UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q



x	Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended ~~September~~June 30, ~~2013~~2014



o	Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to

Commission File Number: 1-6300

____________________________________________________

PENNSYLVANIA REAL ESTATE INVESTMENT TRUST

(Exact name of Registrant as specified in its charter)

____________________________________________________



Pennsylvania		23-6216339
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

200 South Broad Street Philadelphia, PA		19102
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code (215) 875-0700

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer	x		Accelerated filer	o
Non-accelerated filer	o	(Do not check if a smaller reporting company)	Smaller reporting company	o

Indicate by check mark whether registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Common shares of beneficial interest, $1.00 par value per share, outstanding at ~~October 25, 2013~~July 28, 2014: ~~68,202,291~~68,775,675

Table of Contents

PENNSYLVANIA REAL ESTATE INVESTMENT TRUST

CONTENTS

Insert Title Here

		Page
	PART I—FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited):

	Consolidated Balance Sheets—~~September~~June 30, ~~2013~~2014 and December 31, ~~2012~~2013	1

	Consolidated Statements of Operations—Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2013~~2014 and ~~2012~~2013	2

	Consolidated Statements of Comprehensive Income (Loss)—Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2013~~2014 and ~~2012~~2013	4

	Consolidated Statements of Equity—~~Nine~~Six Months Ended ~~September~~June 30, ~~2013~~2014	5

	Consolidated Statements of Cash Flows—~~Nine~~Six Months Ended ~~September~~June 30, ~~2013~~2014 and ~~2012~~2013	6

	Notes to Unaudited Consolidated Financial Statements	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2022

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4446

Item 4.	Controls and Procedures	4547

	PART II—OTHER INFORMATION

Item 1.	Legal Proceedings	4648

Item 1A.	Risk Factors	4648

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4648

Item 3.	Not Applicable	—

Item 4.	Not Applicable	—

Item 5.	Not Applicable	—

Item 6.	Exhibits	4749

Signatures		4850

Except as the context otherwise requires, references in this Quarterly Report on Form 10-Q to “we,” “our,” “us,” the “Company” and “PREIT” refer to Pennsylvania Real Estate Investment Trust and its subsidiaries, including our operating partnership, PREIT Associates, L.P. References in this Quarterly Report on Form 10-Q to “PREIT Associates” or the “Operating Partnership” refer to PREIT Associates, L.P.

Table of Contents

Item 1. FINANCIAL STATEMENTS

PENNSYLVANIA REAL ESTATE INVESTMENT TRUST

CONSOLIDATED BALANCE SHEETS


(in thousands, except per share amounts)	September 30, 2013			December 31, 2012			June 30, 2014			December 31, 2013
	(unaudited)						(unaudited)
ASSETS:
INVESTMENTS IN REAL ESTATE, at cost:
Operating properties	$	3,422,311		$	3,395,681		$	3,437,079		$	3,450,317
Construction in progress	88,390			68,619			85,416			68,835
Land held for development	10,450			13,240			8,716			8,716
Total investments in real estate	3,521,151			3,477,540			3,531,211			3,527,868
Accumulated depreciation	(993,735		)	(907,928		)	(1,063,080		)	(1,012,746		)
Net investments in real estate	2,527,416			2,569,612			2,468,131			2,515,122
INVESTMENTS IN PARTNERSHIPS, at equity:	15,615			14,855			19,170			15,963
OTHER ASSETS:
Cash and cash equivalents	24,893			33,990			30,741			34,230
Tenant and other receivables (net of allowance for doubtful accounts of $14,159 and $14,042 at September 30, 2013 and December 31, 2012, respectively)	35,535			38,473
Intangible assets (net of accumulated amortization of $14,410 and $14,940 at September 30, 2013 and December 31, 2012, respectively)	9,447			8,673
Tenant and other receivables (net of allowance for doubtful accounts of $12,352 and $13,123 at June 30, 2014 and December 31, 2013, respectively)							37,995			46,439
Intangible assets (net of accumulated amortization of $14,923 and $14,506 at June 30, 2014 and December 31, 2013, respectively)							8,434			9,075
Deferred costs and other assets	100,223			97,399			92,295			97,752
Assets held for sale	—			114,622
Total assets	$	2,713,129		$	2,877,624		$	2,656,766		$	2,718,581
LIABILITIES:
Mortgage loans payable	$	1,538,102		$	1,718,052		$	1,494,801		$	1,502,650
Term Loan	—			182,000
Term loans							130,000			—
Revolving Facility	90,000			—			—			130,000
Tenants’ deposits and deferred rent	15,411			14,862			17,119			17,896
Distributions in excess of partnership investments	64,187			64,874			64,675			64,491
Fair value of derivative instruments	1,387			9,742
Liabilities on assets held for sale	—			102,417
Fair value of derivative liabilities							3,245			844
Accrued expenses and other liabilities	72,315			72,448			87,132			76,248
Total liabilities	1,781,402			2,164,395			1,796,972			1,792,129
COMMITMENTS AND CONTINGENCIES (Note 6):
EQUITY:
Series A Preferred Shares, $.01 par value per share; 25,000 preferred shares authorized; 4,600 shares of Series A Preferred Shares issued and outstanding at each of September 30, 2013 and December 31, 2012; liquidation preference of $115,000	$	46		$	46
Series B Preferred Shares, $.01 par value per share; 25,000 preferred shares authorized; 3,450 shares of Series B Preferred Shares issued and outstanding at each of September 30, 2013 and December 31, 2012; liquidation preference of $86,250	35			35
Shares of beneficial interest, $1.00 par value per share; 200,000 shares authorized; issued and outstanding 68,202 shares at September 30, 2013 and 56,331 shares at December 31, 2012	68,202			56,331
Series A Preferred Shares, $.01 par value per share; 25,000 preferred shares authorized; 4,600 shares of Series A Preferred Shares issued and outstanding at each of June 30, 2014 and December 31, 2013; liquidation preference of $115,000							46			46
Series B Preferred Shares, $.01 par value per share; 25,000 preferred shares authorized; 3,450 shares of Series B Preferred Shares issued and outstanding at each of June 30, 2014 and December 31, 2013; liquidation preference of $86,250							35			35
Shares of beneficial interest, $1.00 par value per share; 200,000 shares authorized; issued and outstanding 68,749 shares at June 30, 2014 and 68,293 shares at December 31, 2013							68,749			68,293
Capital contributed in excess of par	1,463,845			1,247,730			1,470,525			1,467,460
Accumulated other comprehensive loss	(7,804		)	(20,867		)	(7,827		)	(6,637		)
Distributions in excess of net income	(626,885		)	(608,634		)	(703,758		)	(636,939		)
Total equity—Pennsylvania Real Estate Investment Trust	897,439			674,641			827,770			892,258
Noncontrolling interest	34,288			38,588			32,024			34,194
Total equity	931,727			713,229			859,794			926,452
Total liabilities and equity	$	2,713,129		$	2,877,624		$	2,656,766		$	2,718,581

See accompanying notes to the unaudited consolidated financial statements.

Table of Contents

PENNSYLVANIA REAL ESTATE INVESTMENT TRUST CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)	PENNSYLVANIA REAL ESTATE INVESTMENT TRUST CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)												PENNSYLVANIA REAL ESTATE INVESTMENT TRUST CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended June 30,						Six Months Ended June 30,
(in thousands of dollars)	2013			2012			2013			2012			2014			2013			2014			2013
REVENUE:
Real estate revenue:
Base rent	$	70,646		$	67,951		$	209,990		$	201,340		$	71,646		$	69,207		$	142,988		$	137,709
Expense reimbursements	33,517			30,959			95,704			91,280			30,879			30,931			65,230			61,792
Percentage rent	593			694			2,169			2,099			324			584			914			1,566
Lease termination revenue	336			279			579			1,691			154			91			254			231
Other real estate revenue	3,186			2,965			8,953			8,723			3,142			2,735			5,368			5,428
Total real estate revenue	108,278			102,848			317,395			305,133			106,145			103,548			214,754			206,726
Other income	3,208			2,608			5,491			4,254			680			1,395			1,458			2,283
Total revenue	111,486			105,456			322,886			309,387			106,825			104,943			216,212			209,009
EXPENSES:
Operating expenses:
CAM and real estate taxes	(36,938		)	(33,755		)	(107,426		)	(100,557		)	(35,228		)	(34,642		)	(74,631		)	(69,541		)
Utilities	(6,954		)	(6,637		)	(17,213		)	(17,525		)	(5,841		)	(5,068		)	(14,051		)	(10,126		)
Other operating expenses	(4,806		)	(5,228		)	(12,824		)	(13,815		)	(3,295		)	(3,909		)	(7,399		)	(7,647		)
Total operating expenses	(48,698		)	(45,620		)	(137,463		)	(131,897		)	(44,364		)	(43,619		)	(96,081		)	(87,314		)
Depreciation and amortization	(36,053		)	(31,918		)	(105,332		)	(95,232		)	(37,135		)	(35,088		)	(73,370		)	(68,705		)
Other expenses:
General and administrative expenses	(8,116		)	(8,694		)	(26,578		)	(28,818		)	(8,774		)	(9,606		)	(17,851		)	(18,462		)
Impairment of assets	(29,966		)				(29,966		)				(16,098		)	—			(17,398		)	—
Provision for employee separation expense	—			(4,958		)	(2,314		)	(5,754		)	(4,877		)	(1,035		)	(4,877		)	(2,314		)
Project costs and other expenses	(462		)	(380		)	(862		)	(777		)
Acquisition costs and other expenses													(960		)	(198		)	(2,606		)	(400		)
Total other expenses	(38,544		)	(14,032		)	(59,720		)	(35,349		)	(30,709		)	(10,839		)	(42,732		)	(21,176		)
Interest expense, net	(23,477		)	(29,996		)	(78,503		)	(91,531		)	(21,550		)	(27,689		)	(41,720		)	(55,027		)
Total expenses	(146,772		)	(121,566		)	(381,018		)	(354,009		)	(133,758		)	(117,235		)	(253,903		)	(232,222		)
Loss before equity in income of partnerships, discontinued operations and gains on sales of discontinued operations	(35,286		)	(16,110		)	(58,132		)	(44,622		)
Loss before equity in income of partnerships, gain on sale of interest in real estate, discontinued operations and gains on sales of discontinued operations													(26,933		)	(12,292		)	(37,691		)	(23,213		)
Equity in income of partnerships	2,345			2,164			7,081			6,110			2,784			2,283			5,186			4,736
Gain on sale of interest in real estate													99			—			99			—
Loss from continuing operations	(32,941		)	(13,946		)	(51,051		)	(38,512		)	(24,050		)	(10,009		)	(32,406		)	(18,477		)
Discontinued operations:
Operating results from discontinued operations	428			1,085			2,082			2,834			—			1,000			—			2,021
Gains on sales of discontinued operations	45,097			—			78,351			—			—			—			—			33,254
Income from discontinued operations	45,525			1,085			80,433			2,834			—			1,000			—			35,275
Net income (loss)	12,584			(12,861		)	29,382			(35,678		)
Less: net (income) loss attributable to noncontrolling interest	(382		)	508			(1,073		)	1,440
Net income (loss) attributable to PREIT	12,202			(12,353		)	28,309			(34,238		)
Less: dividends on preferred shares	(3,962		)	(2,372		)	(11,886		)	(4,217		)
Net income (loss) attributable to PREIT common shareholders	$	8,240		$	(14,725	)	$	16,423		$	(38,455	)
Net (loss) income													(24,050		)	(9,009		)	(32,406		)	16,798
Less: net loss (income) attributable to noncontrolling interest													725			314			977			(691		)
Net (loss) income attributable to PREIT													(23,325		)	(8,695		)	(31,429		)	16,107
Less: preferred share dividends													(3,962		)	(3,962		)	(7,924		)	(7,924		)
Net (loss) income attributable to PREIT common shareholders													$	(27,287	)	$	(12,657	)	$	(39,353	)	$	8,183

See accompanying notes to the unaudited consolidated financial statements.

Table of Contents

PENNSYLVANIA REAL ESTATE INVESTMENT TRUST CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)	PENNSYLVANIA REAL ESTATE INVESTMENT TRUST CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)												PENNSYLVANIA REAL ESTATE INVESTMENT TRUST CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

(in thousands of dollars, except per share amounts)	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended June 30,						Six Months Ended June 30,
(in thousands of dollars, except per share amounts)	2013			2012			2013			2012			2014			2013			2014			2013
Loss from continuing operations	$	(32,941	)	$	(13,946	)	$	(51,051	)	$	(38,512	)	$	(24,050	)	$	(10,009	)	$	(32,406	)	$	(18,477	)
Noncontrolling interest	992			551			1,656			1,552			725			348			977			677
Dividends on preferred shares	(3,962		)	(2,372		)	(11,886		)	(4,217		)	(3,962		)	(3,962		)	(7,924		)	(7,924		)
Dividends on unvested restricted shares	(108		)	(132		)	(319		)	(321		)	(92		)	(103		)	(205		)	(211		)
Loss from continuing operations used to calculate loss per share—basic and diluted	$	(36,019	)	$	(15,899	)	$	(61,600	)	$	(41,498	)	$	(27,379	)	$	(13,726	)	$	(39,558	)	$	(25,935	)
Income from discontinued operations	$	45,525		$	1,085		$	80,433		$	2,834		$	—		$	1,000		$	—		$	35,275
Noncontrolling interest	(1,374		)	(43		)	(2,729		)	(112		)	—			(34		)	—			(1,368		)
Income from discontinued operations used to calculate earnings per share—basic and diluted	$	44,151		$	1,042		$	77,704		$	2,722		$	—		$	966		$	—		$	33,907
Basic and diluted earnings (loss) per share:
Basic and diluted (loss) earnings per share:
Loss from continuing operations	$	(0.53	)	$	(0.29	)	$	(0.99	)	$	(0.75	)	$	(0.40	)	$	(0.22	)	$	(0.58	)	$	(0.43	)
Income from discontinued operations	0.65			0.02			1.25			0.05			—			0.02			—			0.56
	$	0.12		$	(0.27	)	$	0.26		$	(0.70	)	$	(0.40	)	$	(0.20	)	$	(0.58	)	$	0.13
(in thousands of shares)
Weighted average shares outstanding—basic	67,579			55,190			62,330			55,081			68,236			63,540			68,091			59,661
Effect of common share equivalents⁽¹⁾	—			—			—			—			—			—			—			—
Weighted average shares outstanding—diluted	67,579			55,190			62,330			55,081			68,236			63,540			68,091			59,661

_________________________

⁽¹⁾

The Company had net losses from continuing operations for all periods presented. Therefore, the effects of common share equivalents of ~~825~~309 and ~~982~~727 for the three months ended ~~September~~June 30, ~~2013~~2014 and ~~2012~~2013, respectively, and ~~851~~326 and ~~1,017~~780 for the ~~nine~~six months ended ~~September~~June 30, ~~2013~~2014 and ~~2012~~,2013, respectively, are excluded from the calculation of diluted loss per share for these periods because they would be antidilutive.

See accompanying notes to the unaudited consolidated financial statements.

Table of Contents

PENNSYLVANIA REAL ESTATE INVESTMENT TRUST

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

Three Months Ended
September 30, Nine Months Ended
September 30,
(in thousands of dollars) 2013 2012 2013 2012
Comprehensive income (loss):
Net income (loss) $ 12,584
$ (12,861 ) $ 29,382
$ (35,678 )
Unrealized gain on derivatives 651
3,030
8,747
7,307
Amortization of losses (gains) of settled swaps, net 984
289
4,766
797
Total comprehensive income (loss) 14,219
(9,542 ) 42,895
(27,574 )
Less: comprehensive (income) loss attributable to noncontrolling interest (402 ) 375
(1,523 ) 1,113
Comprehensive income (loss) attributable to PREIT $ 13,817
$ (9,167 ) $ 41,372
$ (26,461 )



	Three Months Ended June 30,						Six Months Ended June 30,
(in thousands of dollars)	2014			2013			2014			2013
Comprehensive (loss) income:
Net (loss) income	$	(24,050	)	$	(9,009	)	$	(32,406	)	$	16,798
Unrealized (loss) gain on derivatives	(1,919		)	5,917			(3,102		)	8,096
Amortization of losses of settled swaps, net of gains	1,544			3,577			1,837			3,782
Total comprehensive (loss) income	(24,425		)	485			(33,671		)	28,676
Less: comprehensive loss (income) attributable to noncontrolling interest	773			(23		)	1,052			(1,121		)
Comprehensive (loss) income attributable to PREIT	$	(23,652	)	$	462		$	(32,619	)	$	27,555

See accompanying notes to the unaudited consolidated financial statements.

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PENNSYLVANIA REAL ESTATE INVESTMENT TRUST

CONSOLIDATED STATEMENTS OF EQUITY

~~Nine~~Six Months Ended

~~September~~June 30, ~~2013~~2014

(Unaudited)

PREIT Shareholders
(in thousands of dollars, except per share amounts)
Total
Equity

Series A
Preferred
Shares, $.01 par

Series B
Preferred
Shares, $.01 par

Shares of
Beneficial
Interest,
$1.00 Par

Capital
Contributed
in Excess of
Par

Accumulated
Other
Comprehensive
Income (Loss)

Distributions
in Excess of
Net Income

Non-
controlling
interest
Balance December 31, 2012 $ 713,229
$ 46
$ 35
$ 56,331
$ 1,247,730
$ (20,867 ) $ (608,634 ) $ 38,588
Net income 29,382
—
—
—
—
—
28,309
1,073
Comprehensive income 13,513
—
—
—
—
13,063
—
450
Common shares issued in 2013 public offering, net 220,300
—
—
11,500
208,800
—
—
—
Shares issued upon redemption of Operating Partnership units —
—
—
172
2,371
—
—
(2,543 )
Shares issued under employee compensation plans, net of shares retired (1,103 ) —
—
199
(1,302 ) —
—
—
Amortization of deferred compensation 6,246
—
—
—
6,246
—
—
—
Distributions paid to common shareholders ($0.54 per share) (34,674 ) —
—
—
—
—
(34,674 ) —
Distributions paid to Series A preferred shareholders ($1.5468 per share) (7,115 ) —
—
—
—
—
(7,115 ) —
Distributions paid to Series B preferred shareholders ($1.3827 per share) (4,771 ) —
—
—
—
—
(4,771 ) —
Noncontrolling interests:
Distributions paid to Operating Partnership unit holders ($0.54 per unit) (1,198 ) —
—
—
—
—
—
(1,198 )
Amortization of historic tax credit (1,810 ) —
—
—
—
—
—
(1,810 )
Other distributions to noncontrolling interests, net (272 ) —
—
—
—
—
(272 )
Balance September 30, 2013 $ 931,727
$ 46
$ 35
$ 68,202
$ 1,463,845
$ (7,804 ) $ (626,885 ) $ 34,288



				PREIT Shareholders
(in thousands of dollars, except per share amounts)	Total Equity			Series A Preferred Shares, $.01 par		Series B Preferred Shares, $.01 par		Shares of Beneficial Interest, $1.00 Par		Capital Contributed in Excess of Par			Accumulated Other Comprehensive Income (Loss)			Distributions in Excess of Net Income			Non- controlling interest
Balance December 31, 2013	$	926,452		$	46	$	35	$	68,293	$	1,467,460		$	(6,637	)	$	(636,939	)	$	34,194
Net loss	(32,406		)	—		—		—		—			—			(31,429		)	(977		)
Other comprehensive loss	(1,265		)	—		—		—		—			(1,190		)	—			(75		)
Shares issued under employee compensation plans, net of shares retired	(1,942		)	—		—		456		(2,398		)	—			—			—
Amortization of deferred compensation	5,463			—		—		—		5,463			—			—			—
Distributions paid to common shareholders ($0.40 per share)	(27,466		)	—		—		—		—			—			(27,466		)	—
Distributions paid to Series A preferred shareholders ($1.0312 per share)	(4,744		)	—		—		—		—			—			(4,744		)	—
Distributions paid to Series B preferred shareholders ($0.9218 per share)	(3,180		)	—		—		—		—			—			(3,180		)	—
Noncontrolling interests:
Distributions paid to Operating Partnership unit holders ($0.40 per unit)	(852		)	—		—		—		—			—			—			(852		)
Other distributions to noncontrolling interests, net	(266		)	—		—		—		—			—			—			(266		)
Balance June 30, 2014	$	859,794		$	46	$	35	$	68,749	$	1,470,525		$	(7,827	)	$	(703,758	)	$	32,024

See accompanying notes to the unaudited consolidated financial statements.

Table of Contents

PENNSYLVANIA REAL ESTATE INVESTMENT TRUST

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Nine Months Ended September 30,						Six Months Ended June 30,
(in thousands of dollars)	2013			2012			2014			2013
Cash flows from operating activities:
Net income (loss)	$	29,382		$	(35,678	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Net (loss) income							$	(32,406	)	$	16,798
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation	99,163			94,659			68,415			65,430
Amortization	9,932			11,655			4,949			6,995
Straight-line rent adjustments	(1,032		)	(1,292		)	(823		)	(757		)
Provision for doubtful accounts	1,872			2,260			629			1,103
Amortization of deferred compensation	6,246			8,208			5,463			4,422
Loss on hedge ineffectiveness	3,409			—			1,238			2,693
Gains on sales of real estate	(78,351		)	—			(99		)	(33,254		)
Equity in income of partnerships, net of distributions	(2,496		)	—			(853		)	(1,623		)
Amortization of historic tax credits	(2,494		)	(1,810		)
Impairment of assets and expensed project costs	30,416						17,659			—
Change in assets and liabilities:
Net change in other assets	(5,051		)	(8,997		)	14,739			10,330
Net change in other liabilities	(6,470		)	7,864			4,855			(14,372		)
Net cash provided by operating activities	84,526			76,869			83,766			57,765
Cash flows from investing activities:
Investments in consolidated real estate acquisitions	(60,879		)	—			(20,000		)	(60,879		)
Additions to construction in progress	(24,524		)	(32,008		)	(17,493		)	(13,775		)
Investments in real estate improvements	(25,191		)	(24,303		)	(19,502		)	(11,224		)
Cash proceeds from sales of real estate	173,280			—			23,600			126,895
Additions to leasehold improvements	(212		)	(693		)	(736		)	(145		)
Investments in partnerships	(207		)	(3,640		)	(3,651		)	(166		)
Capitalized leasing costs	(3,902		)	(4,137		)	(2,829		)	(2,722		)
Increase in cash escrows	1,600			151			(211		)	(470		)
Cash distributions from partnerships in excess of equity in income	1,257			2,005			1,482			577
Net cash provided by (used in) investing activities	61,222			(62,625		)
Net cash (used in) provided by investing activities							(39,340		)	38,091
Cash flows from financing activities:
Net proceeds from issuance of common shares	220,300			—			—			220,300
Net proceeds from issuance of preferred shares	—			110,896
Repayments of Term Loan	(182,000		)	—
Net borrowings from (repayments of) Revolving Facility	90,000			(80,000		)
Repayment of Exchangeable Notes	—			(136,900		)
Borrowings from (repayments of) term loans							130,000			(182,000		)
Net (repayments of) borrowings from revolving facility							(130,000		)	35,000
Proceeds from mortgage loans	76,692			467,750			—			76,692
Principal installments on mortgage loans	(12,698		)	(15,714		)	(7,849		)	(8,447		)
Repayments of mortgage loans	(294,514		)	(320,731		)	—			(217,524		)
Payment of deferred financing costs	(3,764		)	(1,817		)	(1,882		)	(3,613		)
Dividends paid to common shareholders	(34,674		)	(26,778		)	(27,466		)	(22,402		)
Dividends paid to preferred shareholders	(11,886		)	(3,821		)	(7,924		)	(7,924		)
Distributions paid to Operating Partnership unit holders	(1,198		)	(1,099		)	(852		)	(813		)
Value of shares of beneficial interest issued	1,315			1,413			2,691			828
Value of shares retired under equity incentive plans, net of shares issued	(2,418		)	(2,993		)	(4,633		)	(2,418		)
Net cash used in financing activities	(154,845		)	(9,794		)	(47,915		)	(112,321		)
Net change in cash and cash equivalents	(9,097		)	4,450			(3,489		)	(16,465		)
Cash and cash equivalents, beginning of period	33,990			21,798			34,230			33,990
Cash and cash equivalents, end of period	$	24,893		$	26,248		$	30,741		$	17,525

See accompanying notes to the unaudited consolidated financial statements.

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PENNSYLVANIA REAL ESTATE INVESTMENT TRUST

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

~~September~~June 30, ~~2013~~2014

1. BASIS OF PRESENTATION

Nature of Operations

Pennsylvania Real Estate Investment Trust (“PREIT” or the “Company”) prepared the accompanying unaudited consolidated financial statements pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted pursuant to such rules and regulations, although we believe that the included disclosures are adequate to make the information presented not misleading. Our unaudited consolidated financial statements should be read in conjunction with the audited financial statements and the notes thereto included in PREIT’s Annual Report on Form 10-K for the year ended December 31, ~~2012.~~2013. In our opinion, all adjustments, consisting only of normal recurring adjustments, necessary to present fairly our consolidated financial position, the consolidated results of our operations, consolidated statements of other comprehensive income (loss), consolidated statements of equity and our consolidated statements of cash flows are included. The results of operations for the interim periods presented are not necessarily indicative of the results for the full year.

PREIT, a Pennsylvania business trust founded in 1960 and one of the first equity real estate investment trusts (“REITs”) in the United States, has a primary investment focus on retail shopping malls located in the eastern half of the United States, primarily in the Mid-Atlantic region. As of ~~September~~June 30, ~~2013~~2014, our portfolio consisted of a total of 4445 properties in 12 states, including 3634 shopping malls, ~~five~~seven ~~strip and power centers~~other retail properties and ~~three~~four development properties, with two of the development properties classified as “mixed use” (a combination of retail and other uses), one of the properties classified as “other retail” (outlet) and one of the development properties classified as “other.~~” We have recorded the results of~~ ~~five~~ ~~properties sold in the nine months ended September 30, 2013 as “discontinued operations.~~”

We hold our interest in our portfolio of properties through our operating partnership, PREIT Associates, L.P. (“PREIT Associates” or the “Operating Partnership”). We are the sole general partner of the Operating Partnership and, as of ~~September~~June 30, ~~2013~~2014, we held a 97.0% controlling interest in the Operating Partnership, and consolidated it for reporting purposes. The presentation of consolidated financial statements does not itself imply that the assets of any consolidated entity (including any special-purpose entity formed for a particular project) are available to pay the liabilities of any other consolidated entity, or that the liabilities of any consolidated entity (including any special-purpose entity formed for a particular project) are obligations of any other consolidated entity.

Pursuant to the terms of the partnership agreement of the Operating Partnership, each of the limited partners has the right to redeem such partner’s units of limited partnership interest in the Operating Partnership (“OP Units”) for cash or, at our election, we may acquire such OP Units in exchange for our common shares on a one-for-one basis, in some cases beginning one year following the respective issue dates of the OP Units and in other cases immediately. If all of the outstanding OP Units held by limited partners had been redeemed for cash as of ~~September~~June 30, ~~2013~~2014, the total amount that would have been distributed would have been $~~39.8~~40.1 million, which is calculated using our ~~September~~June 30, ~~2013~~2014 closing price on the New York Stock Exchange of $~~18.70~~18.82 per share multiplied by the number of outstanding OP Units held by limited partners, which was 2,129,202 as of ~~September~~June 30, ~~2013~~2014.

