing costs associated with a fixed amount of shortfall space, as defined. The obligations of Crown Investments under the Support Agreement presently con- tinue as to all four malls and will terminate as to a mall when the aggregate base rents at such mall achieve the stipulated amount over four consecutive quarters (as determined by the independent trustees of the Company).
Total cash flow support earned by the Company was $2.9 million, $2.6 million, and $3.7 million for the years ended December 31, 1996, 1995 and 1994, respect- ively. In addition, Crown Investments agreed to fund certain tenant improve- ment costs incurred for signed leases as of June 30, 1993 scheduled to commence subsequent thereto. The total amounts received for tenant improvement costs were $0.0 million, $0.1 million, and $4.7 million for the years ended December 31, 1996, 1995 and 1994, respectively. During 1995 Crown Holding advanced $6.4 million to the Company primarily to pre-fund estimated future payments under the Support Agreement. This pre-funding did not change or terminate the Support Agreement, and additional funding is expected to recommence in late 1997. Earned support payments and funded tenant improvements under the Support Agreement have been accounted for as capital contributions made by the minority owner in the Operating Partnership and are credited to minority interest (as to the minority ownership percentage) with the remainder to paid-in capital. The remaining unearned pre-funded balance is included in accounts payable and other liabilities. Accordingly, as the support amounts are earned each quarter based on the level of actual quarterly base rents at the four malls, the quarterly support amount is deducted from the pre-funding lia- bility account and credited to minority interest and paid-in-capital.
Crown Associates Lease at Pasquerilla Plaza
Approximately 12,200 square feet of Pasquerilla Plaza is leased to Crown Assoc- iates for annual base rent of $226,613 under a lease with a term ending July 31, 2003. The rent was determined based on rental rates being paid by existing third party tenants and on the fact that Crown Associates' lease includes certain furnishings and equipment and allows Crown Associates use of certain facilities in the building not available to other third party tenants. The lease includes a five-year renewal option at then market rents. Total base rent
earned by the Company for the years ended December 31, 1996, 1995 and 1994 was $204,500, $200,000, and $200,000, respectively.
Line of Credit with Crown Financing Company
In December 1996 the Board of Trustees approved the terms of a $10 million standby line of credit with Crown Financing Company, a wholly-owned subsidiary of Crown Holding Company. Under this unsecured facility, which was executed in January 1997, the Company may borrow up to $10 million with interest based on the prime rate plus 1 5/8%. Interest on amounts borrowed will accrue and be payable on the maturity date, which will be when the first tranche of the Mortgage Bonds (see Note 5) are paid or prepaid but not later than December 31, 1998. Amounts borrowed under the line are due at the maturity date and may be prepaid at any time without penalty.
Amounts due to or from Crown Associates and Crown Investments
In addition to the above items, the Company allocates a portion of the costs re- lated to its construction, development, MIS, legal, and risk management depart- ments to Crown Associates based on estimated usage. As a result of these allocated costs (which aggregated $0.5 million, $0.5 million, $0.6 million for the years ended December 31, 1996, 1995, and 1994, respectively), certain inter- company liabilities that arose in connection with the acquisition of two malls in 1995 (see Note 13), and the pre-funding of the Support Agreement as described above, the Company had a net payable to Crown Associates and Crown Holding at December 31, 1996 of $1.9 million.
Acquisition of Wyoming Valley and Middletown Malls
As described above and in Note 13, in 1995 the Company acquired the Wyoming Valley and Middletown Malls. These malls had been jointly owned by Crown Associates and an unrelated third party.
Hess's Department Stores, Inc.
The Company and the Properties routinely had numerous transactions with Hess's Department Stores, Inc. ("Hess's"), a wholly-owned indirect subsidiary of Crown Holding, until November 1994 when all of Hess's operations were sold. These transactions included rental revenues for mall and freestanding stores. Hess's was a tenant in 13 of the income-producing properties and also was a tenant in the joint venture's enclosed shopping mall. Revenues from Hess's for the year ended December 31, 1994, were $4.4 million.
At a special meeting of the Company's shareholders held on September 9, 1994, the shareholders approved modifications of leases with Hess's in connection with the sale by Hess's of its store locations at Company properties to The May Department Stores Company ("May") and The Bon-Ton Stores, Inc. ("Bon-Ton").
Under the transaction with Bon-Ton, which closed in September 1994, Bon-Ton assumed leases and will operate six Hess's stores, and also agreed to temp- orarily operate five Hess's stores through January 1996 (two stores) and January 1997 (three stores). The Company has begun discussions with department store chains and other tenants for replacements in those five malls. A J.C. Penney store will open in March 1997 in one of the temporary locations, and there is currently a furniture store tenant in a second location. In January 1997 Bon-Ton vacated the remaining three locations.
Under the transaction with May, which transaction closed in November 1994, May purchased (pursuant to 99 year ground leases with nominal purchase options) three Hess's store locations from the Company for $17.6 million and leased
the Hess's store at two other locations. One of the leased locations is subject to a purchase option by May in the amount of $3.5 million. In 1994 the Company recorded a gain of $4.5 million on the sale of the three store locations. The Company also committed to renovate the mall where one of the leased stores is located, which was done in 1995. During 1995 May expanded the stores at all five of these locations. In 1994 the Company also received $2.4 million from Hess's relating to one of the stores that May is leasing to make up the difference between the rent formerly paid by Hess's and rent being paid by May. This amount was recorded as deferred income and is being amortized over the remaining lease term (10 years). Hess's also paid $0.8 million to the Company in 1995 for lost or reduced rents from mall shop tenants that occurred during the construction period when the former Hess's locations were being expanded.
NOTE 8 - LEASES
The Company is the lessee under ground leases with third parties for Shenango Valley Mall and Uniontown Mall. The Shenango Valley Mall lease expires on July 24, 2017. One lease for Uniontown Mall expires on March 30, 2018 with up to eleven five-year renewal options and the other lease expires on April 30, 2009 with up to ten five-year renewal options. The leases require fixed annual payments. Fixed rental expense related to these leases for the years ended December 31, 1996, 1995 and 1994, was $153,000 in each year. Future minimum lease payments on these leases are $153,000 per year through 2001 and $1,116,000 for all years thereafter.
Under the Uniontown Mall leases additional rents are paid based on mall tenant percentage rents. These additional rents were $56,000, $65,000, and $92,000, for the years ended December 31, 1996, 1995 and 1994, respectively.
Capital Leases
Assets under capital leases, primarily office and mall equipment, are capital- ized using interest rates appropriate at the inception of each lease. Capital lease obligations amounted to $1.7 million, and $2.0 million at December 31, 1996 and 1995, respectively, and are included in accounts payable and other liabilities.
NOTE 9 - RETIREMENT SAVINGS AND SHARE INCENTIVE PLANS
Retirement Savings Plan and Savings Restoration Plan
The Company established the Crown American Realty Trust Retirement Savings Plan (the "Retirement Savings Plan") pursuant to Section 401(k) of the Internal Revenue Code to cover employees of the Operating Partnership. Employees who have completed at least one year of service, working 1,000 hours per year, and have attained age 21 are eligible to participate in the Retirement Savings Plan.
The Operating Partnership contributes a percentage of each eligible employee's base pay (the "Supplemental Employer Contribution") to the Retirement Savings Plan on behalf of each eligible employee. The Supplemental Employer Contri- bution is 2% of base pay if the employee is under 35 years of age, 3% if 35 to 49 years of age, and 5% if 50 years of age or older. In addition, participants may elect to contribute between 1% and (subject to certain restrictions) 15%. Employee contributions are matched (the "Matching Contribution") by the Company up to 50% of the first 3% of the participant's compensation.
The receipt of benefits attributable to the Operating Partnership's Matching Contribution and Supplemental Employer Contribution is subject to the vesting
and forfeiture provisions of the Retirement Savings Plan. Supplemental Employer Contributions become 100% vested after five years of service is credited to the employee. Matching Contributions become vested 20% after two years of service and an additional 20% becomes vested per year thereafter. Years of service include service with Crown American Corporation. Other amounts are fully vested at all times.
Total plan costs for the years ended December 31, 1996, 1995 and 1994 were $465,000, $394,000, and $374,000, respectively. The plans of predecessor affil- iated entities were terminated upon the formation of the Company.
In late 1996 the Company adopted The Savings Restoration Plan which is designed to allow eligible employees to defer current compensation in amounts that exceed the limits that can be deferred under The Retirement Savings Plan. The plan becomes effective January 1, 1997 and accordingly no compensation was deferred in 1996 under the plan.
Share Incentive Plans
Prior to the initial public offering, the shareholders of the Company approved the 1993 Crown American Realty Option Plan (the "Employee Option Plan"), and the 1993 Crown American Realty Trustees' Option Plan (the "Trustees' Option Plan").
