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 ¨

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 ¨

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.

Indicate by check mark whether registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ 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 ~~November 2, 2010: 55,376,762~~July 29, 2011: 55,687,301

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. References in this Quarterly Report on Form 10-Q to “PRI” refer to PREIT-RUBIN, Inc.


(in thousands of dollars, except share and per share amounts)	September 30, 2010			December 31, 2009			June 30, 2011			December 31, 2010
ASSETS:
INVESTMENTS IN REAL ESTATE, at cost:
Operating properties	$	3,404,454		$	3,459,745		$	3,465,976		$	3,448,900
Construction in progress		157,885			215,231			117,908			121,547
Land held for development		17,021			9,337			15,363			17,021

Total investments in real estate		3,579,360			3,684,313			3,599,247			3,587,468
Accumulated depreciation		(707,963	)		(623,309	)		(792,682	)		(729,086	)

Net investments in real estate		2,871,397			3,061,004			2,806,565			2,858,382

INVESTMENTS IN PARTNERSHIPS, at equity:		27,661			32,694			25,784			30,959
OTHER ASSETS:
Cash and cash equivalents		43,711			74,243			24,163			42,327
Tenant and other receivables (net of allowance for doubtful accounts of $22,494 and $19,981 at September 30, 2010 and December 31, 2009, respectively)		34,832			55,303
Intangible assets (net of accumulated amortization of $175,027 and $198,984 at September 30, 2010 and December 31, 2009, respectively)		19,536			38,978
Tenant and other receivables (net of allowance for doubtful accounts of $21,911 and $22,083 at June 30, 2011 and December 31, 2010, respectively)								29,263			40,732
Intangible assets (net of accumulated amortization of $56,055 and $52,904 at June 30, 2011 and December 31, 2010, respectively)								12,636			15,787
Deferred costs and other assets		96,724			84,358			87,081			91,930

Total assets	$	3,093,861		$	3,346,580		$	2,985,492		$	3,080,117

LIABILITIES:
Mortgage loans payable (including debt premium of $1,859 and $2,744 at September 30, 2010 and December 31, 2009, respectively)	$	1,749,622		$	1,777,121
Exchangeable notes (net of debt discount of $3,282 and $4,664 at September 30, 2010 and December 31, 2009, respectively)		133,618			132,236
Term loans		347,200			170,000
Revolving facilities		—			486,000
Mortgage loans payable (including debt premium of $993 and $1,569 at June 30, 2011 and December 31, 2010, respectively)							$	1,733,356		$	1,744,248
Exchangeable notes (net of debt discount of $1,842 and $2,809 at June 30, 2011 and December 31, 2010, respectively)								135,058			134,091
2010 Term Loan								240,000			347,200
Revolving Facility								70,000			—
Tenants’ deposits and deferred rent		15,468			13,170			15,016			16,583
Distributions in excess of partnership investments		43,893			48,771			56,248			44,614
Accrued construction costs		1,063			11,778
Fair value of derivative instruments		33,289			14,610			25,456			27,233
Accrued expenses and other liabilities		57,826			58,090			52,308			61,618

Total liabilities		2,381,979			2,711,776			2,327,442			2,375,587
COMMITMENTS AND CONTINGENCIES (Note 8)
COMMITMENTS AND CONTINGENCIES (Note 6)
EQUITY:
Shares of beneficial interest, $1.00 par value per share; 100,000,000 shares authorized; issued and outstanding 55,376,762 shares at September 30, 2010 and 44,615,647 shares at December 31, 2009		55,377			44,616
Shares of beneficial interest, $1.00 par value per share; 100,000,000 shares authorized; issued and outstanding 55,685,645 shares at June 30, 2011 and 55,436,003 shares at December 31, 2010								55,686			55,436
Capital contributed in excess of par		1,037,087			881,735			1,042,840			1,040,023
Accumulated other comprehensive loss		(46,346	)		(30,016	)		(38,056	)		(39,993	)
Distributions in excess of net income		(384,856	)		(317,682	)		(450,444	)		(401,193	)

Total equity—PREIT		661,262			578,653			610,026			654,273
Noncontrolling interest		50,620			56,151			48,024			50,257

Total equity		711,882			634,804			658,050			704,530

Total liabilities and equity	$	3,093,861		$	3,346,580		$	2,985,492		$	3,080,117


	Three months ended September 30,						Nine months ended September 30,						Three months ended June 30,						��	Six months ended June 30,
(in thousands of dollars)	2010			2009			2010			2009			2011			2010				2011			2010
REVENUE:
Real estate revenue:
Base rent	$	71,842		$	70,926		$	214,696		$	211,515		$	70,934		$	71,013			$	142,694		$	142,854
Expense reimbursements		33,571			33,291			99,980			100,125			31,355			32,175				65,118			66,410
Percentage rent		767			918			2,292			2,378			715			641				1,696			1,525
Lease termination revenue		370			300			2,551			1,636			693			373				718			2,181
Other real estate revenue		3,301			3,270			9,762			9,982			3,694			3,498				6,727			6,460

Total real estate revenue														107,391			107,700				216,953			219,430
Interest and other income		2,804			862			4,130			2,092			809			598				1,727			1,326

Total revenue		112,655			109,567			333,411			327,728			108,200			108,298				218,680			220,756
EXPENSES:
Operating expenses:
CAM and real estate taxes		(35,683	)		(34,304	)		(107,183	)		(101,285	)		(35,260	)		(34,932	)			(72,564	)		(71,501	)
Utilities		(7,587	)		(6,769	)		(20,053	)		(18,561	)		(6,078	)		(6,165	)			(11,909	)		(12,466	)
Other operating expenses		(6,926	)		(6,760	)		(19,063	)		(19,156	)		(6,129	)		(6,349	)			(12,087	)		(12,136	)

Total operating expenses		(50,196	)		(47,833	)		(146,299	)		(139,002	)		(47,467	)		(47,446	)			(96,560	)		(96,103	)
Depreciation and amortization		(41,673	)		(40,240	)		(122,677	)		(117,951	)		(36,614	)		(40,274	)			(71,124	)		(81,004	)
Other expenses:
General and administrative expenses		(8,958	)		(9,583	)		(28,261	)		(28,436	)		(10,433	)		(9,617	)			(20,015	)		(19,303	)
Impairment of assets		—			—			—			(70	)
Abandoned project costs, income taxes and other expenses		(558	)		(200	)		(1,012	)		(598	)
Project costs and other expenses														(353	)		(161	)			(497	)		(455	)

Total other expenses		(9,516	)		(9,783	)		(29,273	)		(29,104	)		(10,786	)		(9,778	)			(20,512	)		(19,758	)
Interest expense, net		(36,384	)		(32,961	)		(108,588	)		(97,774	)		(34,941	)		(37,998	)			(68,554	)		(72,204	)
Gain on extinguishment of debt		—			4,167			—			13,971

Total expenses		(137,769	)		(126,650	)		(406,837	)		(369,860	)		(129,808	)		(135,496	)			(256,750	)		(269,069	)
Loss before equity in income of partnerships, gains on sales of real estate, and discontinued operations		(25,114	)		(17,083	)		(73,426	)		(42,132	)
Loss before equity in income of partnerships and discontinued operations														(21,608	)		(27,198	)			(38,070	)		(48,313	)
Equity in income of partnerships		1,855			2,355			6,894			7,531			1,147			2,948				2,690			5,038
Gain on sales of real estate		—			—			—			1,654
Gains on sales of real estate														1,450			—				1,450			—

Loss from continuing operations		(23,259	)		(14,728	)		(66,532	)		(32,947	)		(19,011	)		(24,250	)			(33,930	)		(43,275	)

Operating results from discontinued operations		436			1,211			1,557			3,689
Gain on sales of discontinued operations		19,151			3,398			19,151			3,398
Income from discontinued operations														—			600				—			1,121

Income from discontinued operations		19,587			4,609			20,708			7,087
Net loss		(3,672	)		(10,119	)		(45,824	)		(25,860	)		(19,011	)		(23,650	)			(33,930	)		(42,154	)
Less: net loss attributed to noncontrolling interest		87			477			1,928			1,215			763			964				1,364			1,842

Net loss attributable to PREIT	$	(3,585	)	$	(9,642	)	$	(43,896	)	$	(24,645	)	$	(18,248	)	$	(22,686	)		$	(32,566	)	$	(40,312	)


							PREIT Shareholders
(in thousands of dollars, except per share amounts)	Total Equity			Comprehensive Income (Loss)			Shares of Beneficial Interest td.00 Par		Capital Contributed in Excess of Par			Accumulated Other Comprehensive Loss			Distributions in Excess of Net Income			Non- controlling Interest			Total Equity				Comprehensive Income (Loss)			PREIT Shareholders											Non- controlling Interest
Balance January 1, 2010	$	634,804		$	—		$	44,616	$	881,735		$	(30,016	)	$	(317,682	)	$	56,151																				Non- controlling Interest
(in thousands of dollars, except per share amounts)																					Total Equity			Total Equity					Comprehensive Income (Loss)		Shares of Beneficial Interest, td.00 Par			Capital Contributed in Excess of Par			Accumulated Other Comprehensive Loss			Distributions in Excess of Net Income		Non- controlling Interest
(in thousands of dollars, except per share amounts)																							$	Total Equity		55,436			Comprehensive Income (Loss)	$	1,040,023		$	(39,993	)	$	(401,193	)				Non- controlling Interest
Comprehensive income (loss):
Net loss		(45,824	)		(45,824	)							—			(43,896	)		(1,928	)		(33,930	)			(33,930	)							—			(32,566	)		(1,364	)
Unrealized loss on derivatives		(18,679	)		(18,679	)							(17,890	)		—			(789	)
Unrealized gain on derivatives																						1,775				1,775								1,704			—			71
Other comprehensive income		1,630			1,630								1,560			—			70			242				242								233			—			9

Total comprehensive loss	$	(62,873	)	$	(62,873	)													(2,647	)		(31,913	)		$	(31,913	)													(1,284	)

Shares issued in 2010 equity offering, net of expenses		160,589						10,350		150,239			—			—			—
Shares issued under distribution reinvestment and share purchase plan		224						19		205			—			—			—			54							4		50			—			—			—
Shares issued under employee share purchase plan		395						33		362			—			—			—			262							18		244			—			—			—
Shares issued under equity incentive plans, net of retirements		(1,011	)					359		(1,370	)		—			—			—			(1,875	)						228		(2,103	)		—			—			—
Amortization of deferred compensation		5,916						—		5,916			—			—			—			4,626							—		4,626			—			—			—
Distributions paid to common shareholders ($0.45 per share)		(23,278	)					—		—			—			(23,278	)		—
Distributions paid to noncontrolling interests:
Distributions to Operating Partnership unitholders ($0.45 per unit)		(1,017	)					—		—			—			—			(1,017	)
Distributions paid to common shareholders ($0.30 per share)																						(16,685	)						—		—			—			(16,685	)		—
Noncontrolling interests:
Distributions to Operating Partnership unitholders ($0.30 per unit)																						(697	)						—		—			—			—			(697	)
Other distributions to noncontrolling interest, net		(169	)					—		—			—			—			(169	)		(252	)						—		—			—			—			(252	)
Income from historic tax credits		(1,698	)					—		—			—			—			(1,698	)

Balance September 30, 2010	$	711,882					$	55,377	$	1,037,087		$	(46,346	)	$	(384,856	)	$	50,620
Balance June 30, 2011																					$	658,050						$	55,686	$	1,042,840		$	(38,056	)	$	(450,444	)	$	48,024


	Nine months ended September 30,						Six months ended June 30,
(in thousands of dollars)	2010			2009			2011			2010
Cash flows from operating activities:
Net loss	$	(45,824	)	$	(25,860	)	$	(33,930	)	$	(42,154	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation		103,400			97,416			64,960			67,867
Amortization		31,499			29,980			9,574			21,695
Straight-line rent adjustments		(1,269	)		(1,256	)		165			(929	)
Provision for doubtful accounts		5,208			5,807			2,825			3,190
Amortization of deferred compensation		5,916			5,916			4,626			3,803
Gain on sales of real estate and discontinued operations		(19,151	)		(5,052	)
Gain on extinguishment of debt		—			(13,971	)
Gains on sales of real estate								(1,450	)		—
Change in assets and liabilities:
Net change in other assets		(2,769	)		(32	)		11,746			11,500
Net change in other liabilities		4,602			4,031			(6,748	)		(2,921	)

Net cash provided by operating activities		81,612			96,979			51,768			62,051

Cash flows from investing activities:
Repayment of note receivable from tenant		10,000			—
Additions to construction in progress		(19,375	)		(122,131	)		(4,954	)		(12,943	)
Investments in real estate improvements		(18,393	)		(16,705	)		(17,269	)		(7,178	)
Cash proceeds from sales of real estate								7,346			—
Additions to leasehold improvements		(213	)		(257	)		(135	)		(142	)
Investments in partnerships		(6,122	)		(613	)		(64	)		(6,179	)
Capitalized leasing costs		(3,123	)		(3,149	)		(2,524	)		(2,141	)
Cash proceeds from sales of real estate investments		134,669			20,936
(Increase) decrease in cash escrows		(294	)		3,756
Decrease (increase) in cash escrows								844			(1,380	)
Repayment of tenant note receivable								—			10,000
Cash distributions from partnerships in excess of equity in income		6,449			1,884			16,873			4,893

Net cash provided by (used in) investing activities		103,598			(116,279	)		117			(15,070	)

Cash flows from financing activities:
Paydown of 2010 Term Loan								(7,200	)		(106,500	)
Net repayment of Revolving Facility								(30,000	)		(70,000	)
Net proceeds from 2010 Term Loan and Revolving Facility		590,000			—			—			590,000
Shares of beneficial interest issued		161,233			561
Net (repayment of) borrowing from 2003 Credit Facility		(486,000	)		85,000
Net repayment of 2003 Credit Facility								—			(486,000	)
Repayment of senior unsecured 2008 Term Loan		(170,000	)		—			—			(170,000	)
Repayment of 2010 Term Loan		(172,800	)		—
Net repayment of Revolving Facilities		(70,000	)		—
Proceeds from mortgage loans		64,500			70,143			—			32,500
Repayment of mortgage loans		(75,450	)		(18,058	)		—			(750	)
Principal installments on mortgage loans		(15,664	)		(12,736	)		(10,316	)		(9,998	)
Repurchase of exchangeable notes		—			(7,893	)
Payment of deferred financing costs		(16,230	)		(1,776	)		(3,592	)		(15,727	)
Dividends paid to common shareholders		(23,278	)		(24,167	)		(16,685	)		(14,966	)
Distributions paid to Operating Partnership unitholders and noncontrolling interest		(1,017	)		(1,286	)		(697	)		(695	)
Shares of beneficial interest issued								316			161,188
Shares of beneficial interest repurchased, other		(1,036	)		(114	)		(1,875	)		(1,026	)
Contributions from investor with noncontrolling interest in project		—			10,088

Net cash (used in) provided by financing activities		(215,742	)		99,762
Net cash used in financing activities								(70,049	)		(91,974	)

Net change in cash and cash equivalents		(30,532	)		80,462		$	(18,164	)	$	(44,993	)
Cash and cash equivalents, beginning of period		74,243			9,786			42,327			74,243

Cash and cash equivalents, end of period	$	43,711		$	90,248		$	24,163		$	29,250

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 ~~the Company believes~~we believe that the included disclosures are adequate to make the information presented not misleading. ~~The~~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, ~~2009.~~2010. In ~~management’s~~our opinion, all adjustments, consisting only of normal recurring adjustments, necessary to present fairly ~~the~~our consolidated financial position ~~of the Company and its subsidiaries~~ and the consolidated results of ~~its~~our operations and ~~its~~our 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 ~~and strip and power centers~~ located in the eastern half of the United States, primarily in the Mid-Atlantic region. As of ~~September~~June 30, ~~2010, the Company’s~~2011, our portfolio consisted of a total of 49 properties in 13 states, including 38 shopping malls, eight strip and power centers and three development properties, with two of the development properties classified as “mixed use” (a combination of retail and other uses) and one of the development properties classified as “other.”

~~The Company holds its~~We hold our interest in ~~its~~our portfolio of properties through ~~its~~our operating partnership, PREIT Associates, L.P. (“PREIT Associates” or the “Operating Partnership”). ~~The Company is~~We are the sole general partner of the Operating Partnership and, as of ~~September~~June 30, ~~2010, the Company~~2011, we held a 96.0% interest in the Operating Partnership, and ~~consolidates~~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.

The Company evaluates operating results and allocates resources on a property-by-property basis, and does not distinguish or evaluate consolidated operations on a geographic basis. No individual property constitutes 10% or more of consolidated revenue or assets, and thus the individual properties have been aggregated into one reportable segment based upon their similarities with regard to the nature of the Company’s properties and the nature of the Company’s tenants and operational processes, as well as the long-term financial performance of the properties. In addition, no single tenant accounts for 10% or more of consolidated revenue, and none of the Company’s properties are located outside the United States.