We provide management, leasing and real estate development services through two companies: PREIT Services, LLC (“PREIT Services”), which generally develops and manages properties that we consolidate for financial reporting purposes, and PREIT-RUBIN, Inc. (“PRI”), which generally develops and manages properties that we do not consolidate for financial reporting purposes, including properties owned by partnerships in which we own an interest and properties that are owned by third parties in which we do not have an interest. PREIT Services and PRI are consolidated. PRI is a taxable REIT subsidiary, as defined by federal tax laws, which means that it is able to offer an expanded menu of services to tenants without jeopardizing our continuing qualification as a REIT under federal tax law.

We evaluate operating results and allocate resources on a property-by-property basis, and do not distinguish or evaluate our consolidated operations on a geographic basis. ~~We do not~~Due to the nature of our operating properties, which involve retail shopping, we have ~~any significant revenue or asset concentrations, and thus the~~concluded that our individual properties have ~~been~~similar economic characteristics and meet all other aggregation criteria. Accordingly, we have aggregated our individual properties into one reportable ~~segment based upon their similarities with regard to the nature of our properties and the nature of our tenants and operational processes, as well as long-term financial performance.~~segment. In addition, no single tenant accounts for 10% or more of consolidated revenue, and none of our properties are located outside the United States.

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Fair Value

Fair value accounting applies to reported balances that are required or permitted to be measured at fair value under existing accounting pronouncements. Fair value measurements are determined based on the assumptions that market participants would use in pricing the asset or liability. As a basis for considering market participant assumptions in fair value measurements, these accounting requirements establish a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within Levels 1 and 2 of the hierarchy) and the reporting entity’s own assumptions about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy).

Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities that we have the ability to access.

Level 2 inputs are inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs might include quoted prices for similar assets and liabilities in active markets, as well as inputs that are observable for the asset or liability (other than quoted prices), such as interest rates, foreign exchange rates, and yield curves that are observable at commonly quoted intervals.

Level 3 inputs are unobservable inputs for the asset or liability, and are typically based on an entity’s own assumptions, as there is little, if any, related market activity.

In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability. We utilize the fair value hierarchy in our accounting for derivatives (Level 2) and financial instruments (Level 2) and in our reviews for impairment of real estate assets (Level 3) and goodwill (Level 3).

New Accounting Developments

In May 2014, the Financial Accounting Standards Board issued “Revenue from Contracts with Customers.” The objective of this new standard is to establish a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. The core principle of this new standard is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The new guidance is effective for annual reporting periods beginning after December 15, 2016 for public companies. Early adoption is not permitted. Entities have the option of using either a full retrospective or modified approach to adopt this standard. We are currently evaluating the new guidance and have not determined the impact this standard may have on our financial statements nor have we decided upon the method of adoption.

In ~~2013,~~April 2014, we adopted new accounting requirements ~~relating~~pertaining to the ~~presentation~~reporting of ~~comprehensive income. The~~discontinued operations. These new accounting requirements ~~mandate disclosure about items reclassified out~~are required to be effective for the first quarter of ~~accumulated other comprehensive income and into net income, and makes reference to other disclosures about items~~2015 but may be adopted as early as the first quarter of 2014 only for disposals or classifications as held for sale that ~~are~~have not ~~reclassified~~been reported in ~~their entirety into net income. The adoption of~~financial statements previously issued or available for issuance. Under these new accounting requirements, ~~did not have~~only disposals representing a ~~material effect on~~strategic shift in operations will be presented as discontinued operations. Previously, under U.S. GAAP, companies that sold a single investment property were generally required to report the sale as a discontinued operation, which required the companies to reclassify earnings from continuing operations for all periods presented. These new accounting requirements require expanded disclosures about discontinued operations that will provide financial statement users with more information about the assets, liabilities, income and expenses of discontinued operations.

In June 2014, we sold South Mall in Allentown, Pennsylvania. We applied these new accounting requirements by reporting the results of operations of South Mall in the continuing operations section of our ~~financial statements.~~unaudited consolidated statements of operations.

~~Reclassification~~Correction of Prior Period Presentation

Certain prior period amounts have been reclassified to conform with the current year presentation.

Our previously reported results of operations for the three and six months ended June 30, 2013 have been corrected to ~~current period presentation.~~eliminate certain immaterial intercompany revenues and expenses. These immaterial corrections had no effect on net income (loss), basic or diluted earnings (loss) per share amounts, comprehensive income (loss), shareholders' equity or cash flows. The immaterial

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corrections reduced both other real estate revenue and other operating expenses by approximately $0.1 million and $0.3 million for the three and six months ended June 30, 2013, respectively.

2. REAL ESTATE ACTIVITIES

Investments in real estate as of ~~September~~June 30, ~~2013~~2014 and December 31, ~~2012~~2013 were comprised of the following:


(in thousands of dollars)	As of September 30, 2013			As of December 31, 2012			As of June 30, 2014			As of December 31, 2013
Buildings, improvements and construction in progress	$	3,039,163		$	2,996,301		$	3,056,170		$	3,049,758
Land, including land held for development	481,988			481,239			475,041			478,110
Total investments in real estate	3,521,151			3,477,540			3,531,211			3,527,868
Accumulated depreciation	(993,735		)	(907,928		)	(1,063,080		)	(1,012,746		)
Net investments in real estate	$	2,527,416		$	2,569,612		$	2,468,131		$	2,515,122

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Capitalization of Costs

The following table summarizes our capitalized salaries, commissions and benefits ~~real estate taxes~~ and interest for the three and ~~nine~~six months ended ~~September~~June 30, ~~2013~~2014 and ~~2012~~2013:


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended June 30,				Six Months Ended June 30,
(in thousands of dollars)	2013		2012		2013		2012		2014		2013		2014		2013
Development/Redevelopment Activities:
Salaries and benefits	$	272	$	193	$	585	$	675	$	431	$	136	$	825	$	313
Real estate taxes	5		133		5		277
Interest	331		325		620		1,430		191		213		294		289
Leasing Activities:
Salaries, commissions and benefits	1,180		1,636		3,902		4,137		1,409		1,185		2,829		2,722

Dispositions

In July 2014, we entered into a 50/50 joint venture with The Macerich Company to redevelop the Gallery at Market East in Philadelphia, Pennsylvania. In connection therewith, we contributed and sold real estate assets to the venture and Macerich acquired its interest in the venture and real estate from us for $106.8 million in cash. It is expected that both parties will make additional investments in the project. We used $25.8 million of such proceeds to repay a mortgage loan secured by 801 Market Street, a property that is part of the Gallery complex, $50.0 million to repay the outstanding balance on our 2013 Revolving Facility, and the remaining proceeds for general corporate purposes.

In June 2014, we sold South Mall in Allentown, Pennsylvania for $23.6 million, representing a capitalization rate of 10.1%. We recorded a gain of $0.1 million from the sale of this property.

Impairment of Assets

~~Chambersburg~~Nittany Mall

In ~~September 2013,~~June 2014, we recorded a loss on impairment of assets at ~~Chambersburg~~Nittany Mall in ~~Chambersburg,~~State College, Pennsylvania of $~~23.7 million~~ ~~to write down the carrying value of the property’s long-lived assets to the property’s estimated fair value of~~ ~~$8.2~~13.9 million. During the ~~third~~second quarter of ~~2013,~~2014, we entered into negotiations with a ~~potential~~prospective buyer of the property, which are ongoing and could result in changes to our underlying assumptions. As a result of ~~this factor,~~these negotiations, we determined that the holding period for the property was less than had been previously estimated, which we concluded to be a triggering event, leading us to conduct an analysis of possible asset impairment at this property. ~~Using updated assumptions based on this factor,~~Based upon the purchase and sale agreement with the prospective buyer of the property, we determined that the estimated undiscounted cash flows, net of estimated capital expenditures, for ~~Chambersburg~~Nittany Mall were less than the carrying value of the property, and recorded the impairment loss.

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North Hanover Mall

In ~~September 2013,~~June 2014, we recorded a loss on impairment of assets at North Hanover Mall in Hanover, Pennsylvania of $~~6.3 million~~ ~~to write down the carrying value of the property’s long-lived assets to the property’s estimated fair value of~~ ~~$16.7~~2.2 million. ~~We had previously recognized a loss on impairment of assets on the property of~~ ~~$24.1 million~~ ~~in 2011.~~ ~~Since 2011, the property experienced further declines in net operating income and occupancy.~~ During the ~~third~~second quarter of ~~2013,~~2014, we entered into negotiations with a ~~potential~~prospective buyer of the property, which are ongoing and could result in changes to our underlying assumptions. As a result of these ~~factors,~~negotiations, we determined that the holding period for the property was less than had been previously ~~been~~ estimated, which we concluded to be a triggering event, leading us to conduct an analysis of possible asset impairment at this property. ~~Using updated assumptions based on these factors,~~Based upon the purchase and sale agreement with the prospective buyer of the property, we determined that the estimated undiscounted cash flows, net of estimated capital expenditures, for North Hanover ~~Mall~~ were less than the carrying value of the property, and recorded the impairment loss. We previously recognized impairment losses on North Hanover of $6.3 million in 2013 and $24.1 million in 2011.

South Mall

In March 2014, we recorded a loss on impairment of assets at South Mall in Allentown, Pennsylvania of $1.3 million. We sold the property in June 2014.

~~Acquisitions~~

~~In April 2013, we acquired a building located contiguous to The Gallery at Market East in Philadelphia, Pennsylvania for~~ ~~$59.6 million, representing a capitalization rate of approximately~~ ~~5.7%~~.

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~~Dispositions~~

~~The table below presents our dispositions since January 1, 2013:~~

Sale Date
Property and
Location

Description of Real
Estate Sold

Capitalization
Rate
Sale Price (in millions of dollars) Gain (in millions of dollars)
2013 Activity:
January
Phillipsburg Mall,
Phillipsburg, New Jersey ⁽¹⁾
Mall 9.8 % $ 11.5
$ —

Paxton Towne Centre,
Harrisburg, Pennsylvania⁽²⁾⁽³⁾
Power center 6.9 % 76.8
32.7
February
Orlando Fashion Square,
Orlando, Florida ⁽⁴⁾
Mall 9.8 % 35.0
0.6
September
Commons at Magnolia,
Florence, South Carolina ⁽⁵⁾
Strip center 8.9 % 12.3
4.2

Christiana Center,
Newark, Delaware ^(3)(5)(6)
Power center 6.5 % 75.0
40.9

~~_________________________~~


⁽¹⁾	~~We used proceeds of~~ ~~$11.5 million~~ ~~plus~~ ~~$4.5 million~~ of available working capital to pay for the release of the lien on this collateral property that secured a portion of the 2010 Credit Facility (as defined in note 4 to the unaudited consolidated financial statements).


⁽²⁾	~~We used proceeds from the sale of this property to repay the~~ ~~$50.0 million~~ ~~mortgage loan secured by the property.~~


⁽³⁾	~~We divested goodwill of~~ ~~$0.7 million~~ ~~and~~ ~~$0.8 million~~ ~~in connection with the dispositions of Paxton Towne Centre and Christiana Center, respectively.~~


⁽⁴⁾	~~We used proceeds of~~ ~~$35.0 million~~ ~~plus a nominal amount of available working capital to pay for the release of the lien on this collateral property that secured a portion of the 2010 Credit Facility.~~


⁽⁵⁾	~~We used combined proceeds from the sales of these properties to repay~~ ~~$35.0 million~~ ~~of amounts outstanding under our 2013 Revolving Facility and we used the remaining proceeds for general corporate purposes.~~


⁽⁶⁾	~~The buyer of this property assumed the~~ ~~$49.2 million~~ ~~mortgage loan secured by this property.~~

~~Other Dispositions~~

~~In September 2013, we sold a condominium interest in connection with a ground lease located at Voorhees Town Center in Voorhees, New Jersey for~~ ~~$10.5 million~~. No ~~gain or loss was recorded in connection with this sale.~~

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Discontinued Operations

We have presented as discontinued operations the operating results of Phillipsburg Mall, Orlando Fashion Square, Chambersburg Mall, Paxton Towne Centre, Christiana Center and Commons at ~~Magnolia.~~Magnolia, which are properties that were sold in 2013. The following table summarizes revenue and expense information for the three and ~~nine~~six months ended ~~September~~June 30, 2013 ~~and~~ ~~2012~~ for these discontinued ~~operations:~~operations (there were no operating results for these properties from, and there were no properties classified in, discontinued operations in the three or six months ended June 30, 2014):


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended June 30,				Six Months Ended June 30,
(in thousands of dollars)	2013			2012			2013			2012				2013				2013
Real estate revenue	$	1,427		$	7,027		$	6,221		$	21,048			$	2,745			$	6,888
Expenses:
Operating expenses	(443		)	(2,983		)	(2,170		)	(9,521		)		(795		)		(2,881		)
Depreciation and amortization	(62		)	(1,858		)	(216		)	(5,662		)		(363		)		(727		)
Interest expense	(494		)	(1,101		)	(1,753		)	(3,031		)		(587		)		(1,259		)
Total expenses	(999		)	(5,942		)	(4,139		)	(18,214		)		(1,745		)		(4,867		)
Operating results from discontinued operations	428			1,085			2,082			2,834				1,000				2,021
Gains on sales of discontinued operations	45,097			—			78,351			—				—				33,254
Income from discontinued operations	$	45,525		$	1,085		$	80,433		$	2,834			$	1,000			$	35,275

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3. INVESTMENTS IN PARTNERSHIPS

The following table presents summarized financial information of the equity investments in our unconsolidated partnerships as of ~~September~~June 30, ~~2013~~2014 and December 31, ~~2012~~2013:


(in thousands of dollars)	As of September 30, 2013			As of December 31, 2012			As of June 30, 2014			As of December 31, 2013
ASSETS:
Investments in real estate, at cost:
Operating properties	$	415,643		$	414,515		$	419,458		$	416,964
Construction in progress	2,569			2,003			20,037			2,298
Total investments in real estate	418,212			416,518			439,495			419,262
Accumulated depreciation	(166,439		)	(157,361		)	(175,850		)	(169,369		)
Net investments in real estate	251,773			259,157			263,645			249,893
Cash and cash equivalents	11,413			9,833			11,831			15,327
Deferred costs and other assets, net	19,790			18,605			18,011			19,474
Total assets	282,976			287,595			293,487			284,694
LIABILITIES AND PARTNERS’ DEFICIT:
Mortgage loans payable	400,399			405,297			395,266			398,717
Other liabilities	6,257			9,130			9,841			9,667
Total liabilities	406,656			414,427			405,107			408,384
Net deficit	(123,680		)	(126,832		)	(111,620		)	(123,690		)
Partners’ share	(66,210		)	(67,735		)	(57,071		)	(66,325		)
PREIT’s share	(57,470		)	(59,097		)	(54,549		)	(57,365		)
Excess investment⁽¹⁾	8,898			9,078			9,044			8,837
Net investments and advances	$	(48,572	)	$	(50,019	)	$	(45,505	)	$	(48,528	)

Investment in partnerships, at equity	$	15,615		$	14,855		$	19,170		$	15,963
Distributions in excess of partnership investments	(64,187		)	(64,874		)	(64,675		)	(64,491		)
Net investments and advances	$	(48,572	)	$	(50,019	)	$	(45,505	)	$	(48,528	)

_________________________


⁽¹⁾	Excess investment represents the unamortized difference between our investment and our share of the equity in the underlying net investment in the partnerships. The excess investment is amortized over the life of the properties, and the amortization is included in “Equity in income of partnerships.”

We record distributions from our equity investments as cash from operating activities up to an amount equal to the equity in income of partnerships. Amounts in excess of our share of the income in the equity investments are treated as a return of partnership capital and recorded as cash from investing activities.

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The following table summarizes our share of equity in income of partnerships for the three and ~~nine~~six months ended ~~September~~June 30, ~~2013~~2014 and ~~2012~~2013:


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended June 30,						Six Months Ended June 30,
(in thousands of dollars)	2013			2012			2013			2012			2014			2013			2014			2013
Real estate revenue	$	20,153		$	19,530		$	59,941		$	57,594		$	20,331		$	19,528		$	41,507		$	39,722
Expenses:
Operating expenses	(6,037		)	(5,755		)	(17,774		)	(17,006		)	(5,749		)	(5,725		)	(12,849		)	(11,694		)
Interest expense	(5,539		)	(5,640		)	(16,659		)	(16,939		)	(5,452		)	(5,545		)	(10,927		)	(11,094		)
Depreciation and amortization	(3,695		)	(3,600		)	(10,801		)	(10,801		)	(3,413		)	(3,534		)	(7,062		)	(7,106		)
Total expenses	(15,271		)	(14,995		)	(45,234		)	(44,746		)	(14,614		)	(14,804		)	(30,838		)	(29,894		)
Net income	4,882			4,535			14,707			12,848			5,717			4,724			10,669			9,828
Less: Partners’ share	(2,435		)	(2,267		)	(7,318		)	(6,422		)	(2,858		)	(2,339		)	(5,331		)	(4,885		)
PREIT’s share	2,447			2,268			7,389			6,426			2,859			2,385			5,338			4,943
Amortization of excess investment	(102		)	(104		)	(308		)	(316		)	(75		)	(102		)	(152		)	(207		)
Equity in income of partnerships	$	2,345		$	2,164		$	7,081		$	6,110		$	2,784		$	2,283		$	5,186		$	4,736

Acquisitions

In June 2014, we contributed $3.2 million, representing a 25% interest, to the partnership that will be developing Gloucester Premium Outlets in Gloucester Township, New Jersey. The partnership used our and our partners' contribution to purchase the land on which the property will be developed.

Financing Activity

In June 2014, the partnership that will be developing Gloucester Premium Outlets entered into a $90.0 million construction loan. The initial term of the loan is four years with an extension option for one year. The loan is interest only and the interest rate is LIBOR plus 1.50% during the initial term and decreases to LIBOR plus 1.40% if and when the project is completed and a 1.10x debt service coverage ratio is achieved.

Lehigh Valley Mall

We have a 50% partnership interest in Lehigh Valley Associates LP, the owner of the substantial majority of Lehigh Valley Mall, which is a significant unconsolidated subsidiary, and which is included in the amounts above. Summarized balance sheet information as of June 30, 2014 and December 31, 2013 and summarized statement of operations information for the three and six months ended June 30, 2014 and 2013 for this entity, which is accounted for using the equity method, is as follows:



	As of
(in thousands of dollars)	June 30, 2014		December 31, 2013
Summarized balance sheet information
Total assets	$	51,379	$	55,592
Mortgage loan payable	132,484		133,542

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	Three Months Ended June 30,						Six Months Ended June 30,
(in thousands of dollars)	2014			2013			2014			2013
Summarized statement of operations information
Revenue	$	8,961		$	8,509		$	18,096		$	17,326
Property operating expenses	(2,455		)	(2,385		)	(5,211		)	(4,607		)
Interest expense	(1,964		)	(1,994		)	(3,935		)	(3,996		)
Net income	3,774			3,326			7,090			7,082
PREIT's share of equity in income of partnership	1,887			1,663			3,545			3,541

4. FINANCING ACTIVITY

2013 Revolving Facility, as amended

OnIn April ~~17,~~ 2013, PREIT, PREIT Associates, and PRI (collectively, the “Borrower” or “we”) entered into a ~~Credit Agreement (the~~credit agreement (as amended, the “2013 Revolving Facility”) with Wells Fargo Bank, National Association, and the other financial institutions signatory thereto, for a $400.0 million senior unsecured revolving credit facility. The 2013 Revolving Facility replaced the previously existing 2010 Credit Facility. In December 2013, we amended the 2013 Revolving Facility to make certain terms of the 2013 Revolving Facility consistent with the terms of the 2014 Term Loans (discussed below). The 2013 Revolving Facility and the 2014 Term Loans are collectively referred to as the "Credit Agreements." All capitalized terms used in this note 4 and not otherwise defined herein have the meanings ascribed to such terms in the 2013 Revolving Facility.

As of ~~September~~June 30, ~~2013~~2014, ~~$90.0 million~~ ~~was~~there were no amounts outstanding under our 2013 Revolving Facility, and ~~the~~$7.1 million was pledged as collateral for letters of credit. The unused portion of the 2013 Revolving Facility that was available to us was $~~310.0~~392.9 million. ~~In October 2013, we borrowed an additional~~ ~~$70.0 million, which was used in the October 2013 repayment of the mortgage loan secured by Exton Square Mall and for other working capital purposes.~~ ~~Following this borrowing, there was~~ ~~$160.0 million~~ ~~outstanding under our 2013 Revolving Facility and the unused portion that was available to us was~~ ~~$240.0~~ ~~million.~~

~~The weighted average interest rate on outstanding 2013 Revolving Facility borrowings as of~~ ~~September 30, 2013~~ ~~was~~ ~~1.88%~~. Interest expense related to the 2013 Revolving Facility was ~~$0.6~~$0.3 million and ~~$1.3~~$0.8 million for the three months ended June 30, 2014 and 2013, respectively, and $0.8 million for each of the ~~nine~~six months ended ~~September~~June 30, ~~2013~~2014, and 2013, respectively. Deferred financing fee amortization associated with the 2013 Revolving Facility was ~~$0.4~~$0.4 million for each of the three months ended June 30, 2014 and ~~$0.8~~2013, and $0.7 million and $0.4 million for the ~~three and~~ ~~nine~~six months ended ~~September~~June 30, ~~2013~~2014, and 2013, respectively.

The initial maturity of the 2013 Revolving Facility is April 17, 2016, and the Borrower has options for two one-year extensions of the initial maturity date, subject to certain conditions and to the payment of an extension ~~fee~~fees of 0.15% and 0.20% of the Facility Amount for the first and second options, respectively.

The Borrower has the option to increase the maximum amount available under the 2013 Revolving Facility, through an accordion option, from $400.0 million to as much as $600.0 million, in increments of $5.0 million (with a minimum increase of $25.0 million), based on Wells Fargo Bank’s ability to obtain increases in Revolving Commitments from the current lenders or Revolving Commitments from new lenders. No option to increase the maximum amount available under the 2013 Revolving Facility has been exercised by the Borrower.

Amounts borrowed under the 2013 Revolving Facility bear interest at a rate between 1.50% and 2.05% per annum, depending on PREIT’s leverage, in excess of LIBOR, with no floor, as set forth in the table below. The rate in effect at ~~September~~June 30, ~~2013~~2014 was 1.70% per annum in excess of LIBOR. In determining PREIT’s leverage (the ratio of Total Liabilities to Gross Asset Value), the capitalization rate used to calculate Gross Asset Value is (a) 6.50% for each Property having an average sales per square foot of more than $500 for the most recent period of 12 consecutive months, and (b) 7.50% for any other Property.



Level	Ratio of Total Liabilities to Gross Asset Value	Applicable Margin
1	Less than 0.450 to 1.00	1.50	%
2	Equal to or greater than 0.450 to 1.00 but less than 0.500 to 1.00	1.70	%
3	Equal to or greater than 0.500 to 1.00 but less than 0.550 to 1.00	1.85	%
4	Equal to or greater than 0.550 to 1.00	2.05	%

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In the event that we seek and obtain an investment grade credit rating, alternative interest rates would apply. The unused portion of the 2013 Revolving Facility is subject to a fee of 0.30% per annum. In the event that we seek and obtain an investment grade credit rating, alternative facility fees would apply.

~~Certain~~PREIT and the subsidiaries of ~~PREIT’s subsidiaries~~PREIT that ~~are not otherwise prevented from doing so~~either (1) account for more than 2.5% of adjusted Gross Asset Value (other than an Excluded Subsidiary), (2) own or lease an Unencumbered Property, or (3) own, directly or indirectly, a subsidiary described in clause (2) serve as guarantors for funds borrowed under the 2013 Credit Facility. In the event that we seek and obtain an investment grade credit rating, we may request that a subsidiary guarantor be released, unless such guarantor becomes obligated in respect of the debt of the Borrower or another subsidiary or owns Unencumbered Property or incurs recourse debt.

The 2013 Revolving ~~Facility.~~Facility and the 2014 Term Loans (discussed below) are cross-defaulted with one another.

The 2013 Revolving Facility and the 2014 Term Loans contain certain affirmative and negative covenants which are identical and which are described in detail below in the section entitled “Identical covenants contained in the 2013 Revolving Facility and 2014 Term Loans.” As of June 30, 2014, the Borrower was in compliance with all such financial covenants.

The Borrower may prepay the 2013 Revolving Facility at any time without premium or penalty, subject to reimbursement obligations for the lenders’ breakage costs for LIBOR borrowings. The Borrower must repay the entire principal amount outstanding under the 2013 Revolving Facility at the end of its term, as the term may be extended.

Upon the expiration of any applicable cure period following an event of default, the lenders may declare all of the obligations in connection with the 2013 Revolving Facility immediately due and payable, and the Commitments of the lenders to make further loans under the 2013 Revolving Facility will terminate. Upon the occurrence of a voluntary or involuntary bankruptcy proceeding of PREIT, PREIT Associates, PRI, any Material Subsidiary, any subsidiary that owns or leases an Unencumbered Property or certain other subsidiaries, all outstanding amounts will automatically become immediately due and payable and the Commitments of the lenders to make further loans will automatically terminate.

2014 Term Loans

On January 8, 2014, the Borrower entered into two unsecured term loans in the initial aggregate amount of $250.0 million, comprised of:

(1) a 5 Year Term Loan Agreement (the “5 Year Term Loan”) with Wells Fargo Bank, National Association, U.S. Bank National Association and the other financial institutions signatory thereto, for a $150.0 million senior unsecured 5 year term loan facility; and

(2) a 7 Year Term Loan Agreement (the “7 Year Term Loan” and, together with the 5 Year Term Loan, the “2014 Term Loans”) with Wells Fargo Bank, National Association, Capital One, National Association and the other financial institutions signatory thereto, for a $100.0 million senior unsecured 7 year term loan facility.

Amounts borrowed under the 2014 Term Loans bear interest at the rate specified below per annum, depending on PREIT’s leverage, in excess of LIBOR, with no floor. In determining PREIT’s leverage (the ratio of Total Liabilities to Gross Asset Value), the capitalization rate used to calculate Gross Asset Value is (a) 6.50% for each Property having an average sales per square foot of more than $500 for the most recent period of 12 consecutive months, and (b) 7.50% for any other Property.



Level	Ratio of Total Liabilities to Gross Asset Value	5 Year Term Loan Applicable Margin	7 Year Term Loan Applicable Margin
1	Less than 0.450 to 1.00	1.35%	1.80%
2	Equal to or greater than 0.450 to 1.00 but less than 0.500 to 1.00	1.45%	1.95%
3	Equal to or greater than 0.500 to 1.00 but less than 0.550 to 1.00	1.60%	2.15%
4	Equal to or greater than 0.550 to 1.00	1.90%	2.35%

The initial rate in effect under the 5 Year Term Loan was 1.45% per annum in excess of LIBOR. The initial rate in effect under the 7 Year Term Loan was 1.95% per annum in excess of LIBOR.

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If PREIT seeks and obtains an investment grade credit rating and so notifies the lenders under the respective 2014 Term Loans, alternative interest rates would apply.