Under the Employee Option Plan, options to purchase a total of 1,200,000 Limited Partnership "Units" of the Operating Partnership are available for grant to officers and key employees; the Chairman and President currently do not participate in any share incentive plan. In December 1994, the Board of Trustees approved an amendment to the Employee Option Plan, approved by the shareholders in May 1995, to increase the number of Units available for grant to 1,200,000, an increase of 325,000 units. Under the Employee Option Plan, options are to be granted at not less than the market value of the shares on the date of grant. In certain circumstances, option holders may redeem the Units for cash or Shares (at the option of the Company).
Currently, all the Option Agreements except one provide that an option may only be exercised after the optionee has completed two years of employment with the Operating Partnership after the date of the grant of the option. Under such Option Agreements, an option first becomes exercisable to the extent of 20% of the total number of Units subject to the option on each of the second, third, fourth, fifth and sixth anniversaries of the date of the grant of the option. One Option Agreement provides for full vesting of the options granted thereunder three years after the date of grant. If employment is terminated before the option has partially or fully vested, the right to exercise the option is forfeited. If employment is terminated after the option has partially or fully vested, the option may be exercised to the extent it was exercisable at the time of termination of employment. There are certain limitations on the timing of exercise of the option after termination of employment. Currently, all the Option Agreements provide that options expire five years after the date they first become exercisable. Effective on January 3, 1996, the Board of Trustees canceled all then outstanding options (except for 30,000 options that were granted in November 1995) and issued 968,000 of new options at the then current market price of $8.00 per share, pursuant to the terms described above.
Option transactions under the Employee Option Plan are as follows:
					 The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted-average assump- tions used for grants in 1996, 1995 and 1994, respectively: dividend yield of 10.0%, 11.0% and 9.0%; expected volatility of 23%, 35%, and 15%; risk-free interest rates of 6.6%, 7.0%, and 7.0%; and expected lives of 9 years for all options. 		 Under the Trustees' Option Plan, options to purchase a total of 10,000 common shares of beneficial interest of the Company are available to non-employee Trustees. Pursuant to the Trustees' Option Plan, each non-employee Trustee of the Company automatically receives an annual grant of options to purchase 500 common shares having an exercise price equal to 100% of the fair market value of the shares at the date of grant of such option. On December 31, 1996, 1995 and 1994 each of the four non-employee directors were granted options to purchase 500 common shares at an exercise price of $7.500, $7.875, and $13.50 per share, respectively, the market prices at date of grant. It is the Company's current policy to grant to each new non-employee Trustee, upon joining the Board of Trustees, an initial grant of options to purchase 500 shares having an exercise price equal to 100% of the fair market value of the shares as of such date. Accordingly, in August 1993, four directors each received options to purchase 500 common shares at an exercise price of $17.25 per common share,
which was equal to the initial public offering price. As of December 31, 1996, there were 10,000 option shares held by the Trustees. To date, all options granted to Trustees have been exercisable immediately upon grant, but none have been so exercised as of December 31, 1996.
The Company applies APB Opinion 25 and related Interpretations in accounting for its plans. Accordingly, no compensation cost has been recognized for its option plans. Had compensation cost for the Company's option plans been determined based on the fair value at the grant dates for awards under those plans con- sistent with the method of SFAS No. 123, the Company's net income for the years ended December 31, 1996, 1995 and 1994 would have been reduced by approximately $0.12 million, $0.17 million and $0.15 million, respectively, or $0.004, $0.006, and $0.006 per share, respectively.
NOTE 10 - FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107 "Fair Value of Financial Instruments" requires disclosures about fair value for all financial instru- ments. Based on the borrowing rates currently available to the Company, the carrying amount of the Company's $395.8 million of fixed rate debt approximates the current estimated fair value. The remaining $173.0 million of debt is at floating interest rates which approximate current rates available to the Company for such debt, and accordingly the fair value of such floating rate debt approximates the current carrying amount.
NOTE 11 - QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized quarterly financial data for 1996 and 1995 is shown below (in thousands, except per share data):
NOTE 12 - COMMITMENTS AND CONTINGENCIES
The Company obtains insurance for worker's compensation, automobile, general liability, property damage, and medical claims. However, the Company has elected to retain a portion of expected losses for property damage, worker's compensation, and general liability through the use of deductibles which generally range up to $250,000 per claim with certain maximum aggregate policy limits per year. Provisions for losses expected under these programs are recorded based on estimates of the aggregate liability for claims incurred and claims incurred but not reported (IBNR) provided by consulting actuaries who utilize the Company's claims experience and actuarial assumptions. The total estimated liability for these losses at December 31, 1996 and 1995 was $4.5 million and $3.6 million, respectively, and is included in accounts payable and other liabilities.
Based on environmental studies completed on the Properties, management believes any exposure related to environmental clean-up will be immaterial.
Except as described below, neither the Company, the Operating Partnership nor the Financing Partnership are currently involved in any material litigation and, to the best of the Company's knowledge, there is no material litigation currently threatened against the Company, the Operating Partnership, the Financing Partnership or the Properties, other than routine litigation arising in the ordinary course of business, most of which is expected to be covered by liability insurance or established reserves.
On August 10, 1995, August 17, 1995, and September 8, 1995, complaints were filed by various individuals on behalf of themselves, and also purportedly on behalf of other similarly situated persons, against the Company and certain of its executive officers in United States District Court for the Western District of Pennsylvania to recover unspecified damages under the federal securities laws resulting from a decline in the market price for the Company's common shares of beneficial interest which are listed and traded on the New York Stock Exchange. The decline in the Company's share price followed the announcement on August 8, 1995, of various operational and capital resource initiatives by the Company, including a reduction of the Company's quarterly dividend to increase its level of retained internal cash flow and the intention to sell certain assets that were not considered at that time to fit the Company's growth strategy.
A fourth Complaint was filed the week of December 15, 1995, by an individual on behalf of himself and also purportedly on behalf of other similarly situated persons, against the Company and certain of its current and former executive officers in United States District Court for the Eastern District of Pennsylvania. While this Complaint is substantially similar to the previous Complaints, it alleges a class period extending from August 17, 1993, (the IPO Date) to August 8, 1995.
All four cases have been transferred to the Western District, and a consolidated amended complaint has been filed. The Company has filed a motion seeking to dismiss the consolidated action which is currently pending before the Court.
This consolidated legal action is in a very preliminary stage. However, the Company believes, based on advice of legal counsel, that it and the named officers have substantial defenses to the Plaintiffs' claims, and the Company intends to vigorously defend the action. The Company's current and former officers that are named in this litigation are covered under a liability in- surance policy paid for by the Company. The Company's officers also have indemnification agreements with the Company. While the final resolution of this litigation cannot be presently determined, management does not believe that it
will have a material adverse affect on the Company's results of operations or financial condition.
As a result of the fire which damaged the Logan Valley Mall in Altoona, PA on December 16, 1994 (see Note 4), a number of tenants or their insurers have filed lawsuits against the Company for damages to property and for inter- ruption of business. In summary, nine lawsuits have been filed in the Court of Common Pleas of Blair County, PA. The Company has insurance policies in place with coverage limits sufficient to indemnify the Company for any anticipated losses arising from these lawsuits. Accordingly, the ultimate outcome of this litigation is not expected to have any material adverse effect on the Company's results of operations or financial condition.
NOTE 13 - ACQUISITION OF TWO MALLS
At the time of the Company's formation in 1993, Crown Associates retained (i) a 50% tenancy-in-common interest in the fee title to two enclosed shopping malls (Wyoming Valley Mall located in Wilkes-Barre, Pennsylvania, and Middletown Mall located in Fairmont, West Virginia) and (ii) related ground leasehold interests pursuant to long-term ground leases of each of such undivided interests. The other 50% tenancy-in-common interests in both properties were held by an unrelated third party, which at the time objected to purchase of the properties by the Company.
In 1994 the Company, Crown Associates and the unrelated third party entered into agreements, approved by the Independent Trustees, under which the Company pur- chased all interests in the two malls together with the related working capital. The transactions closed effective as of January 31, 1995 (Wyoming Valley Mall) and February 1, 1995 (Middletown Mall). The aggregate purchase price paid for the two malls consisted of $45.2 million in cash, assumption of debt aggregating $7.8 million, of which $6.0 million is a non-recourse note related to Middletown Mall due January 1998, and, for Wyoming Valley Mall, an additional 5.1% partnership interest in the Operating Partnership, issued to Crown American Investment Company ("CAIC"), a wholly-owned subsidiary of Crown Investments. The Company also incurred $1.4 million in transaction costs, including transfer taxes, debt issuance costs, and legal fees. There is additional contingent consideration to CAIC with respect to Middletown Mall, to be paid in partnership units, based on this mall's operating performance over the following three year period. Working capital at the date of purchase approximated $1.0 million.
The funds to pay the purchase price and transaction costs were obtained through a $45.3 million term loan from a bank (subsequently increased to $50.0 million during 1995). The loan bears interest at a variable interest rate indexed to the LIBOR rate and is repayable in January 2000 (includes two one-year extensions).