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 date of the OP Units and in other cases ~~immediately, for cash or, at the election of the Company, the Company may acquire such OP Units for common shares of the Company on a one-for-one basis.~~immediately. In the event ~~of the redemption of~~that all of the outstanding OP Units held by limited partners were redeemed for cash, the total amount that would have been distributed as of ~~September~~June 30, ~~2010~~2011 would have been ~~$27.6~~$36.6 million, ~~in cash or the equivalent value of shares of PREIT,~~ which is calculated using ~~the Company’s September~~our June 30, ~~2010~~2011 closing share price on the New York Stock Exchange of ~~$11.86~~$15.70 multiplied by the number of outstanding OP Units held by limited partners, ~~(2,328,554~~which was 2,329,118 as of ~~September~~June 30, ~~2010).~~2011.

~~The Company provides its~~We provide management, leasing and real estate development services through two companies: PREIT Services, LLC (“PREIT Services”), which generally develops and manages properties that ~~the Company consolidates~~we consolidate for financial reporting purposes, and PREIT-RUBIN, Inc. (“PRI”), which generally develops and manages properties that ~~the Company does~~we do not consolidate for financial reporting purposes, including properties

owned by partnerships in which ~~the Company owns~~we own an interest and properties that are owned by third parties in which ~~the Company does~~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 ~~the Company’s~~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 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 to the nature of our properties and the nature of our tenants and operational processes, as well as long-term financial performance. In addition, no single tenant accounts for 10% or more of consolidated revenue, and none of our properties are located outside the United States.

Fair value ~~is a market-based measurement, not an entity-specific measurement. Therefore, a~~accounting applies to reported balances that are required or permitted to be measured at fair value ~~measurement is~~under existing accounting pronouncements.

Fair value measurements are determined based on the assumptions that market participants would use in pricing ~~assets~~the asset or ~~liabilities.~~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 ~~the Company has~~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 ~~may~~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, ~~which~~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. ~~The Company’s~~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. ~~The Company utilizes~~We utilize the fair value hierarchy in ~~its~~our accounting for derivatives (Level 2), and financial instruments (Level 3)2) and in ~~its~~our reviews for impairment ~~reviews~~ of real estate assets (Level 3) and goodwill (Level 3).

~~On January 1, 2010, the Company~~The Financial Accounting Standards Board has proposed new accounting pronouncements related to fair value accounting for long lived assets, including real estate, and to lease accounting. These pronouncements, if adopted, could have a significant effect on our financial statements. The effective dates of these possible accounting pronouncement changes, if any, are unknown at this time.

Beginning in fiscal years after December 15, 2011, we will adopt new accounting requirements relating to the presentation of comprehensive income. These accounting ~~for transfers~~requirements will increase the prominence of other comprehensive income in our financial ~~assets.~~statements. We will have the option to present the components of net income and comprehensive income in either one or two financial statements. The ~~recognition and measurement provisions of these~~ new accounting requirements ~~are applied~~eliminate the option to ~~transfers that occur on or after January 1, 2010. The disclosure provisions~~present other comprehensive income in the statement of changes in equity. We will apply these ~~new accounting requirements are applied to transfers that occurred both before and after January 1, 2010.~~changes retrospectively. The adoption of these new accounting requirements ~~did~~is not expected to have ~~any~~a material effect on ~~the Company’s consolidated~~our financial statements.

On January 1, 2010, the Company adopted new accounting requirements relating to variable interest entities. These new accounting requirements amend the existing accounting guidance: a) to require an enterprise to perform an analysis to determine whether the enterprise’s variable interest or interests give it a controlling financial interest in a variable interest entity, identifying the primary beneficiary of a variable interest entity; b) to require ongoing reassessment of whether an enterprise is the primary beneficiary of a variable interest entity, rather than only when specific events occur; c) to eliminate the quantitative approach previously required for determining the primary beneficiary of a variable interest; d) to amend certain guidance for determining whether an entity is a variable interest entity; e) to add an additional reconsideration event when changes in facts and circumstances pertinent to a variable interest entity occur; f) to eliminate the exception for troubled debt restructuring regarding variable interest entity reconsideration; and g) to require advanced disclosures that will provide users of financial statements with more transparent information about an enterprise’s involvement in a variable interest entity. The adoption of these new accounting requirements did not have any effect on the Company’s consolidated financial statements.

Investments in real estate as of ~~September~~June 30, ~~2010~~2011 and December 31, ~~2009~~2010 were comprised of the following:

~~Acquisitions~~


(in thousands of dollars)	As of June 30, 2011			As of December 31, 2010
Buildings, improvements and construction in progress	$	3,077,310		$	3,060,754
Land, including land held for development		521,937			526,714

Total investments in real estate		3,599,247			3,587,468
Accumulated depreciation		(792,682	)		(729,086	)

Net investments in real estate	$	2,806,565		$	2,858,382

In September 2010, the Company acquired the remaining 0.2% interest in Bala Cynwyd Associates, L.P. (“BCA”) that it did not already own, for 564 units of PREIT Associates (“OP Units”) and a nominal cash amount. BCA is the owner of One Cherry Hill Plaza, an office building located within the boundaries of Cherry Hill Mall in Cherry Hill, New Jersey. Three of the Company’s trustees and executive officers, Ronald Rubin, George F. Rubin, and Joseph F. Coradino, were direct or indirect owners of the acquired interests.

In ~~September 2010, the Company~~May 2011, we sold ~~its interests in Creekview Center in Warrington, Pennsylvania; Monroe Marketplace in Selinsgrove, Pennsylvania; New River Valley Center in Christiansburg, Virginia;~~a parcel and related land improvements at Pitney Road Plaza in Lancaster, ~~Pennsylvania; and Sunrise Plaza~~Pennsylvania for $1.4 million. We recorded a gain of $0.7 million from this sale.

In May 2011, we sold a condominium interest in ~~Forked River,~~the mall at Voorhees Town Center in Voorhees, New Jersey for ~~an aggregate sale price of $134.7~~$5.9 million. The Company retained an aggregate of eight out parcels at Monroe Marketplace, Pitney Road Plaza and Sunrise Plaza, which were subdivided from the properties in connection with the sale. The Company used the cash proceeds from the sale to repay mortgage loans secured by three of these properties totaling $39.7 million and for the payment of the release prices of the other two properties that secured a portion of the Company’s secured credit facility (the “2010 Credit Facility”), which totaled $57.4 million. The Company also used $10.0 million to repay borrowings under the Revolving Facility (as defined in note 4) and $8.9 million to repay borrowings under the 2010 Term Loan (as defined in note 4), both in accordance with the terms of the 2010 Credit Facility. The Company intends to use the remaining $18.7 million of the proceeds for general corporate purposes. The Company recognizedWe recorded a gain ~~on the sale~~ of ~~these properties of $19.2~~$0.7 million ~~in September 2010.~~

A subsidiary of the Company will serve as the management and leasing agent for the properties for a period of three years after the closing, subject to certain termination rights of the buyer after one year upon payment of a specified amount. The purchase and sale agreement contains earnout provisions under which the Company may be entitled to additional purchase price if the Company leases certain spaces at the properties that were vacant as of the closing date. Under these provisions, the Company earns a portion of the earnout amount when a new lease is signed and an additional amount when the tenant associated with that lease opens. As of September 30, 2010, there was $1.0 million of contingent income associated with earnout tenants that had signed leases but had not yet opened. The Company expects to recognizefrom this ~~income by December 31, 2011.~~sale.

~~For the three and nine months ended September 30, 2010 and 2009, the Company has~~We have presented as discontinued operations the operating results of Creekview Center, Monroe Marketplace, New River Valley Center, Pitney Road Plaza and Sunrise Plaza, all of which are power centers that were sold in ~~September~~ 2010. ~~Also,~~We retained several undeveloped parcels for ~~the three and nine months ended September 30, 2009, the Company has presented as discontinued operations the operating results of Crest~~future development or sale at Monroe Marketplace, Pitney Road Plaza and ~~Northeast Tower Center, which were sold in 2009.~~Sunrise Plaza.

The following table summarizes revenue and expense information ~~and gains on sales~~ for the ~~Company’s~~three and six months ended June 30, 2010 for our discontinued ~~operations:~~operations. There was no income from discontinued operations in 2011:

Costs incurred in development and redevelopment projects for interest, property taxes and insurance are capitalized only during periods in which activities necessary to prepare the property for its intended use are in progress. Costs incurred for such items after the property is substantially complete and ready for its intended use are charged to expense as incurred. Capitalized costs, as well as tenant inducement amounts and internal and external commissions, are recorded in “Construction in progress.” The Company capitalizes a portion of development department employees’ compensation and benefits related to time spent involved in development and redevelopment projects.

~~The Company capitalizes payments made to obtain options to acquire real property. Other related costs~~ that are incurred before acquisition that are expected to have ongoing value to the project are capitalized if the acquisition of the property is probable. Capitalized pre-acquisition costs are charged to expense when it is probable that the property will not be acquired.

~~The Company capitalizes salaries, commissions and benefits related to time spent by leasing and legal department personnel involved in originating leases with third-party tenants.~~

The following table summarizes ~~the Company’s~~our capitalized salaries, commissions and benefits, real estate taxes and interest for the three and ~~nine~~six months ended ~~September~~June 30, ~~2010~~2011 and ~~2009:~~2010:

We expensed project costs that did not meet or no longer met our criteria for capitalization of $0.1 million and $0.2 million for the three months ended June 30, 2011 and 2010, respectively, and $0.2 million and $0.5 million for the six months ended June 30, 2011 and 2010, respectively.

The following table presents summarized financial information of the equity investments in ~~the Company’s~~our unconsolidated partnerships as of ~~September~~June 30, ~~2010~~2011 and December 31, ~~2009:~~2010:

We record distributions from our equity investments up to an amount equal to the equity in income of partnerships as cash from operating activities. 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.

The following table summarizes ~~the operating results of the unconsolidated partnerships and the Company’s~~our share of equity in income of partnerships for the three and ~~nine~~six months ended ~~September~~June 30, ~~2010~~2011 and ~~2009:~~2010:

In ~~January 2010,~~June 2011, the unconsolidated partnership that owns ~~Springfield Park~~Red Rose Commons in Springfield, Pennsylvania repaid a mortgage loan with a balance of $2.8 million. The Company’s share of the mortgage loan payment was $1.4 million. In April 2010, the unconsolidated partnerships that own Springfield Park and Springfield East, in Springfield,Lancaster, Pennsylvania entered into a ~~$10.0~~new $29.9 million, 10 year mortgage loan that is secured by Springfield Park and Springfield East. The Company owns a 50% interest in both entities. The mortgage loan has an initial term of five years and can be extended for an additional five-year term under prescribed conditions. The mortgage loan bears interest at LIBOR plus 2.80%, and has been swapped towith a fixed interest rate of ~~5.39%~~5.14% to replace the prior mortgage on the property that had a balance of $24.2 million. After the repayment of the prior mortgage, the partnership distributed to us excess proceeds of $2.1 million. Our interest in the unconsolidated partnership is 50%.

In June ~~2010,~~2011, the unconsolidated partnership that owns ~~Lehigh~~The Court at Oxford Valley ~~Mall~~ in ~~Allentown,~~Langhorne, Pennsylvania entered into a ~~$140.0~~new $60.0 million, 10 year mortgage loan with a fixed interest rate of 5.56% to replace the prior mortgage on the property that ~~is secured by Lehigh Valley Mall. The Company owns~~had a ~~50%~~balance of $32.0 million. After the repayment of the prior mortgage, the partnership distributed to us excess proceeds of $12.8 million. Our interest in the unconsolidated ~~partnership. The mortgage loan has a term of 10 years and bears interest at a fixed rate of 5.88%. In connection with the new mortgage loan financing, the unconsolidated~~ partnership ~~repaid the previous $150.0 million mortgage loan on Lehigh Valley Mall using proceeds from the new mortgage loan and available working capital.~~is 50%.

OnIn March ~~11,~~ 2010, ~~PREIT Associates and PRI (collectively,~~we entered into the ~~“Borrower”)~~2010 Credit Facility (as defined below), ~~together~~which consisted of a revolving line of credit with ~~PR Gallery I Limited Partnership (“GLP”~~an original capacity of $150.0 million (the “Revolving Facility”) and ~~Keystone Philadelphia Properties, L.P. (“KPP”), two other subsidiaries~~term loans with an original aggregate balance of ~~the Company, entered into an Amended, Restated and Consolidated Senior Secured Credit Agreement comprised of a) an aggregate~~ $520.0 million ~~term loan made up of~~and a ~~$436.0 million term loan (“Term Loan A”)~~balance prior to the ~~Borrower and a separate $84.0~~amendment described below of $340.0 million ~~term loan (“Term Loan B”) to the other two subsidiaries~~ (collectively, the “2010 Term Loan”~~) and b) a $150.0 million revolving line of credit (the “Revolving Facility,”~~ and, together with the ~~2010 Term Loan,~~Revolving Facility, and as amended as described below, the “2010 Credit Facility”) ~~with Wells Fargo Bank, National Association, and the other financial institutions signatory thereto.~~.

~~The~~In June 2011, we amended our 2010 Credit Facility, ~~replaced~~whereby the ~~previously existing $500.0~~capacity of the Revolving Facility was increased by $100.0 million ~~unsecured revolving credit facility, as amended (the “2003 Credit Facility”),~~to $250.0 million and ~~a $170.0~~we repaid $100.0 million ~~unsecured term loan (the “2008 Term Loan”) that had been scheduled to mature on March 20, 2010. All capitalized terms used and not otherwise defined in the description~~ of the 2010 ~~Credit~~Term Loan with proceeds from the Revolving Facility, ~~have the meanings ascribed to such terms in~~after which the 2010 ~~Credit Facility.~~

Term Loan had a balance of $240.0 million. The ~~initial~~amendment also extended the term of the 2010 Credit Facility by one year to March 10, 2014 and eliminated the mandatory pay down requirements from capital events, among other changes.

The amendment lowered the interest rate range to between 2.75% and 4.00% per annum over LIBOR, depending on our leverage. Previously, the interest rate range was between 4.00% and 4.90% per annum over LIBOR. Initially, the new rate in effect is ~~three years, and the Borrower has the right to one 12-month extension~~4.00% per annum over LIBOR.

The amendment also modifies several of the ~~initial maturity date, subject to certain conditions and to the payment of an extension fee of 0.50% of the then outstanding Commitments.~~

~~The Company used the initial proceeds from~~financial covenants under the 2010 Credit ~~Facility~~Facility. The maximum permitted leverage ratio has been reduced to ~~repay outstanding balances under~~70% from 75%, and the ~~2003 Credit Facility~~Corporate Debt Yield, as defined, is required to be at least 9.50% until March 30, 2012, then at least 9.75% for the next year, and ~~2008 Term Loan. At closing, the $520.0 million 2010 Term Loan was fully outstanding and $70.0 million was outstanding under the Revolving Facility.~~

~~Amounts~~at least 10.00% after March 31, 2013. The maximum amount that may be borrowed under the 2010 Credit Facility bear interest at a rate between 4.00% and 4.90% per annum, depending on the Company’s leverage, in excess of LIBOR, with no floor. The initial rate in effect was 4.90% per annum in excess of LIBOR. In determining the Company’s leverage (the ratio of Total Liabilities to Gross Asset Value), the capitalization rate used to calculate Gross Asset Value is 8.00%. The unused portion of the Revolving Facility is subject to a ~~fee~~minimum facility debt yield of ~~0.40% per annum.~~

The Company has entered into interest rate swap agreements to effectively fix $100.0 million of the underlying LIBOR associated with the 2010 Term Loan at a weighted-average rate of 1.77% for the three-year initial term. An additional $200.0 million of the underlying LIBOR was swapped to a fixed rate at a rate of 0.61% for year one, 1.78% for year two and 2.96% for the balance of the initial term. Additionally, $15.8 million of the Company’s 2010 Term Loan is subject to a LIBOR cap with a strike rate of 2.50%. This LIBOR cap will expire in March 2012.