The table set forth below presents the amount outstanding, interest rate (inclusive of the LIBOR spread) in effect and the maturity dates of the 2014 Term Loans as of June 30, 2014:



(in millions of dollars)	5 Year Term Loan			7 Year Term Loan
Total facility	$	150.0		$	100.0
Amount outstanding	$	100.0		$	30.0
Interest rate	1.60		%	2.10		%
Maturity date	January 2019			January 2021

Interest expense related to the 2014 Term Loans was $1.2 million and $2.2 million for the three and six months ended June 30, 2014, respectively. Deferred financing fee amortization associated with the 2014 Term Loans was $0.1 million for each of the three and six months ended June 30, 2014.

Under the 2014 Term Loans, there is a deferred draw feature that enables PREIT to borrow the amounts specified in each of the term loans over a period of up to one year. From the effective date until either one year later or until the maximum amount under the respective loan is borrowed (or until the lenders’ commitments are otherwise terminated), the unused portion of the 2014 Term Loans is subject to a fee of 0.20%, in the case of the 5 year Term Loan, and 0.35%, in the case of the 7 Year Term Loan, per annum. There is an additional commitment termination fee under the 7 Year Term Loan if the maximum amount is not borrowed within one year.

PREIT and the subsidiaries of PREIT that either (1) account for more than 2.5% of adjusted Gross Asset Value (other than an Excluded Subsidiary), (2) own or lease an Unencumbered Property, (3) own, directly or indirectly, a subsidiary described in clause (2), or (4) are guarantors under the 2013 Revolving Facility serve as guarantors for funds borrowed under the 2014 Term Loans. In the event that we seek and obtain an investment grade credit rating, we may request that a subsidiary guarantor be released, unless such guarantor becomes obligated in respect of the debt of the Borrower or another subsidiary, or owns Unencumbered Property and incurs recourse debt.

The Borrower has the option to increase the maximum amount available under the ~~2013 Revolving Facility,~~5 Year Term Loan, through an accordion option (subject to certain conditions), from ~~$400.0~~$150.0 million to as much as ~~$600.0~~$300.0 million,, in increments of ~~$5.0~~$5.0 million (with a minimum increase of ~~$25.0 million~~)$25.0 million), based on Wells Fargo Bank’s ability to obtain increases in ~~Revolving Commitments~~commitments from the current lenders or ~~Revolving Commitments~~ from new lenders. No

The Borrower has the option to increase to the maximum amount available under the 7 Year Term Loan, through an accordion option (subject to certain conditions), from $100.0 million to as much as $200.0 million, in increments of $5.0 million (with a minimum increase of $25.0 million), based on Wells Fargo Bank’s ability to obtain increases in commitments from the current lenders or from new lenders.

The 2014 Term Loans and the 2013 Revolving Facility ~~has been exercised by~~contain certain affirmative and negative covenants which are identical and are described in detail below in the ~~Borrower.~~section “Identical covenants contained in the 2013 Revolving Facility and 2014 Term Loans.”

The Borrower may prepay the 5 Year Term Loan at any time without premium or penalty, subject to reimbursement obligations for the lenders’ breakage costs for LIBOR borrowings. The payment of the 7 Year Term Loan prior to its maturity is subject to reimbursement obligations for the lenders’ breakage costs for LIBOR borrowings and a declining prepayment penalty ranging from 3% within one year after closing, to 2% within two years, to 1% within three years and without penalty thereafter.

Upon the expiration of any applicable cure period following an event of default, the lenders may declare all of the obligations in connection with the 2014 Term Loans immediately due and payable, and before the one year anniversary of the effective date, the commitments of the lenders to make further loans, if any, under the 2014 Term Loans would terminate. Upon the occurrence of a voluntary or involuntary bankruptcy proceeding of PREIT, PREIT Associates, PRI, any material subsidiary, any subsidiary that owns or leases an Unencumbered Property or certain other subsidiaries, all outstanding amounts would automatically become immediately due and payable and, before the one year anniversary of the effective date, the commitments of the lenders to make further loans will automatically terminate.

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PREIT may use the proceeds of the 2014 Term Loans for the repayment of debt, for the payment of development or redevelopment costs, and for working capital and general corporate purposes.

Letter of Credit for Springfield Town Center Acquisition

In connection with the agreement to acquire Springfield Town Center (see note 6), in March 2014, we obtained a $46.5 million letter of credit from Wells Fargo Bank, National Association (the "Letter of Credit"). Amounts secured under the Letter of Credit for Springfield Town Center are subject to a fee per annum, depending on PREIT’s leverage. The initial fee in effect is 1.15% per annum. The Letter of Credit initially expires in July 2015 and may be extended up to one year. The Letter of Credit is subject to covenants that are identical to those contained in the 2013 Revolving Facility and the 2014 Term Loans. We expect that the Letter of Credit will be terminated at the closing of the Springfield Town Center acquisition.

Identical covenants contained in the 2013 Revolving Facility, 2014 Term Loans and Letter of Credit

The 2013 Revolving Facility, ~~contains~~2014 Term Loans, and the Letter of Credit contain certain affirmative and negative covenants ~~customarily found in facilities of this type,~~which are identical, including, without limitation, requirements that PREIT maintain, on a consolidated basis: (1) minimum Tangible Net Worth of not less than 75% of the Company’s tangible net worth on December 31, 2012, plus 75% of the Net Proceeds of all Equity Issuances effected at any time after December 31, 2012; (2) maximum ratio of Total Liabilities to Gross Asset Value of 0.60:1, provided that it will not be a Default if the ratio exceeds 0.60:1 but does not exceed 0.625:1, ~~so long as the ratio does not exceed~~ ~~0.60~~:1for more than two consecutive quarters ~~and such ratio has not exceeded~~ ~~0.60~~:1on more than two ~~times~~occasions during the term; (3) minimum ratio of Adjusted EBITDA to Fixed Charges of 1.45:1 on or before June 30, 2014, or 1.50:1 thereafter; (4) minimum Unencumbered Debt Yield of 12.0%; (5) minimum Unencumbered NOI to Unsecured Interest Expense of 1.75:1; (6) maximum ratio of Secured Indebtedness to Gross Asset Value of 0.60:1; (7) maximum Investments in unimproved real estate and predevelopment costs not in excess of 5.0% of Gross Asset Value; (8) maximum Investments in Persons other than Subsidiaries, Consolidated Affiliates and Unconsolidated Affiliates not in excess of 5.0% of Gross Asset Value; (9) maximum Mortgages in favor of the Borrower or any other Subsidiary not in excess of 5.0% of Gross Asset Value; (10) the aggregate value of the Investments and the other items subject to the preceding clauses (7) through (9) not in excess of 10.0% of Gross Asset Value; (11) maximum Investments in Consolidation Exempt Entities not in excess of 25.0% of Gross Asset Value; (12)maximum Projects Under Development not in excess of 15.0% of Gross Asset Value; (13) the aggregate value of the Investments and the other items subject to the preceding clauses (7) through (9) and (11) and (12) not in excess of 35.0% of Gross Asset Value; ~~and~~ (14) Distributions may not exceed (A) with respect to our preferred shares, the amounts required by the terms of the preferred shares, and (B) with respect to our common shares, the greater of (i) 95.0% of Funds From Operations and (ii) 110% of REIT taxable income for a fiscal ~~year.~~year; and (15) PREIT may not permit the amount of the Gross Asset Value attributable to assets directly owned by PREIT, PREIT Associates, PRI and the guarantors to be less than 95% of Gross Asset Value excluding assets owned by Excluded Subsidiaries or Unconsolidated Affiliates.

These covenants and restrictions limit PREIT’s ability to incur additional indebtedness, grant liens on assets and enter into negative pledge agreements, merge, consolidate or sell all or substantially all of its assets and enter into certain transactions with affiliates. The 2013 Revolving Facility, the 2014 Term Loans and the Letter of Credit are subject to customary events of default and are cross-defaulted with one another.

As of ~~September~~June 30, ~~2013,~~2014, the Borrower was in compliance with all such financial covenants.

~~The Borrower used the initial proceeds from the 2013 Revolving Facility to repay both~~ ~~$97.5 million~~ ~~outstanding under the 2010 Term Loan and~~ ~~$95.0 million~~ ~~outstanding under the 2010 Revolving Facility. At the closing of the 2013 Revolving Facility, there was~~ ~~$192.5 million~~ ~~outstanding under the 2013 Revolving Facility.~~

2010 Credit Facility

Prior to ~~April 17,~~the 2013 ~~our~~Revolving Facility, we had a secured credit facility ~~consisted~~consisting of a revolving line of credit with a capacity of $250.0 million (the “2010 Revolving Facility”) and term loans with an aggregate balance of $97.5 million (collectively, the “2010 Term Loan” and, together with the 2010 Revolving Facility, the “2010 Credit Facility”).

Interest expense related to the 2010 Revolving Facility was $~~0.7~~0.1 million and $0.4 million for the three and six months ended ~~September 30, 2012, and~~ ~~$0.4 million~~ ~~and~~ ~~$2.2 million~~ ~~for the~~ ~~nine~~ ~~months ended~~ ~~September~~June 30, 2013 ~~and 2012,~~, respectively.

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The weighted average effective interest ~~rates~~rate based on amounts borrowed under the 2010 Term Loan for the ~~nine~~six months ended ~~September~~June 30, ~~2012~~2013 was ~~4.89%~~3.95%. Interest expense, excluding non-cash amortization and accelerated amortization of deferred financing fees related to the 2010 Term Loan, was $~~4.0~~0.1 million and $2.4 million for the three and six months ended ~~September 30, 2012, and~~ ~~$2.4 million~~ ~~and~~ ~~$11.2 million~~ ~~for the~~ ~~nine~~ ~~months ended~~ ~~September~~June 30, 2013 ~~and 2012,~~, respectively.

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Deferred financing fee amortization associated with the 2010 Credit Facility was ~~$0.9~~$0.1 million and $0.8 million for the three and six months ended ~~September 30, 2012, and~~ ~~$0.8 million~~ ~~and~~ ~~$2.7 million~~ ~~for the~~ ~~nine~~ ~~months ended~~ ~~September~~June 30, 2013 ~~and 2012,~~, respectively. Accelerated deferred financing fee amortization was ~~$0.9~~$0.1 million and $0.9 million for the three and ~~nine~~six months ended ~~September~~June 30, 2013,~~. The accelerated deferred financing fee amortization for the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2013~~ ~~included~~ ~~$0.8 million~~ respectively, in connection with permanent paydowns of the 2010 Term Loan of $84.5 million in January and February 2013, and ~~$0.1~~$0.1 million in connection with the ~~$97.5~~$97.5 million final permanent paydown of the 2010 Term Loan in April 2013.

Mortgage Loans

The carrying ~~value~~values and estimated fair values of mortgage loans based on interest rates and market conditions at ~~September~~June 30, ~~2013~~2014 and December 31, ~~2012~~2013 were as follows:


	September 30, 2013				December 31, 2012				June 30, 2014				December 31, 2013
(in millions of dollars)	Carrying Value		Fair Value		Carrying Value		Fair Value		Carrying Value		Fair Value		Carrying Value		Fair Value
Mortgage loans	$	1,538.1	$	1,519.7	$	1,718.1	$	1,739.7	$	1,494.8	$	1,486.4	$	1,502.7	$	1,467.9

The mortgage loans contain various customary default provisions. As of ~~September~~June 30, ~~2013~~2014, we were not in default on any of the mortgage loans.

Mortgage Loan Activity

~~The following table presents~~In July 2014, we repaid a $25.8 million mortgage loan plus accrued interest secured by 801 Market Street, a property that is part of the ~~mortgage loans we have entered into since January 1, 2013~~Gallery at Market East in Philadelphia, Pennsylvania, using proceeds from the transaction relating to ~~our consolidated properties:~~

Financing Date Property
Amount Financed or
Extended
(in millions of dollars)
Stated Interest Rate Maturity
2013 Activity:
February
Francis Scott Key Mall⁽¹⁾⁽²⁾
$ 62.6
LIBOR plus 2.60% March 2018
February
Lycoming Mall ⁽³⁾
35.5
LIBOR plus 2.75% March 2018
February
Viewmont Mall⁽¹⁾
48.0
LIBOR plus 2.60% March 2018
March Dartmouth Mall 67.0
3.97% fixed April 2018
September
Logan Valley Mall⁽⁴⁾
51.0
LIBOR plus 2.10% September 2014

~~_________________________~~


⁽¹⁾	~~Interest only payments.~~


⁽²⁾	~~The mortgage loan may be increased by~~ ~~$7.9 million~~ ~~based on certain prescribed conditions.~~

⁽³⁾

~~The initial amount of the mortgage loan was~~ ~~$28.0 million. We took additional draws of~~ ~~$5.0 million~~ ~~in October 2009 and~~ ~~$2.5 million~~ in March 2010. The mortgage loan was amended in February 2013 to lower the interest rate to LIBOR plus 2.75% and to extend the maturity date to March 2018. In February 2013, the unamortized balance of the mortgage loan was ~~$33.4 million~~ ~~before we increased the mortgage loan by~~ ~~$2.1 million~~ ~~to bring the total amount financed to~~ ~~$35.5 million~~.


⁽⁴⁾	~~The initial amount of the mortgage loan was~~ ~~$68.0 million. We repaid~~ ~~$5.0 million~~ ~~in September 2011 and~~ ~~$12.0 million~~ ~~in September 2013. The mortgage loan was amended in September 2013 to extend the maturity date to September 2014.~~

~~Other 2013 Activity~~the Gallery at Market East with The Macerich Company.

In ~~February 2013,~~July 2014, we repaid a $~~53.2~~51.0 million mortgage loan plus accrued interest ~~on Moorestown~~secured by Logan Valley Mall in ~~Moorestown, New Jersey~~Altoona, Pennsylvania using $50.0 ~~million~~ ~~from our 2010 Revolving Facility and~~ ~~$3.5 million~~ ~~from available working capital.~~

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~~In May 2013, we repaid a~~ ~~$56.3 million~~ ~~mortgage loan on Jacksonville Mall in Jacksonville, North Carolina using~~ ~~$35.0~~ million from our 2013 Revolving Facility and $~~21.3~~1.0 million from available working capital. ~~See note 7 for additional information on~~The $50.0 million borrowed from the~~$2.9 million~~ ~~loss on hedge ineffectiveness that was recorded during the three months ended June 30, 2013 in connection with this transaction.~~

~~In September 2013, we repaid a~~ ~~$65.0 million~~ ~~mortgage loan on Wyoming Valley Mall in Wilkes-Barre, Pennsylvania using~~ ~~$65.0 million~~ ~~from our 2013 Revolving Facility.~~

~~In October 2013, we repaid a~~ ~~$66.9 million~~ ~~mortgage loan on Exton Square Mall in Exton, Pennsylvania using~~ ~~$60.0 million~~ ~~from our~~ 2013 Revolving Facility ~~and~~ ~~$6.9 million~~was subsequently repaid in July 2014 using proceeds from ~~available working capital.~~the transaction relating to the Gallery at Market East with The Macerich Company.

Interest Rate Risk

We follow established risk management policies designed to limit our interest rate risk on our interest bearing liabilities, as further discussed in note 7 to our unaudited consolidated financial statements.

5. CASH FLOW INFORMATION

Cash paid for interest was $~~73.1~~36.6 million (net of capitalized interest of $~~0.6~~0.3 million) and $~~86.8~~51.1 million (net of capitalized interest of $~~1.4~~0.3 million) for the ~~nine~~six months ended ~~September~~June 30, ~~2013~~2014 and ~~2012~~2013, respectively.

In our statement of cash flows, we show cash flows on our revolving facilities on a net basis. Gross borrowings on our revolving facilities were $90.0 million and $342.5 million for the six months ended June 30, 2014 and 2013, respectively. Gross paydowns were $220.0 million and $307.5 million for the six months ended June 30, 2014 and 2013, respectively.

6. COMMITMENTS AND CONTINGENCIES

Contractual Obligations

As of ~~September~~June 30, ~~2013~~2014, we had unaccrued contractual and other commitments related to our capital improvement projects and development projects of $~~10.1~~21.7 million in the form of tenant allowances ~~lease termination fees,~~ and contracts with general service providers and other professional service providers.

~~Provision~~

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Springfield Town Center

On March 2, 2014, we entered into a Contribution Agreement (the “Contribution Agreement”) relating to the acquisition of Springfield Town Center in Springfield, Virginia (the “Property”) for ~~Employee Separation Expense~~total consideration of $465.0 million. The total consideration is expected to be funded using $125.0 million of common and preferred Operating Partnership units, with the remaining balance to be paid in cash. We expect to provide the remaining cash balance by borrowing from the amounts available under our existing credit agreements. In addition, the seller of the Property may be entitled to certain additional consideration based on the value of the Property three years after the closing date. The closing is subject to the substantial completion of the redevelopment of the Property in accordance with plans and specifications for such redevelopment, as well as certain other customary closing conditions.

Pursuant to the Contribution Agreement, closing will occur after all of the conditions to closing have been satisfied or waived, on the date that is the earlier of (i) fifteen days after the later of the date on which Regal Cinemas, Dick’s Sporting Goods and at least seventy-five percent (75%) of the aggregate square footage of the in-line space of the Property are occupied, certificates of occupancy have been issued with respect to all of the common areas of the Property and the “grand opening” of the Property has occurred, and (ii) March 31, 2015 (which date may be extended in certain circumstances).

In connection with this Contribution Agreement, we have secured a$46.5 million letter of credit and have incurred $1.9 million of acquisition related expenses as of June 30, 2014. These expenses are included in "Acquisition costs and other expenses" on the consolidated statements of operations for the three and six months ended June 30, 2014.

Employee Separation

In May 2014, George F. Rubin separated from his position as Vice Chairman of PREIT. Under the terms of ~~the amended employment~~Mr. Rubin’s separation agreement ~~with Ronald Rubin, our Executive Chairman,~~ from the ~~quarter ended~~Company, which became effective in June ~~30, 2012 through the quarter ended June 30, 2013,~~2014, we recorded ~~a total provision for~~ employee separation expense of ~~$4.5~~$4.1 million~~. We recorded provision for employee separation expense related to~~ in the second quarter of 2014. Mr. ~~Rubin’s amended employment agreement~~Rubin will receive a payment of ~~$1.1 million~~ ~~during the three months ended~~ ~~September 30, 2012~~ ~~and~~ ~~$1.9 million~~ ~~and~~ ~~$1.4 million~~ ~~for the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2013~~ ~~and 2012, respectively. We recorded a total of~~approximately $2.6 million ~~during~~, which amount is in addition to the ~~year ended December 31, 2012.~~payment of the amounts accrued under Mr. Rubin’s supplemental retirement plan. All of Mr. Rubin’s outstanding unvested restricted shares became vested in connection with his separation and he remains eligible to receive shares under the Company’s Restricted Share Unit Programs based on the achievement of the performance metrics established by those programs as if his employment had not terminated. Mr. Rubin’s term as a member of the Company’s board of trustees expired at the Company’s Annual Meeting held on May 30, 2014.

In ~~February 2013, under our Second Amended and Restated 2003 Equity Incentive Plan, Mr. Rubin received~~ ~~16,000~~ ~~restricted shares that had a fair value~~the second quarter of ~~$0.3 million~~ ~~based on the grant date fair value of~~ ~~$18.28~~ per share and a vesting period though December 31, 2013. This award was amortized through June 7, 2013, the date on which Mr. Rubin became eligible to voluntarily terminate his employment agreement and receive his founder’s retirement payment of ~~$3.5 million, at which time such restricted shares would vest.~~

In connection with the appointment of Joseph F. Coradino as Chief Executive Officer in June 2012, conditions in former President and Chief Operating Officer Edward Glickman's employment agreement were triggered that caused us to record a provision for employee separation expense. We recorded ~~$3.5 million~~ ~~and~~ ~~$4.0 million~~ ~~of employee separation expense related to Mr. Glickman in the~~ ~~three and nine~~ ~~months ended~~ ~~September 30, 2012, respectively.~~

~~In August 2012,~~2014, we terminated the employment of certain employees. In connection with the departure of ~~these~~those employees, we recorded ~~$0.4~~an additional $0.8 million of employee separation ~~expenses.~~expense.

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7. DERIVATIVES

In the normal course of business, we are exposed to financial market risks, including interest rate risk on our interest bearing liabilities. We attempt to limit these risks by following established risk management policies, procedures and strategies, including the use of financial instruments such as derivatives. We do not use financial instruments for trading or speculative purposes.

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Cash Flow Hedges of Interest Rate Risk

Our outstanding derivatives have been designated under applicable accounting authority as cash flow hedges. The effective portion of changes in the fair value of derivatives designated as, and that qualify as, cash flow hedges is recorded in “Accumulated other comprehensive income (loss)” and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. To the extent these instruments are ineffective as cash flow hedges, changes in the fair value of these instruments are recorded in “Interest expense, net.” ~~In the three months ended September 30, 2013, we recorded net losses on hedge ineffectiveness of~~ ~~$0.7 million, primarily due to the accelerated amortization of~~ ~~$0.5 million~~ ~~in connection with the partial mortgage loan repayments at Logan Valley Mall and~~ ~~$0.2 million~~ ~~in connection with the amortization of other swaps. In the~~ ~~nine~~ ~~months ended September 30, 2013, we recorded net losses on hedge ineffectiveness of~~ ~~$3.4 million, primarily in connection with the May 2013 Jacksonville Mall mortgage loan repayment, we recorded net losses on hedge ineffectiveness of~~ ~~$2.9 million~~ relating to a forward starting swap that was cash settled in 2008. The mortgage loan repayment made it probable that the hedged transaction identified in our original hedge documentation would not occur, and we therefore reclassified ~~$2.9 million~~ ~~from “Accumulated other comprehensive income (loss)” to “Interest expense, net.”~~ No ~~gain or loss on hedge ineffectiveness was recorded during the three and nine months ended September 30, 2012.~~

We recognize all derivatives at fair value as either assets or liabilities in the accompanying consolidated balance sheets. The carrying amount of the derivative assets is reflected in “Deferred costs and other assets,” the amount of the associated liabilities is reflected in “Accrued expenses and other liabilities” and the amount of the net unrealized loss is reflected in “Accumulated other comprehensive income (loss)” in the accompanying balance sheets.

Amounts reported in “Accumulated other comprehensive income (loss)” that are related to derivatives will be reclassified to “Interest expense, net” as interest payments are made on our corresponding debt. During the next ~~twelve~~12 months, we estimate that $~~2.8~~4.4 million will be reclassified as an increase to interest expense in connection with derivatives. The amortization of these amounts could be accelerated in the event that we repay amounts outstanding on the debt instruments and do not replace them with new borrowings.

In June 2014, we gave notice to the mortgage lender that we intended to repay the mortgage loan secured by Logan Valley Mall, and in connection therewith, we recorded hedge ineffectiveness of $1.2 million in the three and six months ended June 30, 2014. The notice of our intention to repay the mortgage loan made it probable that the hedged transaction identified in our original hedge documentation would not occur, and we reclassified $1.2 million from accumulated other comprehensive loss to interest expense. We repaid the mortgage loan in July 2014.

Interest Rate Swaps

As of ~~September~~June 30, ~~2013,~~2014, we had entered into ~~six~~12 interest rate swap agreements with a weighted average interest rate of ~~2.54%~~1.67% on a notional amount of ~~$198.8~~$328.1 million maturing on various dates through January ~~2018, and two forward starting interest rate swap agreements with a weighted average interest rate of 1.12% on a notional amount of $103.0 million maturing in January 2018~~.2019.

We entered into these interest rate swap agreements ~~(including the forward starting swap agreements)~~ in order to hedge the interest payments associated with our issuances of variable interest rate long term debt. We have assessed the effectiveness of these interest rate swap agreements as hedges at inception and on a quarterly basis. As of ~~September~~June 30, ~~2013,~~2014, we considered these interest rate swap agreements to be highly effective as cash flow hedges. The interest rate swap agreements are net settled monthly.

~~As of September 30, 2013, the aggregate estimated unrealized net loss attributed to these interest rate derivatives was~~ ~~$1.0 million~~. Accumulated other comprehensive loss as of ~~September~~June 30, ~~2013~~2014 includes a net loss of $~~4.6~~2.8 million relating to forward starting swaps that we cash settled in prior years that are being amortized over 10 year periods commencing on the closing dates of the debt instruments that are associated with these settled swaps.

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The following table summarizes the terms and estimated fair values of our interest rate swap ~~and forward starting swap~~ derivative instruments at ~~September~~June 30, ~~2013~~2014 and December 31, ~~2012~~2013. The notional values provide an indication of the extent of our involvement in these instruments, but do not represent exposure to credit, interest rate or market risks.

(in millions of dollars)
Notional Value

Fair Value at
September 30,
2013 ⁽¹⁾

Fair Value at
December 31,
2012 ⁽¹⁾

Interest
Rate
Effective Date Maturity Date
Interest Rate Swaps
$60.0 N/A
(0.2 ) 1.74 % March 11, 2013
200.0 N/A
(1.0 ) 2.96 % March 11, 2013
40.0 N/A
(0.1 ) 1.82 % March 11, 2013
65.0 N/A
(1.5 ) 3.60 % September 9, 2013
68.0 N/A
(1.6 ) 3.69 % September 9, 2013
35.0 N/A
(1.4 ) 3.73 % September 9, 2013
55.0 (0.2 ) (1.3 ) 2.90 % November 29, 2013
48.0 (0.2 ) (1.2 ) 2.90 % November 29, 2013
25.0 (0.4 ) (0.5 ) 1.10 % July 31, 2016
28.1 (0.6 ) (0.9 ) 1.38 % January 2, 2017
35.1 0.1
N/A
3.72 % December 1, 2017
7.6 0.1
N/A
1.00 % January 1, 2018
Forward Starting Interest Rate Swaps
48.0 0.1
N/A
1.12 % December 1, 2013 January 1, 2018
55.0 0.1
N/A
1.12 % December 1, 2013 January 1, 2018
$ (1.0 ) $ (9.7 )



(in millions of dollars) Notional Value	Fair Value at June 30, 2014 ⁽¹⁾			Fair Value at December 31, 2013 ⁽¹⁾			Interest Rate		Maturity Date
Interest Rate Swaps
$25.0	$	(0.3	)	$	(0.3	)	1.10	%	July 31, 2016
28.1	(0.5		)	(0.5		)	1.38	%	January 2, 2017
34.4	—			0.2			3.72	%	December 1, 2017
7.6	—			0.1			1.00	%	January 1, 2018
55.0	(0.1		)	0.2			1.12	%	January 1, 2018
48.0	(0.1		)	0.2			1.12	%	January 1, 2018
30.0	(0.5		)	N/A			1.78	%	January 2, 2019
20.0	(0.3		)	N/A			1.78	%	January 2, 2019
20.0	(0.3		)	N/A			1.78	%	January 2, 2019
20.0	(0.4		)	N/A			1.79	%	January 2, 2019
20.0	(0.4		)	N/A			1.79	%	January 2, 2019
20.0	(0.3		)	N/A			1.79	%	January 2, 2019
	$	(3.2	)	$	(0.1	)

_________________________


⁽¹⁾	As of ~~September~~June 30, ~~2013~~2014 and December 31, ~~2012~~2013, derivative valuations in their entirety were classified in Level 2 of the fair value hierarchy. As of ~~September~~June 30, ~~2013~~2014 and December 31, ~~2012~~2013, we did not have any significant recurring fair value measurements related to derivative instruments using significant unobservable inputs (Level 3).