Eleven months of operating activities of the two malls are included in the 1995 consolidated results of operations. In 1995 the two malls contributed $11.5 million in revenues and $0.5 million of income before minority interest. In 1996 the two malls contributed $12.8 million in revenues and $0.4 million of income before minority interest.
NOTE 14 - PROPERTY SALES, DISPOSALS, AND ADJUSTMENTS
In September 1996, the Company sold its Patrick Henry Corporate Center, an office building located in Newport News, Virginia to an insurance company. The net sales price was $9.45 million, and the net gain was $2.35 million.
Existing debt on the property of $5.36 million was repaid from the sales pro- ceeds, resulting in $364 thousand extraordinary loss on early extinguishment of debt arising from a prepayment penalty and the write off of unamoritzed deferred financing costs.
As part of the Company's ongoing strategic evaluation of its portfolio of assets, the Trustees of the Company authorized management in August 1995 to pursue the sale of certain malls and other assets that were not considered at that time to be fully consistent with or essential to the Company's long-term strategies. Under generally accepted accounting principles ("GAAP"), assets held for the long-term production of income are recorded at the lower of cost or net realizable value (generally defined as the future net cash flows expected to be generated by the asset, undiscounted and without interest charges). However, when a decision is made to dispose of long-lived assets, the carry- ing value of those assets is computed using their fair value (generally defined as the amount at which the asset could be bought or sold in a current tran- saction other than a forced or liquidation sale) less selling costs. Accord- ingly, in the second quarter of 1995 the Company recorded a $35.0 million adjustment to the carrying value of one of the assets then held for sale as re- quired under GAAP. This non-cash adjustment was charged to operations and represents the difference between the estimated fair value (less direct costs to sell) and net book value of that asset. Assets that had been held for sale are no longer being offered due to new development opportunities that have arisen, current market conditions, and other reasons.
Item 9.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
		Not applicable
PART III
Items 10 through 13.
		In accordance with the provisions of General Instruction G to Form 10-K, the information required by Item 10
Item 14.		Exhibits, Financial Statement Schedules and Reports on Form 8-K
		The financial statements, financial statement schedules and exhibits listed below are filed as part of this annual report: 											Page No. (a) 		(1)	Financial Statements
			Report of Independent Public Accountants				 	29 	 			Consolidated Income Statements of Crown American Realty Trust 		 	30 				for the years ended December 31, 1996, 1995 and 1994.
			Consolidated Balance Sheets of Crown American Realty Trust as of		 	31	 				December 31, 1996, and 1995. 			 			Consolidated Statements of Cash Flows of Crown American Realty Trust	for the years ended December 31, 1996, 1995 and 1994. 32
			Consolidated Statements of Shareholders' Equity of Crown American	Realty Trust for the years ended December 31, 1996, 1995 and 1994. 33
			Notes to Consolidated Financial Statements				 	34-48
		(2)	Financial Statement Schedules
			Schedule III - ConsolidatedReal Estate and Accumulated Depreciation			 	 	 53-54 			Schedule IV- Valuation and Qualifying Accounts and Reserves			 	55 			 (b)	Reports on Form 8-K
	No events which resulted in the filing of a current report on Form 8-K occurred during the fiscal quarter ended December 31, 1996.
(c)		Exhibits
	Item 14(c) of the Report is amended by adding a new Exhibit 23, and 24. The complete text of Item 14(c), as amended, follows. 	 3.1	 Second Amended and Restated Declaration of Trust of the Company. (c) 3.2	 Bylaws of the Company. (c) 4 See Second Amended and Restated Declaration of Trust of the Company, (Exhibit 3.1). (c) 10.1	Amended and Restated Agreement of Limited Partnership of Crown American Properties, L.P. (b) 10.2 (a)	First Amendment to Amended and Restated Agreement of Limited Partnership of Crown	American Properties, L.P. (b) 10.2 (b)	Second Amendment to Amended and Restated Agreement of Limited Partnership of Crown	American Properties, L.P (a) 10.2 (c)	Third Amendment to Amended and Restated Agreement of Limited Partnership of Crown	American Properties, L.P. (a) 10.3	Amended and Restated Partnership Agreement of Crown American Financing Partnership. (b) 10.4	Certificate of Incorporation and Bylaws of Crown American Financing Corporation. (b)
10.5	Real Estate Management Agreements between the Operating Partnership and the following	entities: 	(a) Financing Partnership (b) 	(b) Crown American Associates (b) 	(c) Wyoming Valley Mall, Inc. (b) 	(d) Middletown Mall, Inc. (b) 	(e) Pasquerilla Partnership (b) 	(f) Greater Lewistown Shopping Plaza (b) 	(g) The Grandview Company (b) 10.6	Key Executive Bonus Incentive Plan. (c) # 10.7	Retirement Savings Plan. (c) # 10.8	Sample Indemnification Agreement between the Company and its Trustees and officers (together	with a schedule identifying the other agreements not being filed and material differences therein). (b) 10.9	Loan Agreement between the Financing Partnership and Kidder Peabody Mortgage Capital	Corporation ("Loan Agreement"). (b) 10.10	Amendment to Loan Agreement. (b) 10.11 (a)	Cash Flow Support Agreement (b) 10.11 (b)	Cash Flow Support Agreement, amended May 9, 1994 (a) 10.12	1993 Crown American Realty Option Plan. (c) # 10.13	1993 Crown American Realty Trustees' Option Plan. (c) # 10.14	Sample Option Agreement for Employees (together with a schedule identifying the other	agreements not being filed and material differences therein). (b) # 10.15	Sample Option Agreement for Trustees (together with a schedule identifying the other agreements	not being filed and material differences therein). (b)# 10.16	Option Agreement dated as of April 24, 1995 among CBA Funding, L.L.C., Crown American Realty Trust,	Crown American Properties, L.P. and Crown Investments Trust. (d) 10.17	Registration Rights Agreement dated as of April 24, 1995 between Crown American Realty Trust and	CBA Funding, L.L.C., as Agent (d) 10.18	Exchange Agreement dated as of April 24, 1995 among CBA Funding, L.L.C., as Agent, Crown American	Realty Trust, Crown American Properties, L.P., Crown Investments Trust and Crown American Investment	Company (d) 10.19 Crown American Properties L.P. Savings Restoration Plan (e) # 21	List of subsidiaries of the Company. (c) 23	Consent of Arthur Andersen LLP (e) 24	Powers of Attorney (e) 99(a)	Press release dated February 20, 1997 (e) 99(b)	Fourth Quarter 1996 Supplemental Financial and Operational Information Package (e)
(a) Filed as an Exhibit to the Company's Report on Form 10K for the year ended December 31, 1994. (b) Filed as an Exhibit to the Company's Report on Form 10K for the period ended December 31, 1993. (c) Filed as an Exhibit to the Company's Registration Statement on Form S-11, effective as of August 9, 	1993. (d) Filed as an Exhibit to Amendment No. 1 to the Company's Registration Statement on Form S-3, Registration 	No. 33-91880, effective as of June 9, 1995. (e) Filed herewith. #	Indicates management contract or compensatory plan or arrangement.
SIGNATURES 	 		Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
						CROWN AMERICAN REALTY TRUST
						By 	/s/ Frank J. Pasquerilla 	 						 						 	Frank J. Pasquerilla 	 						Chief Executive Officer
Date: February 28, 1997
		Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Company in the capacities indicated and on the dates indicated.
Signature				 Title		 	Date
/s/ Frank J. Pasquerilla		 	Trustee, Chairman of February 28, 1997 Frank J. Pasquerilla 			the Board and Chief 					 Executive Officer
/s/ Mark E. Pasquerilla			 Trustee and President	 February 28, 1997 Mark E. Pasquerilla
/s/ John M. Kriak			 	Trustee, Executive Vice	 February 28, 1997 John M. Kriak				 President and Chief 					 Financial Officer 					 (Principal Financial Officer)
/s/ Terry L. Stevens			 Senior Vice President and	 February 28, 1997 Terry L. Stevens		 		Chief Accounting Officer, Finance
*			 	Trustee		 	February 28, 1997 Clifford A. Barton
*				 Trustee		 	February 28, 1997 Donald F. Mazziotti
*				 Trustee			 February 28, 1997 Margaret T. Monaco
*			 	Trustee		 	February 28, 1997 Zachary L. Solomon
*By: /s/ Terry L. Stevens Terry L. Stevens as Attorney-in-Fact
Exhitibt 23
ARTHUR ANDERSEN LLP
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by reference of our report dated February 18, 1997, included in this Crown American Realty Trust 1996 Form 10-K, into Crown American Realty Trust's previously filed Registration Statements on Form S-3 dated August 18, 1994 and Form S-3 dated May 4, 1995.