The obligations under Term Loan A are secured by first priority mortgages on 18 of the Company’s properties and a second lien on one property, and the obligations under Term Loan B are secured by first priority leasehold mortgages9.75%, based on the ~~properties ground leased by GLP~~net operating income of our collateral properties. The range of applicable stated interest rates may be further reduced at our option to between 2.00% and ~~KPP (the “Gallery Properties”). The foregoing properties constitute substantially all~~3.00% per annum over LIBOR, we will have an option to extend the maturity date of ~~the Company’s previously unencumbered retail properties.~~

~~PREIT and certain of its subsidiaries that are not otherwise prevented from doing so serve as guarantors for funds borrowed under the 2010 Credit Facility.~~

~~The aggregate amount of the lender Revolving Commitments and 2010 Term Loan under~~ the 2010 Credit Facility ~~was required~~by one year to March 10, 2015, and we may increase the maximum amount available under the Revolving Facility from $250.0 million to $350.0 million, if commitment can be ~~reduced by $33.0 million by March 11, 2011, by a cumulative total of $66.0 million by March 11, 2012~~obtained, and ~~by a cumulative total of $100.0 million by March 11, 2013 (if~~provided that the ~~Company exercises its right~~minimum facility debt will be increased to ~~extend the Termination Date)~~11.00%, ~~including all payments (except payments pertaining~~under specified conditions and subject to certain financial covenants.

In addition to the Release Price of a Collateral Property) resulting in permanent reduction of the aggregate amount of the Revolving Commitments and 2010 Term Loan. The Company used $160.6 million of the proceeds from its May 2010 equity offering to repay borrowings undercovenants described above, the 2010 Credit Facility ~~satisfying~~contains affirmative and negative covenants of the type customarily found in credit facilities of this nature. As of June 30, 2011, we were in compliance with all ~~three~~ of these ~~requirements, and no mandatory paydown provisions remain in effect.~~

In September 2010, in connection with the Company’s sale of five power centers, $57.4 million of the sale proceeds were used for payment of the release prices of two properties that secured a portion of the Company’s 2010 Credit Facility, $10.0 million of the sale proceeds were used to repay borrowings under the Revolving Facility and $8.9 million of the sale proceeds were used to repay borrowings under the 2010 Term Loan. The repayments were made in accordance with the terms of the 2010 Credit Facility.covenants.

As of ~~September~~June 30, ~~2010, there were no amounts~~2011, $70.0 million was outstanding under ~~the~~our Revolving Facility. ~~The Company had~~We pledged ~~$1.5~~$0.6 million ~~under the Revolving Facility~~ as collateral for letters of credit, and the unused portion ~~of the Revolving Facility~~ that was available to us was $179.4 million at June 30, 2011. In July 2011, we repaid $25.0 million of the ~~Company~~outstanding amount under the Revolving Facility. After this paydown, the outstanding amount under the Revolving Facility was ~~$148.5~~$45.0 million, $0.6 million was pledged as collateral for letters of ~~September 30, 2010.~~ credit and the unused portion that was available to us was $204.4 million.

The weighted average interest rate ~~based~~ on ~~amounts borrowed under the Revolving Facility from March 11, 2010 to September 30, 2010 was 5.16%. The interest rate that would have applied to any~~ outstanding Revolving Facility borrowings as of ~~September~~June 30, 2011 was 4.19%. Interest expense related to the Revolving Facility was $0.6 million and $0.5 million for the three months ended June 30, 2011 and 2010, ~~was LIBOR plus 4.90%.~~respectively, and $0.7 million and $0.8 million for the six months ended June 30, 2011 and 2010, respectively, excluding non-cash amortization of deferred financing fees.

As of ~~September~~June 30, ~~2010, $347.2~~2011, $240.0 million was outstanding under the 2010 Term Loan. The weighted average effective interest ~~rate~~rates based on amounts borrowed under the 2010 Term Loan ~~including the effect of deferred financing fee amortization, from March 11, 2010 to September 30, 2010 was 6.52%.~~

The 2010 Credit Facility contains provisions regarding the application of proceeds from a Capital Event. A Capital Event is any event by which the Borrower raises additional capital, whether through an asset sale, joint venture, additional secured or unsecured debt, issuance of equity or from excess proceeds after payment of a Release Price. Capital Events do not include Refinance Events or other specified events. After payment of interest and required distributions, the Remaining Capital Event Proceeds will generally be applied in the following order:

If the Facility Debt Yield is less than 11.00% or the Corporate Debt Yield is less than 10.00%, Remaining Capital Event Proceeds will be allocated 25% to pay down the Revolving Facility (repayments of the Revolving Facility generally may be reborrowed) and 75% to pay down and permanently reduce Term Loan A (or Term Loan B if Term Loan A is repaid in full) or, if the Revolving Facility balance is or would become $0 as a result of such payment, to pay down the Revolving Facility in full and to use any remainder of that 25% to pay down and permanently reduce Term Loan A (or Term Loan B if Term Loan A is repaid in full). So long as the Facility Debt Yield is greater than or equal to 11.00% and the Corporate Debt Yield is greater than or equal to 10.00% and each will remain so immediately after the Capital Event, and so long as either the Facility Debt Yield is less than 12.00% or the Corporate Debt Yield is less than 10.25% and will remain so immediately after the Capital Event, the Remaining Capital Event Proceeds will be allocated 75% to pay down the Revolving Facility and 25% to pay down and permanently reduce Term Loan A (or Term Loan B if Term Loan A is repaid in full) or, if the Revolving Facility balance is or would become $0 as a result of such payment, to pay down the Revolving Facility in full and to use any remainder of that 75% for general corporate purposes. So long as the Facility Debt Yield is greater than or equal to 12.00% and the Corporate Debt Yield is greater than or equal to 10.25% and each will remain so immediately after the Capital Event, Remaining Capital Event Proceeds will be applied 100% to pay down the Revolving Facility, or if the Revolving Facility balance is or would become $0 as a result of such payment, to pay down the Revolving Facility in full and to use any remainder for general corporate purposes. Remaining proceeds from a Capital Event or Refinance Event relating to Cherry Hill Mall will be used to pay down the Revolving Facility and may be reborrowed only to repay the Company’s unsecured indebtedness.

The 2010 Credit Facility also contains provisions regarding the application of proceeds from a Refinance Event. A Refinance Event is any event by which the Company raises additional capital from refinancing of secured debt encumbering an existing asset, not including collateral for the ~~2010 Credit Facility. The proceeds in excess of the~~

amount required to retire an existing secured debt will be applied, after payment of interest, to pay down the Revolving Facility, or if the Revolving Facility balance is or would become $0 as a result of such payment, to pay down the Revolving Facility in fullthree and ~~to use any remainder for general corporate purposes. Remaining proceeds from a Capital Event or Refinancing Event relating to the Gallery Properties may only be used to pay down~~six months ended June 30, 2011 were 5.85% and permanently reduce Term Loan B (or, if the outstanding balance on Term Loan B is or would become $0 as a result of such payment, to pay down Term Loan B in full and to pay any remainder in accordance with the preceding paragraph).

A Collateral Property will be released as security upon a sale or refinancing, subject to payment of the Release Price and the absence of any default or Event of Default. If, after release of a Collateral Property (and giving pro forma effect thereto)5.89%, ~~the Facility Debt Yield will be less than 11.00%, the Release Price will be the Minimum Release Price plus an amount equal to the lesser of (A) the amount that, when paid and applied~~respectively. Interest expense related to the 2010 Term Loan ~~would result in a Facility Debt Yield equal to 11.00%~~was $5.6 million and ~~(B)~~$6.5 million, respectively, for the ~~amount by which~~three months ended June 30, 2011 and 2010, and $10.7 million and $8.3 million, respectively, for the ~~greater~~six months ended June 30, 2011 and 2010, excluding non-cash amortization of (1) 100.0% of net cash proceeds and (2) 90.0% of the gross sales proceeds exceeds the Minimum Release Price. The Minimum Release Price is 110% (120% if, after the Release, there will be fewer than 10 Collateral Properties) multiplied by the proportion that the value of the property to be released bears to the aggregate value of all of the Collateral Properties on the closing date ofdeferred financing fees.

Deferred financing fee amortization associated with the 2010 Credit Facility multiplied by the amount of the then Revolving Commitments plus the aggregate principal amount then outstanding under the 2010 Term Loan. In general, upon release of a Collateral Property, the post-release Facility Debt Yield must be greater than or equal to the pre-release Facility Debt Yield. Release payments must be used to pay down and permanently reduce the amount of the Term Loan.

The 2010 Credit Facility contains affirmative and negative covenants customarily found in facilities of this type, including, without limitation, requirements that the Company maintain, on a consolidated basis: (1) minimum Tangible Net Worth of not less than $483.1 million, minus non-cash impairment charges with respect to the Properties recorded in the quarter ended December 31, 2009, plus 75% of the Net Proceeds of all Equity Issuances effected at any time after September 30, 2009; (2) maximum ratio of Total Liabilities to Gross Asset Value of 0.75:1; (3) minimum ratio of EBITDA to Interest Expense of 1.60:1; (4) minimum ratio of Adjusted EBITDA to Fixed Charges of 1.35:1; (5) maximum Investments in unimproved real estate and predevelopment costs not in excess of 3.0% of Gross Asset Value; (6) maximum Investments in Persons other than Subsidiaries, Consolidated Affiliates and Unconsolidated Affiliates not in excess of 1.0% of Gross Asset Value; (7) maximum Investments in Indebtedness secured by Mortgages in favor of the Company, the Borrower or any other Subsidiary not in excess of 1.0% of Gross Asset Value on the basis of cost; (8) the aggregate value of the Investments and the other items subject to the preceding clauses (5) through (7) shall not exceed 5.0% of Gross Asset Value; (9) maximum Investments in Consolidation Exempt Entities not in excess of 20.0% of Gross Asset Value; (10) a maximum Gross Asset Value attributable to any one Property not in excess of 15.0% of Gross Asset Value; (11) maximum Projects Under Development not in excess of 10.0% of Gross Asset Value; (12) maximum Floating Rate Indebtedness in an aggregate outstanding principal amount not in excess of one-third of all Indebtedness of the Company, its Subsidiaries, its Consolidated Affiliates and its Unconsolidated Affiliates; (13) minimum Corporate Debt Yield of 9.50%, provided that such Corporate Debt Yield may be less than 9.50% for one period of two consecutive fiscal quarters, but may not be less than 9.25%; and (14) Distributions may not exceed 110% of REIT taxable income for a fiscal year, but if the Corporate Debt Yield exceeds 10.00%, then the aggregate amount of Distributions may not exceed the greater of 75% of FFO and 110% of REIT Taxable Income (unless necessary for the ~~Company to retain its status as a REIT),~~three months ended June 30, 2011 and ~~if a Facility Debt Yield of 11.00%~~2010 was $1.0 million and ~~a Corporate Debt Yield of 10.00% are achieved and continuing, there are no limits on Distributions under~~$3.4 million, respectively. Deferred financing fee amortization associated with the 2010 Credit Facility ~~so long as no Default or Event of Default would result from making such Distributions. The Company is required to maintain its status as a REIT at all times. As of September~~for the six months ended June 30, 2011 and 2010 ~~the Company~~ was ~~in compliance with all of these covenants.~~$1.9 million and $3.7 million, respectively.

As of both ~~September~~June 30, ~~2010~~2011 and December 31, ~~2009,~~2010, $136.9 million in aggregate principal amount of our 4.0% Senior Exchangeable Notes due 2012 (the “Exchangeable Notes”) remained outstanding, ~~(excluding~~excluding debt discount of ~~$3.3~~$1.8 million and ~~$4.7~~$2.8 million, ~~respectively).~~respectively.

Interest expense related to ~~the~~our Exchangeable Notes for each of the three months ended June 30, 2011 and June 30, 2010, was $1.4 million, ~~and $2.1 million (excluding~~excluding the non-cash amortization of debt discount of $0.5 ~~million and $0.7~~ million and the non-cash amortization of deferred financing fees of $0.2 million. Interest expense was $2.7 million ~~and $0.2 million)~~ for each of the ~~three~~six months ended ~~September~~June 30, 2011 and 2010, ~~and 2009, respectively.~~

~~Interest expense related to the Exchangeable Notes was $4.1 million and $6.9 million (excluding~~excluding the non-cash amortization of debt discount of ~~$1.4~~$1.0 million and ~~$2.2~~$0.9 million respectively, and the non-cash amortization of deferred financing fees ~~of $0.5~~was $0.4 million and ~~$0.8 million)~~$0.3 million for the ~~nine~~six months ended ~~September~~June 30, ~~2010~~2011 and ~~2009,~~June 30, 2010, respectively. The Exchangeable Notes have an effective interest rate of ~~5.81%~~5.90%.

~~The following table presents the mortgage loans that the Company has entered into or under which it has borrowed additional amounts beginning January 1, 2010:~~

In July 2010, the Company made a principal payment of $0.7 million and exercised the second of two one-year extension options on the mortgage loan on the One Cherry Hill office building in Cherry Hill, New Jersey. The mortgage loan had a balance of $4.9 million as of September 30, 2010.

In September 2010, in connection with the sale of five power centers, the Company repaid the mortgage loans secured by Creekview Center, New River Valley Center and Pitney Road Plaza, which had principal balances of $19.4 million, $15.8 million and $4.5 million, respectively.

Carrying amounts reported on the balance sheet for cash and cash equivalents, tenant and other receivables, accrued expenses, other liabilities and the Revolving Facility approximate fair value due to the short-term nature of these instruments. The majority of the Company’s variable rate debt is subject to interest rate swaps that have effectively fixed the interest rates on the underlying debt. The estimated fair value of fixed rate debt, which is calculated for disclosure purposes, is based on the borrowing rates available to the Company for fixed rate mortgage loans and corporate notes payable with similar terms and maturities.

The Company estimates the fair value of its fixed rate debt and the credit spreads over variable market rates on its variable rate debt by discounting the future cash flows of each instrument at estimated market rates and by reviewing recent market transactions or credit spreads consistent with the maturity of a debt obligation with similar credit features. Credit spreads take into consideration general market conditions and maturity.

The carrying value (including debt premium of ~~$1.9~~$1.0 million and ~~$2.7~~$1.6 million as of ~~September~~June 30, ~~2010~~2011 and December 31, ~~2009,~~2010, respectively) and estimated fair values of mortgage loans based on interest rates and market conditions at ~~September~~June 30, ~~2010~~2011 and December 31, ~~2009 are~~2010 were as follows:

The mortgage loans contain various ~~affirmative and negative covenants customarily found in loans of that type.~~customary default provisions. As of ~~September~~June 30, ~~2010,~~2011, we were not in default on any of the ~~Company was in compliance with all of these covenants.~~mortgage loans.

In ~~May 2010,~~June 2011, we exercised the ~~Company issued 10,350,000 common shares~~first of two one-year extension options on the $45.0 million mortgage loan secured by Christiana Center in Newark, Delaware. In connection with the extension, we now pay principal and interest on the mortgage loan based on a ~~public offering at $16.25 per share. The Company received net proceeds from~~25 year term.

In June 2011, in connection with the ~~offering~~amendment of approximately $160.6 million after deducting payment of the underwriting discount of $0.69 per share and offering expenses. The Company used the net proceeds from this offering, plus available working capital, to repay borrowings under its 2010 Credit Facility. Specifically, the Company used $106.5 million of the net proceeds to repay a portion of the 2010 Term Loan under the 2010 Credit Facility, the lenders released the second mortgage on New River Valley Mall in Christiansburg, Virginia and ~~$54.2 million to repay a portion~~that property is no longer one of the outstanding borrowings under the Revolving Facility under the 2010 Credit Facility. As a result of this transaction, the Company satisfied the requirement contained in the 2010 Credit Facility to reduce the aggregate amount of the lender Revolving Commitments and 2010 Term Loan by $100.0 million over the term ofcollateral properties securing the 2010 Credit Facility.

In July 2011, we entered into a $27.7 million, five year mortgage loan with two one-year extension options secured by a portion of 801 Market Street in Philadelphia, Pennsylvania. The mortgage loan has a variable interest rate of LIBOR plus 2.10%.

In July 2011, we exercised the first of two one-year extension options on the $54.0 million interest only mortgage loan secured by Paxton Towne Centre in Harrisburg, Pennsylvania.

Cash paid for interest was ~~$99.7~~$63.8 million (net of capitalized interest of ~~$2.0~~$0.7 million) and ~~$93.4~~$65.8 million (net of capitalized interest of ~~$4.6~~$1.5 million) for the ~~nine~~six months ended ~~September~~June 30, ~~2010~~2011 and ~~2009,~~2010, respectively.

In connection with the June 2011 amendment to the 2010 Credit Facility, we reduced the amount outstanding under the 2010 Term Loan by $100.0 million and increased the amount outstanding under the 2010 Revolving Facility by $100.0 million.

In connection with ~~its~~our redevelopment ~~projects~~project at Voorhees Town Center and capital ~~improvements~~improvement projects at certain other properties, ~~the Company has~~we have made contractual and other commitments ~~on some of these projects~~ in the form of tenant allowances, lease termination fees and contracts with general contractors and other professional service providers. As of ~~September~~June 30, ~~2010,~~2011, the unaccrued remainder to be paid ~~(excluding amounts already accrued)~~ against ~~such~~these contractual and other commitments was ~~$9.0~~$10.9 million, which is expected to be financed through ~~the~~our Revolving Facility, operating cash flows or through various other capital sources.