The table below presents the effect of derivative financial instruments on our consolidated statements of operations and on our share of our partnerships’ statements of operations for the three and ~~nine~~six months ended ~~September~~June 30, ~~2013~~2014 and ~~2012~~2013:


	Three Months Ended September 30,						Nine Months Ended September 30,						Consolidated Statements of Operations Location	Three Months Ended June 30,						Six Months Ended June 30,						Consolidated Statements of Operations Location
(in millions of dollars)	2013			2012			2013			2012			Consolidated Statements of Operations Location	2014			2013			2014			2013			Consolidated Statements of Operations Location
Derivatives in cash flow hedging relationships:
Interest rate products
Gain (loss) recognized in Other Comprehensive Income (Loss) on derivatives	$	0.3		$	(1.3	)	$	7.9		$	(4.9	)	N/A
(Loss) gain recognized in Other Comprehensive Income (Loss) on derivatives														$	(0.3	)	$	9.7		$	(2.2	)	$	7.6		N/A
Loss reclassified from Accumulated Other Comprehensive Income (Loss) into income (effective portion)	$	2.0		$	4.6		$	9.0		$	13.0		Interest expense	$	1.2		$	3.0		$	2.2		$	7.0		Interest expense
Loss recognized in income on derivatives (ineffective portion and amount excluded from effectiveness testing)	$	(0.7	)	$	—		$	(3.4	)	$	—		Interest expense	$	(1.2	)	$	(3.2	)	$	(1.2	)	$	(2.7	)	Interest expense

Credit-Risk-Related Contingent Features

We have agreements with some of our derivative counterparties that contain a provision pursuant to which, if our entity that originated such derivative instruments defaults on any of its indebtedness, including default where repayment of the

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indebtedness has not been accelerated by the lender, then we could also be declared in default on our derivative obligations. As of ~~September~~June 30, ~~2013~~2014, we were not in default on any of our derivative obligations.

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We have an agreement with a derivative counterparty that incorporates the loan covenant provisions of our loan agreement with a lender affiliated with the derivative counterparty. Failure to comply with the loan covenant provisions would result in our being in default on any derivative instrument obligations covered by the agreement.

As of ~~September~~June 30, ~~2013~~2014, the fair value of derivatives in a net liability position, which excludes accrued interest but includes any adjustment for nonperformance risk related to these agreements, was ~~$1.0 million~~.$3.2 million. If we had breached any of the default provisions in these agreements as of ~~September~~June 30, ~~2013~~2014, we might have been required to settle our obligations under the agreements at their termination value (including accrued interest) of ~~$1.3 million~~.$3.6 million. We had not breached any of these provisions as of ~~September~~June 30, ~~2013~~2014.

~~8. EQUITY OFFERING~~

~~2013 Common Share Offering~~

~~In May 2013, we issued~~ ~~11,500,000~~ ~~common shares in a public offering at~~ ~~$20.00~~ ~~per share. We received net proceeds from the offering of~~ ~~$220.3 million~~ ~~after deducting payment of the underwriting discount of~~ ~~$0.80~~ ~~per share and offering expenses. We used a portion of the net proceeds from this offering to repay all~~ ~~$192.5 million~~ ~~of then-outstanding borrowings under the 2013 Revolving Facility.~~

~~9. HISTORIC TAX CREDITS~~

~~Phase I~~

In the third quarter of 2009, we closed a transaction with a counterparty (the “Phase I Counterparty”) related to the historic rehabilitation of an office building located at 801 Market Street in Philadelphia, Pennsylvania (the “Phase I Project”). Capital contributions received from the Phase I Counterparty are, in substance, consideration that we received in exchange for a put option (whereby we might be obligated or entitled to repurchase the Phase I Counterparty’s ownership interest in the Phase I Project) and our obligation to deliver tax credits to the Phase I Counterparty. The Phase I Counterparty’s contributions, other than the amounts allocated to the put option, are classified as “Noncontrolling interest” and recognized as “Other income” in the consolidated financial statements as our obligation to deliver tax credits is relieved.

The tax credits are subject to a five year credit recapture period, as defined in the Internal Revenue Code of 1986, as amended, beginning one year after the completion of the Phase I Project, which was completed in the third quarter of 2009. Our obligation to the Phase I Counterparty with respect to the tax credits is ratably relieved annually in the third quarter of each year, upon the expiration of each portion of the recapture period and the satisfaction of other revenue recognition criteria. In the third quarter of 2013, we recognized the amount related to the fourth recapture period and recorded~~$1.8 millionof the contribution received from the Phase I Counterparty as “Other income” in the consolidated statements of operations.~~

~~Phase II~~

In the second quarter of 2012, we closed a transaction with a Phase II Counterparty (the “Phase II Counterparty”) related to the historic rehabilitation of an office building located at 801 Market Street in Philadelphia, Pennsylvania (the “Phase II Project”). The Phase II Counterparty agreed to initially contribute~~$3.7 million~~ ~~of equity to the Phase II Project. This amount was subsequently increased to~~ ~~$5.5 million, of which~~ ~~$4.0 million~~was funded as of September 30, 2013. In exchange for its contributions into the Phase II Project, the Phase II Counterparty received substantially all of the historic rehabilitation tax credits associated with the Phase II Project as a distribution. The Phase II Counterparty’s contributions, other than the amounts allocated to a put option (whereby we might be obligated or entitled to repurchase the Phase II Counterparty’s ownership interest in the Phase II Project), are classified as “Accrued expenses and other liabilities” and recognized as “Other income” in the consolidated financial statements as our obligation to deliver tax credits is relieved.

The tax credits are subject to a five year credit recapture period, as defined in the Internal Revenue Code of 1986, as amended, beginning one year after the completion of the Phase II Project, which was completed in the second quarter of 2012. Our obligation to the Phase II Counterparty with respect to the tax credits is ratably relieved annually in the third quarter of each year, upon the expiration of each portion of the recapture period and the satisfaction of other revenue recognition criteria. In the third quarter of 2013, we recognized the amount related to the first recapture period and recorded~~$0.7 millionof the contribution received from the Phase II Counterparty as “Other income” in the consolidated statements of operations.~~

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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following analysis of our consolidated financial condition and results of operations should be read in conjunction with our unaudited consolidated financial statements and the notes thereto included elsewhere in this report.

OVERVIEW

Pennsylvania Real Estate Investment Trust, a Pennsylvania business trust founded in 1960 and one of the first equity real estate investment trusts (“REITs”) in the United States, has a primary investment focus on retail shopping malls located in the eastern half of the United States, primarily in the Mid-Atlantic region.

We currently own interests in 4445 retail properties, of which 41 are operating properties and ~~three~~four are development properties. The 41 operating properties ~~that are classified in continuing operations~~ include 3634 enclosed malls and ~~five~~seven ~~strip and power centers,~~other retail properties, have a total of ~~30.7~~30.1 million square feet and operate in 11 states. We and partnerships in which we own an interest own ~~23.9~~23.3 million square feet at these properties (excluding space owned by anchors).

There are 34 operating retail properties in our portfolio that we consolidate for financial reporting purposes. These consolidated properties have a total of ~~26.1~~25.5 million square feet, of which we own ~~20.8~~20.2 million square feet. The seven operating retail properties that are owned by unconsolidated partnerships with third parties have a total of 4.6 million square feet, of which 3.1 million square feet are owned by such partnerships.

The development portion of our portfolio contains ~~three~~four properties in ~~two~~three states, with two classified as “mixed use” (a combination of retail and other uses), one classified as “retail” (outlet) and one classified as “other.”

Our primary business is owning and operating retail shopping malls, which we primarily do through our operating partnership, PREIT Associates, L.P. (“PREIT Associates”). We provide management, leasing and real estate development services through PREIT Services, LLC (“PREIT Services”), which generally develops and manages properties that we consolidate for financial reporting purposes, and PREIT-RUBIN, Inc. (“PRI”), which generally develops and manages properties that we do not consolidate for financial reporting purposes, including properties in which we own interests in through partnerships with third parties and properties that are owned by third parties in which we do not have an interest. PRI is a taxable REIT subsidiary, as defined by federal tax laws, which means that it is able to offer additional services to tenants without jeopardizing our continuing qualification as a REIT under federal tax law.

Net ~~income~~loss for the three months ended ~~September~~June 30, ~~2013~~2014 was $~~12.6~~24.1 million, an increase of $~~25.4~~15.0 million compared to a net loss of $~~12.9~~9.0 million for the three months ended ~~September~~June 30, ~~2012~~2013. This increase was primarily due to $16.1 million of impairment of assets recorded in connection with North Hanover and Nittany Malls and an increase of $3.8 million of employee separation expense, partially offset by $6.1 million of lower interest expense recorded in the three months ended June 30, 2014 as compared to the same period in 2013.

Net loss for the six months ended June 30, 2014 was $32.4 million, a decrease of $49.2 million compared to net income of $16.8 million for the six months ended June 30, 2013. This decrease was primarily due to $33.3 million of gains on sales of discontinued operations recorded in the six months ended June 30, 2013, $17.4 million of ~~$45.1 million~~impairment of assets in connection with the September 2013 sales of Christiana Center and Commons at Magnolia, a $6.5 million decrease in interest expense and a $5.0 million decrease in employee separation expenses. These favorable changes were partially offset by $30.0 million in impairment losses at Chambersburg Mall and North Hanover Mall, Nittany Mall and ~~a $4.1 million increase~~South Mall recorded in ~~depreciation and amortization expenses.~~

~~Net income~~ ~~for~~ the ~~nine~~six months ended ~~September~~June 30, ~~2013~~ ~~was $29.4 million~~, ~~an increase~~ ~~of $65.1 million~~ ~~compared to a~~ ~~net loss~~ ~~of $35.7 million~~ ~~for the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2012~~. This increase was primarily due to gains on sales of discontinued operations of $78.4 million in connection with the sales of Orlando Fashion Square, Paxton Towne Centre, Phillipsburg Mall, Christiana Center and Commons at Magnolia, a $13.0 million decrease in interest expense, increased ~~net operating income ("NOI")~~ of $7.2 million at same store and properties acquired in 2013 and a decrease of $3.4 million in employee separation expenses. These favorable changes were partially offset by $30.0 million of impairment losses at Chambersburg Mall and North Hanover Mall,2014, an increase of ~~$10.1~~$4.7 million in depreciation and amortization ~~expenses and~~expense, a decrease of ~~$7.4~~$4.0 million of net operating income (“NOI”) from ~~NOI~~properties sold since January 1, 2013 and an increase of ~~discontinued operations.~~$2.6 million of employee separation expense in the six months ended June 30, 2014 as compared to the same period in 2013. These decreases were partially offset by $13.3 million of lower interest expense recorded in the six months ended June 30, 2014 as compared to the same period in 2013.

We evaluate operating results and allocate resources on a property-by-property basis, and do not distinguish or evaluate our consolidated operations on a geographic basis. ~~We do not have any significant revenue or asset concentrations, and thus the individual properties have been aggregated into one reportable segment based upon their similarities with regard~~Due to the nature of our operating properties, which involve retail shopping, we have concluded that our individual properties have similar economic characteristics and ~~the nature of~~meet all other aggregation criteria. Accordingly, we have aggregated our ~~tenants and operational processes, as well as long-term financial performance.~~individual properties into one reportable segment. In addition, no single tenant accounts for 10% or more of ~~our~~ consolidated revenue, and none of our properties are located outside the United States.

As further discussed in our Annual Report on Form 10-K for the year ended December 31, 2012, we have undertaken efforts to raise the overall quality of our portfolio of assets. One of the ways by which we intend to accomplish this is by disposing of

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certain non-core assets, some of which have sales productivity or occupancy below the average for our portfolio. During 2013, we have sold Phillipsburg Mall and Orlando Fashion Square. We are currently in negotiations to sell some other malls that we consider to be non-core.

We hold our interests in our portfolio of properties through our operating partnership, PREIT Associates. We are the sole general partner of PREIT Associates and, as of ~~September~~June 30, ~~2013~~2014, held a 97.0% controlling interest in ~~the Operating Partnership,~~PREIT Associates, and consolidated it for reporting purposes. We hold our investments in seven of the 41 retail properties and ~~one~~two of the ~~three~~four development properties in our portfolio through unconsolidated partnerships with third parties in which we own a ~~40%~~25% to 50%

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interest. We hold a noncontrolling interest in each unconsolidated partnership, and account for such partnerships using the equity method of accounting. We do not control any of these equity method investees for the following reasons:

Except for two properties that we co-manage with our partner, all of the other entities are managed on a day-to-day basis by one of our other partners as the managing general partner in each of the respective partnerships. In the case of the co-managed properties, all decisions in the ordinary course of business are made jointly.

The managing general partner is responsible for establishing the operating and capital decisions of the partnership, including budgets, in the ordinary course of business.

All major decisions of each partnership, such as the sale, refinancing, expansion or rehabilitation of the property, require the approval of all partners.

Voting rights and the sharing of profits and losses are generally in proportion to the ownership percentages of each partner.

We record the earnings from the unconsolidated partnerships using the equity method of accounting under the statements of operations caption entitled “Equity in income of partnerships,” rather than consolidating the results of the unconsolidated partnerships with our results. Changes in our investments in these entities are recorded in the balance sheet caption entitled “Investment in partnerships, at equity.” In the case of deficit investment balances, such amounts are recorded in “Distributions in excess of partnership investments.”

We hold our interest in three of our unconsolidated partnerships through tenancy in common arrangements. For each of these properties, title is held by us and another person or persons, and each has an undivided interest in the property. With respect to each of the three properties, under the applicable agreements between us and the other persons with ownership interests, we and such other persons have joint control because decisions regarding matters such as the sale, refinancing, expansion or rehabilitation of the property require the approval of both us and the other person (or at least one of the other persons) owning an interest in the property. Hence, we account for each of the properties using the equity method of accounting. The balance sheet items arising from these properties appear under the caption “Investments in partnerships, at equity.” The statements of operations items arising from these properties appear in “Equity in income of partnerships.”

For further information regarding our unconsolidated partnerships, see note 3 to our unaudited consolidated financial statements.

Recent Developments

Current Economic Conditions and Our Near Term Capital Needs

The conditions in the economy have caused unemployment to remain relatively high and have caused fluctuations and variations in retail sales, business and consumer confidence and consumer spending on retail goods. As a result, the sales and profit performance of certain retailers has fluctuated. We continue to adjust our plans and actions to take into account the current environment. In particular, we continue to contemplate ways to maintain or reduce our leverage through a variety of means available to us, subject to and in accordance with the terms of our 2013 Revolving ~~Facility.~~Facility, 2014 Term Loans and the Letter of Credit. These steps might include obtaining additional equity capital, including through the issuance of common or preferred equity securities if market conditions are favorable, through joint ventures or other partnerships or arrangements involving our contribution of assets with institutional investors, private equity investors or other REITs, through sales of properties or interests in properties with values in excess of their mortgage loans ~~or allocable debt~~ and application of the excess proceeds to debt reduction, or through other actions.

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Capital Improvements and Development Projects

At our operating properties, we might engage in various types of capital improvement ~~and ground up development~~ projects. Such projects vary in cost and complexity, and can include building out new or existing space for individual tenants, upgrading common areas or exterior areas such as parking lots, or redeveloping the entire property, among other projects. Project costs are accumulated in “Construction in progress” on our consolidated balance sheet until the asset is placed into service, and amounted to $~~88.4~~85.4 million as of ~~September~~June 30, ~~2013~~2014.

At our wholly-owned development properties, we are also engaged in several types of projects. However, we do not expect to make any significant investment in these projects in the short term. As of ~~September~~June 30, ~~2013~~2014, we had incurred $~~50.4~~54.0 million of costs (net of impairment charges recorded in prior years) related to our activity at our wholly-owned development properties.

~~Impairment of Assets~~

~~Chambersburg Mall~~

~~In September 2013, we recorded a loss on impairment of assets at Chambersburg Mall in Chambersburg, Pennsylvania of~~ ~~$23.7 million~~ ~~to write down the carrying value of the property’s long-lived assets to the property’s estimated fair value of~~ ~~$8.2 million~~. During the third quarter of 2013, we entered into negotiations with a potential buyer of the property, which are ongoing and could result in changes to our underlying assumptions. As a result of this factor, we determined that the holding period for the property was less than had been previously estimated, which we concluded to be a triggering event, leading us to conduct an analysis of possible asset impairment at this property. Using updated assumptions based on this factor, we determined that the estimated undiscounted cash flows, net of estimated capital expenditures, for Chambersburg Mall were less than the carrying value of the property, and recorded the impairment loss.

~~North Hanover Mall~~

~~In September 2013, we recorded a loss on impairment of assets at North Hanover Mall in Hanover, Pennsylvania of~~ ~~$6.3 million~~ ~~to write down the carrying value of the property’s long-lived assets to the property’s estimated fair value of~~ ~~$16.7 million. We had previously recognized a loss on impairment of assets on the property of~~ ~~$24.1 million~~ ~~in 2011.~~ Since 2011, the property experienced further declines in net operating income and occupancy. During the third quarter of 2013, we entered into negotiations with a potential buyer of the property, which are ongoing and could result in changes to our underlying assumptions. As a result of these factors, we determined that the holding period for the property was less than had previously been estimated, which we concluded to be a triggering event, leading us to conduct an analysis of possible asset impairment at this property. Using updated assumptions based on these factors, we determined that the estimated undiscounted cash flows, net of estimated capital expenditures, for North Hanover Mall were less than the carrying value of the property, and recorded the impairment loss.

~~Acquisitions and Dispositions~~

~~See note 2 to our unaudited consolidated financial statements for a description of our acquisitions and dispositions in 2013.~~

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CRITICAL ACCOUNTING POLICIES

Critical Accounting Policies are those that require the application of management’s most difficult, subjective or complex judgments, often because of the need to make estimates about the effect of matters that are inherently uncertain and that might change in subsequent periods. In preparing the unaudited consolidated financial statements, management has made estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting periods. In preparing the financial statements, management has utilized available information, including our historical experience, industry standards and the current economic environment, among other factors, in forming its estimates and judgments, giving due consideration to materiality. Management has also considered events and changes in property, market and economic conditions, estimated future cash flows from property operations and the risk of loss on specific accounts or amounts in determining its estimates and judgments. Actual results may differ from these estimates. In addition, other companies may utilize different estimates, which may affect comparability of our results of operations to those of companies in similar businesses. The estimates and assumptions made by management in applying critical accounting policies have not changed materially during 2014 or 2013 ~~and 2012~~ except as otherwise noted, and none of these estimates or assumptions have proven to be materially incorrect or resulted in our recording any significant adjustments relating to prior periods. We will continue to monitor the key factors underlying our estimates and judgments, but no change is currently expected.

For additional information regarding our Critical Accounting Policies, see “Critical Accounting Policies” in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2013.

Asset Impairment

Real estate investments and related intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the property might not be recoverable. A property to be held and used is considered impaired only if ~~our~~ management’s estimate of the aggregate future cash flows, less estimated capital expenditures, to be generated by the property, undiscounted and without interest charges, are less than the carrying value of the property. This estimate takes into consideration factors such as expected future operating income, trends and prospects, as well as the effects of demand, competition and other factors. In addition, these estimates may consider a probability weighted cash flow estimation approach when alternative courses of action to recover the carrying amount of a long-lived asset are under consideration or when a range of possible values is estimated.

The determination of undiscounted cash flows requires significant estimates by management, including the expected course of action at the balance sheet date that would lead to such cash flows. Subsequent changes in estimated undiscounted cash flows arising from changes in the anticipated action to be taken with respect to the property could impact the determination of whether an impairment exists and whether the effects could materially affect our net income. To the extent estimated undiscounted cash flows are less than the carrying value of the property, the loss will be measured as the excess of the carrying amount of the property over the estimated fair value of the property.

Assessment of our ability to recover certain lease related costs must be made when we have a reason to believe that the tenant might not be able to perform under the terms of the lease as originally expected. This requires us to make estimates as to the recoverability of such costs.

~~For additional~~

Table of Contents

See“Results of Operations” for a description of impairment losses recorded during the quarter.

New Accounting Developments

In April 2014, we adopted new accounting requirements pertaining to the reporting of discontinued operations. These new accounting requirements are required to be effective for the first quarter of 2015 but may be adopted as early as the first quarter of 2014 only for disposals or classifications as held for sale that have not been reported in financial statements previously issued or available for issuance. Under these new accounting requirements, only disposals representing a strategic shift in operations will be presented as discontinued operations. Previously, under U.S. GAAP, companies that sold a single investment property were generally required to report the sale as a discontinued operation, which required the companies to reclassify earnings from continuing operations for all periods presented. These new accounting requirements require expanded disclosures about discontinued operations that will provide financial statement users with more information ~~regarding our Critical Accounting Policies, see “Critical Accounting Policies”~~about the assets, liabilities, income and expenses of discontinued operations.

In June 2014, we sold South Mall in ~~Part II, Item 7~~Allentown, Pennsylvania. We applied these new accounting requirements by reporting the results of operations of South Mall in the continuing operations section of our ~~Annual Report on Form 10-K for the year ended December 31, 2012.~~unaudited consolidated statements of operations.

OFF BALANCE SHEET ARRANGEMENTS

We have no material off-balance sheet items other than the partnerships described in note 3 to the unaudited consolidated financial statements and in the “Overview” section above.

~~Table of Contents~~

RESULTS OF OPERATIONS

Occupancy

The table below sets forth certain occupancy statistics for our properties (excluding the properties included in discontinued ~~operations)~~operations or sold) as of ~~September~~June 30, ~~2013~~2014 and ~~2012~~2013:


	Occupancy⁽¹⁾ as of September 30,												Occupancy ⁽¹⁾ as of June 30,
	Consolidated Properties				Unconsolidated Properties				Combined⁽²⁾				Consolidated Properties				Unconsolidated Properties				Combined⁽²⁾
	2013		2012		2013		2012		2013		2012		2014		2013		2014		2013		2014		2013
Retail portfolio weighted average:
Total excluding anchors	89.9	%	88.9	%	93.8	%	93.0	%	90.6	%	89.6	%	89.1	%	89.3	%	94.3	%	94.1	%	90.0	%	90.2	%
Total including anchors	93.2	%	92.7	%	95.6	%	95.0	%	93.5	%	93.0	%	92.9	%	93.1	%	96.0	%	95.8	%	93.3	%	93.4	%
Malls weighted average:
Total excluding anchors	89.9	%	88.9	%	96.0	%	93.9	%	90.3	%	89.3	%	89.0	%	89.3	%	96.0	%	95.9	%	89.5	%	89.8	%
Total including anchors	93.2	%	92.7	%	97.3	%	95.8	%	93.4	%	92.9	%	92.9	%	93.1	%	97.2	%	97.2	%	93.1	%	93.3	%
Strip and power centers weighted average	N/A		N/A		94.5	%	94.5	%	94.5	%	94.5	%
Other retail properties													99.5	%	N/A		95.2	%	94.9	%	95.3	%	94.9	%

_________________________


⁽¹⁾	Occupancy for both periods presented includes all tenants irrespective of the term of their agreements.


⁽²⁾	Combined occupancy is calculated by using occupied gross leasable area (“GLA”) for consolidated and unconsolidated properties and dividing by total GLA for consolidated and unconsolidated properties.

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Leasing Activity

The table below sets forth summary leasing activity information with respect to our consolidated and unconsolidated properties for the ~~three and nine~~six months ended ~~September~~June 30, ~~2013~~2014:


			Average Gross Rent psf				Increase (Decrease) in Gross Rent psf					Annualized Tenant Improvements psf⁽²⁾					Average Gross Rent psf				Increase in Gross Rent psf				Annualized Tenant Improvements psf⁽²⁾
	Number	GLA	Previous		New⁽¹⁾		Dollar			Percentage		Annualized Tenant Improvements psf⁽²⁾			Number	GLA	Previous		New⁽¹⁾		Dollar		Percentage		Annualized Tenant Improvements psf⁽²⁾
New Leases:⁽³⁾
1st Quarter	33	95,895	N/A		$	39.60	$	39.60		N/A		$	7.82		39	81,690	N/A		$	48.07	$	48.07	N/A		$	5.20
2nd Quarter ⁽⁴⁾	53	144,481	N/A		39.73		39.73			N/A		7.36			52	152,596	N/A		41.71		41.71		N/A		7.25
3rd Quarter ⁽⁵⁾	60	234,946	N/A		26.74		26.74			N/A		6.31
Total/Average	146	475,322	N/A		$	33.28	$	33.28		N/A		$	6.93		91	234,286	N/A		$	43.93	$	43.93	N/A		$	6.54

Renewal - non-anchor tenants 10,000 square feet and under:⁽⁶⁾
Renewal - non-anchor tenants 10,000 square feet and under:⁽⁴⁾														Renewal - non-anchor tenants 10,000 square feet and under:⁽⁴⁾
1st Quarter	73	216,780	$	35.21	$	36.93	$	1.72		4.9	%	$	0.04		48	145,510	$	36.02	$	38.68	$	2.66	7.4	%	$	—
2nd Quarter	107	249,256	34.98		36.81		1.83			5.2	%	—			105	286,783	33.75		35.27		1.52		4.5	%	—
3rd Quarter	63	184,923	34.06		36.28		2.22			6.5	%	—
Total/Average	243	650,959	$	34.80	$	36.70	$	1.90		5.5	%	$	0.01		153	432,293	$	34.51	$	36.42	$	1.90	5.5	%	$	—

Renewal - non-anchor tenants greater than 10,000 square feet:⁽⁶⁾
Renewal - non-anchor tenants greater than 10,000 square feet:⁽⁴⁾														Renewal - non-anchor tenants greater than 10,000 square feet:⁽⁴⁾
1st Quarter	1	11,521	$	7.49	$	7.23	$	(0.26	)	(3.5	)%	$	—		6	107,781	$	16.22	$	17.04	$	0.82	5.1	%	$	—
2nd Quarter	1	20,308	7.60		15.43		7.83			103.0	%	—			4	124,249	17.51		18.90		1.39		7.9	%	—
3rd Quarter	3	47,600	16.32		13.25		(3.07		)	(18.8	)%	—
Total/Average															10	232,030	$	16.91	$	18.04	$	1.13	6.7	%	$	—

Anchor New:
1st Quarter															1	52,055	N/A		$	7.50	$	7.50	N/A		$	4.00
2nd Quarter															1	98,391	N/A		15.34		15.34		N/A		8.33
Total/Average	5	79,429	$	12.81	$	12.93	$	0.12		1.0	%	$	—		2	150,446	N/A		$	12.63	$	12.63	N/A		$	6.83

Anchor Renewal:
1st Quarter	1	83,835	$	8.58	$	9.10	$	0.52		6.1	%	$	—		1	101,476	$	2.79	$	2.80	$	0.01	0.4	%	$	—
2nd Quarter	4	374,700	3.59		3.24		(0.35		)	(9.7	)%	—			1	77,688	2.85		2.92		0.07		2.5	%	—
3rd Quarter	8	666,739	4.64		4.84		0.20			4.3	%	—
Total/Average	13	1,125,274	$	4.58	$	4.62	$	0.04		0.9	%	$	—		2	179,164	$	2.82	$	2.85	$	0.04	1.3	%	$	—

_________________________


⁽¹⁾	New rent is the initial amount payable upon rent commencement. In certain cases, a lower rent may be payable until certain conditions in the lease are satisfied.