Washington, D.C. February 28, 1997
Exhibit 24
POWER OF ATTORNEY
		KNOW ALL MEN BY THESE PRESENTS, that Clifford A. Barton, Trustee of Crown American Realty Trust (the "Company") whose signature appears below constitutes and appoints Terry L. Stevens and Ronald P. Rusinak, and each of them, his true and lawful attorney-in-fact and agent, with full power of substitution and revocation, for him and in his name, place and stead, in any and all capacities, to sign the Company's Annual Report on Form 10-K for the year ended December 31, 1996, and to file same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute or substitutes, may lawfully do or cause to be done by virtue thereof.
Date		2/19/97 /s/ Clifford A. Barton 			 	(Name) Clifford A. Barton
								Title: Trustee
POWER OF ATTORNEY
		KNOW ALL MEN BY THESE PRESENTS, that Donald F. Mazziotti, Trustee of Crown American Realty Trust (the "Company") whose signature appears below constitutes and appoints Terry L. Stevens and Ronald P. Rusinak, and each of them, his true and lawful attorney-in-fact and agent, with full power of substitution and revocation, for him and in his name, place and stead, in any and all capacities, to sign the Company's Annual Report on Form 10-K for the year ended December 31, 1996, and to file same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute or substitutes, may lawfully do or cause to be done by virtue thereof.
				 Date	 2/19/97 					/s/ Donald F. Mazziotti (Name) Donald F. Mazziotti
							Title: Trustee
POWER OF ATTORNEY
		KNOW ALL MEN BY THESE PRESENTS, that Zachary L. Solomon, Trustee of Crown American Realty Trust (the "Company") whose signature appears below constitutes and appoints Terry L. Stevens and Ronald P. Rusinak, and each of them, his true and lawful attorney-in-fact and agent, with full power of substitution and revocation, for him and in his name, place and stead, in any and all capacities, to sign the Company's Annual Report on Form 10-K for the year ended December 31, 1996, and to file same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and per- form each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his sub- stitute or substitutes, may lawfully do or cause to be done by virtue thereof.
Date	 2/19/97 /s/ Zachary L. Solomon 				 (Name) Zachary L. Solomon
								Title: Trustee
POWER OF ATTORNEY
		KNOW ALL MEN BY THESE PRESENTS, that Margaret T. Monaco, Trustee of Crown American Realty Trust (the "Company") whose signature appears below constitutes and appoints Terry L. Stevens and Ronald P. Rusinak, and each of them, her true and lawful attorney-in-fact and agent, with full power of substitution and revocation, for her and in her name, place and stead, in any and all capacities, to sign the Company's Annual Report on Form 10-K for the year ended December 31, 1996, and to file same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes ass he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or her substitute or substitutes, may lawfully do or cause to be done by virtue thereof.
Date		2/19/97 /s/ Margaret t. Monaco 					 (Name) Margaret T. Monaco
								Title: Trustee
Exhibit 10.19
CROWN AMERICAN PROPERTIES, L.P.
SAVINGS RESTORATION PLAN
Effective January 1, 1997
	Page
ARTICLE I	TITLE AND EFFECTIVE DATE		 1
	Section 1.01	Title		 1 	Section 1.02	Effective Date		 1 	Section 1.03	Application of this Plan		 1
ARTICLE II	DEFINITIONS		 2
	Section 2.01	Definitions		 2
ARTICLE III	ELIGIBILITY AND PARTICIPATION		 5
	Section 3.01	Eligibility		 5 	Section 3.02	Participation		 5
ARTICLE IV	DEFERRED COMPENSATION CREDITS		 6
	Section 4.01	Deferred Compensation		 6 	Section 4.02	Deferral Agreement		 6 	Section 4.03	No Deferral Without Agreement		 6 	Section 4.04	Duration of Deferral Agreement		 6 	Section 4.05	Change of Deferrals		 6 	Section 4.06	Exception	 	7
ARTICLE V	RESTORATION ACCOUNT		 8
	Section 5.01	Restoration Account		 8 	Section 5.02	Earnings and Losses	 	8 	Section 5.03	Deemed Investment Options	 	8 	Section 5.04	Election of Deemed Investment Options		 8
ARTICLE VI	DISTRIBUTIONS	 	10
	Section 6.01	Distribution of Restoration Account 		 to Participant		 10 	Section 6.02	Distribution of Restoration Account 		 to Beneficiary		 10 	Section 6.03	Vesting of Deferred Compensation		 10 	Section 6.04	Amount of Deferred Payment		 11 	Section 6.05	Loans	 	11 	Section 6.06	Automatic Cashout		 11 	Section 6.07	Withholding for Taxes		 11
ARTICLE VII	BENEFICIARY		 12
	Section 7.01	Beneficiary Designation	 	12 	Section 7.02	Proper Beneficiary		 12 	Section 7.03	Minor or Incompetent Participant 		 or Beneficiary	 	12
ARTICLE VIII	ADMINISTRATION OF THE PLAN		 13
	Section 8.01	Plan Administrator and Agents	 	13 	Section 8.02	Rules, Regulations, and Plan 		 Interpretation	 	13 	Section 8.03	Certificates and Reports		 13 	Section 8.04	Costs		 13
ARTICLE IX	CLAIMS PROCEDURE	 	14
	Section 9.01	Written Claim	 	14 	Section 9.02	Denied Claim		 14 	Section 9.03	Review Procedure		 14 	Section 9.04	Plan Administrator Review		 14 	Section 9.05	Claims Procedure Mandatory and Binding	 	15
ARTICLE X	NATURE OF OBLIGATION	 	16
	Section 10.01	Obligation		 16 	Section 10.02	Creditor Status		 16
ARTICLE XI	MISCELLANEOUS		 17
	Section 11.01	Written Notice	 	17 	Section 11.02	Merger or Consolidation		 17 	Section 11.03	Amendment and Termination		 17 	Section 11.04	Non-alienation 	 	17 	Section 11.05	Construction	 	17 	Section 11.06	Gender and Number	 	17 	Section 11.07	No Employment Rights 	 	17 	Section 11.08	Illegal or Invalid Provision	 	18
CROWN AMERICAN PROPERTIES, L.P.
SAVINGS RESTORATION PLAN
	The purpose of the Crown American Properties, L.P. Savings Restoration Plan (the "Plan") is to permit a select group of management or highly compensated employees to defer current compensation which cannot be deferred under the Crown American Properties, L.P. Retirement Savings Plan (the "401(k) Plan").
	This Plan is primarily designed to provide compensation deferral opportunities which are lost because of the following limitations imposed on the 401(k) Plan:
	(1)	The Code Section 402(g) limits which restrict the amount of Elective Deferral Contributions under the 401(k) Plan (e.g., $9,500 for 1997).
	(2)	The Code Section 401(a)(17) limits which specify a maximum amount of compensation that can be taken into account for purposes of determining contributions under the 401(k) Plan (e.g., $160,000 for 1997).
	(3)	Limitations imposed by the non-discrimination requirements of Code Section 401(k) (the ADP test).
	(4)	The Code Section 415 limits which restrict the amount of Elective Deferral Contributions and other Contributions which can be allocated to a participant's account under the 401(k) Plan.
ARTICLE I
TITLE AND EFFECTIVE DATE
	Section 1.01 - Title. This Plan shall be known as the Crown American Properties, L.P. Savings Restoration Plan.
	Section 1.02 - Effective Date. The original effective date of this Plan shall be January 1, 1997.
	Section 1.03 - Application of this Plan. The Plan set forth herein is generally effective as of January 1, 1997 for participants selected by the Plan Administrator to participate herein.
ARTICLE II
DEFINITIONS
	Section 2.01 - Definitions. As used herein, the following words and phrases shall have the meanings specified below unless a different meaning is clearly required by the context:
	(a)	"Beneficiary" shall mean the person or persons, natural or legal, designated in writing by the Participant in accordance with Article VII to receive any benefits under the Plan which may become payable in the event of the Participant's death, or if none is designated or surviving at the time of the Participant's death, the Participant's beneficiary under the 401(k) Plan.
	(b)	"Board" shall mean the Board of Trustees of Crown American Realty Trust, the sole general partner of Crown American Properties, L.P.
	(c)	"Code" shall mean the Internal Revenue Code of 1986, as amended from time to time.
	(d)	"Code Limits" shall mean the limitation on Elective Deferral Contributions for a Plan Year because of Code Sections 401(k), 401(a)(17), 402(g), or 415.
	(e)	"Compensation" shall mean the Participant's compensation from Crown American Properties, L.P. which is used for purposes of determining a Participant's contributions to the 401(k) Plan, as increased by Deferred Compensation, and determined without regard to any maximum limitations imposed under Code Section 401(a)(17).
	(f)	"Deferral Agreement" shall mean the written form provided by the Plan Administrator or his delegate which the Participant files with the Plan Administrator before the relevant Election Date to indicate the portion of the Participant's Compensation to be deferred in accordance with the terms of the Plan. No Deferral Agreement shall be effective until it is received and acknowledged by the Plan Administrator or his delegate.
	(g)	"Deferred Compensation" shall mean the portion of a Participant's Compensation for a Plan Year that has been deferred according to the Participant's Deferral Agreement and the provisions of the Plan.