In the normal course of business, the Company has and may become involved in legal actions relating to the ownership and operation of its properties and the properties it manages for third parties. In management’s opinion, the resolutions of any such pending legal actions are not expected to have a material adverse effect on the Company’s consolidated financial position or results of operations.

The Company is aware of certain environmental matters at some of its properties, including ground water contamination and the presence of asbestos containing materials. The Company has, in the past, performed remediation of such environmental matters, and is not aware of any significant remaining potential liability relating to these environmental matters. The Company may be required in the future to perform testing relating to these or other environmental matters. The Company does not expect these matters to have any significant impact on its liquidity or results of operations, however, the Company can provide no assurance that the amounts reserved will be adequate to cover further environmental costs. The Company has insurance coverage for certain environmental claims up to $10.0 million per occurrence and up to $20.0 million in the aggregate.

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

The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish this objective, the Company uses interest rate swaps and caps as part of its interest rate risk management strategy. The Company’sOur outstanding derivatives have been designated under accounting requirements as cash flow hedges. We recognize all derivatives at fair value as either assets or liabilities in the accompanying consolidated balance sheets. Our derivative assets are recorded in “Deferred costs and other assets” and our derivative liabilities are recorded in “Fair value of derivative instruments.” 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 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.” The Company recognizes all derivatives at fair value as either assets or liabilities in the accompanying consolidated balance sheets. The Company’s derivative assets and liabilities are recorded in “Fair value of derivative instruments.”

During the three and nine months ended September 30, 2010, the Company’s derivatives were used to hedge the variable cash flows associated with existing variable rate debt. During the three and nine months ended September 30, 2010, the Company recorded no amounts associated with hedge ineffectiveness in earnings.

Amounts reported in “Accumulated other comprehensive loss” that are related to derivatives will be reclassified to “Interest expense, net” as interest payments are made on the ~~Company’s~~corresponding debt. During the next twelve months, ~~the Company estimates~~we estimate that ~~$16.9~~$16.0 million ~~would~~will be reclassified as an increase to interest expense in connection with ~~derivatives.~~derivatives and related transactions. To the extent our derivative instruments are ineffective as cash flow hedges, changes in the fair value of these instruments are recorded in “Interest expense, net.”

As of ~~September~~June 30, ~~2010, the Company~~2011, we had entered into 1110 interest rate swap agreements and one interest rate cap agreement ~~and two forward starting~~that collectively have a weighted average interest rate ~~swap agreements~~of 2.65% (excluding the spread on related debt) on a notional amount of ~~$732.6~~$687.5 million maturing on various dates through November ~~2013. Five~~2013, and one forward starting interest rate swap ~~agreements~~agreement that ~~were outstanding as~~has an interest rate of ~~December 31, 2009 were settled~~2.96% (excluding the spread on related debt) on a notional amount of $200.0 million maturing in ~~the nine months ended September 30, 2010.~~March 2013.

~~The Company~~We entered into these interest rate swap agreements (including the forward starting swap agreement) and the cap agreement in order to hedge the interest payments associated with ~~the Company’s 2010 Credit Facility and issuances of variable interest rate long-term~~our LIBOR-based debt. ~~The Company~~We have assessed the effectiveness of these interest rate swap agreements and the cap agreement as hedges at inception and on ~~September~~a quarterly basis. On June 30, ~~2010 and~~2011, we considered these interest rate swap agreements and cap agreement to be highly effective as cash flow hedges. The ~~Company’s~~ interest rate swap agreements and cap agreement ~~will be~~are net settled ~~in cash.~~monthly.

Accumulated other comprehensive loss as of June 30, 2011 includes a net loss of $11.3 million relating to swaps that we cash settled and are being amortized over 10 year periods commencing on the closing dates of the debt instruments that are associated with these settled swaps.

The following table summarizes the terms and estimated fair values of ~~the Company’s~~our interest rate swap, cap and forward starting swap derivative instruments at ~~September~~June 30, ~~2010~~2011 and December 31, ~~2009.~~2010. The notional amounts provide an indication of the extent of ~~the Company’s~~our involvement in these instruments, but do not represent the amount of exposure to credit, interest rate or market risks. The fair values of ~~the Company’s~~our derivative instruments are recorded in “Fair value of derivative instruments” on ~~the Company’s~~our balance sheet.

The table below presents the effect of ~~the Company’s~~our derivative financial instruments on ~~the Consolidated statement~~our consolidated statements of operations ~~as of September~~for the three and six months ended June 30, ~~2010~~2011 and ~~2009.~~2010:

~~The Company has~~We have agreements with some of ~~its~~our derivative counterparties that contain a provision pursuant to which, if ~~the Company’s~~our entity that originated such derivative instruments defaults on any of its indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, then ~~the Company~~we could also be declared in default on ~~its~~our derivative obligations. As of ~~September~~June 30, ~~2010, the Company was~~2011, we were not in default on any of ~~its~~our derivative obligations.

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

As of ~~September~~June 30, ~~2010,~~2011, the fair value of derivatives in a net liability position, which excludes accrued interest but includes any adjustment for nonperformance risk ~~was $33.3 million. As of September 30, 2010, the Company has not posted any collateral~~ related to these ~~agreements.~~agreements, was $25.5 million. If ~~the Company~~we had breached any of the default provisions in these ~~provisions~~agreements as of ~~September~~June 30, ~~2010, it would~~2011, we might have been required to settle ~~its~~our obligations under the agreements at their termination value (including accrued interest) of ~~$37.1~~$28.2 million. ~~The Company has~~We have not breached any of the default provisions as of ~~September~~June 30, ~~2010.~~2011.

Currently, the Company uses interest rate swaps and caps to manage its interest rate risk. The valuation of these instruments is determined using widely accepted valuation techniques, including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs.

The Company incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, the Company has considered the impact of netting and any applicable credit enhancements.

Although the Company has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives utilize Level 3 inputs, such as estimates of current credit spreads, to evaluate the likelihood of default by itself and its counterparties. However, as of September 30, 2010, the Company has assessed the significance of the effect of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustments are not significant to the overall valuation of its derivatives. As a result, the Company has determined that its derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy.

~~In March 2010, Boscov’s, Inc. repaid its $10.0 million note payable to the Company.~~

On September 29, 2009, the Company closed a transaction with a counterparty (the “Counterparty”) related to the historic rehabilitation of an office building located at 801 Market Street in Philadelphia, Pennsylvania (the “Project”). The Counterparty agreed to contribute approximately $10.6 million of equity to the Project and paid $10.1 million of that amount in cash contemporaneously with the closing of the transaction, which was recorded in “Noncontrolling interest.” The remaining funds will be advanced subject to the Company’s achievement of certain conditions. In exchange for its contributions into the Project, the Counterparty received substantially all of the rehabilitation tax credits associated with the Project as a distribution. The Counterparty does not have a material interest in the underlying economics of the Project. The transaction also includes a put/call option whereby the Company may be obligated or entitled to repurchase the Counterparty’s ownership interest in the Project at a stated value of $1.6 million. The Company believes that the put option will be exercised by the Counterparty, and an amount attributed to that option is included in the recorded balance of “Noncontrolling interest.”

Based on the contractual arrangements that obligate the Company to deliver tax credits and provide other guarantees to the Counterparty and that entitle the Company, through fee arrangements, to receive substantially all available cash flow from the Project, the Company concluded that the Project should be consolidated. The Company also concluded that capital contributions received from the Counterparty are, in substance, consideration that the Company received in exchange for the put option and the Company’s obligation to deliver tax credits to the Counterparty. The Counterparty’s contributions, other than the amounts allocated to the put option, are classified as “Noncontrolling interest” and recognized as “Interest and other income” in the consolidated financial statements as the Company’s 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, beginning one year after the completion of the Project in August 2009. The Company’s obligation to the Counterparty with respect to the tax credits is ratably relieved annually each August, upon the expiration of each portion of the recapture period. In August 2010, the first recapture period expired and the Company recognized $1.7 million of the contribution received from the Counterparty as “Interest and other income” in the consolidated statements 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.

Pennsylvania Real Estate Investment Trust, a Pennsylvania business trust founded in 1960 and one of the first equity ~~REITs~~real estate investment trusts (“REITs”) in the United States, has a primary investment focus on retail shopping malls ~~and strip and power centers~~ located in the eastern half of the United States, primarily in the Mid-Atlantic region. Our portfolio currently consists of a total of 49 properties in 13 states, including 38 ~~shopping~~enclosed malls, eight strip and power centers and three development ~~properties, with two of the development properties classified as “mixed use” (a combination of retail and other uses) and one of the development properties classified as “other.”~~properties. The operating retail properties have a total of approximately 33.2 million square feet. The operating retail properties that we consolidate for financial reporting purposes have a total of approximately ~~28.6~~28.7 million square feet, of which we own approximately ~~22.9~~23.0 million square feet. The operating retail properties that are owned by unconsolidated partnerships with third parties have a total of approximately ~~4.6~~4.5 million square feet, of which 2.9 million square feet are owned by such partnerships. The development portion of our portfolio contains three properties in two states, with two classified as “mixed use” (a combination of retail and other uses) 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 ~~strip~~real estate development services through PREIT Services, LLC (“PREIT Services”), which generally develops and ~~power centers.~~ 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 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.

Our ~~current strategic initiatives include maintaining a leading position~~revenue consists primarily of fixed rental income, additional rent in the ~~Philadelphia metropolitan area, promoting~~form of expense reimbursements, and percentage rent (rent that is based on a percentage of our ~~mall locations as retail hubs~~tenants’ sales or a percentage of sales in ~~their trade areas, optimizing~~excess of thresholds that are specified in the leases) derived from our ~~portfolio~~income producing properties. We also receive income from our real estate partnership investments and from the management and leasing services PRI provides.

Net loss for the three months ended June 30, 2011 was $19.0 million, a decrease of $4.7 million compared to a net loss for the three months ended June 30, 2010 of $23.7 million. Net loss for the six months ended June 30, 2011 was $33.9 million, a decrease of $8.3 million compared to a net loss for the six months ended June 30, 2010 of $42.2 million. Our June 30, 2011 results of operations were primarily affected by ~~selling non-core assets as market conditions permit,~~decreases in interest expense and ~~reducing our leverage through~~in depreciation and amortization expense and gains on sales, partially offset by a ~~variety of means available to us, subject to the terms of the 2010 Credit Facility, as further described below.~~decrease in net operating income.

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. ~~No individual property constitutes more than 10% of our consolidated~~We do not have any significant revenue or ~~assets,~~asset concentrations, and thus the individual properties have been aggregated 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. 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.

We hold our interests in our portfolio of properties through our operating partnership, PREIT ~~Associates, L.P. (“PREIT Associates”).~~Associates. We are the sole general partner of PREIT Associates and, as of ~~September~~June 30, ~~2010,~~2011, held a 96.0% controlling interest in PREIT Associates. We consolidate PREIT Associates for financial reporting purposes. We hold our investments in seven of the 46 retail properties and one of the three development properties in our portfolio through unconsolidated partnerships with third parties in which we own a 40% to 50% 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 ~~of each partnership~~ 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 ~~statement~~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 ~~income statement~~statements of operations items arising from these properties appear in “Equity in income of partnerships.”

For further information regarding our unconsolidated partnerships, see note 43 to our unaudited consolidated financial statements.

We provide our 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 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 an expanded menu of services to tenants without jeopardizing our continuing qualification as a REIT under federal tax law.

Our revenue consists primarily of fixed rental income, additional rent in the form of expense reimbursements, and percentage rent (rent that is based on a percentage of our tenants’ sales or a percentage of sales in excess of thresholds that are specified in the applicable leases) derived from our income producing retail properties. We also receive income from our real estate partnership investments and from the management and leasing services PRI provides.

Our net loss for the three months ended September 30, 2010 decreased to $3.7 million, a $6.4 million decrease from the $10.1 million net loss for the three months ended September 30, 2009. The net loss decreased primarily due to the $19.2 million gain on the sale of five power centers in September 2010, and a $3.1 million increase in revenue, partially offset by increased operating expenses, interest expense and depreciation and amortization expense, as well as a $4.2 million gain on the extinguishment of debt that occurred during the three months ended September 30, 2009 that did not recur in the comparable period in 2010.

Our net loss for the nine months ended September 30, 2010 increased by $19.9 million to a net loss of $45.8 million from a net loss of $25.9 million for the nine months ended September 30, 2009. The increase in the loss was affected by increased operating expenses, depreciation and amortization expense and interest expense, and a $14.0 million gain on extinguishment of debt that occurred during the nine months ended September 30, 2009 that did not recur in the comparable period in 2010. Further, the operating results were affected by a $19.2 million gain on the sale of five power centers in September 2010.

Current Economic ~~Downturn~~ and ~~Challenging~~ Capital Market Conditions, Our Leverage and Our Near Term Capital Needs

The ~~downturn~~conditions in the ~~overall~~ economy and the disruptions in the financial markets have reduced business and consumer confidence and negatively affected employment and consumer spending on retail goods. As a result, the sales and profit performance of retailers in general ~~and~~has decreased, sales at many of our properties in particular have decreased, ~~from peak levels. We~~and we have ~~also~~ experienced delays or deferred decisions regarding the openings of new retail stores and of lease renewals. We ~~have modified and~~ continue to ~~modify~~adjust our plans and actions to take into account the ~~difficult~~ current environment.

In addition, credit markets have experienced significant dislocations and liquidity disruptions. These circumstances have materially affected liquidity in the debt markets, making financing terms for borrowers less attractive, and in certain cases have resulted in the limited availability or unavailability of certain types of debt financing.

~~In September 2010, we sold our interests~~The conditions in ~~Creekview Center in Warrington, Pennsylvania; Monroe Marketplace in Selinsgrove, Pennsylvania; New River Valley Center in Christiansburg, Virginia; Pitney Road Plaza in Lancaster, Pennsylvania;~~the market for debt capital and ~~Sunrise Plaza in Forked River, New Jersey for an aggregate sale price of~~

$134.7 million. We retained an aggregate of eight out parcels at Monroe Marketplace, Pitney Road Plaza and Sunrise Plaza, which were subdivided from the properties in connection with the sale. We used the cash proceeds from the sale to repaycommercial mortgage loans, ~~secured by three~~including the commercial mortgage backed securities market, and the conditions in the economy and their effect on retail sales, as well as our significant leverage resulting from use of ~~these properties totaling $39.7 million,~~debt to fund our redevelopment program and ~~for the payment of the release prices of the~~ other ~~two properties~~development activity, have combined to necessitate that ~~secured a portion~~we vary our approach to obtaining, using and recycling capital. We intend to consider all of our ~~secured credit facility (the “2010 Credit Facility”), which totaled $57.4 million.~~ available options for accessing the capital markets, given our position and constraints. The amount remaining to be invested in the last phase of our current redevelopment project is significantly less than in 2009 and 2010, and we believe that we have access to sufficient capital to fund this remaining amount.

We ~~also used $10.0 million~~continue to ~~repay borrowings under the Revolving Facility (as defined below)~~contemplate ways to reduce our leverage through a variety of means available to us, subject to and ~~$8.9 million to repay borrowings under the 2010 Term Loan (as defined below), both~~ in accordance with the terms of our Amended, Restated and Consolidated Senior Secured Credit Agreement (as amended, the ~~2010~~“2010 Credit ~~Facility. We intend to use~~Facility”). These steps might include obtaining additional equity capital, including through the ~~remaining $18.7 million~~issuance of 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 with values in excess of their mortgage loans or allocable debt and application of the excess proceeds for general corporate purposes. Following these repayments of borrowings under the 2010 Credit Facility, as of September 30, 2010, the 2010 Term Loan had a remaining balance of $347.2 million, and the $150.0 million Revolving Facility (as defined below) had no outstanding balance. We recognized a gain on sale of these properties of $19.2 million in September 2010.

~~One of our subsidiaries will serve as the management and leasing agent for the properties for a period of three years after the closing, subject~~ to certain termination rights of the buyer after one year upon payment of a specific amount. The purchase and sale agreement contains earnout provisions under which we may be entitled to additional purchase price if we lease certain spaces at the properties that were vacant as of the closing date. Under these provisions, we earn a portion of the earnout amount when a new lease is signed, and an additional amount when the tenant associated with that lease opens. As of September 30, 2010, there was $1.0 million of contingent income associated with earnout tenants that had signed leases but had not yet opened. We expect to recognize this income by December 31, 2011.debt reduction, or through other actions.