⁽²⁾	These leasing costs are presented as annualized costs per square foot and are spread uniformly over the initial lease term.


⁽³⁾	This category includes newly constructed and recommissioned space.


⁽⁴⁾	~~Excluding tenants greater than 10,000 square feet, average gross rent per square foot for new leases was~~ ~~$51.11~~.


⁽⁵⁾	~~Excluding tenants greater than 10,000 square feet, average gross rent per square foot for new leases was~~ ~~$30.91~~.


⁽⁶⁾	This category includes expansions and lease extensions.

As of ~~September~~June 30, ~~2013~~2014, for non-anchor leases, the average gross rent per square foot as of the expiration date was $~~35.78~~34.91 for the renewing leases in “Holdover” status and $~~31.49~~38.06 for leases expiring in ~~2013.~~2014.

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Overview

Net loss for the three months ended June 30, 2014 was $24.1 million, an increase of $15.0 million compared to a net loss of $9.0 million for the three months ended June 30, 2013. This increase was primarily due to $16.1 million of impairment of assets recorded in connection with North Hanover and Nittany Malls and an increase of $3.8 million of employee separation expense, partially offset by $6.1 million of lower interest expense recorded in the three months ended June 30, 2014 as compared to the same period in 2013.

Net loss for the six months ended June 30, 2014 was $32.4 million, a decrease of $49.2 million compared to net income of $16.8 million for the six months ended June 30, 2013. This decrease was primarily due to $33.3 million of gains on sales of discontinued operations recorded in the six months ended June 30, 2013, $17.4 million of impairment of assets in connection with North Hanover Mall, Nittany Mall and South Mall recorded in the six months ended June 30, 2014, an increase of $4.7 million in depreciation and amortization expense, a decrease of $4.0 million of NOI from properties sold since January 1, 2013 and an increase of $2.6 million of employee separation expense in the six months ended June 30, 2014 as compared to the same period in 2013. These decreases were partially offset by $13.3 million of lower interest expense recorded in the six months ended June 30, 2014 as compared to the same period in 2013.

The following ~~information~~table sets forth our results of operations for the three and ~~nine~~six months ended ~~September~~June 30, ~~2013~~2014 and ~~2012~~2013.

~~Net income~~ ~~for the three months ended~~ ~~September 30, 2013~~ ~~was $12.6 million~~, ~~an increase~~ ~~of $25.4 million~~ ~~compared to a~~ ~~net loss~~ ~~of $12.9 million~~ ~~for the three months ended~~ ~~September 30, 2012~~. This increase was primarily due to gains on sales of discontinued operations of $45.1 million in connection with the September 2013 sales of Christiana Center and Commons at Magnolia, a $6.5 million decrease in interest expense and a $5.0 million decrease in employee separation expenses. These favorable changes were partially offset by $30.0 million in impairment losses at Chambersburg Mall and North Hanover Mall and a $4.1 million increase in depreciation and amortization expenses.

~~Net income~~ ~~for the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2013~~ ~~was $29.4 million~~, ~~an increase~~ ~~of $65.1 million~~ ~~compared to a~~ ~~net loss~~ ~~of $35.7 million~~ ~~for the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2012~~. This increase was primarily due to gains on sales of discontinued operations of $78.4 million in connection with the sales of Orlando Fashion Square, Paxton Towne Centre, Phillipsburg Mall, Christiana Center and Commons at Magnolia, a $13.0 million decrease in interest expense, increased ~~NOI~~ of $7.2 million at same store and properties acquired in 2013 and a decrease of $3.4 million in employee separation expenses. These favorable changes were partially offset by $30.0 million of impairment losses at Chambersburg Mall and North Hanover Mall, an increase of $10.1 million in depreciation and amortization expenses and a decrease of $7.4 million from NOI of discontinued operations.


	Three Months Ended September 30,				% Change 2012 to 2013			Nine Months Ended September 30,						% Change 2012 to 2013		Three Months Ended June 30,								% Change 2013 to 2014		Six Months Ended June 30,				% Change 2013 to 2014
(in thousands of dollars)	2013		2012				2013			2012			2014				2013					2014		% Change 2013 to 2014		2013				% Change 2013 to 2014
Real estate revenue	108,278		102,848		% Change 2012 to 2013	5	%		317,395			305,133		% Change 2012 to 2013			4	%	$	106,145			$	103,548		3	%	214,754		206,726		4	%
Other income	3,208		2,608		23	%		5,491			4,254			29	%	680				1,395				(51	)%	1,458		2,283		(36	)%
Operating expenses	(48,698	)	(45,620	)	7	%		(137,463	)		(131,897	)		4	%	(44,364		)		(43,619		)		2	%	(96,081	)	(87,314	)	10	%
Depreciation and amortization	(36,053	)	(31,918	)	13	%		(105,332	)		(95,232	)		11	%	(37,135		)		(35,088		)		6	%	(73,370	)	(68,705	)	7	%
General and administrative expenses	(8,116	)	(8,694	)	(7	)%		(26,578	)		(28,818	)		(8	)%	(8,774		)		(9,606		)		(9	)%	(17,851	)	(18,462	)	(3	)%
Impairment of assets	(29,966	)	—		N/A			(29,966	)		—			N/A		(16,098		)		—				N/A		(17,398	)	—		N/A
Provision for employee separation expense	—		(4,958	)	(100	)%		(2,314	)		(5,754	)		(60	)%	(4,877		)		(1,035		)		371	%	(4,877	)	(2,314	)	111	%
Project costs and other expenses	(462	)	(380	)	22	%		(862	)		(777	)		11	%
Acquisition costs and other expenses																(960		)		(198		)		385	%	(2,606	)	(400	)	552	%
Interest expense, net	(23,477	)	(29,996	)	(22	)%		(78,503	)		(91,531	)		(14	)%	(21,550		)		(27,689		)		(22	)%	(41,720	)	(55,027	)	(24	)%
Equity in income of partnerships	2,345		2,164		8	%		7,081			6,110			16	%	2,784				2,283				22	%	5,186		4,736		10	%
Gain on sale of real estate																99				—				N/A		99		—		N/A
Net loss from continuing operations	(32,941	)	(13,946	)	136	%		(51,051	)		(38,512	)		33	%	(24,050		)		(10,009		)		140	%	(32,406	)	(18,477	)	75	%
Operating results from discontinued operations	428		1,085		(61	)%		2,082			2,834			(27	)%	—				1,000				(100	)%	—		2,021		(100	)%
Gains on sales of discontinued operations	45,097		—		N/A			78,351			—			N/A		—				—				N/A		—		33,254		(100	)%
Net income (loss)	12,584		(12,861	)	198	%		29,382			(35,678	)		182	%
Net (loss) income																$	(24,050	)		$	(9,009	)		167	%	(32,406	)	16,798		(293	)%

The amounts in the preceding table reflect our consolidated properties and our unconsolidated properties. Our unconsolidated properties are presented under the equity method of accounting in the line item “Equity in income of partnerships.”

Real Estate Revenue

Real estate revenue increased by $~~5.4~~2.6 million, or 5%3%, in the three months ended ~~September~~June 30, ~~2013~~2014 compared to the three months ended ~~September~~June 30, ~~2012~~2013, primarily due to:

an increase of ~~$2.7~~$2.4 million in base rent, including ~~$1.4~~$0.5 million related to ~~the April 2013 acquisition of 907 Market Street, Philadelphia, Pennsylvania.~~properties acquired since March 2013. Base rent also increased due to new store openings and lease renewals with higher base rent, with notable increases at ~~Willow Grove Park,~~Moorestown Mall and Cherry Hill ~~Mall and Plymouth Meeting~~ Mall; and

an increase of ~~$2.6~~$0.4 million in ~~expense reimbursements, following increases in~~other real estate ~~tax and utility expenses (see “—Operating Expenses”).~~

revenue; partially offset by

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a decrease of $0.3 million in percentage rent, due to a combination of lower tenant sales and lease renewals with higher base rents and corresponding higher sales breakpoints for calculating percentage rent.

Real estate revenue increased by $~~12.3~~$8.0 million,, or 4%, in the ~~nine~~six months ended ~~September~~June 30, ~~2013~~2014 compared to the ~~nine~~six months ended ~~September~~June 30, ~~2012~~2013, primarily due to:

an increase of ~~$8.7~~$5.3 million in base rent, including ~~$2.6~~$2.2 million related to ~~the April 2013 acquisition of 907 Market Street and $1.3 million associated with the July 2012 lease commencement date of the Philadelphia Media Network at The Gallery at Market East.~~properties acquired since December 2012. Base rent also increased due to new store openings and lease renewals with higher base rent, with notable increases at ~~Willow Grove Park,~~Moorestown Mall and Cherry Hill ~~Mall, Plymouth Meeting Mall~~Mall; and ~~Jacksonville Mall;~~

an increase of ~~$4.4~~$3.4 million in expense reimbursements, following increases in ~~common area maintenance and~~snow removal expense, real estate ~~tax~~taxes and utility expenses (see “—Operating Expenses”); partially offset by

a decrease of ~~$1.1~~$0.7 million in percentage rent, due to a combination of lower tenant sales and lease ~~termination revenue as a result of $1.1 million received from three tenants~~renewals with higher base rents and corresponding higher sales breakpoints for calculating percentage rent. Tenant sales during the ~~nine~~three months ~~ended~~ ~~September 30, 2012~~.

ending March 31, 2014 were negatively affected by severe winter weather that particularly affected our properties located in the Mid-Atlantic states.

Operating Expenses

Operating expenses increased by $~~3.1~~0.7 million, or 7%2%, in the three months ended ~~September~~June 30, ~~2013~~2014 compared to the three months ended ~~September~~June 30, ~~2012~~2013, primarily due to:

an increase of ~~$3.4~~$0.8 million in non-common area utility expense primarily as a result of an increase in electric rates that particularly affected our properties located in Pennsylvania, New Jersey and Maryland; and

an increase of $0.7 million in real estate tax expense, including a ~~$2.7~~$0.5 million increase at three of our ~~four~~ properties located in New Jersey due to ~~the combined effect~~a combination of increases in the real estate tax assessment values and real estate tax ~~rates;~~

~~an increase of $0.3 million in non-common area utility expense, including increases of $0.2 million related to the April 2013 acquisition of 907 Market Street;~~rates, partially offset byby;

a decrease of ~~$0.2 million in common area maintenance expense, including a $0.3 million decrease in loss prevention expense due to contract renewal savings; and~~

~~a decrease of $0.2~~$0.6 million in bad debt expense primarily as a result of a decrease in our estimated reserve related to straight line rent receivables, due to ~~favorable collections resulting~~improved historical results in ~~lower billed accounts receivable balances.~~recent periods.

Operating expenses increased by $~~5.6~~$8.8 million,, or 4%10%, in the ~~nine~~six months ended ~~September~~June 30, ~~2013~~2014 compared to the ~~nine~~six months ended ~~September~~June 30, ~~2012~~2013, primarily due to:

an increase of ~~$6.1~~$3.9 million in non-common area utility expense as a result of a significant increase in electric rates at many of our properties. The extreme cold weather this winter, and resulting natural gas supply constraints, led to an historic spike in wholesale electricity rates that particularly affected our properties located in Pennsylvania, New Jersey and Maryland;

an increase of $3.3 million in common area maintenance expenses, including increases of $1.9 million in snow removal expense and $1.1 million in common area utility expense. Snow removal expense at our properties located in the Mid-Atlantic States, particularly Pennsylvania and New Jersey, was affected by a severe winter with numerous snowfalls during the three months ended March 31, 2014. In addition, common area utility expense increased as a result of higher electric expense rates as described in more detail above; and

an increase of $1.8 million in real estate tax expense, including a ~~$5.0~~$1.0 million increase at three of our ~~four~~ properties located in New Jersey due to ~~the combined effect~~a combination of increases in ~~the~~ real estate tax assessment values and real estate tax ~~rates;~~rates.

an increase of $0.8 million in common area maintenance expenses, including increases of $0.4 million related to the April 2013 acquisition of 907 Market Street and $0.5 million in snow removal expense. Snow removal expense was higher during the ~~nine~~ ~~months ending~~ ~~September 30, 2013~~ ~~due to having a mild and dry winter across the Mid-Atlantic states where many of our properties are located in the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2012; partially offset by~~

~~a decrease of $0.3 million in non-common area utility expense due to lower electric rates as a result of alternate supplier contracts executed over the past 12 months; and~~

~~a decrease of $0.3 million in bad debt expense due to favorable collections resulting in lower billed accounts receivable balances.~~

Net Operating Income (“NOI”)

NOI (a non-GAAP measure) is derived from real estate revenue (determined in accordance with generally accepted accounting principles, or GAAP, including lease termination revenue) minus operating expenses (determined in accordance with GAAP), plus our share of revenue and operating ~~expenses~~expense of our partnership investments, and includes real estate revenue and operating ~~expenses~~expense from properties included in discontinued operations, if any. It does not represent cash generated from operating activities in accordance with GAAP and should not be considered to be an alternative to net income (determined in accordance with GAAP) as an indication of our financial performance or to be an alternative to cash flow from operating activities (determined in accordance with GAAP) as a measure of our liquidity. It is not indicative of funds available for our cash needs, including our ability to make cash distributions. We believe that NOI is helpful to management and investors as a measure of operating performance because it is an indicator of the return on property investment and provides a method of comparing property performance over time. We believe that net income is the most directly comparable GAAP measurement to NOI.

Table of Contents

NOI excludes interest and other income, general and administrative ~~expenses,~~expense, provision for employee separation ~~expenses,~~expense, interest expense, depreciation and amortization, gains on sales of interests in real estate, gains on sales of non-operating real estate, gains on sales of discontinued operations, ~~gain on extinguishment of debt,~~ impairment losses, ~~project~~acquisition costs and other ~~expenses.~~expense.

~~Table of Contents~~

The following table presents NOI for the three and ~~nine~~six months ended ~~September~~June 30, ~~2013~~2014 and ~~2012~~2013. The results are presented using the “proportionate-consolidation method” (a non-GAAP measure), which includes our share of the results of our partnership investments. Under GAAP, we account for our partnership investments under the equity method of accounting. Operating results for retail properties that we owned for the full periods presented (“Same Store”) exclude properties acquired or disposed of or reclassified as held for sale during the periods presented. A reconciliation of NOI to net income (loss) determined in accordance with GAAP appears under the heading “Reconciliation of GAAP Net Income (Loss) to Non-GAAP Measures.”


	Same Store								Non Same Store								Total								Same Store								Non Same Store								Total
	Three Months Ended September 30,								Three Months Ended September 30,								Three Months Ended September 30,								Three Months Ended June 30,								Three Months Ended June 30,								Three Months Ended June 30,
(in thousands of dollars)	2013			2012			% Change		2013			2012			% Change		2013			2012			% Change		2014			2013			% Change		2014			2013			% Change		2014			2013			% Change
Real estate revenue	$	116,135		$	112,032		4	%	$	3,550		$	7,511		(53	)%	$	119,685		$	119,543		—	%	$	112,706		$	109,845		3	%	$	3,526		$	6,133		(43	)%	$	116,232		$	115,978		—	%
Operating expenses	(50,819		)	(48,058		)	6	%	(1,293		)	(3,390		)	(62	)%	(52,112		)	(51,448		)	1	%	(45,533		)	(44,681		)	2	%	(1,692		)	(2,560		)	(34	)%	(47,225		)	(47,241		)	—	%
Net Operating Income	$	65,316		$	63,974		2	%	$	2,257		$	4,121		(45	)%	$	67,573		$	68,095		(1	)%	$	67,173		$	65,164		3	%	$	1,834		$	3,573		(49	)%	$	69,007		$	68,737		—	%

Total NOI ~~decreased~~increased by $~~0.5~~0.3 million, or 1%0%, in the three months ended ~~September~~June 30, ~~2013~~2014 compared to the three months ended ~~September~~June 30, ~~2012~~2013 primarily due to a $2.0 million increase in NOI from Same Store properties, partially offset by a decrease of $1.7 million in NOI from Non Same Store properties. The decrease in NOI from Non Same Store properties was primarily due to NOI from properties sold. See “—Real Estate Revenue” and “—Operating Expenses” above for further information about the factors affecting NOI from our consolidated properties. Same Store NOI includes lease termination revenue of $0.2 million and $0.1 million for the three months ended June 30, 2014 and 2013, respectively.



	Same Store								Non Same Store								Total
	Six Months Ended June 30,								Six Months Ended June 30,								Six Months Ended June 30,
(in thousands of dollars)	2014			2013			% Change		2014			2013			% Change		2014			2013			% Change
Real estate revenue	$	228,091		$	220,955		3	%	$	7,259		$	12,363		(41	)%	$	235,350		$	233,318		1	%
Operating expenses	(99,030		)	(90,120		)	10	%	(3,447		)	(5,873		)	(41	)%	(102,477		)	(95,993		)	7	%
Net Operating Income	$	129,061		$	130,835		(1	)%	$	3,812		$	6,490		(41	)%	$	132,873		$	137,325		(3	)%

Total NOI decreased by $4.5 million, or 3%, in the six months ended June 30, 2014 compared to the six months ended June 30, 2013 primarily due to a $1.8 million decrease in NOI from Same Store properties and a decrease of $2.7 million in NOI from Non Same Store ~~properties offset by a~~ ~~$1.3 million~~properties. The Same Store decrease resulted from an increase in ~~NOI~~operating expenses, most notably common area maintenance expenses and utility expenses, resulting from ~~our Same Store properties.~~the severe and prolonged winter weather. The Non Same Store decrease was primarily due to a ~~$3.0~~$4.0 million decrease ofin NOI from ~~discontinued operations, primarily~~properties sold, partially offset by a ~~$1.1~~$1.7 million increase in NOI from ~~907 Market Street, which was~~properties acquired ~~in April~~since January 2013. See “—Real Estate Revenue” and “—Operating Expenses” above for further information about the factors affecting NOI from our consolidated properties. Same Store NOI includes lease termination revenue of $~~0.3~~$0.3 million and $0.2 million for ~~each of~~ the ~~three~~six months ended ~~September~~June 30, ~~2013~~2014 and ~~2012~~2013, respectively.

Same Store Non Same Store Total
Nine Months Ended
September 30, Nine Months Ended
September 30, Nine Months Ended
September 30,
(in thousands of dollars) 2013 2012
%
Change
2013 2012
%
Change
2013 2012
%
Change
Real estate revenue $ 342,726
$ 332,188
3 % $ 10,573
$ 22,499
(53 )% $ 353,299
$ 354,687
— %
Operating expenses (144,065 ) (138,972 ) 4 % (4,336 ) (10,855 ) (60 )% (148,401 ) (149,827 ) (1 )%
Net Operating Income $ 198,661
$ 193,216
3 % $ 6,237
$ 11,644
(46 )% $ 204,898
$ 204,860
— %

~~Total NOI was unchanged at $204.9 million for the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2013. Same Store NOI increased $5.4 million and was offset by a $5.4 million decrease in Non Same Store NOI. Non Same Store NOI consisted~~Table of a decrease of $7.4 million from properties classified as discontinued operations, partially offset by a $2.1 million increase in NOI from 907 Market Street, which was acquired in April 2013. See “—Real Estate Revenue” and “—Operating Expenses” above for further information about our consolidated properties. Same Store NOI includes lease termination revenue of $~~0.6~~ ~~million and $1.7~~ ~~million for the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2013~~ ~~and~~ ~~2012, respectively.~~Contents

Depreciation and Amortization

Depreciation and amortization expense increased by $~~4.1~~2.0 million, or ~~13%~~6%, in the three months ended ~~September~~June 30, ~~2013~~2014 compared to the three months ended ~~September~~June 30, ~~2012~~2013, primarily due to:

an increase of ~~$2.9~~$1.8 million primarily ~~due to~~as a result of a higher asset base resulting from capital improvements related to new tenants at our properties; and

an increase of ~~$1.2~~$0.5 million associated with properties acquired since March 2013; partially offset by

a decrease of $0.2 million associated with the ~~April 2013 acquisition~~sale of ~~907 Market Street.~~South Mall in June 2014.

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Depreciation and amortization expense increased by ~~$10.1~~$4.7 million,, or ~~11%~~7%, in the ~~nine~~six months ended ~~September~~June 30, ~~2013~~2014 compared to the ~~nine~~six months ended ~~September~~June 30, ~~2012~~2013, primarily due to:

an increase of ~~$8.3~~$3.0 million ~~primarily due to~~as a result of a higher asset base resulting from capital improvements related to new tenants at our properties; and

an increase of ~~$2.1~~$1.9 million associated with ~~the April 2013 acquisition of 907 Market Street;~~properties acquired since December 2012; partially offset by

a decrease of ~~$0.3~~$0.2 million ~~because certain lease intangibles~~associated with the sale of South Mall in June 2014.

Provision for Employee Separation Expense

We recorded a provision for employee separation expense of $4.1 million during the three and six months ended June 30, 2014 related to the departure of George Rubin, our former vice chairman. We also recorded $0.8 million related to the separation of other employees during the three and six months ended June 30, 2014.

We recorded a provision for employee separation expense of $1.0 million and $2.3 million during the three and six months ended June 30, 2013, respectively, primarily related to an amended employment agreement for Ronald Rubin, our executive chairman.

Impairment of Assets

In June 2014, we recorded losses on impairment of assets at Nittany Mall in State College, Pennsylvania of $13.9 million and at North Hanover Mall in Hanover, Pennsylvania of $2.2 million. During the second quarter of 2014, we entered into negotiations with a prospective buyer of the properties which are ongoing and could result in changes to our underlying assumptions. As a result of these negotiations, we determined that the holding period for each of the properties was less than had been previously estimated, which we concluded to be a triggering event for each property, leading us to conduct an analysis of possible asset impairment at these properties. Based upon the purchase and sale agreement with the prospective buyer of these two properties, ~~purchased during 2005 became fully amortized during 2012.~~we determined that the estimated undiscounted cash flows, net of estimated capital expenditures, for Nittany and North Hanover Malls were less than the carrying value of the properties, and recorded the impairment losses.

~~General~~In March 2014, we recorded a loss on impairment of assets at South Mall in Allentown, Pennsylvania of $1.3 million.We sold the property in June 2014.

Acquisition Costs and ~~Administrative~~Other Expenses

~~General~~Acquisition costs and ~~administrative~~other expenses ~~decreased~~increased by $~~0.6~~$0.8 million~~, or~~ 7%~~, in~~ during the three months ended ~~September~~June 30, ~~2013~~2014 compared to the three months ended ~~September~~June 30, ~~2012~~2013~~. This~~ ~~decrease~~ ~~was~~ primarily due to ~~a decrease~~$0.6 million of $~~0.6~~ ~~million in executive compensation and benefit costs.~~

~~General and administrative expenses~~ ~~decreased~~ ~~by $2.2 million, or~~ 8%~~, in the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2013~~ ~~compared to the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2012. This decrease was primarily due to a decrease of $1.8~~ ~~million in executive compensation and benefit~~acquisition costs ~~and a decrease of $0.4~~ ~~million in other general and administrative expenses.~~

~~Provision for Employee Separation Expenses~~

In connection with the terms of the amended employment agreement with Ronald Rubin, our Executive Chairman, we recorded a total provision for employee separation expense of $4.5 million. We recorded provision for employee separation expense related to Mr. Rubin’s amended employment agreement of $~~1.1~~ ~~million~~incurred during the three months ended ~~September~~June 30, ~~2012~~2014 related to our entering into an agreement to acquire Springfield Town Center.,

Acquisition costs and $~~1.9~~ ~~million and $1.4~~other expenses increased by $2.2 million during the ~~nine~~six months ended ~~September~~June 30, 2014 compared to the six months ended June 30, 2013 ~~and~~ ~~2012, respectively. We recorded a total~~ primarily due to $1.9 million of ~~$2.6 million~~acquisition costs incurred during the ~~year~~six months ended ~~December 31, 2012.~~June 30, 2014 related to our entering into an agreement to acquire Springfield Town Center.

~~In February 2013, under our Second Amended and Restated 2003 Equity Incentive Plan, Mr. Rubin received~~ ~~16,000~~ ~~restricted shares that had a fair value~~

Table of ~~$0.3 million~~ ~~based on the grant date fair value of~~ ~~$18.28~~ per share and a vesting period through December 31, 2013. This award was amortized through June 7, 2013, the date on which Mr. Rubin became eligible to voluntarily terminate his employment agreement and receive his founder’s retirement payment of ~~$3.5 million, at which time such restricted shares would vest.~~Contents

In connection with the appointment of Joseph F. Coradino as Chief Executive Officer in June 2012, conditions in former President and Chief Operating Officer Edward Glickman's employment agreement were triggered that caused us to record a provision for employee separation expense. We recorded $3.5 million and $4.0 million of employee separation expense related to Mr. Glickman in the ~~three and nine~~ ~~months ended~~ ~~September 30, 2012, respectively.~~

Interest Expense

Interest expense decreased by $~~6.5~~6.1 million, or 22%, for the three months ended ~~September~~June 30, ~~2013~~2014 compared to the three months ended ~~September~~June 30, ~~2012~~2013. This decrease was primarily due to lower weighted average interest rates and a ~~$7.3 million~~ decrease ~~due to a lower~~in our weighted average debt balance, ~~and a lower applicable stated interest rates, partially offset by a $0.7~~which together contributed $4.2 million ~~loss on hedge ineffectiveness.~~to the decrease. Our weighted average effective borrowing rate was ~~5.59~~4.99% for the three months ended June 30, 2014 compared to 5.63% for the three months ended ~~September~~June 30, 2013 ~~compared to~~ ~~6.17% for the three months ended~~ ~~September 30, 2012~~. Our weighted average debt balance was $~~1,651.6~~1,643.0 million for the three months ended ~~September~~June 30, ~~2013~~2014 compared to $~~1,966.2~~1,756.8 million for the three months ended ~~September~~June 30, ~~2012~~2013. ~~The decrease~~We also recorded hedge ineffectiveness of $1.2 million in ~~our weighted average debt balance is primarily~~the three months ended June 30, 2014 due to accelerated amortization resulting from the ~~application~~July 2014 repayment of the ~~net proceeds of our Series B preferred share issuance~~mortgage loan secured by Logan Valley Mall, compared to a $3.2 million loss on hedge ineffectiveness recorded in ~~2012 and our common share issuance in May~~the three months ended June 30, 2013.