	(h)	"Election Date" shall mean the date by which a Participant must file a valid Deferral Agreement with the Plan Administrator or his delegate in order to defer future Compensation. The applicable Election Date for a Plan Year is as follows: (1) 30 days after the employee is notified of his status as an Executive pursuant to Section 3.01 if not an Executive on the first day of the Plan Year, or (2) December 31 of the preceding Plan Year if (1) above does not apply.
	(i)	"Elective Deferral Contributions" shall mean the Elective Deferral Contributions made on behalf of an Executive under, and as defined in, the 401(k) Plan.
	(j)	"Eligible Executive" shall mean an Executive who as of January 1 of a Plan Year (or as of the later Election Date for a Plan Year in which an employee becomes an Executive after January 1 of a Plan Year) is not yet eligible to participate in the 401(k) Plan or has elected a percentage of Elective Deferral Contributions which constitutes the Maximum Elective Deferral Percentage.
	(k)	"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time.
	(l)	"Executive" shall mean any common law employee of Crown American Properties, L.P. who is a Highly Compensated Employee. Each Executive shall be notified by the Plan Administrator or his delegate in writing of such classification.
	(m)	"401(k) Plan" shall mean the Crown American Properties, L.P. Retirement Savings Plan.
	(n)	"Highly Compensated Employee" shall mean an employee who is a highly compensated employee within the meaning of Code Section 414(q); provided, however, that (i) the definition of comepnsation which shall be used shall be the definition of "Compensation" which is set forth in paragraph (e) above (i.e., prior to any deferrals under the Plan or the 401(k) Plan); and (ii) to the extent permitted under Code Section 414(q), the Board in its discretion may condition classification as a Highly Compensated Employee upon the employee's inclusion in the top twenty percent (20%) of employees ranked on the basis of compensation.
	(o)	"Maximum Elective Deferral Amount" shall mean the maximum dollar amount of Elective Deferral Contributions permitted to be credited to a Participant's account under the 401(k) Plan for the Plan Year by a Code Limit applicable to Elective Deferral Contributions or other applicable law.
	(p)	"Maximum Elective Deferral Percentage" shall mean the maximum percentage of Elective Deferral Contributions permitted to be made by a highly compensated employee (as defined under Code Section 414(q)) under the 401(k) Plan for each pay period in a Plan Year (such maximum percentage shall be established for a Plan Year prior to the first day of such Plan Year).
	(q)	"Participant" shall mean an Executive or former Executive with a Restoration Account.
	(r)	"Plan" shall mean the Crown American Properties, L.P. Savings Restoration Plan, effective January 1, 1997, as set forth herein and as it may be subsequently amended from time to time.
	(s)	"Plan Administrator" shall mean the Director of Human Resources of Crown American Properties, L.P., who shall manage and administer the Plan.
	(t)	"Plan Year" shall mean each calendar year beginning on or after January 1, 1997.
	(u)	"Restoration Account" shall mean the bookkeeping account established for a Participant on the books and records of Crown American Properties, L.P. to reflect the amounts credited to the Participant and adjustments thereto under the various provisions of the Plan. The use of the term "Restoration Account" shall not under any circumstances mean that a Participant or Beneficiary, or the Participant's estate, shall have title to any specific assets of Crown American Properties, L.P.
ARTICLE III
ELIGIBILITY AND PARTICIPATION
	Section 3.01 - Eligibility. An employee who is classified as an Executive shall receive written notice of the date as of which such classification is effective and shall submit such information and execute such documents as may be required by the Plan Administrator or his delegate for participation in the Plan. An employee who ceases to be classified as an Executive shall be given notice of that fact by the Plan Administrator or his delegate.
	Section 3.02 - Participation. An Eligible Executive shall be eligible to become a Participant as of the first Election Date applicable to the Eligible Executive, but Compensation may be deferred only if the requirements of Article IV are satisfied. Participation shall continue until the Participant's Restoration Account has been fully distributed or forfeited.
ARTICLE IV
DEFERRED COMPENSATION CREDITS
	Section 4.01 - Deferred Compensation. Each Participant during such time as he is an Eligible Executive may have Compensation for a pay period deferred as provided in the Deferral Agreement, but not for any pay period during a Plan Year following the effective date of the Participant's voluntary election under the 401(k) Plan of a percentage of Elective Deferral Contributions which is less than the Maximum Elective Deferral Percentage, unless the Maximum Elective Deferral Amount for the Plan Year has previously been credited to the Participant's account under the 401(k) Plan. The percentage of Compensation to be deferred under the Plan shall be the percentage of Compensation designated by the Participant (such percentage must be a whole number), less the percentage of Compensation represented by the dollars of Elective Deferral Contributions for such pay period.
	Section 4.02 - Deferral Agreement. In order to defer Compensation pursuant to Section 4.01, a Participant must submit a written Deferral Agreement to the Plan Administrator or his delegate on or before the applicable Election Date. Valid Deferral Agreements filed by the applicable Election Date as defined in Section 2.01(h)(1) shall apply to Compensation earned after the Election Date. Valid Deferral Agreements filed by the applicable Election Date as defined in Section 2.01(h)(2) shall apply to Compensation earned on or after January 1 of the Plan Year beginning after the Election Date. Notwithstanding anything to the contrary herein, no Deferral Agreement shall be effective for a Participant who has made a hardship withdrawal from the 401(k) Plan (a) for a period of 12 months from the date of such hardship withdrawal, if the hardship withdrawal has been made in reliance on Treasury Regulation 1.401(k)-1(d)(2) (iv)(B) and the Deferred Compensation would constitute an employee elective contribution or employee contribution under an employer plan within the meaning of Treasury Regulation 1.401(k)-1(d)(2)(iv)(B)(4) or any successor regulation, or (b) for such other period as required for suspension of Deferred Compensation pursuant to the provisions of the 401(k) Plan.
	Section 4.03 - No Deferral Without Agreement. A Participant who has not submitted a valid Deferral Agreement to the Plan Administrator or his delegate on or before the relevant Election Date may not defer any Compensation for the applicable Plan Year under this Plan.
	Section 4.04 - Duration of Deferral Agreement. Deferral Agreements remain in effect until revoked or modified by the filing of a new Deferral Agreement in accordance with Section 4.05, except that a Deferral Agreement shall become void for a Plan Year with respect to which the Participant is not an Eligible Executive.
	Section 4.05 - Change of Deferrals. A new Deferral Agreement must be filed by the Election Date as defined in Section 2.01(h)(2) if the Participant wishes to increase or decrease (including to zero) the amount of Deferred Compensation. Any Deferral Agreement which changes the amount of Deferred Compensation will become effective with respect to Compensation earned on and after January 1 of the Plan Year beginning after the Election Date, except that such Deferral
Agreement shall be void if the Participant is not an Eligible Executive on January 1 of such Plan Year.
	Section 4.06 - Exception. Notwithstanding the foregoing, in no event shall amounts corrected as a result of the application of the discrimination tests under Code Section 401(k) (the ADP test) to the 401(k) Plan be treated as Deferred Compensation under the Plan.
ARTICLE V
RESTORATION ACCOUNT
	Section 5.01 - Restoration Account. The Plan Administrator shall cause a Restoration Account to be established and maintained on the books of Crown American Properties, L.P. for each Participant. Such account shall be credited with the dollar amount of the Participant's Deferred Compensation as of the date on which such amounts would have been credited to the Participant's account under the 401(k) Plan if treated as Elective Deferral Contributions. Separate sub-accounts within the Restoration Account may be maintained at the discretion of the Plan Administrator.
	Section 5.02 - Earnings and Losses. The amount in the Participant's Restoration Account shall be adjusted each business day to reflect net earnings, gains, or losses for such business day. The adjustment for earnings, gains, and losses for each business day shall be equal to the total amount determined by multiplying the rate earned (positive or negative) by each deemed investment option available under Section 5.03 (taking into account earnings distributed and appreciation (gains) or depreciation (losses) in the value of such options) for each business day by the portion of the balance in the Participant's Restoration Account which is deemed to be invested in such option pursuant to Section 5.04.
	Section 5.03 - Deemed Investment Options. The Plan Administrator shall establish the deemed investment options which may be elected by Participants pursuant to Section 5.04. The Plan Administrator may change such deemed investment options from time to time; provided, however, that any such options which are added shall be made available and communicated to all Participants on a uniform basis.
	Section 5.04 - Election of Deemed Investment Options.
	(a)	The Participant shall designate, in the manner established by the Plan Administrator, the percentage, in one percent (1%) multiples (or such other percentage as is permitted from time to time by the Plan Administrator), of the Deferred Compensation that is to be deemed to be invested in the available investment options under Section 5.03. Said designation shall remain in effect and apply to all subsequent Deferred Compensation until changed as provided below.