In September 2010, we acquired the remaining 0.2% interest in Bala Cynwyd Associates, L.P. (“BCA”) that we did not already own, for 564 units of PREIT Associates (“OP Units”) and a nominal cash amount. BCA is the owner of One Cherry Hill Plaza, an office building located within the boundaries of Cherry Hill Mall in Cherry Hill, New Jersey. Three of the Company’s trustees and executive officers, Ronald Rubin, George F. Rubin, and Joseph F. Coradino, were direct or indirect owners of the acquired interests.

We have reached the last phase in our current redevelopment program. Over the past ~~five~~six years, we have invested approximately ~~$1.0~~$1.1 billion in our portfolio. The current estimated project cost of Voorhees Town Center, our only remaining redevelopment ~~property,~~project, is $83.0 million, and the amount invested as of ~~September~~June 30, ~~2010~~2011 was ~~$70.1~~$72.9 million.Our ~~projected share of~~ estimated project costs isare net of any expected tenant reimbursements, parcel sales, tax credits or other incentives. We ~~may~~might spend additional amounts at our completed redevelopment properties for tenant allowances, leasehold improvements and other costs.

We are engaged in the development of three mixed use and other projects, although we do not expect to make material investments in these projects in the short term. As of ~~September~~June 30, ~~2010,~~2011, we had incurred ~~$78.4~~$55.6 million of costs (net of impairment charges recorded in prior years) related to these three projects. The details of the White Clay Point, Springhills and Pavilion at Market East projects and related costs have not been determined. In each case, we will evaluate the financing opportunities available to us at the time a project requires funding. In cases where the project is undertaken with a partner, our flexibility in funding the project might be governed by the partnership agreement or restricted by the covenants contained in our 2010 Credit Facility, which limit our involvement in such projects.

~~The following table sets forth the amounts invested as of September 30, 2010 in each development project:~~

In connection with our remaining redevelopment ~~projects~~project at Voorhees Town Center and capital ~~improvements~~improvement projects at certain other properties, we have made contractual and other commitments ~~on these projects~~ in the form of tenant allowances, lease termination fees and contracts with general contractors and other professional service providers. As of ~~September~~June 30, ~~2010,~~2011, the unaccrued remainder to be paid against these contractual and other commitments was ~~$9.0~~$10.9 million, which is expected to be financed through ~~our Revolving~~the $250.0 million revolving line of credit that is part of the 2010 Credit Facility (the “Revolving Facility”), operating cash flows or through various other capital sources. The projects on which these commitments have been made have total expected remaining costs of ~~$44.8~~$84.6 million.

~~We have no material off-balance sheet items other than the partnerships described in~~See note 42 to ~~the~~our unaudited consolidated financial statements ~~and in the “Overview” section above.~~

~~PRI provides management, leasing and development services~~ for nine properties owned by partnerships and other entities in which certain officers or trustees of the Company and of PRI or members of their immediate families and affiliated entities have indirect ownership interests. Total revenue earned by PRI for such services was $0.2 million for each of the three months ended September 30, 2010 and 2009, respectively, and $0.6 million for each of the nine months ended September 30, 2010 and 2009, respectively.

~~We lease our principal executive offices from Bellevue Associates (the “Landlord”), an entity in which certain~~a description of our ~~officers/trustees have an interest. Total rent expense under this lease was $0.4 million for each of the three months ended September 30, 2010~~acquisitions and 2009, respectively, and $1.3 million and $1.2 million for the nine months ended September 30, 2010 and 2009, respectively. Ronald Rubin and George F. Rubin, collectively with members of their immediate families and affiliated entities, own approximately a 50% interestdispositions in ~~the Landlord.~~2011.

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 ~~instruments~~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 past history, 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 ~~impact~~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 ~~2010~~2011 and ~~2009,~~2010, 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.

Our management makes complex or subjective assumptions and judgments with respect to applying its critical accounting policies. In making these judgments and assumptions, management considers, among other factors:

~~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.~~

For additional information regarding our Critical Accounting Policies, ~~please refer to the caption~~see “Critical Accounting Policies” in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, ~~2009.~~2010.

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.

~~The table below sets forth certain occupancy statistics as of September 30, 2010 and 2009:~~

The following information sets forth our results of operations for each of the three and ~~nine~~six months ended ~~September~~June 30, 2011 and June 30, 2010.

Net loss for the three months ended June 30, 2011 was $19.0 million, a decrease of $4.7 million compared to a net loss of $23.7 million for the three months ended June 30, 2010. Net loss for the six months ended June 30, 2011 was $33.9 million, a decrease of $8.3 million compared to a net loss for the six months ended June 30, 2010 of $42.2 million. Our June 30, 2011 results of operations were primarily affected by decreases in interest expense and ~~2009:~~in depreciation and amortization expense and gains on sales, partially offset by a decrease in net operating income.

The ~~operating results for~~amounts in the preceding table reflect our consolidated properties, with the exception of properties that are classified as discontinued operations that are presented in the line item “Income from discontinued operations,” and unconsolidated ~~partnerships~~properties that are presented under the equity method of accounting in the line item “Equity in income of partnerships.”

The table below sets forth certain occupancy statistics for our properties as of June 30, 2011 and 2010:

⁽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.

The table below sets forth summary leasing activity information with respect to our properties for the three and six months ended June 30, 2011, including consolidated and unconsolidated properties.

As of June 30, 2011, for non-anchor leases, the average minimum rent per square foot as of the expiration date was $21.05 for the renewing leases in “Holdover” status, $27.54 for the remaining leases expiring in 2011 and $23.64 for leases expiring in 2012.

Real estate revenue decreased by ~~$3.1~~$0.3 million, or 3%0%, in the three months ended ~~September~~June 30, ~~2010,~~2011 compared to the three months ended ~~September 30, 2009.~~

~~Real estate revenue from properties that were owned for the entire period from July 1, 2009 to September~~June 30, 2010, ~~(“Third Quarter Same Store Properties”) increased by $1.1 million,~~ primarily due ~~to increases~~to:

A decrease of ~~$0.9 million in base rent, which is comprised of minimum rent, straight line rent and rent from tenants that pay a percentage of sales in lieu of minimum rent, $0.3~~$0.8 million in expense ~~reimbursements and $0.1 million in lease terminations. These increases were partially offset by a decrease of $0.2 million in percentage rent.~~

Base rent for the Third Quarter Same Store Properties increased by $0.9 million in the three months ended September 30, 2010 compared to the three months ended September 30, 2009. The increase was primarily due to base rent at three of our recently completed redevelopment projects, which increased by an aggregate of $1.0 million due to increased occupancy from newly opened tenants.

Expense reimbursements for the Third Quarter Same Store Properties increased by $0.3 million in the three months ended September 30, 2010 compared to the three months ended September 30, 2009, due to an increase in property operating expenses, which offset a decrease in the proportion of such expenses recovered.

Interest and other income increased by $1.9 million in the three months ended September 30, 2010 compared to the three months ended September 30, 2009, primarily due to the recognition of income of $1.7 million from historic tax credits earned in 2010 related to our interest in the 801 Market Street Project.

~~Revenue increased by $5.7 million, or 2%, in the nine months ended September 30, 2010 compared to the nine months ended September 30, 2009.~~

Real estate revenue from properties that were owned for the entire period from January 1, 2009 to September 30, 2010 (“Nine Month Same Store Properties”) increased by $3.6 million, primarily due to increases of $3.2 million in base rent and $0.9 million in lease terminations. This increase was partially offset by decreases of $0.2 million in expense reimbursements, $0.2 million in other real estate revenue and $0.1 million in percentage rent.

Base rent for the Nine Month Same Store Properties increased by $3.2 million in the nine months ended September 30, 2010 compared to the nine months ended September 30, 2009. Base rent at three of our recently completed redevelopment projects increased by an aggregate of $5.6 million due to increased occupancy from newly opened tenants. Partially offsetting this increase, base rent at our other properties decreased by $1.9 million due to decreased occupancy and leases that were converted to pay a percentage of sales in lieu of base rent. Base rent was also affected by a $0.5 million decrease in above/below market lease amortization from the prior year, when $0.6 million was recognized as revenue in connection with leases that were terminated prior to their expiration.

~~Expense reimbursements decreased by $0.2 million in the nine months ended September 30, 2010 compared to the nine months ended September 30, 2009.~~reimbursements. At many of our malls, we have continued to recover a lower proportion of common area maintenance and real estate tax ~~expenses than in prior periods. In addition~~expenses. Our properties continue to ~~being affected by store closings, our properties are experiencing~~experience a trend towards more gross leases (leases that provide that tenants pay a higher minimum rent in

lieu of contributing toward common area maintenance costs and real estate taxes), as well as more leases that provide for the rent amount to be determined on the basis of a percentage of sales in lieu of minimum rent or any contribution toward common area maintenance or real estate tax expenses. In recent years, we have entered into agreements with some tenants experiencing financial difficulties to convert their leases to gross leases or percentage of sales leases, resulting in lower expense reimbursements.

A decrease of $0.1 million in base rents, including a $0.6 million net decrease in straight line rent resulting from write-offs associated with the Borders Group, Inc. planned liquidation. This decrease was offset by base rent ~~amount~~increases of $0.4 million at Cherry Hill Mall and $0.3 million at Woodland Mall due to new store openings; and

An increase of $0.3 million in ~~lieu~~lease termination revenue as a result of ~~contributing toward common area maintenance costs and real estate taxes), as well as more leases that provide for~~$0.6 million received from one tenant during the rent amount to be determined on the basis of a percentage of sales in lieu of minimum rent. We are also experiencing rental concessions made to tenants experiencing financial difficulties, as well as other rental concessions in connection with conditions in the economy. Other realthree months ended June 30, 2011.

Real estate revenue decreased by ~~$0.2~~$2.5 million, ~~primarily due to a $0.3 million decrease in marketing revenue. The decrease in marketing revenue~~

~~was offset by a corresponding decrease in marketing expense. Marketing revenue is generally recognized in tandem with marketing expense.~~

~~Interest and other income increased by $2.0 million~~or 1%, in the ~~nine~~six months ended ~~September~~June 30, ~~2010~~2011 compared to the ~~nine~~six months ended ~~September~~June 30, ~~2009,~~2010, primarily due ~~to the recognition~~to:

A decrease of ~~income~~$1.5 million in lease termination revenue as a result of $1.7 million received from ~~historic tax credits earned~~four tenants during 2010 that did not recur; and

A decrease of $1.3 million in ~~2010 related to our interest in~~expense reimbursements for the ~~801 Market Street Project.~~reasons discussed above.

Operating expenses from Third Quarter Same Store Properties increased by $2.4 million, or 5%, primarily due to a $0.9 million increase in real estate taxes, a $0.8 million increase in utility expense, a $0.5 million increase in common area maintenance expenses and a $0.2 million increase in other operating expenses.

~~Real estate tax expense increased by $0.9 million~~were unchanged in the three months ended ~~September~~June 30, ~~2010~~2011 compared to the three months ended ~~September~~June 30, ~~2009,~~2010, as increases in common area maintenance expenses were offset by a decrease in bad debt expense.

Operating expenses increased by $0.5 million, or 0%, in the six months ended June 30, 2011 compared to the six months ended June 30, 2010, primarily due ~~to higher~~to:

An increase of $0.7 million in common area maintenance expenses as a result of stipulated annual contractual increases in housekeeping and security services;

An increase of $0.3 million in real estate tax ~~rates~~expense; and ~~increased property assessments at some~~

A decrease of ~~our properties. Non common~~$0.6 million in non-common area utility expense, ~~increased by $0.8 million,~~ including a ~~$0.5~~$1.0 million ~~increase~~decrease at ~~four~~seven of our Pennsylvania properties where electricity rate caps expired on January 1, 2010. Common area maintenance expenses increased by $0.5 million, primarily due to increases of $0.2 million in common area utility expense, $0.1 million in housekeeping expense and $0.1 million in loss prevention expense. The increase in common area utilities included a $0.2 million increase arising from the Commonwealth of Pennsylvania lease of newly commissioned space at the 801 Market Street office building, which is adjacent to The Gallery at Market East that commenced in August 2009. The increases in housekeeping expense and loss prevention expense were due primarily to stipulated annual contractual increases. Other operating expenses increased by $0.2 million, including a $0.2 million increase in legal fee expense related to tenant collections.

Operating expenses for the Nine Month Same Store Properties increased by $7.3 million, or 5%, in the nine months ended September 30, 2010 compared to the nine months ended September 30, 2009, primarily due to a $3.7 million increase in common area maintenance expense, a $2.2 million increase in real estate taxes and a $1.5 million increase in utility expense. These increases were partially offset by a $0.1 million decrease in other operating expenses.

Common area maintenance expenses increased by $3.7 million in the nine months ended September 30, 2010 compared to the nine months ended September 30, 2009 primarily due to increases of $1.2 million in snow removal expense, $0.9 million in common area utility expense, $0.8 million in common area administrative expense, $0.5 million in housekeeping expense and $0.5 million in loss prevention expense. Snow removal expenses at our properties located in Pennsylvania and New Jersey increasedelectric rates have decreased as a result of ~~two significant snowstorms that affected~~deregulation and alternate supplier contracts executed over the Mid-Atlantic states in February 2010. The increase in common area utilities included a $0.5 million increase arising from the Commonwealth of Pennsylvania lease of newly commissioned space at the 801 Market Street office building, which is adjacent to The Gallery at Market East that commenced in August 2009. The increases in housekeeping expense and loss prevention expense were due primarily to stipulated annual contractual increases. Real estate tax expense increased by $2.2 million, primarily due to higher tax rates in the jurisdictions where properties are located and increased property assessments at some of our properties. Non common area utility expense increased by $1.5 million, including a $1.2 million increase at four of our Pennsylvania properties, where electricity rate caps expired on January 1, 2010.past 12 months.

Depreciation and amortization expense for the Third Quarter Same Store Properties increased by $1.4 million, or 4%, in the three months ended September 30, 2010 compared to the three months ended September 30, 2009, primarily due to increased depreciation expense of $2.8 million that resulted from a higher asset base following capital improvements at our properties, particularly at properties where we have recently completed redevelopments that have been placed in service. We placed assets with an aggregate basis of $107.7 million in service from September 30, 2009 to September 30, 2010. Offsetting this increase, amortization expense decreased by $1.4 million due to lease intangibles that are now fully amortized at seven properties purchased during the second and third quarters of 2003.

Depreciation and amortization expense from Nine Month Same Store Properties increased by $7.3 million, or 4%, primarily due to a higher asset base resulting from capital improvements at our properties, particularly at properties where we have recently completed redevelopments that have been placed in service. Partially offsetting this increase, amortization expense decreased by $2.6 million due to lease intangibles that are now fully amortized at seven properties purchased during the second and third quarters of 2003.

Interest expense increased by $3.4 million, or 10%, in the three months ended September 30, 2010 compared to the three months ended September 30, 2009. We placed assets with an aggregate cost basis of $107.7 million in service from September 30, 2009 to September 30, 2010. Interest on these assets was capitalized during construction periods and was expensed during periods after the improvements were placed in service. The increase in interest expense also resulted from higher applicable stated interest rates (6.15% in 2010 compared to 5.30% in 2009), even though our weighted average debt balance decreased from $2.6 billion in 2009 to $2.4 billion in 2010). We also incurred $1.4 million of accelerated amortization of deferred financing cost expense associated with the repayment of a portion of the 2010 Term Loan during the third quarter of 2010 and the repayment of mortgage loans secured by properties involved in the sale of five power centers.

Interest expense increased by $10.8 million, or 11%, in the nine months ended September 30, 2010 compared to the nine months ended September 30, 2009. This increase was primarily due to higher applicable stated interest rates and decreased capitalized interest after assets were placed in service. We also incurred $3.7 million of accelerated amortization of deferred financing costs associated with the repayment of a portion of the 2010 Term Loan and Revolving Facility and the repayment of mortgage loans secured by properties involved in the sale of five power centers in September 2010.

We have presented as discontinued operations the operating results of five power centers: Creekview Center, Monroe Marketplace, New River Valley Center, Pitney Road Plaza and Sunrise Plaza (sold in September 2010); Crest Plaza (sold in August 2009); and Northeast Tower Center (sold in October 2009).

~~The following table summarizes the results of operations and gains on sales for discontinued operations for the periods presented:~~

NOI (a non-GAAP measure) is derived from real estate revenue (determined in accordance with ~~GAAP)~~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 of our partnership investments as described below, and includes real estate revenue and operating expenses from properties included in discontinued operations. 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; nor~~liquidity. It is itnot 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 Net Operating Income. We believe that Net Operating Income~~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.

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

The following tables present ~~Net Operating Income results~~NOI for the three and ~~nine~~six months ended ~~September~~June 30, ~~2010~~2011 and ~~2009.~~2010. The results are presented using the “proportionate-consolidation method” (a non-GAAP measure), which ~~includes~~presents our share of the results of our partnership ~~investments in order to provide more detailed information with respect to the revenue and expenses of the aggregate of our wholly owned properties and our share of partnership properties.~~investments. Under GAAP, we account for our ~~unconsolidated~~ 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 during the periods ~~presented:~~presented. A reconciliation of NOI to net loss calculated in accordance with GAAP appears under the heading “Reconciliation of GAAP Net Loss to Non-GAAP Measures.”