Interest expense decreased by ~~$13.0~~$13.3 million,, or ~~14%~~24%, for the ~~nine~~six months ended ~~September~~June 30, ~~2013~~2014 compared to the ~~nine~~six months ended ~~September~~June 30, ~~2012~~2013. This decrease was primarily due to lower weighted average interest rates and a $~~17.5~~ ~~million~~ decrease ~~as a result of a lower~~in our weighted average debt balance, ~~and lower applicable stated interest rates,~~ partially ~~offset by a net loss on hedge ineffectiveness of $3.4 million and a $1.1 million increase in accelerated amortization of deferred financing costs related~~due to ~~the repayment of~~ our 2010 Credit Facility and the repayment of the Jacksonville mortgage loan. Of that $3.4 million net loss on hedge ineffectiveness, $2.9 million related to a forward starting swap that was cash settled in 2008 was determined to be ineffective in connection with the repayment of the mortgage loan on Jacksonville Mall in May 2013.2013 common equity offering. Our weighted average effective borrowing rate

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was ~~5.74~~%4.96% for the ~~nine~~six months ended ~~September~~June 30, ~~2013~~2014 compared to ~~6.06~~%5.84% for the ~~nine~~six months ended ~~September~~June 30, ~~2012~~2013. Our weighted average debt balance was $~~1,757.1~~$1,643.7 million for the ~~nine~~six months ended ~~September~~June 30, ~~2013~~2014 compared to $~~2,045.6~~$1,802.7 million for the ~~nine~~six months ended ~~September~~June 30, ~~2012~~2013. ~~The decrease~~There was also a $2.7 million net loss on hedge ineffectiveness recorded in ~~our weighted average debt balance is primarily due to~~ the ~~application of the net proceeds of our two preferred share issuances in 2012 and our common share issuance in May~~six months ended June 30, 2013.

~~Impairment of assets~~

As further described above and in note 2 to the notes to our unaudited consolidated financial statements, in September 2013, we recorded impairment of assets of $23.7 million on Chambersburg Mall in Chambersburg, Pennsylvania and $6.3 million on North Hanover Mall in Hanover, Pennsylvania.

Discontinued Operations

We have presented as discontinued operations the operating results of Orlando Fashion Square, Paxton Towne Centre, Phillipsburg Mall, Chambersburg Mall, Christiana Center and Commons at Magnolia, which are properties that were sold in 2013.

Operating results and gains on sales of discontinued operations for the properties in discontinued operations for the periods presented were as ~~follows:~~follows. There were no operating results for these properties from, and there were no properties classified in, discontinued operations for the three and six months ended June 30, 2014.


(in thousands of dollars)	Three Months Ended September 30,					Nine Months Ended September 30,						Three Months Ended June 30, 2013		Six Months Ended June 30, 2013
	2013		2012			2013			2012
Operating results of:
Christiana Center	$	288	$	347		$	1,609		$	1,186
Orlando Fashion Square	—		439			150			626			$	—	$	150
Paxton Towne Centre	—		299			(121		)	816			—		(121		)
Phillipsburg Mall												—		(51		)
Chambersburg Mall												150		366
Christiana Center												669		1,321
Commons at Magnolia	140		135			495			378			181		356
Phillipsburg Mall	—		(135		)	(51		)	(172		)
Operating results from discontinued operations	428		1,085			2,082			2,834			1,000		2,021
Gains on sales of discontinued operations	45,097		—			78,351			—			—		33,254
Income from discontinued operations	$	45,525	$	1,085		$	80,433		$	2,834		$	1,000	$	35,275

Gains on Sales of Discontinued Operations

~~Gains on sales of discontinued operations were~~ ~~$45.1 million~~ ~~in the three months ended~~ ~~September 30, 2013~~ ~~due to a $40.9 million gain on the sale of Christiana Center in September 2013 and a $4.2 million gain on the sale of Commons at Magnolia, also in September 2013.~~

~~Gain on sales of discontinued operations were~~ ~~$78.4 million~~ ~~in the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2013~~ due to a $32.7 million gain on the sale of Paxton Towne Centre in January 2013, a $0.6 million gain on the sale of Orlando Fashion Square in February 2013, a $40.9 million gain on the sale of Christiana Center in September 2013 and a $4.2 million gain on the sale of the Commons at Magnolia, also in September 2013.

There were no gains on sales of discontinued operations in the three and ~~nine~~six months ended ~~September~~June 30, ~~2012~~2014.

Gains on sales of discontinued operations were $33.3 million in the six months ended June 30, 2013 due to a $32.7 million gain on sale of Paxton Towne Centre in January 2013 and a $0.6 million gain on the sale of Orlando Fashion Square in February 2013.

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Funds From Operations

The National Association of Real Estate Investment Trusts (“NAREIT”) defines Funds From Operations (“FFO”), which is a non-GAAP measure commonly used by REITs, as net income (computed in accordance with GAAP), excluding gains ~~(or losses) from~~and losses on sales of ~~property,~~operating properties, extraordinary items (computed in accordance with GAAP) and significant non-recurring events that materially distort the comparative measurement of company performance over time; plus real estate depreciation and ~~amortization,~~amortization; and after adjustments for unconsolidated partnerships and joint ~~ventures. Adjustments for unconsolidated partnerships and joint~~ ventures ~~will be calculated~~ to reflect funds from operations on the same basis. We compute FFO in accordance with standards established by NAREIT, which may not be comparable to FFO reported by other REITs that do not define the term in accordance with the current NAREIT definition, or that interpret the current NAREIT definition differently than we do. NAREIT’s established guidance provides that excluding impairment write downs of depreciable real estate is consistent with the NAREIT definition.

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FFO is a commonly used measure of operating performance and profitability among REITs. We use FFO and FFO per diluted share and unit of limited partnership interest in our operating partnership (“OP Unit”) in measuring our performance against our peers and as one of the performance measures for determining incentive compensation amounts earned under certain of our performance-based executive compensation programs.

FFO does not include gains and losses on sales of operating real estate assets or impairment write downs of depreciable real estate, which are included in the determination of net income in accordance with GAAP. Accordingly, FFO is not a comprehensive measure of our operating cash flows. In addition, since FFO does not include depreciation on real estate assets, FFO may not be a useful performance measure when comparing our operating performance to that of other non-real estate commercial enterprises. We compensate for these limitations by using FFO in conjunction with other GAAP financial performance measures, such as net income and net cash provided by operating activities, and other non-GAAP financial performance measures, such as NOI. FFO does not represent cash generated from operating activities in accordance with GAAP and should not be considered to be an alternative to net income (determined in accordance with GAAP) as an indication of our financial performance or to be an alternative to cash flow from operating activities (determined in accordance with GAAP) as a measure of our liquidity, nor is it indicative of funds available for our cash needs, including our ability to make cash distributions. We believe that net income is the most directly comparable GAAP measurement to FFO.

We also present Funds From Operations, as adjusted, and Funds From Operations per diluted share and OP Unit, as adjusted, which are non-GAAP measures, for the three and ~~nine~~six months ended ~~September~~June 30, ~~2013~~2014 and ~~2012~~2013 to show the effect of acquisition costs, provision for employee separation expense, accelerated amortization of deferred financing costs and gain and loss on hedge ineffectiveness, which had a significant effect on our results of operations, but are not, in our opinion, indicative of our operating performance.

We believe that FFO is helpful to management and investors as a measure of operating performance because it excludes various items included in net income that do not relate to or are not indicative of operating performance, such as gains on sales of operating real estate and depreciation and amortization of real estate, among others. We believe that Funds From Operations, as adjusted, is helpful to management and investors as a measure of operating performance because it adjusts FFO to exclude items that management does not believe are indicative of ~~its~~our operating performance, such as acquisition costs, provision for employee separation expense, accelerated amortization of deferred financing costs and gain or loss on hedge ineffectiveness.

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The following table presents FFO and FFO per diluted share and OP Unit and FFO, as adjusted, and FFO per diluted share and OP Unit, as adjusted, for the three months ended ~~September~~June 30, ~~2013~~2014 and ~~2012~~2013:


(in thousands of dollars, except per share amounts)	Three Months Ended September 30, 2013		% Change 2012 to 2013	Three Months Ended September 30, 2012		Three Months Ended June 30, 2014		% Change 2013 to 2014	Three Months Ended June 30, 2013
Funds from operations	$	31,244	55%	$	20,132	$	26,477	10%	$	23,967
Acquisition costs						554			—
Provision for employee separation expense	—		(100)%	4,958		4,877			1,035
Loss on hedge ineffectiveness						1,238			3,146
Accelerated amortization of deferred financing costs	50		N/A	—		—			112
Loss on hedge ineffectiveness	727		N/A	—
Funds from operations, as adjusted	$	32,021	28%	$	25,090	$	33,146	17%	$	28,260
Funds from operations per diluted share and OP Unit	$	0.44	29%	$	0.34	$	0.37	3%	$	0.36
Funds from operations per diluted share and OP Unit, as adjusted	$	0.45	5%	$	0.43	$	0.47	12%	$	0.42

Weighted average number of shares outstanding	67,579			55,190		68,236			63,540
Weighted average effect of full conversion of OP Units	2,136			2,302		2,129			2,228
Effect of common share equivalents	825			982		309			727
Total weighted average shares outstanding, including OP Units	70,540			58,474		70,674			66,495

FFO was $~~31.2~~26.5 million for the three months ended ~~September~~June 30, ~~2013~~2014, an increase of $~~11.1~~2.5 million, or ~~55%~~10%, compared to $~~20.1~~24.0 million for the three months ended ~~September~~June 30, ~~2012~~2013. This increase was primarily due to:

a $4.8 million decrease in interest expense ~~of $8.0 million~~ (including our proportionate share of interest expense of our partnership properties) ~~resulting from~~due to lower overall debt balances and lower average interest rates;

a decrease of ~~$5.0~~$1.9 million from hedge ineffectiveness; and

a $2.0 million increase in NOI from Same Store properties; partially offset by

an increase of $3.8 million in provision for employee separation expense;

~~an increase of $1.3~~a $2.0 million ~~in Same Store NOI (presented using the “proportionate consolidation method;” See “—Net Operating Income”);~~

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~~an increase of $1.1~~ ~~million~~decrease in NOI from ~~907 Market Street, which was acquired in April 2013;~~properties sold; and

~~a decrease~~an increase of $0.6 million in ~~general and administrative expenses; partially offset by~~acquisition costs related to the pending acquisition of Springfield Town Center.

~~a decrease of $3.0 million in NOI from properties in discontinued operations;~~

an increase of $1.6 million in preferred dividends paid resulting from the Series B Preferred Shares issued in October 2012 that were not issued and outstanding during the three months ended September 30, 2012; and

~~an increase of $0.7~~ ~~million in interest expense primarily due to net loss on hedge ineffectiveness that was recorded in interest expense.~~

FFO per diluted share increased by $~~0.10~~0.01 per share to $~~0.44~~0.37 per share for the three months ended ~~September~~June 30, ~~2013~~2014, compared to $~~0.34~~0.36 per share for the three months ended ~~September~~June 30, ~~2012~~2013. ~~FFO per diluted share increased by $0.19 per share due to the $11.1 million increase in FFO, partially offset by a decrease~~

Table of ~~$0.09 per share primarily due to the weighted average effect of 11,500,000 common shares issued in May 2013.~~Contents

The following table presents FFO and FFO per diluted share and OP Unit and FFO, as adjusted, and FFO per diluted share and OP Unit, as adjusted, for the ~~nine~~six months ended ~~September~~June 30, ~~2013~~2014 and ~~2012~~2013:


(in thousands of dollars, except per share amounts)	Nine Months Ended September 30, 2013		% Change 2012 to 2013	Nine Months Ended September 30, 2012		Six Months Ended June 30, 2014		% Change 2013 to 2014	Six Months Ended June 30, 2013
Funds from operations	$	79,387	20%	$	65,932	$	53,092	10%	$	48,143
Acquisition costs						1,941			—
Provision for employee separation expense	2,314		(60)%	5,754		4,877			2,314
Loss on hedge ineffectiveness						1,238			2,682
Accelerated amortization of deferred financing costs	1,076		N/A	—		—			1,026
Loss on hedge ineffectiveness	3,409		N/A	—
Funds from operations, as adjusted	$	86,186	20%	$	71,686	$	61,148	13%	$	54,165
Funds from operations per diluted share and OP Unit	$	1.21	7%	$	1.13	$	0.75	(3)%	$	0.77
Funds from operations per diluted share and OP Unit, as adjusted	$	1.32	7%	$	1.23	$	0.87	1%	$	0.86

Weighted average number of shares outstanding	62,330			55,081		68,091			59,661
Weighted average effect of full conversion of OP Units	2,215			2,313		2,129			2,256
Effect of common share equivalents	851			1,017		326			780
Total weighted average shares outstanding, including OP Units	65,396			58,411		70,546			62,697

FFO was ~~$79.4~~$53.1 million for the ~~nine~~six months ended ~~September~~June 30, ~~2013~~2014, an increase of ~~$13.5~~$4.9 million,, or ~~20%~~10.3%, compared to ~~$65.9~~$48.1 million for the ~~nine~~six months ended ~~September~~June 30, ~~2012~~2013. This increase was primarily ~~was~~ due to:

a $12.1 million decrease ~~of $18.9 million~~ in interest expense (including our proportionate share of interest expense of our partnership properties) ~~resulting from~~due to lower overall debt balances and lower average interest rates; and

~~an increase of $5.4 million in Same Store NOI (presented using the “proportionate consolidation method;” See “—Net Operating Income”);~~

anand a decrease of ~~$3.5~~$1.4 million from hedge ineffectiveness recorded; partially offset by

a $4.0 million decrease in NOI from from properties sold;

a $2.6 million increase in provision for employee separation expense;

a $1.8 million decrease ~~of $2.2 million~~ in ~~general and administrative expenses;~~NOI from Same Store properties; and

an increase of ~~$2.1~~$1.9 million in ~~NOI from 907 Market Street, which was acquired in April 2013; partially offset by~~

~~an increase of $7.7 million in preferred dividends paid resulting from the Series A Preferred shares issued in April 2012 and the Series B Preferred Shares issued in October 2012;~~

~~a decrease of~~ ~~$7.4~~ ~~million in NOI related to properties in discontinued operations;~~

~~an increase of $3.4 million in interest expense due to net loss on hedge ineffectiveness that was recorded in interest expense; and~~

~~an increase of $1.1 million of accelerated deferred financing~~acquisition costs ~~primarily~~ related to the ~~permanent repayment~~pending acquisition of ~~the 2010 Term Loan in 2013.~~Springfield Town Center.

FFO per diluted share ~~increased$0.08~~decreased by $0.02 per share to ~~$1.21~~$0.75 per share for the ~~nine~~six months ended ~~September~~June 30, ~~2013~~2014, compared to ~~$1.13~~$0.77 per share for the ~~nine~~six months ended ~~September~~June 30, ~~2012~~2013~~. FFO per diluted share increased by~~ ~~$0.23~~ ~~per share due to the~~

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~~$13.5 million increase in FFO, offset by a decrease of~~ ~~$0.15~~ ~~per share primarily~~ due to the weighted average effect of ~~the~~ 11,500,000 common shares issued in May 2013, ~~and other common share issuances since January 1, 2012.~~partially offset by the $4.9 million million increase in FFO.

Reconciliation of GAAP Net Income (Loss) to Non-GAAP Measures

The preceding discussions compare our unaudited Consolidated Statements of Operations results for different periods based on GAAP. Also, the non-GAAP measures of NOI and FFO have been discussed. We believe that NOI is helpful to management and investors as a measure of operating performance because it is an indicator of the return on property investment, and provides a method of comparing property performance over time. We believe that FFO is helpful to management and investors as a measure of operating performance because it excludes various items included in net income that do not relate to or are not indicative of operating performance, such as gains on sales of operating real estate and depreciation and amortization of real estate, among others. FFO is a commonly used measure of operating performance and profitability among REITs, and we use FFO and FFO per diluted share and OP Unit as supplemental non-GAAP measures to compare our performance for different periods to that of our industry peers.

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The following information is provided to reconcile NOI and FFO, which are non-GAAP measures, to net income (loss), a GAAP measure:


	Three Months Ended September 30, 2013												Three Months Ended June 30, 2014
	Continuing Operations												Continuing Operations
(in thousands of dollars)	Consolidated			Share of Unconsolidated Partnerships			Discontinued Operations			Total			Consolidated			Share of Unconsolidated Partnerships			Total
Real estate revenue	$	108,278		$	9,980		$	1,427		$	119,685		$	106,145		$	10,087		$	116,232
Operating expenses	(48,698		)	(2,971		)	(443		)	(52,112		)	(44,364		)	(2,861		)	(47,225		)
Net operating income (NOI)	59,580			7,009			984			67,573			61,781			7,226			69,007
General and administrative expenses	(8,116		)	—			—			(8,116		)	(8,774		)	—			(8,774		)
Provision for employee separation expense													(4,877		)	—			(4,877		)
Other income	3,208			—			—			3,208			680			—			680
Project costs and other expenses	(462		)	—			—			(462		)
Acquisition costs and other expenses													(960		)	—			(960		)
Interest expense, net	(23,477		)	(2,773		)	(494		)	(26,744		)	(21,550		)	(2,718		)	(24,268		)
Depreciation of non real estate assets	(253		)	—			—			(253		)	(369		)	—			(369		)
Preferred share dividends	(3,962		)	—			—			(3,962		)	(3,962		)	—			(3,962		)
Funds from operations (FFO)	26,518			4,236			490			31,244			21,969			4,508			26,477
Depreciation of real estate assets	(35,800		)	(1,891		)	(62		)	(37,753		)	(36,766		)	(1,724		)	(38,490		)
Equity in income of partnerships	2,345			(2,345		)	—			—			2,784			(2,784		)	—
Gain on sale of real estate assets													99			—			99
Impairment of assets	(29,966		)	—			—			(29,966		)	(16,098		)	—			(16,098		)
Operating results from discontinued operations	428			—			(428		)	—
Gain on sale of discontinued operations	45,097			—			—			45,097
Preferred share dividends	3,962			—			—			3,962			3,962			—			3,962
Net income	$	12,584		$	—		$	—		$	12,584
Net loss													$	(24,050	)	$	—		$	(24,050	)



	Three Months Ended June 30, 2013
	Continuing Operations
(in thousands of dollars)	Consolidated			Share of Unconsolidated Partnerships			Discontinued Operations			Total
Real estate revenue	$	103,548		$	9,685		$	2,745		$	115,978
Operating expenses	(43,619		)	(2,827		)	(795		)	(47,241		)
Net operating income (NOI)	59,929			6,858			1,950			68,737
General and administrative expenses	(9,606		)	—			—			(9,606		)
Provision for employee separation expense	(1,035		)	—			—			(1,035		)
Other income	1,395			—			—			1,395
Acquisition costs and other expenses	(198		)	—			—			(198		)
Interest expense, net	(27,689		)	(2,765		)	(587		)	(31,041		)
Depreciation of non real estate assets	(323		)	—			—			(323		)
Preferred share dividends	(3,962		)	—			—			(3,962		)
Funds from operations (FFO)	18,511			4,093			1,363			23,967
Depreciation of real estate assets	(34,765		)	(1,810		)	(363		)	(36,938		)
Equity in income of partnerships	2,283			(2,283		)	—			—
Operating results from discontinued operations	1,000			—			(1,000		)	—
Preferred share dividends	3,962			—			—			3,962
Net loss	$	(9,009	)	$	—		$	—		$	(9,009	)

3335

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	Three Months Ended September 30, 2012												Six Months Ended June 30, 2014
	Continuing Operations												Continuing Operations
(in thousands of dollars)	Consolidated			Share of Unconsolidated Partnerships			Discontinued Operations			Total			Consolidated			Share of Unconsolidated Partnerships			Total
Real estate revenue	$	102,848		$	9,668		$	7,027		$	119,543		$	214,754		$	20,596		$	235,350
Operating expenses	(45,620		)	(2,845		)	(2,983		)	(51,448		)	(96,081		)	(6,396		)	(102,477		)
Net operating income (NOI)	57,228			6,823			4,044			68,095			118,673			14,200			132,873
General and administrative expenses	(8,694		)	—			—			(8,694		)	(17,851		)	—			(17,851		)
Provision for employee separation expense	(4,958		)	—			—			(4,958		)	(4,877		)	—			(4,877		)
Other income	2,608			—			—			2,608			1,458			—			1,458
Project costs and other expenses	(380		)	(1		)	—			(381		)
Acquisition costs and other expenses													(2,606		)	—			(2,606		)
Interest expense, net	(29,996		)	(2,813		)	(1,101		)	(33,910		)	(41,720		)	(5,448		)	(47,168		)
Depreciation of non real estate assets	(256		)	—			—			(256		)	(813		)	—			(813		)
Preferred share dividends	(2,372		)	—			—			(2,372		)	(7,924		)	—			(7,924		)
Funds from operations (FFO)	13,180			4,009			2,943			20,132			44,340			8,752			53,092
Depreciation of real estate assets	(31,662		)	(1,845		)	(1,858		)	(35,365		)	(72,557		)	(3,566		)	(76,123		)
Equity in income of partnerships	2,164			(2,164		)	—			—			5,186			(5,186		)	—
Operating results from discontinued operations	1,085			—			(1,085		)	—
Gain on sale of real estate assets													99			—			99
Impairment of assets													(17,398		)	—			(17,398		)
Preferred share dividends	2,372			—			—			2,372			7,924			—			7,924
Net loss	$	(12,861	)	$	—		$	—		$	(12,861	)	$	(32,406	)	$	—		$	(32,406	)


	Nine Months Ended September 30, 2013												Six Months Ended June 30, 2013
	Continuing Operations												Continuing Operations
(in thousands of dollars)	Consolidated			Share of Unconsolidated Partnerships			Discontinued Operations			Total			Consolidated			Share of Unconsolidated Partnerships			Discontinued Operations			Total
Real estate revenue	$	317,395		$	29,683		$	6,221		$	353,299		$	206,726		$	19,704		$	6,888		$	233,318
Operating expenses	(137,463		)	(8,768		)	(2,170		)	(148,401		)	(87,314		)	(5,798		)	(2,881		)	(95,993		)
Net operating income (NOI)	179,932			20,915			4,051			204,898			119,412			13,906			4,007			137,325
General and administrative expenses	(26,578		)	—			—			(26,578		)	(18,462		)	—			—			(18,462		)
Provision for employee separation expense	(2,314		)	—			—			(2,314		)	(2,314		)	—			—			(2,314		)
Other income	5,491			—			—			5,491			2,283			—			—			2,283
Project costs and other expenses	(862		)	—			—			(862		)
Acquisition costs and other expenses													(400		)	—			—			(400		)
Interest expense, net	(78,503		)	(8,305		)	(1,753		)	(88,561		)	(55,027		)	(5,531		)	(1,259		)	(61,817		)
Depreciation of non real estate assets	(801		)	—			—			(801		)	(548		)	—			—			(548		)
Preferred share dividends	(11,886		)	—			—			(11,886		)	(7,924		)	—			—			(7,924		)
Funds from operations (FFO)	64,479			12,610			2,298			79,387			37,020			8,375			2,748			48,143
Depreciation of real estate assets	(104,531		)	(5,529		)	(216		)	(110,276		)	(68,157		)	(3,639		)	(727		)	(72,523		)
Equity in income of partnerships	7,081			(7,081		)	—			—			4,736			(4,736		)	—			—
Impairment of assets	(29,966		)	—			—			(29,966		)
Operating results from discontinued operations	2,082			—			(2,082		)	—			2,021			—			(2,021		)	—
Gain on sale of discontinued operations	78,351			—			—			78,351			33,254			—			—			33,254
Preferred share dividends	11,886			—			—			11,886			7,924			—			—			7,924
Net income	$	29,382		$	—		$	—		$	29,382		$	16,798		$	—		$	—		$	16,798

~~Table of Contents~~

Nine Months Ended September 30, 2012
Continuing Operations
(in thousands of dollars) Consolidated
Share of
Unconsolidated
Partnerships

Discontinued
Operations
Total
Real estate revenue $ 305,133
$ 28,506
$ 21,048
$ 354,687
Operating expenses (131,897 ) (8,409 ) (9,521 ) (149,827 )
Net operating income (NOI) 173,236
20,097
11,527
204,860
General and administrative expenses (28,818 ) —
—
(28,818 )
Provision for employee separation expense (5,754 ) —
—
(5,754 )
Other income 4,254
—
—
4,254
Project costs and other expenses (777 ) (1 ) —
(778 )
Interest expense, net (91,531 ) (8,449 ) (3,031 ) (103,011 )
Depreciation of non real estate assets (604 ) —
—
(604 )
Preferred share dividends (4,217 ) —
—
(4,217 )
Funds from operations (FFO) 45,789
11,647
8,496
65,932
Depreciation of real estate assets (94,628 ) (5,537 ) (5,662 ) (105,827 )
Equity in income of partnerships 6,110
(6,110 ) —
—
Operating results from discontinued operations 2,834
—
(2,834 ) —
Preferred share dividends 4,217
—
—
4,217
Net loss $ (35,678 ) $ —
$ —
$ (35,678 )

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LIQUIDITY AND CAPITAL RESOURCES

This “Liquidity and Capital Resources” section contains certain “forward-looking statements” that relate to expectations and projections that are not historical facts. These forward-looking statements reflect our current views about our future liquidity and capital resources, and are subject to risks and uncertainties that might cause our actual liquidity and capital resources to differ materially from the forward-looking statements. Additional factors that might affect our liquidity and capital resources include those discussed herein and in the section entitled “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, ~~2012 and in our Quarterly Report on Form 10-Q for the quarter ended March 31,~~ 2013 filed with the Securities and Exchange Commission. We do not intend to update or revise any forward-looking statements about our liquidity and capital resources to reflect new information, future events or otherwise.

Capital Resources

We expect to meet our short-term liquidity requirements, including distributions to common and preferred shareholders, recurring capital expenditures, tenant improvements and leasing commissions, but excluding acquisitions and development and redevelopment projects, generally through our available working capital and net cash provided by operations, subject to the terms and conditions of our 2013 Revolving ~~Facility.~~Facility, our 2014 Term Loans (collectively, the “Credit Agreements”) and the Letter of Credit in connection with the Springfield Town Center acquisition. We believe that our net cash provided by operations will be sufficient to allow us to make any distributions necessary to enable us to continue to qualify as a REIT under the Internal Revenue Code of 1986, as amended. The aggregate distributions made to preferred shareholders, common shareholders and OP Unit holders for the first ~~nine~~six months of ~~2013~~2014 were $~~47.8~~36.2 million, based on distributions of $~~1.5468~~1.3012 per Series A Preferred Share, $~~1.3827~~0.9218 per Series B Preferred Share and $~~0.54~~0.40 per common share and OP Unit. The following are some of the factors that could affect our cash flows and require the funding of future cash distributions, recurring capital expenditures, tenant improvements or leasing commissions with sources other than operating cash flows:

adverse changes or prolonged downturns in general, local or retail industry economic, financial, credit or capital market or competitive conditions, leading to a reduction in real estate revenue or cash flows or an increase in expenses;

deterioration in our tenants’ business operations and financial stability, including anchor or ~~in-line~~non anchor tenant bankruptcies, leasing delays or terminations, or lower sales, causing deferrals or declines in rent, percentage rent and cash flows;

inability to achieve targets for, or decreases in, property occupancy and rental rates, resulting in lower or delayed real estate revenue and operating income;

increases in operating costs, including increases that cannot be passed on to tenants, resulting in reduced operating income and cash flows; and

increases in interest rates resulting in higher borrowing costs.

We expect to meet certain of our longer-term requirements, such as obligations to fund ~~development~~redevelopment and ~~redevelopment~~development projects and certain capital requirements ~~including~~(including scheduled debt ~~maturities,~~maturities), future property and portfolio ~~acquisitions, expenses associated with~~ acquisitions, renovations, expansions and other non-recurring capital improvements, through a variety of capital sources, subject to the terms and conditions of our ~~2013 Revolving Facility.~~Credit Agreements.