	(b)	A Participant may elect to change, as of any business day, the deemed investment election under paragraph (a) above with respect to future Deferred Compensation among one or more of the options then available by giving notice in the manner established by the Plan Administrator. Such change shall be effective for any amounts thereafter credited to the Participant's Restoration Account, until another change is made in accordance with this paragraph (b).
	(c)	A Participant may elect to reallocate the then-current balance of the Restoration Account, subject to any limitations imposed by the Plan Administrator or his delegate, as of any business day, in one percent (1%) multiples (or such other percentage as permitted from time to time by the Plan Administrator) among the deemed investment options then available. A Participant may make such an election by giving notice in the manner established by the Plan Administrator.
	(d)	The election among the deemed investment options provided above shall be the sole responsibility of each Participant. Crown American Properties, L.P., Executives, and the Plan Administrator are not authorized to make any recommendation to any Participant with respect to such election. Each Participant assumes all risk in connection with any election of deemed investment options and the adjustment to the value of his Restoration Account as the result of changes to the value of such options. Neither the Plan Administrator nor Crown American Properties, L.P. in any way guarantees against loss or depreciation with respect to a Restoration Account.
	(e)	All payments from the Plan shall be recorded as having been made proportionately from each available investment option in which the Participant's Restoration Account (or of the applicable subaccount) is deemed to be invested.
ARTICLE VI
DISTRIBUTIONS
	Section 6.01 - Distribution of Restoration Account to Participant.
	(a)	Distribution of the balance of a Participant's Restoration Account for a Plan Year, determined pursuant to Sections 6.03 and 6.04, shall be made in a lump sum; provided, however, that payment may be made in annual installments for a period of three (3) years or five (5) years, if the Deferral Agreement so provides. The first payment to the Participant under the Plan shall commence at the same time that payment is made to the Participant from the 401(k) Plan following the Participant's termination of employment with Crown American Properties, L.P. and all affiliates. For this purpose, termination of employment includes voluntary or involuntary termination of employment for any reason other than death, including disability, and shall be the date reflected on the records of Crown American Properties, L.P. or an affiliate as of the Participant's termination date.
	(b)	Not later than the last day of the Plan Year which is two (2) years prior to the year in which the distribution is to be made or is to begin, an Executive may change the payment form which he has previously elected (e.g., to change the form of payment with respect to an amount to be paid in 1999, the Participant can make an election up to December 31, 1997). The form of payment cannot be changed after installment payments have begun.
	Section 6.02 - Distribution of Restoration Account to Beneficiary.
	(a)	In the event of the Participant's death prior to commencement of installment or lump sum payments due under the Plan, the first installment or lump sum payment to the Beneficiary shall be made on the
first day of the month which is at least ninety (90) days after the date of the Participant's death and shall be paid in the same form of payment as would have been applicable to the Participant had the Participant survived.
	(b)	In the event of the Participant's death after commencement of installment payments to the Participant but prior to full payment of the installments due, the remaining installments due under the Plan in respect of the Participant shall continue to the Beneficiary on the same basis as they would have been paid to the Participant. The first payment to the Beneficiary shall be made on the later of the date payment would otherwise be made or the last day of the second month following the month in which the Participant's death occurs and shall include all payments due to the Beneficiary following death and prior to the first payment.
	Section 6.03 - Vesting of Deferred Compensation. Subject to Section 10.02, the Participant shall at all times be fully vested and have a nonforfeitable interest in his Restoration Account.
	Section 6.04 - Amount of Deferred Payment. If a lump sum payment is elected for distribution of a Participant's Restoration Account, such payment shall be based on the value of the Participant's Restoration Account on the last business day prior to the date the lump sum payment is to be made. If annual installments are elected as the payment method, the amount of the first installment shall be calculated by dividing the lump sum value of the Participant's Restoration Account, as determined above, by the number of installments to be paid. Each later installment shall be determined on the same basis as the first installment except that the value shall be divided by the number of installments remaining to be paid. Amounts held pending distribution from the Plan shall continue to be credited with earnings, gains, or losses pursuant to Section 5.02.
	Section 6.05 - Loans. No loans to Participants of amounts credited to a Participant's Restoration Account shall be permitted.
	Section 6.06 - Automatic Cashout. The Plan is intended to constitute an unfunded plan for tax purposes and for purposes of Title I of ERISA and is intended to be maintained primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees of Crown American Properties, L.P. and to qualify for the exclusions from Title I of ERISA which are provided for in Sections 201(2), 301(a)(3), and 401(a) (1) of ERISA. Notwithstanding any provision in this Plan to the contrary, in the event that the Department of Labor, or any other regulatory body, issues final regulations which provide, or a court issues a final determination, that the Plan does not qualify for any of such exclusions under the Code or ERISA, the Plan Administrator or the Board may revoke the approval of all or some employees as Executives for the current or future Plan Years, and the Plan Administrator or the Board may take such other action as he or it determines to be appropriate in order for the Plan to qualify for such exclusions. In addition, Participants who are determined not to be Executives because of this Section 6.06 shall have the balance in their Restoration Account distributed in a single lump sum as soon as practicable after it is determined that they are no longer Executives, and such Participants' Deferral Agreements shall be void and of no further effect. Crown American Properties, L.P., the Plan Administrator, and the Board shall have no liability to any Participant who receives a distribution from the Plan or whose participation is otherwise affected by reason of this Section 6.06.
	Section 6.07 - Withholding for Taxes. All Deferred Compensation shall be subject to Federal income, FICA, and other tax withholding as required by applicable law. At the time that tax withholding is required, if an amount is payable under the Plan to the Participant the amount of the required tax withholding shall be withheld from and reduce such payment. If, however, an amount is not then payable or the amount payable under the Plan to the Participant is less than the required withholding, the Participant shall pay, by check or money order payable to Crown American Properties, L.P., not later than the date such withholding is required, the amount of the required tax withholding or, at the sole election of Crown American Properties, L.P., the amount of required tax withholding shall be withheld from other compensation or amounts payable to the Participant. The Participant shall hold Crown American Properties, L.P. harmless from any liability for acting to satisfy the withholding obligation in this manner.
ARTICLE VII
BENEFICIARY
	Section 7.01 - Beneficiary Designation. A Participant may file with the Plan Administrator or his delegate a completed Designation of Beneficiary Form provided by the Plan Administrator or his delegate. Such designation may be made, revoked, or changed by the Participant at any time before death or receipt of the balance of the Restoration Account, but such designation will not be effective and will not supersede all prior designations until it is received and acknowledged by the Plan Administrator or his delegate.
	Section 7.02 - Proper Beneficiary. If the Plan Administrator has any doubt as to the proper Beneficiary to receive payments hereunder, the Plan Administrator shall have the right to withhold such payments until the matter is finally adjudicated. However, any payment made in good faith shall fully discharge the Plan Administrator, Crown American Properties, L.P., the Plan, and the Board from all further obligations with respect to that payment.
	Section 7.03 - Minor or Incompetent Participant or Beneficiary. If the Plan Administrator determines that any Participant or Beneficiary entitled to a payment under the Plan is a minor or incompetent by reason of physical or mental disability, he may in his sole discretion cause any payment thereafter becoming due to such person to be made to any other person for his benefit, without responsibility to follow application of amounts so paid. Payments made pursuant to this provision shall completely discharge Crown American Properties, L.P., the Plan, the Plan Administrator, and the Board.
ARTICLE VIII
ADMINISTRATION OF THE PLAN
	Section 8.01 - Plan Administrator and Agents. Full power and authority to administer the Plan shall be vested in the Plan Administrator. The Plan Administrator may also employ such agents as he deems appropriate to assist him with the administration of the Plan.
	Section 8.02 - Rules, Regulations, and Plan Interpretation. The Plan Administrator shall, from time to time, establish rules, forms, and procedures
of general application for the administration of the Plan. The Plan Administrator shall have the full power and authority to construe and interpret the Plan, make all determinations of Deferred Compensation under the Plan, and determine all facts and other issues relating to claims and appeals under the Plan. Any determination or action of the Plan Administrator or the Board and the records of the Plan Administrator shall be final, conclusive, and binding on all Participants and Beneficiaries, and their beneficiaries, heirs, personal representatives, executors, and administrators, and upon Crown American Properties, L.P. and all other persons having or claiming to have any right or interest in or under the Plan. No Participant shall participate in any decision of the Board or the Plan Administrator which directly or indirectly affects the Participant's Deferred Compensation or Restoration Account.
	Section 8.03 - Certificates and Reports. The Plan Administrator and the officers and directors of Crown American Properties, L.P. shall be entitled to rely on all certificates and reports made by any accountants, and on all opinions given by legal counsel.
	Section 8.04 - Costs. The costs and expenses involved in the administration of the Plan shall be borne by Crown American Properties, L.P.
ARTICLE IX
CLAIMS PROCEDURE
	Section 9.01 - Written Claim. The value of a Participant's Restoration Account shall be paid in accordance with the provisions of the Plan. In the event of a claim by a Participant or a Participant's Beneficiary for or in respect of any benefit under the Plan or the method of payment thereof, such Participant or Beneficiary shall present the reason for his claim in writing to the Plan Administrator, addressed to the principal place of business of Crown American Properties, L.P. or such other person or entity designated by the Plan Administrator.