Total ~~Net Operating Income~~NOI decreased by ~~$2.0~~$3.4 million, or 3%5%, in the three months ended ~~September~~June 30, ~~2010~~2011 compared to the three months ended ~~September~~June 30, ~~2009.~~2010, including a decrease of $2.7 million relating to Non Same Store ~~Net Operating Income~~properties, which resulted primarily from the sale of five power centers in 2010, and $0.6 million relating to a write off of straight line rent in connection with the planned liquidation of Borders Group, Inc. See “—Discontinued Operations” below for further information. Same Store NOI decreased by ~~$1.0~~$0.7 million. See “—Real Estate Revenue” and “—Operating Expenses” above for further information about our consolidated properties.

Total NOI decreased by $8.3 million, or 2%6%, in the six months ended June 30, 2011 compared to the six months ended June 30, 2010, including ~~$0.4~~a decrease of $5.3 million relating to Non Same Store properties, which resulted primarily from the sale of five power centers in 2010, and $0.9 million relating to a write off of straight line rent in connection with the bankruptcy filing and planned liquidation of Borders Group, Inc. See “—Discontinued Operations” below for further information. Same Store NOI decreased by $3.0 million. See “—Real Estate Revenue” and “—Operating Expenses” above for further information about our consolidated properties.

NOI includes lease termination revenue of $0.7 million and $0.6 million for the three months ended June 30, 2011 and 2010, respectively, and $0.7 million and $2.5 million for the six months ended June 30, 2011 and 2010, respectively.

Depreciation and amortization expense decreased by $3.7 million, or 9%, in the three months ended ~~September~~June 30, ~~2010~~2011 compared to the three months ended ~~September~~June 30, ~~2009, which included $0.3~~2010, primarily due to:

A decrease of $5.9 million because certain lease intangibles and tenant improvements at 28 properties purchased during 2003 became fully amortized in ~~lease termination revenue. See “Results~~2010; and

An increase of ~~Operations—Revenue”~~$2.2 million due to a higher asset base resulting from capital improvements at our properties, particularly at properties where we have completed redevelopments that have been placed in

service, and $1.0 million resulting from tenant improvement and deferred leasing commission write-offs associated with tenant bankruptcies.

Depreciation and ~~“—Operating Expenses” for further discussion of these variances. Non Same Store Net Operating Income~~amortization expense decreased by ~~$1.0~~$9.9 million, or ~~28%~~12%, in the six months ended June 30, 2011 compared to the six months ended June 30, 2010, primarily due to:

A decrease of $12.6 million because certain lease intangibles and tenant improvements at 28 properties purchased during 2003 became fully amortized in 2010; and

An increase of $2.8 million, including $1.7 million resulting from tenant improvement and deferred leasing commission write-offs associated with tenant bankruptcies, due to a higher asset base resulting from capital improvements at our properties, particularly at properties where we have completed redevelopments that have been placed in service.

General and administrative expenses increased by $0.8 million, or 8%, in the three months ended ~~September~~June 30, ~~2010~~2011 compared to the three months ended ~~September~~June 30, ~~2009,~~2010. The increase is primarily due to ~~the sales of Crest Plaza~~a $1.1 million increase in compensation costs, which was driven by increases in incentive compensation expense, salaries and ~~Northeast Tower Center in 2009.~~benefit costs.

~~Total Net Operating Income decreased~~General and administrative expenses increased by ~~$5.8~~$0.7 million, or 3%4%, in the ~~nine~~six months ended ~~September~~June 30, ~~2010~~2011 compared to the ~~nine~~six months ended ~~September~~June 30, ~~2009. Same Store Net Operating Income~~2010. The increase is primarily due to a $1.6 million increase in compensation costs, offset by a $0.3 million reduction in professional fees and a $0.6 million decrease in other miscellaneous expenses.

Interest expense decreased by $3.1 million, or 2%8%, ~~including $2.8 million in lease termination revenue,~~ in the ~~nine~~three months ended ~~September~~June 30, ~~2010~~2011 compared to the ~~nine~~three months ended ~~September~~June 30, ~~2009, which included $1.8~~2010. Of this amount, $2.3 million of the decrease was due to a reduction of deferred financing costs recorded in ~~lease termination revenue. See “Results~~May 2010 in connection with a partial repayment of ~~Operations—Revenue”~~the 2010 Term Loan that did not recur in 2011. The remaining decrease was primarily due to a lower overall debt balance and ~~“—Operating Expenses”~~lower applicable stated interest rates, partially offset by decreased capitalized interest after assets were placed in service. Our weighted average borrowing rate was 6.41% for ~~further discussion of these variances. Non~~

~~Same Store Net Operating Income~~Interest expense decreased by ~~$2.7~~$3.6 million, or ~~26%~~5%, in the ~~nine~~six months ended ~~September~~June 30, ~~2010~~2011 compared to the ~~nine~~six months ended ~~September~~June 30, ~~2009,~~2010. Of this amount, $2.3 million of the decrease was due to a reduction of deferred financing costs recorded in May 2010 in connection with a partial repayment of the 2010 Term Loan that did not recur in 2011. The remaining decrease was primarily due to a lower overall debt balance, partially offset by higher applicable stated interest rates and decreased capitalized interest after assets were placed in service. Our weighted average borrowing rate was 6.26% for the six months ended June 30, 2011 compared to 6.00% for the six months ended June 30, 2010.

Equity in income of partnerships decreased by $1.8 million, or 61%, for the three months ended June 30, 2011 compared to the three months ended June 30, 2010. The decrease was primarily due to an increase in mortgage interest expense of the partnerships of $1.0 million, a decrease in revenue of $0.5 million and an increase in other expenses of $0.3 million.

Equity in income of partnerships decreased by $2.3 million, or 47%, for the six months ended June 30, 2011 compared to the six months ended June 30, 2010. The decrease was primarily due to an increase in mortgage interest expense of the partnerships of $2.2 million and a decrease in revenue of $0.2 million, partially offset by a decrease in other expenses of $0.1 million.

Gains on sales of ~~Crest~~interests in real estate were $1.4 million in the three and six months ended June 30, 2011 due to a $0.7 million gain from the sale of a parcel and related land improvements at Pitney Road Plaza in Lancaster, Pennsylvania and a $0.7 million gain from the sale of condominium interest in the mall at Voorhees Town Center, in Voorhees, New Jersey.

There were no gains on sales of real estate in the three or six months ended June 30, 2010.

We have presented as discontinued operations the operating results of the five power centers that were sold in 2010: Creekview Center, Monroe Marketplace, New River Valley Center, Pitney Road Plaza and ~~Northeast Tower Center~~Sunrise Plaza.

~~The following information is provided to reconcile net loss to Net Operating Income:~~discontinued operations for the three months and six months ended June 30, 2010 were as follows (there was no income from discontinued operations in the three and six months ended June 30, 2011):

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 income before gains and losses on sales of operating properties and extraordinary items (computed in accordance with GAAP); plus real estate depreciation; plus or minus adjustments for unconsolidated partnerships to reflect funds from operations on the same basis.

~~FFO is a commonly used measure of operating performance and profitability in the real estate industry.~~ We use FFO and FFO per diluted share and unit of limited partnership interest in our operating partnership (“OP ~~Unit as supplemental non-GAAP measures to compare~~Unit”) in measuring our ~~Company’s~~ performance ~~for different periods to that of~~against our ~~industry peers. Similarly, FFO per diluted share~~peers and ~~OP Unit is a measure that is useful because it reflects the dilutive impact of outstanding convertible securities. In addition, we use FFO and FFO per diluted share and OP Unit~~ as one ~~of the~~ performance ~~measures~~measure for determining incentive compensation amounts earned under certain of our performance-based executive compensation programs. 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.

FFO does not include gains and losses on sales of operating real estate assets, 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 ~~Net Operating Income.~~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.

The following table presents FFO for the three months ended June 30, 2011 and 2010:

The following table presents FFO for the six months ended June 30, 2011 and 2010:

FFO was $19.0 million for the three months ended June 30, 2011, a decrease of $0.7 million, or 3%, compared to FFO of $19.7 million for the three months ended June 30, 2010. This decrease was primarily due to:

the sale of five power centers in 2010; and

a decrease in Same Store NOI.

FFO per diluted share and OP Unit decreased $0.04 per share to $0.33 per share for the three months ended June 30, 2011, compared to $0.37 per share for the three months ended June 30, 2010.

FFO was $40.3 million for the six months ended June 30, 2011, a decrease of $4.9 million, or 11%, compared to FFO of $45.2 million for the six months ended June 30, 2010. This decrease was primarily due to:

the sale of five power centers in 2010; and

a decrease in Same Store NOI, including a $1.7 million decrease in lease termination revenue.

FFO per diluted share and OP Unit decreased $0.21 per share to $0.70 per share for the six months ended June 30, 2011, compared to $0.91 per share for the six months ended June 30, 2010.

The preceding discussions compare our unaudited Consolidated Statements of Operations results for different periods determined in accordance with GAAP. Also, the non-GAAP measures of NOI and FFO are 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 various non-recurring items that are considered extraordinary under GAAP,~~ gains on sales of operating real estate and depreciation and amortization of real ~~estate.~~

estate, among other items. FFO ~~was $21.8 million for the three months ended September 30, 2010,~~is a ~~decrease~~commonly used measure of ~~$8.0 million, or 27%, compared to $29.8 million for the three months ended September 30, 2009.~~operating performance and profitability among REITs, and we use FFO decreased due to a decrease in Net Operating Income as a result of increased operating expenses, and due to higher interest expense. FFO per share decreased $0.29 per share to $0.38 per share for the three months ended September 30, 2010, compared to $0.67 per share for the three months ended September 30, 2009, due in part to a higher weighted average number of shares following the May 2010 equity offering and equity issuances in 2009.

FFO was $67.0 million for the nine months ended September 30, 2010, a decrease of $29.9 million, or 31%, compared to $96.9 million for the nine months ended September 30, 2009. FFO decreased due to a decrease in Net Operating Income as a result of increased operating expenses, and due to higher interest expense, as well as gains on sales of non operating real estate that occurred in 2009 that did not recur in 2010. FFO per share decreased $1.01 per share to $1.28 per share for the nine months ended September 30, 2010, compared to $2.29 per share for the nine months ended September 30, 2009, due in part to a higher weighted average number of shares following the May 2010 equity offering and equity issuances in 2009.

~~The shares used to calculate both FFO per basic share~~ and FFO per diluted share ~~include common shares~~ and OP ~~Units not held by us. FFO per diluted share also includes the effect~~Unit as supplemental non-GAAP measures to compare our performance for different periods to that of ~~common share equivalents.~~our industry peers.

The following information is provided to reconcile NOI and FFO, which are non-GAAP measures, to net loss, ~~to FFO, and to show the items included in our FFO for the periods indicated:~~a GAAP measure:


	Three months ended June 30, 2010
(in thousands of dollars)	Consolidated			Share of unconsolidated partnerships			Discontinued operations			Total
Real estate revenue	$	107,700		$	9,797		$	3,155		$	120,652
Operating expenses		(47,446	)		(2,894	)		(604	)		(50,944	)


Net operating income		60,254			6,903			2,551			69,708
General and administrative expenses		(9,617	)		—			—			(9,617	)
Interest and other income		598			—			—			598
Project costs and other expenses		(161	)		—			—			(161	)
Interest expense, net		(37,998	)		(1,853	)		(627	)		(40,478	)
Depreciation on non real estate assets		(378	)		—			—			(378	)


Funds from operations		12,698			5,050			1,924			19,672
Depreciation on real estate assets		(39,896	)		(2,102	)		(1,324	)		(43,322	)
Equity in income of partnerships		2,948			(2,948	)		—			—
Income from discontinued operations		600			—			(600	)		—

Net loss	$	(23,650	)	$	—		$	—		$	(23,650	)


	Six months ended June 30, 2011
(in thousands of dollars)	Consolidated			Share of unconsolidated partnerships			Discontinued operations			Total
Real estate revenue	$	216,953		$	18,544		$	—		$	235,497
Operating expenses		(96,560	)		(5,889	)		—			(102,449	)


Net operating income		120,393			12,655			—			133,048
General and administrative expenses		(20,015	)		—			—			(20,015	)
Interest and other income		1,727			—			—			1,727
Project costs and other expenses		(497	)		—			—			(497	)
Interest expense, net		(68,554	)		(5,637	)		—			(74,191	)
Gains on sales of non operating real estate		710			—			—			710
Depreciation on non real estate assets		(474	)		—			—			(474	)


Funds from operations		33,290			7,018			—			40,308
Gains on sale of real estate		740			—			—			740
Depreciation on real estate assets		(70,650	)		(4,328	)		—			(74,978	)
Equity in income of partnerships		2,690			(2,690	)		—			—

Net loss	$	(33,930	)	$	—		$	—		$	(33,930	)

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 in the section entitled “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, ~~2009~~2010 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.

We expect to meet our short-term liquidity requirements, including distributions to shareholders, recurring capital expenditures, tenant improvements and leasing commissions, but excluding development and redevelopment projects, generally through our available working capital and net cash provided by operations, and subject to the terms and conditions of our 2010 Credit Facility. 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 common shareholders and OP Unitholders

in the ~~nine~~six months ended ~~September~~June 30, ~~2010~~2011 were ~~$24.3~~$17.4 million, based on ~~quarterly~~ distributions of ~~$0.15~~$0.30 per 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;

~~continued~~ deterioration in ~~or prolonged downturn of,~~ our tenants’ business operations and financial stability, including 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, ~~or higher costs or delays in completion of our development or redevelopment projects,~~ resulting in lower or delayed real estate revenue and operating income;

~~increases in interest rates resulting in higher borrowing costs; and~~

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

increases in interest rates resulting in higher borrowing costs.

We expect to meet certain of our longer term requirements, such as remaining obligations to fund ~~existing~~ development and redevelopment projects and certain capital requirements, including scheduled debt maturities, future property and portfolio acquisitions, expenses associated with acquisitions and renovations, expansions and other non-recurring capital improvements, through a variety of capital sources, subject to the terms and conditions of our 2010 Credit Facility.

The ~~difficult~~ conditions in the market for debt capital and commercial mortgage loans, including the commercial mortgage backed securities market, and the ~~downturn~~conditions in the ~~general~~ economy and ~~its~~their effect on retail sales, as well as our significant leverage resulting from debt incurred to fund our redevelopment ~~projects~~program and other development activity, have combined to necessitate that we vary our approach to obtaining, using and recycling capital. We intend to consider all of our available options for accessing the capital markets, given our position and constraints.

The amounts remaining to be invested in the last phase of our current redevelopment program are significantly less than in 2009, and we believe that we have access to sufficient capital to fund these remaining amounts.

In the past, one avenue available to us to finance our obligations or new business initiatives has been to obtain unsecured debt, based in part on the existence of properties in our portfolio that were not subject to mortgage loans. The terms of the 2010 Credit Facility include our grant of a security interest consisting of a first lien on 20 ~~properties and a second lien on one property.~~properties. As a result, we have very few remaining assets that we could use to support unsecured debt financing. Our lack of properties in the portfolio that could be used to support unsecured debt ~~limits~~might limit our ability to obtain capital in this way.

We are contemplating ways to reduce our leverage through a variety of means available to us, and subject to and in accordance with the terms and conditions of the 2010 Credit Facility. These steps might include obtaining ~~additional~~ equity capital, including through the issuance of equity securities if market conditions are favorable, ~~as was done in May 2010,~~ 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 with values in excess of their mortgage loans or allocable debt and application of the excess proceeds to debt reduction, or through other actions.

~~We may use~~In March 2009, the SEC declared effective our $1.0 billion universal shelf registration ~~statement, which was used for the~~statement. In May 2010, we issued 10,350,000 common ~~equity~~shares in a public offering at $16.25 per share. We received net proceeds from the offering of approximately $160.6 million. We used the net proceeds from this offering, plus available working capital, to repay borrowings under our 2010 Credit Facility. Currently, we may use the remaining 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. However, we may be unable to issue securities under the shelf registration statement, or otherwise, on terms that are favorable to us, ifor at all.

In May 2010, we issued 10,350,000 common shares in a public offering at $16.25 per share. We received net proceeds from the offering of approximately $160.6 million after deducting payment of the underwriting discount of $0.69 per share and offering expenses. We used the net proceeds from this offering, plus available working capital, to repay borrowings under our 2010 Credit Facility. Specifically, we used $106.5 million of the net proceeds to repay a portion of the 2010 Term

Loan under the 2010 Credit Facility and $54.2 million to repay a portion of the outstanding borrowings under the Revolving Facility under the 2010 Credit Facility. As a result of this transaction, we satisfied the requirement contained in the 2010 Credit Facility to reduce the aggregate amount of the lender Revolving Commitments and 2010 Term Loan by $100.0 million over the term of the 2010 Credit Facility.