In January 2012, the SEC declared effective our $1.0 billion universal shelf registration statement. We may use the availability under our shelf registration statement to offer and sell common shares of beneficial interest, preferred shares and various types of debt securities, among other types of securities, to the public. In April 2012, we issued $115.0 million of Series A Preferred Shares (net proceeds of $110.9 million), in October 2012, we issued $86.3 million of Series B Preferred Shares (net proceeds of $83.3 million), and in May 2013, we issued $230.0 million of common shares (net proceeds of $220.3 million) in underwritten public offerings under this registration statement. Thus, we have $568.7 million remaining available under this shelf registration statement. However, in the future, we may be unable to issue securities under the shelf registration statement, or otherwise, on terms that are favorable to us, or at all.

Table of Contents

2013 Revolving Facility, as amended

OnIn April ~~17,~~ 2013, ~~PREIT, PREIT Associates and PRI (collectively, the “Borrower” or “we”)~~we entered into a Credit Agreement ~~(the~~(as amended, the “2013 Revolving Facility”) with Wells Fargo Bank, National Association, and the other financial institutions signatory thereto, for a ~~$400.0~~$400.0 million senior unsecured revolving credit facility. The 2013 Revolving Facility replaced the previously existing 2010 Credit Facility. In December 2013, we amended the 2013 Revolving Facility to make certain terms of the 2013 Revolving Facility consistent with the terms of the 2014 Term Loans (discussed below). The 2013 Revolving Facility and the 2014 Term Loans are collectively referred to as the "Credit Agreements." All capitalized terms used in ~~this section~~the discussion below that are and not otherwise defined have the meanings ascribed to such terms in the 2013 Revolving Facility.

~~Table of Contents~~

~~The weighted average interest rate on outstanding 2013 Revolving Facility borrowings as of~~ ~~September 30, 2013~~ ~~was~~ ~~1.88%~~. Interest expense related to the 2013 Revolving Facility was $~~0.6~~0.3 million and ~~$1.3~~$0.8 million for the three ~~and~~ ~~nine~~months ended ~~September~~June 30, ~~2013~~2014. and 2013, respectively, and $0.8 million for each of the six months ended June 30, 2014 and 2013. Deferred financing fee amortization associated with the 2013 Revolving Facility was $0.4 million for each of the three months ended June 30, 2014 and ~~$0.8~~2013, and $0.7 million and $0.4 million for the ~~three and~~ ~~nine~~six months ended ~~September~~June 30, ~~2013~~2014. and 2013, respectively.

The initial maturity of the 2013 Revolving Facility is April 17, 2016, and ~~the Borrower has~~we have options for two one-year extensions of the initial maturity date, subject to certain conditions and to the payment of an extension ~~fee~~fees of 0.15% and 0.20% of the Facility Amount for the first and second options, respectively.

Amounts borrowed under the 2013 Revolving Facility bear interest at a rate between 1.50% and 2.05% per annum, depending on PREIT’s leverage, in excess of LIBOR, with no floor, as set forth in the table below. The rate in effect at ~~September 30, 2013~~ was 1.70% per annum in excess of LIBOR. In determining PREIT’s leverage (the ratio of Total Liabilities to Gross Asset Value), the capitalization rate used to calculate Gross Asset Value is 6.50% for each Property having an average sales per square foot of more than $500 for the most recent period of 12 consecutive months and (b) 7.50% for any other Property.

Level Ratio of Total Liabilities to Gross Asset Value Applicable Margin
1 Less than 0.450 to 1.00 1.50 %
2 Equal to or greater than 0.450 to 1.00 but less than 0.500 to 1.00 1.70 %
3 Equal to or greater than 0.500 to 1.00 but less than 0.550 to 1.00 1.85 %
4 Equal to or greater than 0.550 to 1.00 2.05 %

~~The unused portion of the 2013 Revolving Facility is subject to a fee of 0.30% per annum.~~

~~Certain of PREIT’s subsidiaries that are not otherwise prevented from doing so serve as guarantors for funds borrowed under the 2013 Revolving Facility.~~

~~The Borrower has~~We have the option to increase the maximum amount available under the 2013 Revolving Facility, through an accordion option, from $400.0 million to as much as $600.0 million, in increments of $5.0 million (with a minimum increase of $25.0 million), based on Wells Fargo Bank’s ability to obtain increases in Revolving Commitments from the current lenders or Revolving Commitments from new lenders. No option to increase to the maximum amount available under the 2013 Revolving Facility has been exercised by ~~the Borrower.~~us.

~~The~~Amounts borrowed under the 2013 Revolving Facility ~~contains affirmative~~bear interest at a rate between 1.50% and ~~negative covenants customarily found~~2.05% per annum, depending on PREIT’s leverage, in ~~facilities~~excess of ~~this type, including, without limitation, requirements that PREIT maintain, on a consolidated basis: (1) minimum Tangible Net Worth~~LIBOR, with no floor, as set forth in the table below. The rate in effect at June 30, 2014 was 1.70% per annum in excess of ~~not less than 75% of the Company’s tangible net worth on December 31, 2012, plus 75% of the Net Proceeds of all Equity Issuances effected at any time after December 31, 2012; (2) maximum~~LIBOR. In determining PREIT’s leverage (the ratio of Total Liabilities to Gross Asset Value), the capitalization rate used to calculate Gross Asset Value is (a) 6.50% for each Property having an average sales per square foot of ~~0.60:1, provided~~more than $500 for the most recent period of 12 consecutive months, and (b) 7.50% for any other Property.



Level	Ratio of Total Liabilities to Gross Asset Value	Applicable Margin
1	Less than 0.450 to 1.00	1.50	%
2	Equal to or greater than 0.450 to 1.00 but less than 0.500 to 1.00	1.70	%
3	Equal to or greater than 0.500 to 1.00 but less than 0.550 to 1.00	1.85	%
4	Equal to or greater than 0.550 to 1.00	2.05	%

PREIT and the subsidiaries of PREIT that ~~it will not be a Default if the ratio exceeds 0.60:1 but does not exceed 0.625:1, so long as the ratio does not exceed 0.60:1~~either (1) account for more than ~~two consecutive quarters and such ratio has not exceeded 0.60:1 more than two times during the term; (3) minimum ratio~~2.5% of Adjusted EBITDA to Fixed Charges of 1.45:1 on or before June 30, 2014, or 1.50:1 thereafter; (4) minimum Unencumbered Debt Yield of 12.0%; (5) minimum Unencumbered NOI to Unsecured Interest Expense of 1.75:1; (6) maximum ratio of Secured Indebtedness toadjusted Gross Asset Value (other than an Excluded Subsidiary), (2) own or lease an Unencumbered Property, or (3) own, directly or indirectly, a subsidiary described in clause (2) will serve as guarantors for funds borrowed under the 2013 Credit Facility. In the event that we seek and obtain an investment grade credit rating, we may request that a subsidiary guarantor be released, unless such guarantor becomes obligated in respect of 0.60:1; (7) maximum Investments in unimproved real estate and predevelopment costs not in excess of 5.0% of Gross Asset Value; (8) maximum Investments in Persons other than Subsidiaries, Consolidated Affiliates and Unconsolidated Affiliates not in excess of 5.0% of Gross Asset Value; (9) maximum Mortgages in favorthe debt of the Borrower or ~~any other Subsidiary not in excess of 5.0% of Gross Asset Value; (10)~~another subsidiary or owns Unencumbered Property or incurs recourse debt.

In the ~~aggregate value~~event that we seek and obtain an investment grade credit rating, alternative interest rates would apply. The unused portion of the ~~Investments and the other items~~2013 Revolving Facility is subject to a fee of 0.30% per annum. In the ~~preceding clauses (7) through (9) not~~event that we seek and obtain an investment grade credit rating, alternative facility fees would apply.

The 2013 Revolving Facility and 2014 Term Loans (discussed below) are cross-defaulted with one another.

See note 4 in excess of 10.0% of Gross Asset Value; (11) maximum Investments in Consolidation Exempt Entities not in excess of 25.0% of Gross Asset Value; (12) maximum Projects Under Development not in excess of 15.0% of Gross Asset Value; (13) the ~~aggregate value~~notes to our unaudited consolidated financial statements for a description of the ~~Investments~~identical covenants contained in the 2013 Revolving Facility and the other items subject to the preceding clauses (7) through (9) and (11) and (12) not in excess of 35.0% of Gross Asset Value; and (14) Distributions may not exceed (A) with respect to our preferred shares, the amounts required by the terms of the preferred shares, and (B) with respect to our common shares, the greater of (i) 95.0% of Funds From Operations and (ii) 110% of REIT taxable income for a fiscal year.2014 Term Loans.

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As2014 Term Loans

On January 8, 2014, we entered into two unsecured term loans in the initial aggregate amount of ~~September~~$250.0 million, comprised of:



Level	Ratio of Total Liabilities to Gross Asset Value	5 Year Term Loan Applicable Margin	7 Year Term Loan Applicable Margin
1	Less than 0.450 to 1.00	1.35%	1.80%
2	Equal to or greater than 0.450 to 1.00 but less than 0.500 to 1.00	1.45%	1.95%
3	Equal to or greater than 0.500 to 1.00 but less than 0.550 to 1.00	1.60%	2.15%
4	Equal to or greater than 0.550 to 1.00	1.90%	2.35%

The initial rate in effect under the 5 Year Term Loan was 1.45% per annum in excess of LIBOR. The initial rate in effect under the 7 Year Term Loan was 1.95% per annum in excess of LIBOR.

If PREIT seeks and obtains an investment grade credit rating and so notifies the lenders under the respective 2014 Term Loans, alternative interest rates would apply.

The table set forth below presents the amount outstanding, interest rate (inclusive of the LIBOR spread) in effect and the maturity dates of the 2014 Term Loans as of June 30, ~~2013, the Borrower was in compliance with all such financial covenants.~~ 2014:



(in millions of dollars)	5 Year Term Loan			7 Year Term Loan
Total facility	$	150.0		$	100.0
Initial borrowing	$	100.0		$	30.0
Initial interest rate	1.60		%	2.10		%
Maturity date	January 2019			January 2021

~~The Borrower may prepay~~Interest expense related to the ~~2013 Revolving Facility at any time without premium~~2014 Term Loans was $1.2 million and $2.2 million for the three and six months ended June 30, 2014, respectively. Deferred financing fee amortization associated with the 2014 Term Loans was $0.1 million for each of the three and six months ended June 30, 2014.

Under the 2014 Term Loans, there is a deferred draw feature that enables PREIT to borrow the amounts specified in each of the term loans over a period of up to one year. From the effective date until either one year later or ~~penalty,~~until the maximum amount under the respective loan is borrowed (or until the lenders’ commitments are otherwise terminated), the unused portion of the 2014 Term Loans is subject to ~~reimbursement obligations~~a fee of 0.20%, in the case of the 5 year Term Loan, and 0.35%, in the case of the 7 Year Term Loan, per annum. There is an additional commitment termination fee under the 7 Year Term Loan if the maximum amount is not borrowed within one year.

PREIT and the subsidiaries of PREIT that either (1) account for ~~the lenders’ breakage costs for LIBOR borrowings. The Borrower must repay the entire principal amount outstanding~~more than 2.5% of adjusted Gross Asset Value (other than an Excluded Subsidiary), (2) own or lease an Unencumbered Property, (3) own, directly or indirectly, a subsidiary described in clause (2), or (4) are guarantors under the 2013 Revolving Facility atserve as guarantors for funds borrowed under the ~~end~~2014 Term

Table of ~~its term, as~~Contents

Loans. In the ~~term~~event that we seek and obtain an investment grade credit rating, we may ~~have been extended.~~
request that a subsidiary guarantor be released, unless such guarantor becomes obligated in respect of the debt of the Borrower or another subsidiary, or owns Unencumbered Property and incurs recourse debt.

~~Upon~~We have the ~~expiration~~option to increase the maximum amount available under the 5 Year Term Loan, through an accordion option (subject to certain conditions), from $150.0 million to as much as $300.0 million, in increments of ~~any applicable cure period following~~$5.0 million (with a minimum increase of $25.0 million), based on Wells Fargo Bank’s ability to obtain increases in commitments from the current lenders or from new lenders.

We have the option to increase the maximum amount available under the 7 Year Term Loan, through an ~~event~~accordion option (subject to certain conditions), from $100.0 million to as much as $200.0 million, in increments of ~~default,~~$5.0 million (with a minimum increase of $25.0 million), based on Wells Fargo Bank’s ability to obtain increases in commitments from the current lenders or from new lenders.

We may ~~declare all~~use the proceeds of the ~~obligations~~2014 Term Loans for the repayment of debt, for the payment of development or redevelopment costs and for working capital and general corporate purposes.

See note 4 in ~~connection with~~the notes to our unaudited consolidated financial statements for a description of the identical covenants contained in the 2013 Revolving Facility ~~immediately due~~ and ~~payable,~~2014 Term Loans.

Springfield Town Center

On March 2, 2014, we entered into a Contribution Agreement (the “Contribution Agreement”) relating to the acquisition of Springfield Town Center in Springfield, Virginia for total consideration of $465.0 million. The total consideration is expected to be funded using $125.0 million of common and preferred Operating Partnership units, with the ~~Commitments~~remaining balance to be paid in cash. We expect to fund the remaining cash balance by borrowing from the amounts available under our Credit Agreements. In addition, the seller of the ~~lenders~~property may be entitled to ~~make further loans~~certain additional consideration based on the value of the property three years after the closing date. We expect closing to occur in the fourth quarter of 2014 or the first quarter of 2015, subject to the substantial completion of the redevelopment of the property as well as certain other customary closing conditions.

Letter of Credit for Springfield Town Center Acquisition

In connection with the agreement to acquire Springfield Town Center, in March 2014, we obtained a $46.5 million letter of credit (the "Letter of Credit") from Wells Fargo Bank, National Association. Amounts secured under the Letter of Credit for Springfield Town Center are subject to a fee per annum, depending on PREIT’s leverage. The initial fee in effect is 1.15% per annum. The Letter of Credit initially expires in July 2015 and may be extended up to one year. The Letter of Credit is subject to covenants that are identical to those contained in the 2013 Revolving Facility will terminate. Upon the occurrence of a voluntary or involuntary bankruptcy proceeding of PREIT, PREIT Associates, PRI, any Material Subsidiary, any subsidiary that owns or leases an Unencumbered Property or certain other subsidiaries, all outstanding amounts will automatically become immediately due and payable and the ~~Commitments of the lenders to make further loans will automatically terminate.~~

~~The Borrower used the initial proceeds from the 2013 Revolving Facility to repay both $97.5 million outstanding under the 2010~~2014 Term ~~Loan and $95.0 million outstanding under the 2010 Revolving Facility.~~Loans. At the closing of the Springfield Town Center acquisition, it is expected that the Letter of Credit will be terminated.

The Gallery Joint Venture

In July 2014, we entered into a 50/50 joint venture with The Macerich Company ("Macerich") to redevelop the Gallery at Market East in Philadelphia, Pennsylvania. Macerich acquired its interest in the venture and related real estate from us for $106.8 million in cash. We used $25.8 million of such proceeds to repay a mortgage loan secured by 801 Market Street, a property that is part of the Gallery complex, $50.0 million to repay the outstanding balance on our 2013 Revolving Facility, ~~there was $192.5 million outstanding under~~and the ~~2013 Revolving Facility.~~remaining proceeds for general corporate purposes.

Interest Rate Derivative Agreements

As of ~~September~~June 30, ~~2013,~~2014, we had entered into ~~six~~12 interest rate swap agreements with a weighted average interest rate of ~~2.54%~~1.67% on a notional amount of ~~$198.8~~$328.1 million maturing on various dates through ~~January 1, 2018, and two forward starting interest rate swap agreements with a weighted average interest rate of 1.12%~~ ~~on a notional amount of~~ ~~$103.0 million~~ ~~maturing in~~ January ~~2018~~.2019.

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provisions in these agreements as of ~~September~~June 30, ~~2013~~2014, we might have been required to settle our obligations under the agreements at their termination value (including accrued interest) of ~~$1.3 million~~.$3.6 million. We had not breached any of the provisions as of ~~September~~June 30, ~~2013~~2014.

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Mortgage Loan Activity

Financing Date Property
Amount Financed or
Extended
(in millions of dollars)
Stated Interest Rate Maturity
2013 Activity:
February
Francis Scott Key Mall⁽¹⁾⁽²⁾
$ 62.6
LIBOR plus 2.60% March 2018
February
Lycoming Mall⁽³⁾
35.5
LIBOR plus 2.75% March 2018
February
Viewmont Mall⁽¹⁾
48.0
LIBOR plus 2.60% March 2018
March Dartmouth Mall 67.0
3.97% fixed April 2018
September
Logan Valley Mall⁽⁴⁾
51.0
LIBOR plus 2.10% September 2014

~~_________________________~~


⁽¹⁾	~~Interest only payments.~~


⁽²⁾	~~The mortgage loan may be increased by~~ ~~$7.9 million~~ ~~based on certain prescribed conditions.~~

⁽³⁾


⁽⁴⁾	The initial amount of the mortgage loan was $68.0 million. We repaid $5.0 million September 2011 and $12.0 million in September 2013. The mortgage loan was amended in September 2013 to extend the maturity date to September 2014.

~~Other 2013 Activity~~the Gallery at Market East with The Macerich Company.

In ~~February 2013,~~July 2014, we repaid a $~~53.2~~51.0 million mortgage loan plus accrued interest ~~on Moorestown~~secured by Logan Valley Mall in ~~Moorestown, New Jersey~~Altoona, Pennsylvania using $50.0 million from our ~~2010~~2013 Revolving Facility and $~~3.5~~1.0 million from available working capital.

~~In May 2013, we repaid a $56.3~~ The $50.0 million ~~mortgage loan on Jacksonville Mall in Jacksonville, North Carolina using $35.0~~borrowed from ~~our~~the 2013 Revolving Facility ~~and $21.3 million~~was subsequently repaid in July 2014 using proceeds from ~~available working capital.~~

~~In September 2013, we repaid a $65.0 million mortgage loan on Wyoming Valley Mall in Wilkes-Barre, Pennsylvania using $65.0 million from our 2013 Revolving Facility.~~

In October 2013, we repaid a $66.9 million mortgage loan on Exton Square Mall in Exton, Pennsylvania using $60.0 million from our 2013 Revolving Facility and $6.9 million from available working capital.

the transaction relating to the Gallery at Market East with The Macerich Company.

Mortgage Loans

Our mortgage loans, which are secured by 1918 of our consolidated properties, are due in installments over various terms extending to ~~the year~~ ~~2032~~December 2023. ~~The balances~~Twelve of ~~the fixed rate~~these mortgage loans ~~have~~bear interest at fixed interest rates that range from 3.90% to ~~9.36%~~6.34% and had a weighted average interest rate of ~~5.31%~~5.05% at ~~September~~June 30, ~~2013~~2014. Six of our mortgage loans bear interest at variable rates and had a weighted average interest rate of ~~2.68%~~2.67% at ~~September~~June 30, ~~2013~~2014. The weighted average interest rate of all consolidated mortgage loans was ~~4.88%~~4.65% at ~~September~~June 30, ~~2013~~2014. Mortgage loans for properties owned by unconsolidated partnerships are accounted for in “Investments in partnerships, at equity” and “Distributions in excess of partnership investments” on the consolidated balance sheets and are not included in the table below.

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The following table outlines the timing of principal payments related to our consolidated mortgage loans as of ~~September~~June 30, ~~2013~~2014:


	Payments by Period
(in thousands of dollars)	Total		Remainder of 2013		2014-2015		2016-2017		Thereafter		Total		Remainder of 2014		2015-2016		2017-2018		Thereafter
Principal payments	$	116,225	$	4,277	$	39,142	$	23,308	$	49,498	$	117,080	$	9,608	$	35,519	$	24,476	$	47,477
Balloon payments ⁽¹⁾⁽²⁾	1,421,877		—		388,532		393,745		639,600
Balloon payments ⁽¹⁾											1,377,721		51,000		514,544		291,532		520,645
Total	$	1,538,102	$	4,277	$	427,674	$	417,053	$	689,098	$	1,494,801	$	60,608	$	550,063	$	316,008	$	568,122

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⁽¹⁾	~~Due dates for certain of the balloon payments set forth in this table may be extended pursuant to the terms of the respective loan agreements.~~


⁽²⁾	In ~~October 2013,~~July 2014, we repaid a ~~$66.9~~$51.0 million mortgage loan plus accrued interest on ~~Exton Square Mall.~~Logan Valley Mall in Altoona, Pennsylvania using $50.0 million from our 2013 Revolving Facility and $1.0 million from available working capital.

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Contractual Obligations

The following table presents our aggregate contractual obligations as of ~~September~~June 30, ~~2013~~2014 for the periods presented:


(in thousands of dollars)	Total		Remainder of 2013		2014-2015		2016-2017		Thereafter		Total		Remainder of 2014		2015-2016		2017-2018		Thereafter
Mortgage loans ⁽¹⁾	$	1,538,102	$	4,277	$	427,674	$	417,053	$	689,098	$	1,494,801	$	60,608	$	550,063	$	316,008	$	568,122
2013 Revolving Facility	90,000		—		—		90,000		—
Interest on indebtedness ⁽²⁾⁽³⁾	389,717		20,458		144,738		79,172		145,349
Term Loans											130,000		—		—		—		130,000
Letter of Credit											46,500		—		46,500		—		—
Interest on indebtedness ⁽²⁾											313,458		37,747		116,685		70,029		88,997
Operating leases	9,293		491		3,504		2,821		2,477		8,758		1,046		3,639		2,921		1,152
Ground leases	41,961		137		1,116		1,095		39,613		41,545		279		1,110		1,070		39,086
Springfield Town Center Contribution Agreement⁽³⁾											465,000		465,000		—		—		—
Development and redevelopment commitments ⁽⁴⁾	10,075		9,716		359		—		—		21,738		21,738		—		—		—
Total	$	2,079,148	$	35,079	$	577,391	$	590,141	$	876,537	$	2,521,800	$	586,418	$	717,997	$	390,028	$	827,357

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⁽¹⁾	In ~~October 2013,~~July 2014, we repaid a ~~$66.9~~$51.0 million mortgage loan plus accrued interest on ~~Exton Square Mall.~~Logan Valley Mall in Altoona, Pennsylvania using $50.0 million from our 2013 Revolving Facility and $1.0 million from available working capital.


⁽²⁾	Includes payments expected to be made in connection with interest rate swaps and forward starting interest rate swap agreements.


⁽³⁾	~~Includes amounts for~~We expect to use Operating Partnership units with a value of $125.0 million towards the ~~Exton Square Mall mortgage loan, which was repaid in~~$465.0 million purchase price of Springfield Town Center. The Springfield Town Center closing is expected to occur between October ~~2013.~~2014 and March 2015.


⁽⁴⁾	The timing of the payments of these amounts is uncertain. We expect that the majority of such payments will be made prior to December 31, ~~2013,~~2014, but cannot provide any assurance that changed circumstances at these projects will not delay the settlement of these obligations.

~~2013 Common Share Offering~~

In May 2013, we issued 11,500,000 common shares in a public offering at $20.00 per share. We received net proceeds from the offering of $220.3 million after deducting payment of the underwriting discount of $0.80 per share and offering expenses. We used a portion of the net proceeds from this offering to repay all $192.5 million of then-outstanding borrowings under the 2013 Revolving Facility.

Preferred Share Dividends

Annual dividends on our 4,600,000 8.25% Series A Preferred Shares ($25.00 liquidation preference) ~~for a full year are expected to be $9.5 million.~~

~~Annual dividends on~~and our 3,450,000 7.375% Series B Preferred Shares ($25.00 liquidation preference) ~~for a full year~~ are expected to be $9.5 million and $6.4 ~~million.~~million, respectively.

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CASH FLOWS

Net cash provided by operating activities totaled $~~84.5~~83.8 million for the ~~nine~~six months ended ~~September~~June 30, ~~2013~~2014 compared to $~~76.9~~57.8 million for the ~~nine~~six months ended ~~September~~June 30, ~~2012~~2013. This increase in cash from operating activities is primarily due to the reduction of cash paid for interest in the first ~~nine~~six months of ~~2013~~2014. and other working capital changes.

Cash flows ~~provided by~~used in investing activities were $~~61.2~~39.3 million for the ~~nine~~six months ended ~~September~~June 30, ~~2013~~2014 compared to cash flows ~~used in~~provided by investing activities of $~~62.6~~38.1 million for the ~~nine~~six months ended ~~September~~June 30, ~~2012~~2013. Cash flows used in investing activities for the six months ended June 30, 2014 included $20.0 million used in acquiring two street retail properties in Philadelphia, Pennsylvania, investment in construction in progress of $17.5 million and real estate improvements of $19.5 million, primarily related to ongoing improvements at our properties, partially offset by proceeds of $23.6 million from the sale of South Mall in June 2014. Investing activities for the first ~~nine~~six months of 2013 reflected ~~$173.3~~$126.9 million in proceeds from the sales of real estate, including ~~Christiana Center, Commons at Magnolia,~~ Paxton Towne Centre, Phillipsburg Mall and Orlando Fashion ~~Square and a condominium interest at Voorhees Town Center.~~Square. Cash flows provided by investing activities ~~for~~during the ~~nine~~six months ended ~~September~~June 30, 2013 were partially offset by ~~$60.9~~$60.9 million used ~~to acquire a building located contiguous to The Gallery at~~in the acquisition of 907 Market ~~East~~Street in Philadelphia, ~~Pennsylvania (907 Market Street),~~ investment in construction in progress of ~~$24.5~~$13.8 million and real estate improvements of ~~$25.2~~$11.2 million,, primarily related to ongoing improvements at our properties. ~~Investing activities for the first~~ ~~nine~~ ~~months of 2012 reflected investment in construction in progress of~~ ~~$32.0 million~~ ~~and real estate improvements of~~ ~~$24.3 million~~.