	Section 9.02 - Denied Claim. The Plan Administrator shall, within ninety (90) days after the receipt of such written claim, send written notification to the Participant or Beneficiary as to the claim's disposition, unless special circumstances require an extension of time for processing the claim. If such an extension of time for processing is required, written notice of the extension shall be furnished to the claimant prior to the termination of the initial ninety (90) day period. In no event shall such extension exceed a period of ninety (90) days from the end of such initial period. The extension notice shall indicate the special circumstances requiring an extension of time and the date by which the Plan Administrator expects to render the final decision. In the event the claim is wholly or partially denied, the written notification shall (i) state the specific reason or reasons for the denial, (ii) include specific references to pertinent Plan provisions on which the denial is based, (iii) provide an explanation of any additional material or information necessary for the Participant or Beneficiary to perfect the claim and a statement of why such material or information is necessary, and (iv) set forth the procedure by which the Participant or Beneficiary may appeal the denial of the claim. If the claim has not been granted and notice is not furnished within the time period specified in the preceding paragraph, the claim shall be deemed to be denied for the purpose of proceeding to appeal in accordance with Section 9.03.
	Section 9.03 - Review Procedure. In the event a Participant or Beneficiary wishes to appeal the denial of his claim, he may request a review of such denial by making written application to the Plan Administrator, addressed to the principal place of business of Crown American Properties, L.P., or such other person or entity designated by the Plan Administrator, within sixty (60) days after receipt of the written notice of denial (or the date on which such claim is deemed denied if written notice is not received within the applicable time period specified in Section 9.02). Such Participant or Beneficiary (or his duly authorized representative) may, upon written request to the Plan Administrator, review documents which are pertinent to such claim, and submit in writing issues and comments in support of his position.
	Section 9.04 - Plan Administrator Review. Within sixty (60) days after receipt of the written appeal (unless an extension of time is necessary due to special circumstances or is agreed to by the parties, but in no event more than one hundred and twenty (120) days after such receipt), the Plan Administrator shall notify the Participant or Beneficiary of his final decision. Such final decision shall be in writing and shall include specific reasons for the decision, written in a manner calculated to be understood by the claimant, and specific references to the pertinent Plan provisions on which the decision is based. If an extension of time for review is required because of special circumstances, written notice of the extension shall be furnished to the claimant prior to the commencement of the extension. If the claim has not been granted and written notice is not provided within the time period specified above, the appeal shall be deemed to be denied.
	Section 9.05 - Claims Procedure Mandatory and Binding. If a Participant or Beneficiary does not follow the procedures set forth above, he shall be deemed to have waived his right to appeal benefit determinations under the Plan. In addition, the decisions, actions, and records of the Plan Administrator shall be conclusive and binding upon Crown American Properties, L.P. and all persons having or claiming to have any right or interest in or under the Plan.
ARTICLE X
NATURE OF OBLIGATION
	Section 10.01 - Obligation. The Plan constitutes only a promise by Crown American Properties, L.P. to make benefit payments in the future, and its obligations under the Plan shall be unfunded and unsecured promises to pay. Crown American Properties, L.P. shall not be obligated under any circumstance to fund its financial obligations under the Plan. It may, in its discretion, set aside funds in a trust or other vehicle, subject to the claims of its creditors, in order to assist it in meeting its obligations under the Plan, if such arrangement will not cause the Plan to be considered a funded deferred compensation plan under ERISA or the Code.
	Section 10.02 - Creditor Status. Crown American Properties, L.P. and the Plan do not give the Participant any beneficial ownership interest in any asset of Crown American Properties, L.P. The Participants and their Beneficiaries shall have the status of, and their rights to receive payment from a Restoration Account shall be no greater than the rights of, general unsecured creditors of Crown American Properties, L.P.
ARTICLE XI
MISCELLANEOUS
	Section 11.01 - Written Notice. Any notice to the Plan Administrator which shall be or may be given under the Plan and Deferral Agreements shall be in writing and delivered to the Plan Administrator or his delegate. Notice to a Participant shall be addressed to the address shown on such Participant's Deferral Agreement. Any party may, from time to time, change the address to which notices shall be mailed by giving written notice of such new address to the other party.
	Section 11.02 - Merger or Consolidation. All obligations for amounts vested but not yet paid under the Plan shall survive any merger, consolidation, or sale of substantially all of the Crown American Properties, L.P. assets to any entity, and be the liability of the successor to the merger or consolidation or the purchaser of assets, unless otherwise agreed by the parties thereto.
	Section 11.03 - Amendment and Termination. The Board, in its sole discretion, may amend, modify, or terminate the Plan at any time and from time to time, provided that no such amendment, modification, or termination shall reduce the Participant's or Beneficiary's vested interest in the Restoration Account as of the day before any such amendment, modification, or termination, unless consented to by the affected Participant or by the Beneficiary if the Participant is deceased.
	Section 11.04 - Non-alienation. Except as may be required by law, neither the Participant nor any Beneficiary shall have the right to, directly or indirectly, alienate, assign, transfer, pledge, anticipate, or encumber (except by reason of death) any amount that is or may be payable hereunder, including in respect of any liability of a Participant or Beneficiary for alimony or other payments for the support of a spouse, former spouse, child, or other dependent, prior to actually being received by the Participant or Beneficiary hereunder, nor shall the Participant's or Beneficiary's rights to benefit payments under the Plan be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment by creditors of the Participant or Beneficiary or to the debts, contracts, liabilities, engagements, or torts of any Participant or Beneficiary, or transfer by operation of law in the event of bankruptcy or insolvency of the Participant or any Beneficiary, or any legal process.
	Section 11.05 - Construction. The provisions of the Plan shall be construed, administered, and governed by the laws of the Commonwealth of Pennsylvania, including its statute of limitations provisions, to the extent not preempted by ERISA or other applicable Federal law. Titles of Articles and Sections of the Plan are for convenience of reference only and are not to be taken into account when construing and interpreting the provisions of the Plan.
	Section 11.06 - Gender and Number. The masculine pronoun whenever used in the Plan shall include the feminine and vice versa. The singular shall include the plural and the plural shall include the singular whenever used herein unless the context requires otherwise.
	Section 11.07 - No Employment Rights. Neither the adoption of the Plan nor any provision of the Plan shall be construed as a contract of employment between Crown American Properties, L.P. and any Executive or Participant, or as a guarantee or right of any Executive or Participant to future or continued employment with Crown American Properties, L.P., or as a limitation on the right of Crown American Properties, L.P. to discharge any of its employees
with or without cause. Specifically, classification as an Executive or a Participant does not create any rights, and no rights are created under the Plan, with respect to continued or future employment or conditions of employment.
	Section 11.08 - Illegal or Invalid Provision. In case any provision of the Plan shall be held illegal or invalid for any reason, such illegal or invalid provision shall not affect the remaining parts of the Plan, but the Plan shall be construed and enforced without regard to such illegal or invalid provision.
	IN WITNESS WHEREOF, Crown American Properties, L.P. has caused this Plan to be executed and attested to this ______ day of December, 1996.
			CROWN AMERICAN PROPERTIES, L.P. 			by Its Sole General Partner ATTEST:			CROWN AMERICAN REALTY TRUST
___________________________	By_____________________________ Secretary		 			Title__________________________
[Seal]
Exhibit 99(a)
NEWS FROM:
C R O W N A M E R I C A N R E A L T Y T R U S T
CONTACT:		Media:	 	Christine Menna	814-536-9520 			Investors:	Frank Pasquerilla	814-535-9347 					 Mark Pasquerilla	814-535-9364 Internet:	 http://www.crownam.com
IMMEDIATE RELEASE: 		Thursday, February 20, 1997
CROWN AMERICAN REALTY TRUST ANNOUNCES FOURTH QUARTER RESULTS AND 1996 RESULTS; DECLARES QUARTERLY DIVIDEND
	Johnstown, Pa. - Crown American Realty Trust (NYSE:CWN), a real estate investment trust, today announced financial results and operating information for the fourth quarter and for the twelve months ended December 31, 1996. The Board of Trustees also declared a regular fourth quarter dividend.
"In 1996 the revolution in specialty retailing presented a major challenge which we were able to work through and still exceed consensus FFO estimates. We continue to lay the foundation which will lead to future long-term growth of our portfolio," said Crown American President, Mark E. Pasquerilla. "In 1996, several significant, encouraging trends occurred in our shopping malls: Average base rents for mall shop tenants increased for the 13th consecutive quarter, rising 5 percent to $15.85 per square foot at year end. Comparable mall shop sales showed significant growth in 1996, ending the year at $217 per square foot, up over 5 percent from $206 per square foot in 1995. This is considerably higher than the 2.9 percent increase reported by the International Council of Shopping Centers earlier this month. Another positive trend is that tenant occupancy cost as a percentage of their sales was 10.6 percent, the lowest level since our IPO in 1993 which is a positive indicator of the affordability of our malls for specialty retailers. Mall shop tenant allowances per square foot on leases signed in 1996 declined by 13 percent to $12.73 compared to 1995 and are 28 percent lower than 1994.