Amended, Restated and Consolidated Senior Secured Credit Agreement ~~(2010 Credit Facility)~~

OnIn March ~~11,~~ 2010, ~~PREIT Associates and PRI (collectively,~~we entered into the ~~“Borrower”)~~2010 Credit Facility (as defined below), ~~together~~which consisted of a revolving line of credit with ~~PR Gallery I Limited Partnership (“GLP”~~an original capacity of $150.0 million (the “Revolving Facility”) and ~~Keystone Philadelphia Properties, L.P. (“KPP”), two~~term loans with an original aggregate balance of ~~our other subsidiaries, entered into an Amended, Restated and Consolidated Senior Secured Credit Agreement comprised of (a) an aggregate~~ $520.0 million ~~term loan made up of~~and a ~~$436.0 million term loan (“Term Loan A”)~~balance prior to the ~~Borrower and a separate $84.0~~amendment described below of $340.0 million ~~term loan (“Term Loan B”) to the other two subsidiaries~~ (collectively, the “2010 Term Loan”~~) and (b) a $150.0 million revolving line of credit (the “Revolving Facility,”~~ and, together with the ~~2010 Term Loan,~~Revolving Facility, and as amended as described below, the “2010 Credit Facility”) ~~with Wells Fargo Bank, National Association, and the other financial institutions signatory thereto.~~.

The amendment lowered the interest rate range to between 2.75% and 4.00% per annum over LIBOR, depending on our leverage. Previously, the interest rate range was between 4.00% and 4.90% per annum over LIBOR. Initially, the new rate in effect is ~~three years, and we have the right to one 12-month extension~~4.00% per annum over LIBOR.

The amendment also modifies several of the ~~initial maturity date, subject to certain conditions and to the payment of an extension fee of 0.50% of the then outstanding Commitments.~~

~~We used the initial proceeds from~~financial covenants under the 2010 Credit ~~Facility~~Facility. The maximum permitted leverage ratio has been reduced to ~~repay outstanding balances under~~70% from 75%, and the ~~2003 Credit Facility~~Corporate Debt Yield, as defined, is required to be at least 9.50% until March 30, 2012, then at least 9.75% for the next year, and ~~2008 Term Loan. At closing, the $520.0 million 2010 Term Loan was fully outstanding and $70.0 million was outstanding under the Revolving Facility.~~

~~Amounts~~at least 10.00% after March 31, 2013. The maximum amount that may be borrowed under the 2010 Credit Facility bear interest at a rate between 4.00% and 4.90% per annum, depending on our leverage, in excess of LIBOR, with no floor. The initial rate in effect was 4.90% per annum in excess of LIBOR. In determining our leverage (the ratio of Total Liabilities to Gross Asset Value), the capitalization rate used to calculate Gross Asset Value is 8.00%. The unused portion of the Revolving Facility is subject to a ~~fee~~minimum facility debt yield of ~~0.40% per annum.~~

~~We have entered into interest rate swap agreements to effectively fix $100.0 million of~~9.75%, based on the underlying LIBOR associated with the 2010 Term Loan at a weighted-average rate of 1.77% for the three-year initial term. An additional $200.0 million of the underlying LIBOR was swapped to a fixed rate at a rate of 0.61% for year one, 1.78% for year two and 2.96% for the balance of the initial term. Additionally, $15.8 millionnet operating income of our ~~2010 Term Loan is subject~~collateral properties. The range of applicable stated interest rates may be further reduced at our option to abetween 2.00% and 3.00% per annum over LIBOR, ~~cap with a strike rate~~we will have an option to extend the maturity date of ~~2.50%. This LIBOR cap will expire in March 2012.~~

The obligations under Term Loan A are secured by first priority mortgages on 18 of our properties and a second lien on one property, and the obligations under Term Loan B are secured by first priority leasehold mortgages on the properties ground leased by GLP and KPP (the “Gallery Properties”). The foregoing properties constitute substantially all of our previously unencumbered retail properties.

~~We and certain of our subsidiaries that are not otherwise prevented from doing so serve as guarantors for funds borrowed under the 2010 Credit Facility.~~

~~The aggregate amount of the lender Revolving Commitments and 2010 Term Loan under~~ the 2010 Credit Facility ~~was required~~by one year to March 10, 2015, and we may increase the maximum amount available under the Revolving Facility from $250.0 million to $350.0 million, if commitments can be ~~reduced by $33.0 million by March 11, 2011, by a cumulative total of $66.0 million by March 11, 2012~~obtained, and ~~by a cumulative total of $100.0 million by March 11, 2013 (if we exercise our right~~provided that the minimum facility debt yield will be increased to ~~extend the Termination Date)~~11.00%, ~~including all payments (except payments pertaining~~under specified conditions and subject to certain financial covenants.

In addition to the Release Price of a Collateral Property) resulting in permanent reduction of the aggregate amount of the Revolving Commitments and 2010 Term Loan. We used $160.6 million of the proceeds from our May 2010 equity offering to repay borrowings undercovenants described above, the 2010 Credit Facility ~~satisfying~~contains affirmative and negative covenants of the type customarily found in credit facilities of this nature. As of June 30, 2011, we were in compliance with all ~~three~~ of these ~~paydown requirements, and no mandatory paydown provisions remain in effect.~~

In September 2010, in connection with our sale of five power centers, $57.4 million of the sale proceeds were used for payment of the release prices of two of the properties that secured a portion of the 2010 Credit Facility. Also, $10.0 million of the sale proceeds were used to repay borrowings under our Revolving Facility, and

~~$8.9 million of the sale proceeds were used to repay borrowings under the 2010 Term Loan. The repayments were made in accordance with the terms of the 2010 Credit Facility.~~covenants.

As of ~~September~~June 30, ~~2010, there were no amounts~~2011, $70.0 million was outstanding under ~~the~~our Revolving Facility. We pledged ~~$1.5~~$0.6 million ~~under the Revolving Facility~~ as collateral for letters of credit, and the unused portion ~~of the Revolving Facility~~ that was available to us was ~~$148.5~~$179.4 million at ~~September~~June 30, ~~2010.~~ 2011. In July 2011, we repaid $25.0 million of the outstanding amount under the Revolving Facility. After this paydown, the outstanding amount under the Revolving Facility was $45.0 million, $0.6 million was pledged as collateral for letters of credit and the unused portion that was available to us was $204.4 million.

As of ~~September~~June 30, ~~2010, $347.2~~2011, $240.0 million was outstanding under the 2010 Term Loan. The weighted average effective interest ~~rate~~rates based on amounts borrowed under the 2010 Term Loan ~~including the impact of deferred financing fee amortization, from March 11, 2010 to September 30, 2010 was 6.52%.~~

The 2010 Credit Facility contains provisions regarding the application of proceeds from a Capital Event. A Capital Event is any event by which we raise additional capital, whether through an asset sale, joint venture, additional secured or unsecured debt, issuance of equity, or from excess proceeds after payment of a Release Price. Capital Events do not include Refinance Events or other specified events. After payment of interest and required distributions, the Remaining Capital Event Proceeds will generally be applied in the following order:

The 2010 Credit Facility also contains provisions regarding the application of proceeds from a Refinance Event. A Refinance Event is any event by which we raise additional capital from refinancing of secured debt encumbering an existing asset, not including collateral for the 2010 Credit Facility. The proceeds in excess of the amount required to retire an existing secured debt will be applied, after payment of interest, to pay down the Revolving Facility, or if the Revolving Facility balance is or would become $0 as a result of such payment, to pay down the Revolving Facility in fullthree and ~~to use any remainder for general corporate purposes. Remaining proceeds from a Capital Event or Refinancing Event relating to the Gallery Properties may only be used to pay down~~six months ended June 30, 2011 were 5.85% and permanently reduce Term Loan B (or, if the outstanding balance on Term Loan B is or would become $0 as a result of such payment, to pay down Term Loan B in full and to pay any remainder in accordance with the preceding paragraph).

A Collateral Property will be released as security upon a sale or refinancing, subject to payment of the Release Price and the absence of any default or Event of Default. If, after release of a Collateral Property (and giving pro forma effect thereto)5.89%, ~~the Facility Debt Yield will be less than 11.00%, the Release Price will be the Minimum Release Price plus an amount equal to the lesser of (A) the amount that, when paid and applied~~respectively. Interest expense related to the 2010 Term Loan ~~would result in a Facility Debt Yield equal to 11.00%~~was $5.6 million and (B) the amount by which the greater of (1) 100.0% of net cash proceeds and (2) 90.0% of the gross sales proceeds exceeds the Minimum Release Price. The Minimum Release Price is 110% (120% if, after the Release, there will be fewer than 10 Collateral Properties) multiplied by the proportion that the value of the property to be released bears to the aggregate value of all of the Collateral Properties on the closing date of the 2010 Credit Facility, multiplied by the amount of the then Revolving

Commitments plus the aggregate principal amount then outstanding under the 2010 Term Loan. In general, upon release of a Collateral Property, the post-release Facility Debt Yield must be greater than or equal to the pre-release Facility Debt Yield. Release payments must be used to pay down and permanently reduce the amount of the Term Loan.

The 2010 Credit Facility contains affirmative and negative covenants customarily found in facilities of this type, including, without limitation, requirements that we maintain, on a consolidated basis: (1) minimum Tangible Net Worth of not less than $483.1$6.5 million, minus non-cash impairment charges with respect to the Properties recorded in the quarter ended December 31, 2009, plus 75% of the Net Proceeds of all Equity Issuances effected at any time after September 30, 2009; (2) maximum ratio of Total Liabilities to Gross Asset Value of 0.75:1; (3) minimum ratio of EBITDA to Interest Expense of 1.60:1; (4) minimum ratio of Adjusted EBITDA to Fixed Charges of 1.35:1; (5) maximum Investments in unimproved real estate and predevelopment costs not in excess of 3.0% of Gross Asset Value; (6) maximum Investments in Persons other than Subsidiaries, Consolidated Affiliates and Unconsolidated Affiliates not in excess of 1.0% of Gross Asset Value; (7) maximum Investments in Indebtedness secured by Mortgages in favor of the Company, the Borrower or any other Subsidiary not in excess of 1.0% of Gross Asset Value on the basis of cost; (8) the aggregate value of the Investments and the other items subject to the preceding clauses (5) through (7) shall not exceed 5.0% of Gross Asset Value; (9) maximum Investments in Consolidation Exempt Entities not in excess of 20.0% of Gross Asset Value; (10) a maximum Gross Asset Value attributable to any one Property not in excess of 15.0% of Gross Asset Value; (11) maximum Projects Under Development not in excess of 10.0% of Gross Asset Value; (12) maximum Floating Rate Indebtedness in an aggregate outstanding principal amount not in excess of one-third of all Indebtedness of the Company, its Subsidiaries, its Consolidated Affiliates and its Unconsolidated Affiliates; (13) minimum Corporate Debt Yield of 9.50%, provided that such Corporate Debt Yield may be less than 9.50% for one period of two consecutive fiscal quarters, but may not be less than 9.25%; and (14) Distributions may not exceed 110% of REIT taxable income for a fiscal year, but if the Corporate Debt Yield exceeds 10.00%, then the aggregate amount of Distributions may not exceed the greater of 75% of FFO and 110% of REIT Taxable Income (unless necessaryrespectively, for the ~~Company to retain its status as a REIT),~~three months ended June 30, 2011 and ~~if a Facility Debt Yield~~2010, and $10.7 million and $8.3 million, respectively, for the six months ended June 30, 2011 and 2010, excluding non-cash amortization of 11.00% and a Corporate Debt Yield of 10.00% are achieved and continuing, there are no limits on Distributions under the 2010 Credit Facility, so long as no Default or Event of Default would result from making such Distributions. We are required to maintain our status as a REIT at all times. As of September 30, 2010, we were in compliance with all of these covenants.deferred financing fees.

We may prepay any future borrowings under the Revolving Facility at any time without premium or penalty. We must repay the entire principal amount outstanding under the 2010 Credit 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~~Deferred financing fee amortization associated with the 2010 Credit Facility ~~immediately due~~for the three months ended June 30, 2011 and ~~payable,~~2010 was $1.0 million and ~~the Commitments of the lenders to make further loans under~~$3.4 million, respectively. Deferred financing fee amortization associated with the 2010 Credit Facility ~~will terminate. Upon~~for the ~~occurrence~~six months ended June 30, 2011 and 2010 was $1.9 million and $3.7 million, respectively.

As of ~~a voluntary or involuntary bankruptcy proceeding~~June 30, 2011 and December 31, 2010, $136.9 million in aggregate principal amount of our 4.0% Senior Exchangeable Notes due 2012 (the “Exchangeable Notes”) remained outstanding, excluding debt discount of $1.8 million and $2.8 million, respectively.

Interest expense related to our Exchangeable Notes for each of the ~~Company, PREIT Associates, PRI, any owner~~three months ended June 30, 2011 and 2010 was $1.4 million, excluding the non-cash amortization of ~~a Collateral Property or any Material Subsidiary, all outstanding amounts will automatically become immediately due and payable~~debt discount of $0.5 million and the ~~Commitments~~non-cash amortization of deferred financing fees of $0.2 million. Interest expense was $2.7 million for each of the ~~lenders to make further loans will automatically terminate.~~

six months ended June 30, 2011 and 2010 excluding the non-cash amortization of debt discount of $1.0 million and $0.9 million, respectively, and the non-cash amortization of deferred financing fees of $0.4 million and $0.3 million for the six months ended June 30, 2011 and June 30, 2010, respectively. The ~~following table presents the mortgage loans we, or partnerships in which we own interests, entered into or under which we borrowed additional amounts since January 1, 2010:~~

⁽²⁾

The mortgage loan has a three year term and one one-year extension option. $25.0 million of the principal amount has been swapped to a fixed interest rate of 6.33%. Through September 2010, we made aggregate principal payments of $2.0 million. The mortgage loan had a balance of $28.1 million as of September 30, 2010.

⁽³⁾	The mortgage loan agreement initially entered into in June 2009 provides for a maximum loan amount of $38.0 million. 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.

⁽⁴⁾	~~The mortgage loan has an initial term of five years and can be extended for an additional five-year term under prescribed conditions.~~

⁽⁵⁾	~~Our interest in the unconsolidated partnership is 50%.~~

⁽⁶⁾	In connection with the new mortgage loan financing, the unconsolidated partnership repaid a $150.0 million mortgage loan secured by Lehigh Valley Mall using proceeds from the new mortgage loan and available working capital.

⁽⁷⁾	~~In connection with the new mortgage loan financing, we repaid a $33.8 million mortgage loan using proceeds from the new mortgage loan and available working capital.~~

In January 2010, the unconsolidated partnership that owns Springfield Park in Springfield, Pennsylvania repaid a mortgage loan with a balance of $2.8 million. Our share of the mortgage loan payment was $1.4 million. In April 2010, the unconsolidated partnerships that own Springfield Park and Springfield East, in Springfield, Pennsylvania, entered into a $10.0 million mortgage loan that is secured by Springfield Park and Springfield East. We own a 50% interest in both entities. The mortgage loan hasExchangeable Notes have an ~~initial term of five years and can be extended for an additional five-year term under prescribed conditions. The mortgage loan bears interest at LIBOR plus 2.80%, and has been swapped to a fixed~~effective interest rate of ~~5.39%~~5.90%.

In June 2010, the unconsolidated partnership that owns Lehigh Valley Mall in Allentown, Pennsylvania entered into a $140.0 million mortgage loan that is secured by Lehigh Valley Mall. We own a 50% interest in the unconsolidated partnership. The mortgage loan has a term of 10 years and bears interest at a fixed interest rate of 5.88%. In connection with the new mortgage loan financing, the unconsolidated partnership repaid the previous $150.0 million mortgage loan on Lehigh Valley Mall using proceeds from the new mortgage loan and available working capital.

In July 2010, we made a principal payment of $0.7 million and exercised the second of two one-year extension options on the mortgage loan on the One Cherry Hill office building in Cherry Hill, New Jersey. The mortgage loan had a balance of $4.9 million as of September 30, 2010.

In September 2010, in connection with the sale of five power centers, we repaid the mortgage loans secured by Creekview Center, New River Valley Center and Pitney Road Plaza, which had principal balances of $19.4 million, $15.8 million and $4.5 million, respectively.