Cash flows used in financing activities were $~~154.8~~47.9 million for the ~~nine~~six months ended ~~September~~June 30, ~~2013~~2014 compared to cash flows used in financing activities of $~~9.8~~112.3 million for the ~~nine~~six months ended ~~September~~June 30, ~~2012~~2013. Cash flows used in financing activities for the first ~~nine~~six months of ~~2013~~ ~~included a~~ ~~$182.0 million~~ ~~repayment of the 2010 Term Loan, a~~ ~~$50.0 million~~ ~~repayment of the mortgage loan on Paxton Towne Centre in conjunction with its sale, a~~ ~~$53.2 million~~ ~~repayment of the mortgage loan on Moorestown Mall, a~~ ~~$56.3 million~~ repayment of the mortgage loan on Jacksonville Mall, a $65.0 million repayment of the mortgage loan on Wyoming Valley Mall, and a $12.0 million paydown of the mortgage loan on Logan Valley Mall. Cash flows from financing activities for the ~~nine~~ ~~months ended~~ ~~September 30, 2013~~2014 included $~~220.3~~130.0 million in net ~~proceeds from the issuance~~repayments of ~~common shares,~~ ~~$90.0 million~~ ~~in net borrowings from~~ the 2013 Revolving Facility, ~~$18.7 million in net proceeds from the new mortgage loan on Dartmouth Mall and additional borrowings under the mortgage loans secured by Francis Scott Key Mall and Lycoming Mall, partially offset by~~ dividends and distributions of $~~47.8~~36.2 million, and principal installments on mortgage loans of $~~12.7~~7.8 million., partially offset by $130.0 million in borrowings from the 2014 Term Loans. Cash flows used in financing activities for the ~~nine~~six months ended ~~September~~June 30, ~~2012~~2013 included ~~the~~a $182.0

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million repayment ~~of exchangeable notes of $136.9 million, dividends and distributions of~~ ~~$31.7 million, principal installments on mortgage loans of~~ ~~$15.7 million~~ ~~and a net $80.0 million paydown~~ of the 2010 ~~Revolving Facility. We also received $110.9~~Term Loan and $217.5 million in repayments of mortgage loans. Cash flows from financing activities during the six months ended June 30, 2013 included $220.3 million in net proceeds from the issuance of ~~Series A Preferred Shares and~~ ~~$467.8~~common shares, $35.0 million in net borrowings from the 2010 Revolving Facility, $76.7 million in net proceeds from new mortgage loans, as well as dividends and distributions of $31.1 million, and principal installments on ~~Capital City Mall, Cherry Hill Mall, Cumberland Mall and Christiana Center in the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2012~~.mortgage loans of $8.4 million.

ENVIRONMENTAL

We are aware of certain environmental matters at some of our ~~properties, including ground water contamination and the presence of asbestos containing materials.~~properties. We have, in the past, performed remediation of ~~similar~~such environmental matters, and we are not aware of any significant remaining potential liability relating to these environmental

matters. We may be required in the future to perform testing relating to these ~~matters. We are not aware of any significant remaining potential liability relating to such~~ matters. We have insurance coverage for certain environmental claims up to $10.0 million per occurrence and up to $20.0 million in the aggregate. See our Annual Report on Form 10-K for the year ended December 31, 2013, in the section entitled “Item 1A. Risk Factors —We might incur costs to comply with environmental laws, which could have an adverse effect on our results of operations.”

COMPETITION AND TENANT CREDIT RISK

Competition in the retail real estate industry is intense. We compete with other public and private retail real estate companies, including companies that own or manage malls, ~~strip~~power centers, ~~power~~strip centers, lifestyle centers, factory outlet centers, theme/festival centers and community centers, as well as other commercial real estate developers and real estate owners, particularly those with properties near our properties, on the basis of several factors, including location and rent charged. We compete with these companies to attract customers to our properties, as well as to attract anchor and ~~in-line~~non anchor store and other tenants. We also compete to acquire land for new site development, ~~during more favorable economic conditions.~~or to add to our existing properties. Our malls and our ~~strip~~power and ~~power~~strip centers face competition from similar retail centers, including more recently developed or renovated centers that are near our retail properties. We also face competition from a variety of different retail formats, including internet retailers, discount or value retailers, home shopping networks, mail order operators, catalogs, and telemarketers. Our tenants face competition from companies at the same and other properties and from other retail formats, ~~as well.~~including internet retailers. This competition could have a material adverse effect on our ability to lease space and on the amount of rent and expense reimbursements that we receive.

The existence or development of competing retail properties and the related increased competition for tenants might, subject to the terms and conditions of the ~~2013 Revolving Facility,~~the Credit Agreements, require us to make capital improvements to properties that we would have deferred or would not have otherwise planned to make and might also affect the total sales, sales per square foot,

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occupancy and net operating income of such properties. Any such capital improvements, undertaken individually or collectively, would involve costs and expenses that could adversely affect our results of operations.

We compete with many other entities engaged in real estate investment activities for acquisitions of malls, other retail properties and other prime development sites or sites adjacent to our properties, including institutional pension funds, other REITs and other owner-operators of retail properties. Our efforts to compete for acquisitions are also subject to the terms and conditions of our 2013 Revolving Facility. Given current economic, capital market and retail industry conditions, however, there has been substantially less competition with respect to portfolio or property acquisition activity in recent quarters. When we seek to make acquisitions, competitors might drive up the price we must pay for properties, parcels, other assets or other companies or might themselves succeed in acquiring those properties, parcels, assets or companies. In addition, ~~the owners of~~our potential acquisition targets might find our competitors to be more attractive suitors if they have greater resources, are willing to pay more, or have a more compatible operating philosophy. In particular, larger REITs might enjoy significant competitive advantages that result from, among other things, a lower cost of capital, a better ability to raise capital, a better ability to finance an acquisition, and enhanced operating efficiencies. We might not succeed in acquiring retail properties or development sites that we seek, or, if we pay a higher price for a property and/or generate lower cash flow from an acquired property than we expect, our investment returns will be reduced, which will adversely affect the value of our securities.

We receive a substantial portion of our operating income as rent under leases with tenants. At any time, any tenant having space in one or more of our properties could experience a downturn in its business that might weaken its financial condition. Such tenants might enter into or renew leases with relatively shorter terms. Such tenants might also defer or fail to make rental payments when due, delay or defer lease commencement, voluntarily vacate the premises or declare bankruptcy, which could result in the termination of the tenant’s lease or preclude the collection of rent in connection with the space for a period of time, and could result in material losses to us and harm to our results of operations. Also, it might take time to terminate leases of underperforming or nonperforming tenants and we might incur costs to remove such tenants. Some of our tenants occupy stores at multiple locations in our portfolio, and so the effect of any bankruptcy or store closings of those tenants might be more significant to us than the bankruptcy or store closings of other tenants. Given current conditions in the economy, certain industries and the capital markets, in some instances retailers that have sought protection from creditors under bankruptcy law have had difficulty in obtaining debtor-in-possession financing, which has decreased the likelihood that such retailers will emerge from bankruptcy protection and has limited their alternatives. In addition, under many of our leases, our tenants pay rent based, in whole or in part, on a percentage of their sales. Accordingly, declines in these tenants’ sales directly affect our results of operations. Also, if tenants are unable to comply with the terms of their leases, or otherwise seek changes to the

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terms, including changes to the amount of rent, we might modify lease terms in ways that are less favorable to us. Given current conditions in the economy, certain industries and the capital markets, in some instances retailers that have sought protection from creditors under bankruptcy law have had difficulty in obtaining debtor-in-possession financing, which has decreased the likelihood that such retailers will emerge from bankruptcy protection and has limited their alternatives.

SEASONALITY

There is seasonality in the retail real estate industry. Retail property leases often provide for the payment of a portion of rent based on a percentage of a tenant’s sales revenue, or sales revenue over certain levels. Income from such rent is recorded only after the minimum sales levels have been met. The sales levels are often met in the fourth quarter, during the December holiday season. Also, many new and temporary leases are entered into later in the year in anticipation of the holiday season and a higher number of tenants vacate their space early in the year. As a result, our occupancy and cash flows are generally higher in the fourth quarter and lower in the first ~~quarter.~~and second quarters. Our concentration in the retail sector increases our exposure to seasonality and has resulted, and is expected to continue to result, in a greater percentage of our cash flows being received in the fourth quarter.

INFLATION

Inflation can have many effects on financial performance. Retail property leases often provide for the payment of rent based on a percentage of sales, which might increase with inflation. Leases may also provide for tenants to bear all or a portion of operating expenses, which might reduce the impact of such increases on us. However, rent increases might not keep up with inflation, or if we recover a smaller proportion of property operating expenses, we might bear more costs if such expenses increase because of inflation.

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FORWARD LOOKING STATEMENTS

This Quarterly Report on Form 10-Q for the quarter ended ~~September~~June 30, ~~2013~~2014, together with other statements and information publicly disseminated by us, contain certain “forward-looking statements” within the meaning of the ~~U.S. Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.~~federal securities laws. Forward-looking statements relate to expectations, beliefs, projections, future plans, strategies, anticipated events, trends and other matters that are not historical facts. These forward-looking statements reflect our current views about future events, achievements or results and are subject to risks, uncertainties and changes in circumstances that might cause future events, achievements or results to differ materially from those expressed or implied by the forward-looking statements. In particular, our business might be materially and adversely affected by uncertainties affecting real estate businesses generally as well as the following, among other factors:

our substantial debt and stated value of preferred shares and our high leverage ratio;

constraining leverage, interest and tangible net worth covenants under our 2013 Revolving ~~Facility;~~Facility, our 2014 Term Loans and the Letter of Credit;

potential losses on impairment of certain long-lived assets, such as real estate, or of intangible assets, such as ~~goodwill;~~

~~potential~~goodwill, including such losses ~~on impairment of assets~~ that we might be required to record in connection with any dispositions of assets;

~~recent~~ changes to our corporate management team and any resulting modifications to our business strategies;

our ability to refinance our existing indebtedness when it matures, on favorable terms or at all;

our ability to raise capital, including through the issuance of equity or equity-related securities if market conditions are favorable, through joint ventures or other partnerships, through sales of properties or interests in properties, or through other actions;

our ~~short-~~ability to identify and execute on suitable acquisition opportunities and to integrate acquired properties into our

portfolio;

our partnerships and joint ventures with third parties to acquire or develop properties;

our short and long-term liquidity position;

current economic conditions and their effect on employment and consumer confidence and spending, and the corresponding effects on tenant business performance, prospects, solvency and leasing decisions and on our cash flows, and the value and potential impairment of our properties;

~~general economic, financial and political conditions, including credit and capital market conditions, changes in interest rates or unemployment;~~

changes in the retail industry, including consolidation and store closings, particularly among anchor tenants;

the effects of online shopping and other uses of technology on our retail tenants;

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general economic, financial and political conditions, including credit and capital market conditions, changes in interest rates or unemployment;

risks relating to development and redevelopment activities;

our ability to sell properties that we seek to dispose of or our ability to obtain estimated sale prices;

our ability to maintain and increase property occupancy, sales and rental rates, in light of the relatively high number of leases that have expired or are expiring in the next two years;

acts of violence at malls, including our properties, or at other similar spaces, and the potential effect on traffic and

sales;

increases in operating costs that cannot be passed on to tenants;

~~risks relating to development and redevelopment activities;~~

concentration of our properties in the Mid-Atlantic region;

changes in local market conditions, such as the supply of or demand for retail space, or other competitive factors; and

potential dilution from any capital raising ~~transactions;~~transactions or other equity issuances.

~~possible environmental liabilities;~~

~~our ability to obtain insurance at a reasonable cost; and~~

~~existence of complex regulations, including those relating to our status as a REIT, and the adverse consequences if we were to fail to qualify as a REIT.~~

Additional factors that might cause future events, achievements or results to differ materially from those expressed or implied by our forward-looking statements include those discussed herein and in our Annual Report on Form 10-K for the year ended December 31, ~~2012, and in our Quarterly Report on Form 10-Q for the quarter ended March 31,~~ 2013 in the section entitled “Item 1A. Risk Factors.” We do not intend to update or revise any forward-looking statements to reflect new information, future events or otherwise.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

The analysis below presents the sensitivity of the market value of our financial instruments to selected changes in market interest rates. As of ~~September~~June 30, ~~2013~~2014, our consolidated debt portfolio consisted primarily of $~~90.0~~1,494.8 million of fixed and variable rate mortgage loans, $100.0 million borrowed under our ~~2013 Revolving Facility,~~5 Year Term Loan which bore interest at a rate of ~~1.88%~~1.60%, and ~~$1,538.1~~$30.0 million ~~in fixed and variable~~ borrowed under our 7 Year Term Loan which bore interest at a rate ~~mortgage loans.~~of 2.10%.

Our interest rate risk is monitored using a variety of techniques. The table below presents the principal ~~payments~~amounts of the expected annual maturities due in the respective years and the weighted average interest rates for the principal payments in the specified periods:


	Fixed Rate Debt				Variable Rate Debt					Fixed Rate Debt				Variable Rate Debt
(in thousands of dollars) For the Year Ending December 31,	Principal Payments		Weighted Average Interest Rate ⁽¹⁾		Principal Payments			Weighted Average Interest Rate⁽¹⁾		Principal Payments		Weighted Average Interest Rate ⁽¹⁾		Principal Payments			Weighted Average Interest Rate⁽¹⁾
2013	$	3,888	5.51	%	$	389		2.65	%
2014	$	82,913	5.87	%	$	52,590		2.30	%	$	8,808	5.22	%	$	51,800	⁽²⁾	2.26	%
2015	$	290,516	5.75	%	$	1,655		2.65	%	291,342		5.75	%	1,655			2.62	%
2016	$	230,133	5.38	%	$	115,726	⁽²⁾	2.03	%	231,340		5.38	%	25,726			2.29	%
2017 and thereafter	$	679,542	5.19	%	$	170,750		3.07	%
2017										161,400		5.36	%	1,001			2.90	%
2018 and thereafter										551,980		4.37	%	299,749		⁽³⁾	2.16	%

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⁽¹⁾	Based on the weighted average interest rates in effect as of ~~September~~June 30, ~~2013~~2014.


⁽²⁾	~~Includes~~In July 2014, we repaid a $51.0 million mortgage loan plus accrued interest on Logan Valley Mall in Altoona, Pennsylvania using $50.0 million from our 2013 Revolving Facility and $1.0 million from available working capital.


⁽³⁾	Includes 2014 Term Loan borrowings of ~~$90.0~~$130.0 million with a weighted average interest rate of ~~1.88%~~1.72% as of ~~September~~June 30, ~~2013~~2014.

As of ~~September~~June 30, ~~2013~~2014, we had $~~341.1~~379.9 million of variable rate debt. Also, as of ~~September~~June 30, ~~2013~~2014, we had entered into ~~six~~12 interest rate swap agreements with an aggregate weighted average interest rate of ~~2.54%~~1.67% on a notional amount of $~~198.8~~328.1 million maturing on various dates through January ~~1, 2018, and~~ ~~two~~ ~~forward starting interest rate swap agreements with a weighted average interest rate of~~ ~~1.12%~~ ~~on a notional amount of~~ ~~$103.0 million~~ ~~maturing in~~ ~~January 2018~~.2019. We entered into these interest rate swap agreements in order to hedge the interest payments associated with our issuances of variable interest rate long-term debt.

Changes in market interest rates have different effects on the fixed and variable rate portions of our debt portfolio. A change in market interest rates applicable to the fixed portion of the debt portfolio affects the fair value, but it has no effect on interest incurred or cash flows. A change in market interest rates applicable to the variable portion of the debt portfolio affects the interest incurred and cash flows, but does not affect the fair value. The following sensitivity analysis related to our debt portfolio, which includes the effects of our interest rate swap agreements, assumes an immediate 100 basis point change in interest rates from their actual ~~September~~June 30, ~~2013~~2014 levels, with all other variables held constant.

A 100 basis point increase in market interest rates would have resulted in a decrease in our net financial instrument position of $~~51.8~~58.6 million at ~~September~~June 30, ~~2013~~2014. A 100 basis point decrease in market interest rates would have resulted in an increase in our net financial instrument position of $~~59.1~~60.8 million at ~~September~~June 30, ~~2013~~2014. Based on the variable rate debt included in our debt portfolio at ~~September~~June 30, ~~2013~~2014, a 100 basis point increase in interest rates would have resulted in an additional $~~1.4~~0.5 million in interest annually. A 100 basis point decrease would have reduced interest incurred by $~~1.4~~0.5 million annually.

To manage interest rate risk and limit overall interest cost, we may employ interest rate swaps, options, forwards, caps and floors, or a combination thereof, depending on the underlying exposure. Interest rate differentials that arise under swap contracts are recognized in interest expense over the life of the contracts. If interest rates rise, the resulting cost of funds is expected to be lower than that which would have been available if debt with matching characteristics was issued

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directly. Conversely, if interest rates fall, the resulting costs would be expected to be, and in some cases have been, higher. We

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may also employ forwards or purchased options to hedge qualifying anticipated transactions. Gains and losses are deferred and recognized in net income in the same period that the underlying transaction occurs, expires or is otherwise terminated. See note 7 of the notes to our unaudited consolidated financial statements.

Because the information presented above includes only those exposures that existed as of ~~September~~June 30, ~~2013~~2014, it does not consider changes, exposures or positions which have arisen or could arise after that date. The information presented herein has limited predictive value. As a result, the ultimate realized gain or loss or expense with respect to interest rate fluctuations will depend on the exposures that arise during the period, our hedging strategies at the time and interest rates.

ITEM 4. CONTROLS AND PROCEDURES.

We are committed to providing accurate and timely disclosure in satisfaction of our SEC reporting obligations. In 2002, we established a Disclosure Committee to formalize our disclosure controls and procedures. Our Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of our disclosure controls and procedures as of ~~September~~June 30, ~~2013~~2014, and have concluded as follows:

Our disclosure controls and procedures are designed to ensure that the information that we are required to disclose in our reports under the Securities Exchange Act of 1934 (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

Our disclosure controls and procedures are effective to ensure that information that we are required to disclose in our Exchange Act reports is accumulated and communicated to management, including our principal executive and principal financial officers, as appropriate, to allow timely decisions regarding required disclosure.

There was no change in our internal controls over financial reporting that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

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PART II—OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

In the normal course of business, we have become and might in the future become involved in legal actions relating to the ownership and operation of our properties and the properties that we manage for third parties. In management’s opinion, the resolution of any such pending legal actions is not expected to have a material adverse effect on our consolidated financial position or results of operations.

ITEM 1A. RISK FACTORS.

In addition to the other information set forth in this report, you should carefully consider the risks that could materially affect our business, financial condition or results of operations, which are discussed under the caption “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, ~~2012 and in our Quarterly Report on Form 10-Q for the quarter ended March 31,~~ 2013.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

Issuer Purchases of Equity Securities

The following table shows the total number of shares that we acquired in the three months ended ~~September~~June 30, ~~2013~~2014 and the average price paid per share.

~~Period~~

~~Total Number~~

~~of Shares~~

~~Purchased~~

~~Average Price~~

~~Paid per~~

~~Share~~

~~Total Number of~~

~~Shares Purchased~~

~~as part of Publicly~~

~~Announced Plans~~

~~or Programs~~

~~Maximum Number~~

~~(or Approximate Dollar~~

~~Value) of Shares that~~

~~May Yet Be Purchased~~

~~Under the Plans or~~

~~Programs~~

~~July 1—July 31, 2013~~

—

~~August 1—August 31, 2013~~

—

~~September 1—September 30, 2013~~

—

~~Total~~

—



Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as part of Publicly Announced Plans or Programs	Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs
April 1—April 30, 2014	—	$	—	—	$	—
May 1—May 31, 2014	9,643	18.11		—	—
June 1—June 30, 2014	16,194	17.91		—	—
Total	25,837	$	17.98	—	$	—

On September 24, 2013, we issued 7,000 common shares in return for an equal number of Class A Units tendered for redemption by a limited partner of PREIT Associates, L.P. The shares were issued under exemptions provided by Section 4(a)(2) of the Securities Act of 1933 as transactions not involving a public offering.

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ITEM 6. EXHIBITS.



~~10.1~~	~~Amendment No. 1 to Second Amended~~

2.1	Contribution Agreement, dated as of March 2, 2014, by and ~~Restated 2003 Equity Plan,~~among Franconia Two, L.P., PR Springfield Town Center LLC, PREIT Associates, L.P. and Vornado Realty L.P., filed herewith and as Exhibit ~~10.1~~2.1 to ~~PREIT's~~our Current Report on Form 8-K filed on ~~July 22, 2013, is incorporated herein by reference.~~March 3, 2014.

10.1	Separation of Employment Agreement and General Release between Pennsylvania Real Estate Investment Trust, PREIT Services, L.P. and George Rubin dated as of June 13, 2014.

31.1	Certification pursuant to Exchange Act Rules 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2	Certification pursuant to Exchange Act Rules 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101*101	Pursuant to Rule 405 of Regulation S-T, the following financial information from the Company’s Quarterly Report on Form 10-Q for the period ended ~~September~~June 30, ~~2013~~2014 is formatted in XBRL interactive data files: (i) Consolidated Statements of Operations for the three and ~~nine~~six months ended ~~September~~June 30, ~~2013~~2014 and ~~2012;~~2013; (ii) Consolidated Statements of Comprehensive Income (Loss) for the three and ~~nine~~six months ended ~~September~~June 30, ~~2013~~2014 and ~~2012;~~2013; (iii) Consolidated Balance Sheets as of ~~September~~June 30, ~~2013~~2014 and December 31, ~~2012;~~2013; (iv) Consolidated Statements of Equity for the ~~nine~~six months ended ~~September~~June 30, ~~2013;~~2014; (v) Consolidated Statements of Cash Flows for the ~~nine~~six months ended ~~September~~June 30, ~~2013~~2014 and ~~2012;~~2013; and (vi) Notes to Unaudited Consolidated Financial Statements.

______________________



*	As provided in Rule 406T of Regulation S-T, this information is furnished and not filed for purposes of Sections 11 and 12 of the Securities Act of 1933 and Section 18 of the Securities Exchange Act of 1934.

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SIGNATURE OF REGISTRANT

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



		PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
Date: ~~October 30, 2013~~	August 1, 2014
		By:	/s/ Joseph F. Coradino
			Joseph F. Coradino
			Chief Executive Officer

		By:	/s/ Robert F. McCadden
			Robert F. McCadden
			Executive Vice President and Chief Financial Officer

		By:	/s/ Jonathen Bell
			Jonathen Bell
			Senior Vice President and Chief Accounting Officer
			(Principal Accounting Officer)

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Exhibit Index




2.1*	Contribution Agreement, dated as of March 2, 2014, by and among Franconia Two, L.P., PR Springfield Town Center LLC, PREIT Associates, L.P. and Vornado Realty L.P., filed herewith and as Exhibit 2.1 to our Current Report on Form 8-K filed on March 3, 2014.

10.1*	Separation of Employment Agreement and General Release between Pennsylvania Real Estate Investment Trust, PREIT Services, L.P. and George Rubin dated as of June 13, 2014.

31.1*	Certification pursuant to Exchange Act Rules 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2*	Certification pursuant to Exchange Act Rules 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1**	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2**	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101***	Pursuant to Rule 405 of Regulation S-T, the following financial information from the Company’s Quarterly Report on Form 10-Q for the period ended ~~September~~June 30, ~~2013~~2014 is formatted in XBRL interactive data files: (i) Consolidated Statements of Operations for the three and ~~nine~~six months ended ~~September~~June 30, ~~2013~~2014 and ~~2012;~~2013; (ii) Consolidated Statements of Comprehensive Income (Loss) for the three and ~~nine~~six months ended ~~September~~June 30, ~~2013~~2014 and ~~2012;~~2013; (iii) Consolidated Balance Sheets as of ~~September~~June 30, ~~2013~~2014 and December 31, ~~2012;~~2013; (iv) Consolidated Statements of Equity for the ~~nine~~six months ended ~~September~~June 30, ~~2013;~~2014; (v) Consolidated Statements of Cash Flows for the ~~nine~~six months ended ~~September~~June 30, ~~2013~~2014 and ~~2012;~~2013; and (vi) Notes to Unaudited Consolidated Financial Statements.

_______________________



*	filed herewith



**	furnished herewith



~~***~~	As provided in Rule 406T of Regulation S-T, this information is furnished and not filed for purposes of Sections 11 and 12 of the Securities Act of 1933 and Section 18 of the Securities Exchange Act of 1934.

4951



Sale Date	Property and Location	Description of Real Estate Sold	Capitalization Rate		Sale Price (in millions of dollars)		Gain (in millions of dollars)
2013 Activity:
January	Phillipsburg Mall, Phillipsburg, New Jersey ⁽¹⁾	Mall	9.8	%	$	11.5	$	—
	Paxton Towne Centre, Harrisburg, Pennsylvania⁽²⁾⁽³⁾	Power center	6.9	%	76.8		32.7
February	Orlando Fashion Square, Orlando, Florida ⁽⁴⁾	Mall	9.8	%	35.0		0.6
September	Commons at Magnolia, Florence, South Carolina ⁽⁵⁾	Strip center	8.9	%	12.3		4.2
	Christiana Center, Newark, Delaware ^(3)(5)(6)	Power center	6.5	%	75.0		40.9



Financing Date	Property	Amount Financed or Extended (in millions of dollars)		Stated Interest Rate	Maturity
2013 Activity:
February	Francis Scott Key Mall⁽¹⁾⁽²⁾	$	62.6	LIBOR plus 2.60%	March 2018
February	Lycoming Mall ⁽³⁾	35.5		LIBOR plus 2.75%	March 2018
February	Viewmont Mall⁽¹⁾	48.0		LIBOR plus 2.60%	March 2018
March	Dartmouth Mall	67.0		3.97% fixed	April 2018
September	Logan Valley Mall⁽⁴⁾	51.0		LIBOR plus 2.10%	September 2014



(in millions of dollars) Notional Value	Fair Value at September 30, 2013 ⁽¹⁾			Fair Value at December 31, 2012 ⁽¹⁾			Interest Rate		Effective Date	Maturity Date
Interest Rate Swaps
$60.0	N/A			(0.2		)	1.74	%		March 11, 2013
200.0	N/A			(1.0		)	2.96	%		March 11, 2013
40.0	N/A			(0.1		)	1.82	%		March 11, 2013
65.0	N/A			(1.5		)	3.60	%		September 9, 2013
68.0	N/A			(1.6		)	3.69	%		September 9, 2013
35.0	N/A			(1.4		)	3.73	%		September 9, 2013
55.0	(0.2		)	(1.3		)	2.90	%		November 29, 2013
48.0	(0.2		)	(1.2		)	2.90	%		November 29, 2013
25.0	(0.4		)	(0.5		)	1.10	%		July 31, 2016
28.1	(0.6		)	(0.9		)	1.38	%		January 2, 2017
35.1	0.1			N/A			3.72	%		December 1, 2017
7.6	0.1			N/A			1.00	%		January 1, 2018
Forward Starting Interest Rate Swaps
48.0	0.1			N/A			1.12	%	December 1, 2013	January 1, 2018
55.0	0.1			N/A			1.12	%	December 1, 2013	January 1, 2018
	$	(1.0	)	$	(9.7	)



	Nine Months Ended September 30, 2012
	Continuing Operations
(in thousands of dollars)	Consolidated			Share of Unconsolidated Partnerships			Discontinued Operations			Total
Real estate revenue	$	305,133		$	28,506		$	21,048		$	354,687
Operating expenses	(131,897		)	(8,409		)	(9,521		)	(149,827		)
Net operating income (NOI)	173,236			20,097			11,527			204,860
General and administrative expenses	(28,818		)	—			—			(28,818		)
Provision for employee separation expense	(5,754		)	—			—			(5,754		)
Other income	4,254			—			—			4,254
Project costs and other expenses	(777		)	(1		)	—			(778		)
Interest expense, net	(91,531		)	(8,449		)	(3,031		)	(103,011		)
Depreciation of non real estate assets	(604		)	—			—			(604		)
Preferred share dividends	(4,217		)	—			—			(4,217		)
Funds from operations (FFO)	45,789			11,647			8,496			65,932
Depreciation of real estate assets	(94,628		)	(5,537		)	(5,662		)	(105,827		)
Equity in income of partnerships	6,110			(6,110		)	—			—
Operating results from discontinued operations	2,834			—			(2,834		)	—
Preferred share dividends	4,217			—			—			4,217
Net loss	$	(35,678	)	$	—		$	—		$	(35,678	)