"While there were positive operating trends in the portfolio, the consolidation and rationalization in mall specialty retailing hampered our growth in 1996, with higher than expected mall shop closings and a slowing of new lease signings, both of which contributed to the drop in occupancy in 1996. We expect this occupancy trend to reverse by year end 1997 as the weak tenant fallout appears to be largely behind us, and based on encouraging leasing activity during the last six months. Accordingly, we expect 1997 year end mall shop occupancy to improve to approximately 78 to 80 percent, although occupancy may drop below 76 percent in the first two quarters, historically our lowest quarters of mall shop occupancy.
Financial Information - Fourth Quarter
For the quarter ended December 31, 1996, the Company's 74.5 percentage share of total Funds from Operations ("FFO") was $10.3 million, or $0.37 per share, compared to $10.6 million, or $0.39 per share, in the same quarter of 1995. Higher seasonal leasing income, higher average rental rates, and higher lease buyout income in the current quarter were offset by higher interest costs, lower
gain on land sales, lower business interruption insurance income, and lower mall shop occupancy compared to 1995. The mall shop occupancy decline was concen- trated among poorer performing tenants with low sales productivity. Fourth quarter 1996 FFO was $2.1 million higher, or $0.07 per share, than the immediately preceding quarter ended September 30, 1996. The increase in FFO in the fourth quarter compared to the third quarter relates mostly to the seasonal impact of temporary and seasonal leasing and of percentage rents.
	Total revenues for the fourth quarter of 1996 increased by $1.0 million to $37.8 million compared with 1995. Net income for the fourth quarter of 1996 was $2.4 million, or $0.09 per share, compared to $1.9 million, or $0.07 per share, in the fourth quarter of 1995.
Financial Information - Twelve Months
The Company's percentage share of total FFO for the year ended December 31, 1996 was $36.1 million, or $1.31 per share, compared to $37.4 million, or $1.37 per share, in 1995. Higher seasonal leasing income, higher average rental rates, lower property and general administrative costs, and higher lease buyout income in 1996 were offset by higher interest costs, lower straight line rental income, lower business interruption insurance income, and the decline in mall shop occupancy that occurred during 1996.
	Total revenues for 1996 were $134.0 million, or $1.7 million higher than 1995. For the full year 1996, net income was $5.8 million, or $0.21 per share, compared to a net loss of $12.0 million, or $0.43 per share, for 1995. The loss in 1995 related to the $35 million adjustment in the carrying value of certain assets offset by $11.2 million in extraordinary gain from fire insurance on property damage.
Operating Information
During the fourth quarter of 1996, leases for 91,000 square feet of mall shops were signed resulting in $1.8 million in annual base rental income. A total of 57 leases were signed, which included 30 renewals and 27 new leases. The average rent for leases signed was $20.16 per square foot, including $33.01 for new leases and $15.65 for renewals.
For all of 1996, leases for 423,000 square feet of mall shops were signed for $8.5 million in annual base rental income. A total of 247 leases were signed, including 104 renewals and 143 new leases. Average rent per square foot for 1996 was $20.14, which includes $21.62 per square foot for new space and $18.10 per square foot for renewals. This is a 12.1 percent increase over $17.96 per square foot, the average for leases signed in 1995.
The average base rent of the portfolio as of December 31, 1996 was $15.85 per square foot. This is a 5 percent increase from $15.10 per square foot as of December 31, 1995, and the 13th consecutive quarter that average base rent has increased.
Overall, mall shop occupancy was 76 percent as of December 31, 1996, a one percent drop from 77 percent as of September 30, 1996. This compares to 82 percent as of December 31, 1995. The tenants that closed in 1996 (439,000 square feet) were predominately the poorer performers, averaging slightly less than half of the portfolio's average sales per foot, and were concentrated in the popular-priced women's apparel category, thus reducing the portfolio's over-reliance on this weak retail segment.
Comparable mall shop sales for the full year 1996 were $217 per square foot, a 5.3 percent increase over the $206 per square foot reported for 1995. The six malls where a new May Company department store opened in 1995 averaged a six percent sales increase. The growth trend in tenant sales was increasing, as fourth quarter mall shop tenant sales were 6.4 percent higher than the same period in 1995. Comparable anchor sales per square foot reported in 1996 were $169 per square foot, up 5.7 percent from 1995.
Occupancy costs, that is, base rent, percentage rent and expense recoveries as a percentage of mall shop sales at all properties, were 10.6 percent as of December 31, 1996, as compared to 11.1 percent as of December 31, 1995. This is the lowest level since the Company's August 1993 IPO and is a positive indicator of the affordability of Crown malls for specialty retailers.
Seasonal and temporary leasing income for 1996 amounted to $8.4 million, a 23 percent increase over the $6.8 million recorded for 1995.
Dividend Information
For the quarter ended December 31, 1996, the Board of Trustees declared a regular quarterly dividend of $.20 per share. The dividend is payable March 18, 1997 to shareholders of record on March 3, 1997.
Pasquerilla continued, "Despite the drop in occupancy in 1996, we were able to grow our "core" revenues (base rent, percentage rent, cost recovery income, seasonal & temporary leasing, and net utility income) by over 2 percent, largely from the 5 percent higher average base rents in the portfolio and through another record year in seasonal leasing income, up 23 percent to $8.4 million in 1996. We expect these trends to continue in 1997, which coupled with the expected rise in occupancy by year end, should result in continued growth in core revenues for 1997. However, total revenues for 1997 should be relatively flat with 1996 as this growth in core revenues is expected to be offset by a reduction in lease buyout income from 1996's unusually high level.
"Thus, for the full year 1997, we expect total revenues and earnings before interest, depreciation and amortization ("EBITDA") to be relatively flat compared to 1996. However, we expect FFO to be approximately 5 percent lower primarily due to higher interest costs and lower gain on outparcel land sales. Interest expense in 1997 will increase as the full amount of the Logan Valley construction loan is drawn coupled with a decrease in Logan Valley capitalized construction interest as the third and final phase of that project is placed into service. Gain on sales of out-parcel land in 1997 is expected to be approximately 40 percent lower than the high level achieved in 1996. Virtually all of the decline in FFO in 1997 is expected to occur in the first half. This is due mainly to the timing of expected land sales in 1997 compared to 1996, when land sales were heavily concentrated in the first half, and in part to the normal concentration of tenant openings in the second half, including the Logan Valley expansion. Because the interest expense and land sale trends are not expected to impact 1998 as they are in 1997, we remain optimistic concerning our FFO growth prospects for 1998 and beyond."
"We continue to be on track with our capital improvement and financing program announced in mid-1995. From July 1, 1995 to date, we have incurred approx- imately $79 million of our $120 million spending plan covering the 21/2 years ending December 31, 1997. Most of the amount incurred to date relates to the Logan Valley Mall reconstruction. During 1996 we completed two refinancings, achieving lower interest rates in both cases, and we extended to 1998 and 1999 two loans that were scheduled to mature in 1997 totaling $42.9 million. Over 88 percent of the debt coming due in 1997 matures in December. In addition,
a $10 million unsecured line of credit at prime plus 1 5/8 percent was recently executed between the Company and Crown Financing Company, which is a company owned by the Pasquerilla family. No amounts are currently outstanding under this line which is intended to provide the Company with additional financing flexibility to handle capital investment opportunities.
Pasquerilla concluded, "We are transforming the portfolio through adding finan- cially stronger and more productive specialty retailers and through continuing enhancements of our anchor store base. The fundamental operating trends in the portfolio are strong and improving. Increasing mall shop occupancy remains our greatest opportunity for internal earnings growth and therefore is our primary operational focus. Our goal is to obtain stronger tenants who we believe can thrive and grow into the next decade, thus substantially improv- ing the inherent value of our properties' income stream which will, in turn, increase the underlying value of the properties and ultimately increase share- holder value."
	Certain preceding quotations contain forward looking statements that involve risk and uncertainties, including overall economic conditions, the impact of competition, consumer buying trends, weather patterns, and other factors.
Crown American Realty Trust is the managing general partner and 74.5 percent owner of Crown American Properties, L.P. (the "Operating Partnership") and a general partner of Crown American Financing Partnership, which owns, acquires, operates and develops regional shopping malls. Currently, Crown American owns and operates 25 regional shopping malls in Pennsylvania, Maryland, Virginia, West Virginia, New Jersey, Tennessee and Georgia.
Selected financial data follows for Crown American Realty Trust for the three and twelve month periods ended December 31, 1996. A copy of the Company's Supplemental Financial and Operational Inormation Package is available by calling Investor Relations at 1-800-860-2011.