Interview ...
Mark Pasquerilla, CEO and President
Crown American Realty Trust

Crown American (NYSE: CWN), headquartered in Johnstown, PA, acquires, operates and develops regional shopping malls in Pennsylvania, Maryland, West Virginia, Virginia, New Jersey, North Carolina, Tennessee and Georgia. The current portfolio includes 26 regional shopping malls. Pasquerilla responded to three e-mail questions on August 30, 1999.

Pike: Will e-commerce affect the value of Crown America's
(CWN) shopping centers?

 Pasquerilla: The future impact of e-commerce is still unknown and not quantifiable. We at CWN are eager to watch e-commerce unfold and develop and tap into this potential tool which can enhance our bricks and mortar retail. Short term, e-commerce has affected the value of our stock and other mall REITs. According to last week's Wall Street Journal, all equity REITs were down 2.9% YTD, while mall REITs were down 9.6% YTD. Ironically, 73% of our peer companies beat analyst estimates for the Second Quarter, and we met them.

The customers that really drive our business, the specialty retailers, are having near-record years. Many of these retailers are pursuing a dual strategy of developing a strong web site, while still pursing bricks and mortar retail. Retailers like the Gap, American Eagle Outfitters, and Electronics Boutique, all with a strong web presence, continue to aggressively grow their retail space through pursuing a bricks and mortar retail strategy. Kevin Kelly, Editor of Wired, predicts even virtual retailers like Amazon may soon pursue a real estate strategy to complement their virtual franchise. So the bottom like is that e-commerce may affect certain categories like books and CDs, but not apparel.

Few recognize that e-commerce may drive some retailers to upgrade their bricks-and-mortar locations and thus benefit us. Nor do most analysts recognize that mall companies will learn to use the Internet to drive sales to their bricks-and-mortar facilities. So right now the fear of e-commerce's impact is a drag on mall stocks. Some of the concerns are certainly warranted. But I believe that we and other mall REITs have been discounted too heavily.

Pike: Can Crown America help tenants compete in the e-commerce arena? How?

Pasquerilla: Our malls have a strong community and retail franchise. We must develop a web-based strategy that complements our bricks-and-mortar facilities. However we must be careful about our Internet strategy not to over spend its development or rollout. We must create a tangible asset that is used at the least cost. We are working now on developing a mall-based web site that would help drive local customers to our malls and hotlink to retailers' own web sites and to other important community and national users.

Pike: Has the Internet changed the way that Crown America acquires and manages properties?

Pasquerilla: The Internet has not changed the way we manage malls. We must have the dominant retail, entertainment and community focus of our markets. Maintaining, creating, or acquiring this dominant presence will make us less vulnerable to Internet competition and may actually position us to where we can benefit from the societal changes that the web is creating like people working closer to their homes, people having more time, people having more money from a growing economy, benefiting from increased productivity, and lastly from people who want to get out from behind a screen and see and socialize with others.

While, the Internet has not changed the way we manage our malls, it has changed the way we communicate with our employees, our customers and our shareholders. We have an active Intranet site, which allows me to communicate company goals with all our co-workers. We have a web site which allows shareholders and potential customers to get basic information on the company and the latest developments, whether corporate or at the property level. Furthermore, we are implementing an enhanced investor relations communications program with a company called Shareholder Direct whereby shareholders can have all our shareholder information sent to them electronically. The Internet is about information exchange, so we are using this tool to better communicate will all of our constituencies be they investors, our specialty retail customers, or their shoppers.

--Peter