As of ~~September~~June 30, ~~2010,~~2011, we had entered into 1110 interest rate swap agreements and one interest rate cap agreement ~~and two forward starting~~that have a weighted average interest rate ~~swap agreements~~of 2.65% (excluding the spread on the related debt) on a notional amount of ~~$732.6~~$687.5 million maturing on various dates through November ~~2013. Five~~2013, and one forward starting interest rate swap ~~agreements~~agreement that ~~were outstanding as~~has an interest rate of ~~December 31, 2009 were settled~~2.96% (excluding the spread on the related debt) on a notional amount of $200.0 million maturing in ~~the nine months ended September 30, 2010.~~

We entered into these interest rate ~~derivatives~~swap agreements (including the forward starting swap agreements) and cap agreement in order to hedge the interest payments associated with our ~~2010 Credit Facility and our issuances of variable interest rate long-term~~LIBOR based debt. We have assessed the effectiveness of these ~~swaps~~interest rate swap agreements and cap agreement as hedges at inception and on ~~September~~a quarterly basis. On June 30, ~~2010 and~~2011, we considered these ~~swaps~~interest rate swap agreements and the cap agreement to be highly effective as cash flow hedges. ~~Our~~The interest rate ~~swaps~~swap agreements and cap agreement are net settled monthly.

As of ~~September~~June 30, ~~2010,~~2011, the aggregate estimated unrealized net loss attributed to these interest rate derivatives was ~~$33.3~~$25.5 million. The carrying amount of the derivative assets is reflected in “Deferred costs and other assets,” the associated ~~instruments~~liabilities are reflected in ~~“Fair value of derivative instruments”~~“Accrued expenses and other liabilities” and the net unrealized loss is reflected in “Accumulated other comprehensive loss” in the accompanying balance sheets.

As of June 30, 2011, 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 $25.5 million. If we had breached any of the default provisions in these agreements as of June 30, 2011, we might have been required to settle our obligations under the agreements at their termination value (including accrued interest) of $28.2 million. We had not breached any of the provisions as of June 30, 2011.

In June 2011, the unconsolidated partnership that owns Red Rose Commons in Lancaster, Pennsylvania entered into a new $29.9 million, 10 year mortgage loan with a fixed interest rate of 5.14% to replace the prior mortgage on the property that had a balance of $24.2 million. After the repayment of the prior mortgage, the partnership distributed to proceeds of $2.1 million. Our interest in the unconsolidated partnership is 50%.

In June 2011, the unconsolidated partnership that owns The Court at Oxford Valley in Langhorne, Pennsylvania entered into a new $60.0 million, 10 year mortgage loan with a fixed interest rate of 5.56% to replace the prior mortgage on the property that had a balance of $32.0 million. After the repayment of the prior mortgage, the partnership distributed to us excess proceeds of $12.8 million. Our interest in the unconsolidated partnership is 50%.

In June 2011, we exercised the first of two one-year extension options on the $45.0 million mortgage loan secured by Christiana Center in Newark, Delaware. In connection with the extension, we now pay principal and interest on the mortgage loan based on a 25 year term.

In June 2011, in connection with the amendment of the 2010 Credit Facility, the lenders released the second mortgage on New River Valley Mall in Christiansburg, Virginia, and that property is no longer one of the collateral properties securing the 2010 Credit Facility.

In July 2011, we exercised the first of two one-year extension options on the $54.0 million interest only mortgage loan secured by Paxton Towne Centre in Harrisburg, Pennsylvania.

Twenty-six mortgage loans, which are secured by 24 of our consolidated properties, are due in installments over various terms extending to the year 2020. Seventeen of the mortgage loans bear interest at a fixed rate, ~~seven~~six of the mortgage loans bear interest at variable rates that have been swapped to a fixed ~~rate, one~~rates, two mortgage ~~loan bears~~loans bear interest at a variable rate, and the interest rate on one mortgage loan has been partially swapped to a fixed rate and partially bears interest at a variable rate.

The fixed ~~rate~~ mortgage loan balances, including mortgage loans that have variable interest rates based on LIBOR, the interest payments on which have been swapped to a fixed interest ~~rate,~~rates, have interest rates that range from 4.95% to 7.61% and had a weighted average interest rate of 5.81% at ~~September~~June 30, ~~2010.~~2011. The variable rate mortgage loans ~~have~~had a weighted average interest rate of ~~2.81%.~~2.57% (excluding the spread on the related debt) at June 30, 2011. The weighted average interest rate of all consolidated mortgage loans was ~~5.80%~~5.72% at ~~September~~June 30, ~~2010.~~2011. Mortgage loans for ~~properties owned by~~our unconsolidated ~~partnerships~~properties 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.

The following table outlines the timing of principal payments ~~pursuant to the terms of~~related to our mortgage loans as of ~~September~~June 30, ~~2010.~~2011.

The following table presents our aggregate contractual obligations as of ~~September~~June 30, ~~2010~~2011 for the periods presented.

~~LIBOR associated with~~specific mortgage loan, or, to the ~~term loans~~extent that we are unable to obtain mortgages for these properties on terms that are satisfactory to us, or at ~~a rate of 1.77% for~~all, we expect to utilize the ~~three-year initial term. An additional $200.0 million of~~Revolving Facility to repay the underlying LIBOR was swapped to a fixed rate at a rate of 0.61% for year one, 1.78% for year two and 2.96% for the balance of the initial term. Additionally, $15.8 million of our 2010 Term Loan is subject to a LIBOR cap with a strike rate of 2.50%. This LIBOR cap will expire in March 2012.amounts outstanding under such mortgages.

⁽²⁾	The Exchangeable Notes are due in the second quarter of 2012. We currently anticipate that the sources of funds for repayment might include excess proceeds of mortgage loan refinancings, property sales, the Revolving Facility, or other sources.

⁽³⁾	The 2010 Credit Facility, which is comprised of the 2010 Term Loan and the Revolving Facility, has a variable interest rate that ranges between 2.75% and 4.00% plus LIBOR depending on our total leverage ratio.

⁽⁴⁾	Includes payments expected to be made in connection with interest rate swaps, caps and forward starting interest rate swap agreements.

⁽⁵⁾

The timing of the payments of these amounts is uncertain. We ~~estimate~~expect that substantially all of such payments will be made ~~in the upcoming year,~~prior to December 31, 2011, but ~~situations could arise~~cannot provide any assurances that changed circumstances at these ~~development and redevelopment~~ projects ~~that could~~will not delay the settlement of these obligations.

Net cash provided by operating activities totaled ~~$81.6~~$51.8 million for the ~~nine~~six months ended ~~September~~June 30, ~~2010~~2011 compared to ~~$97.0~~$62.1 million for the ~~nine~~six months ended ~~September~~June 30, ~~2009. The~~2010. This decrease in cash from operating activities ~~in the nine months ended September 30, 2010 compared~~was primarily due to ~~the nine months ended September 30, 2009 is partially attributed to the sale of two operating properties in 2009 (which had contributed $3.3 million in~~decreased net operating income as the result of a $1.5 million decrease in lease termination revenue, increased common area maintenance expenses and real estate taxes, and the ~~first nine months~~disposition of ~~2009) and a $6.3 million increase~~five power centers in ~~cash paid for interest expense.~~September 2010.

Cash flows provided by investing activities were ~~$103.6~~$0.1 million for the ~~nine~~six months ended ~~September~~June 30, ~~2010~~2011 compared to cash flows used ~~for~~in investing activities of ~~$116.3~~$15.1 million for the ~~nine~~six months ended ~~September~~June 30, ~~2009.~~2010. Investing activities for ~~2010~~the six months ended June 30, 2011 reflect ~~cash proceeds from the sale of five power centers of $134.7 million,~~ investment in construction in progress of ~~$19.4~~$5.0 million and real estate improvements of ~~$18.4~~$17.3 million, primarily relating to our ongoing maintenance of our properties and $7.3 million of proceeds from sales of real estate. Investing activities also reflect $14.9 million in proceeds related to mortgage loans at two of our unconsolidated properties. Investing activities for the six months ended June 30, 2010 reflect

investment in construction in progress of $12.9 million and real estate improvements of $7.2 million, which primarily relate to our development and redevelopment activities, and ongoing maintenance of our properties. Investing activities also reflect $6.1 million paid relating to construction activities and one mortgage loan repayment at our unconsolidated properties. Cash flows used in investing activities also reflects the receipt ofoffset by a $10.0 million ~~from the repayment of the note~~decrease in notes receivable from Boscov’s, Inc. Cash flows from investing activities for the nine months ended September 30, 2009 reflects investment in construction in progress of $122.1 million, and real estate improvements of $16.7 million.tenants.

Cash flows used in financing activities were ~~$215.7~~$70.0 million for the ~~nine~~six months ended ~~September~~June 30, ~~2010~~2011 compared to cash flows ~~provided by~~used in financing activities of ~~$99.8~~$92.0 million for the ~~nine~~six months ended ~~September~~June 30, ~~2009. In March~~2010. Cash flows used in financing activities for the six months ended June 30, 2011 included dividends and distributions of $17.4 million and principal installments on mortgage loans of $10.3 million. Cash flows used in financing activities also reflect a $30.0 million paydown of the Revolving Facility and a $7.2 million paydown of the 2010 weTerm Loan. Cash flows used in financing activities for the six months ended June 30, 2010 reflected the refinancing of our 2003 Credit Facility and 2008 Term Loan. We replaced the $486.0 million outstanding on the 2003 Credit Facility and the $170.0 million 2008 Term Loan with $590.0 million in proceeds from the 2010 Credit Facility. We paid ~~$16.2~~$15.7 million in deferred financing costs in the ~~nine~~six months ended ~~September~~June 30, 2010, primarily relating to the 2010 Credit Facility. In May 2010, we raised $160.6 million in an equity offering. These proceeds were used for a $106.5 million paydown of the 2010 Term Loan and a $54.2 million repayment of the Revolving Facility. We used the proceeds from the sale of five power center properties in September 2010 to pay down the 2010 Term Loan and Revolving Facility by an additional $66.3 million (including $57.4 million that was paid for the release of two properties that secured a portion of our 2010 Credit Facility) and $10.0 million, respectively, and to repay $39.7 million of mortgage loan debt, secured by three of the properties sold.this refinancing. We also received ~~$62.0~~$32.5 million in proceeds from ~~new~~a $30.0 million mortgage ~~loans,~~loan on New River Valley Mall and an additional $2.5 million draw ~~from the existing mortgage loan~~ on ~~Lycoming Mall. We repaid~~ the mortgage loan ~~secured by Valley View~~at Lycoming Mall ~~which had a principal balance of $33.8 million. Cash flows from financing activities for~~in the ~~nine~~six months ended ~~September~~June 30, ~~2010 were also affected by dividends and distributions of $24.3 million and principal installments on mortgage loans of $15.7 million.~~2010.

~~At September 30, 2010, we had $9.0 million of unaccrued contractual obligations to complete current~~In connection with our redevelopment ~~projects~~project and capital improvements at certain other ~~properties. Total~~properties, we have made contractual and other commitments in the form of tenant allowances, lease termination fees and contracts with general contractors and other professional service providers. As of June 30, 2011, the unaccrued remainder to be paid against these contractual and other commitments was $10.9 million, which is expected to be financed through our Revolving Facility, operating cash flows or through various other capital sources. The projects on which these commitments have been made have total expected remaining costs ~~for the particular projects with such commitments are $44.8~~of $84.6 million. We expect to finance these amounts through borrowings under the ~~Revolving~~2010 Credit Facility ~~operating cash flows~~ or through various other capital sources. See “—Liquidity and Capital Resources—Capital Resources.”

We are aware of certain environmental matters at some of our properties, including ground water contamination and the presence of asbestos containing materials. We have, in the past, performed remediation of 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. ~~Subject to certain exclusions, we~~We have ~~environmental liability~~ insurance coverage ~~which currently covers liability~~ for ~~pollution and on-site remediation of~~certain environmental claims up to $10.0 million per occurrence and up to $20.0 million in the aggregate. ~~There can be no assurance that this coverage will be adequate to cover future environmental liabilities. If this environmental coverage were inadequate, we would~~

~~be obligated to fund those liabilities. We might be unable to continue to obtain insurance for environmental matters, at a reasonable cost or at all, in the future.~~

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 centers, power 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 store tenants. We also compete to acquire land for new site development, during more favorable economic conditions. Our malls and our strip and power 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. 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. Our tenants face competition from companies at the same and other properties and from other retail formats as well.

The development of competing retail properties and the related increased competition for tenants might 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 occupancy and net operating income of such properties. Any such capital improvements, undertaken individually or collectively, would be subject to the terms and conditions of the 2010 Credit Facility and 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, including institutional pension funds, other REITs and other

~~Many of our~~ Our efforts to compete are also subject to the terms and conditions of our 2010 Credit Facility. Given current economic, capital market and retail industry conditions, however, there has been substantially less competition with respect to acquisition activity in recent quarters. When we seek to make acquisitions, these 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, 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 long-term 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. These tenants ~~have, and in the future~~ might defer or fail to make rental payments when due, delay or defer lease commencement, voluntarily vacate the premises or declare bankruptcy, which ~~has resulted, and in the future~~ could result in the termination of the tenant’s lease, 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 of those tenants might be more significant to us than the bankruptcy of other tenants. In addition, under many of our leases, our tenants pay rent based on a percentage of their sales. Accordingly, declines in these tenants’ sales directly ~~and negatively~~ affect our results of operations. Also, if tenants are unable to comply with the terms of their leases, we ~~have modified, and~~ might ~~in the future~~ modify lease terms in ways that are less favorable to us.

In February 2011, Borders Group, Inc. (“Borders”) filed for bankruptcy protection. At that time, we had 11 stores operated by Borders in our portfolio, three of which closed prior to June 30, 2011, including one store that had a lease expiration in March 2011. In July 2011, Borders determined to liquidate operations, and as a result of this action, the eight remaining stores operated by Borders in our portfolio will close during 2011. In connection with the planned liquidation, in the three months ended June 30, 2011, we recorded write-offs of $0.6 million of straight line rent, net of reserves, and $1.0 million of tenant allowances. We expect that the liquidation of Borders and subsequent closures of the remaining stores in our portfolio will result in the loss of approximately $2.0 million in annual rental revenue from those stores.

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 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 ~~there is~~ a higher ~~concentration~~number of tenants ~~vacating~~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. Our concentration in the retail sector increases our exposure to seasonality and is expected to continue to result in a greater percentage of our cash flows being received in the fourth quarter.

Inflation can have many effects on ~~our~~ financial performance. Retail property leases often provide for the payment of rent based on a percentage of sales, which may increase with inflation. Leases may also provide for tenants to bear all or a portion of operating expenses, which may 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, ~~as we have in recent periods,~~ we might bear more costs if such expenses increase because of inflation.

This Quarterly Report on Form 10-Q for the quarter ended ~~September~~June 30, ~~2010,~~2011, 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. 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 our high leverage ratio;

constraining leverage, interest and tangible net worth covenants under our 2010 Credit ~~Facility, as well as capital application provisions;~~Facility;

our ability to refinance our existing indebtedness when it ~~matures;~~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 through other actions;

our short- and long-term liquidity position;

the effects on us of dislocations and liquidity disruptions in the capital and credit markets;

~~the~~ current economic ~~downturn~~conditions and ~~its~~their effect on employment, consumer confidence and ~~consumer spending,~~spending; tenant business performance, prospects, solvency and leasing ~~decisions~~decisions; and the value and potential impairment of our properties;

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

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

our ability to maintain and increase property occupancy, sales and rental rates, including at our ~~recently~~ redeveloped properties;

risks relating to development and redevelopment activities;

changes in the retail industry, including consolidation and store closings;

~~general economic, financial~~the effects of online shopping and ~~political conditions, including credit market conditions, changes in interest rates or unemployment;~~other uses of technology on our retail tenants;

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;

potential dilution from any capital raising transactions;

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 in ~~the section entitled “Item 1A. Risk Factors” in~~ our Annual Report on Form 10-K for the year ended December 31, ~~2009.~~2010 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.

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, ~~2010,~~2011, our consolidated debt portfolio consisted primarily of ~~$347.2~~$240.0 million borrowed under our 2010 Term Loan, which bore interest at a ~~weighed~~weighted average interest rate of ~~5.62%~~5.78%, $70.0 million borrowed under our Revolving Facility, which bore interest at ~~September 30, 2010,~~a rate of 5.55%, $136.9 million of Exchangeable Notes, which bear interest at 4.00%, excluding debt discount of ~~$3.3~~$1.8 million, and ~~$1,749.6~~$1,733.4 million in fixed and variable rate mortgage loans, including ~~$1.9~~$1.0 million of mortgage debt premium.

Twenty-six mortgage loans, which are secured by 24 of our consolidated properties, are due in installments over various terms extending to the year 2020. Seventeen of the mortgage loans bear interest at a fixed rate, ~~seven~~six of the mortgage loans bear interest at variable rates that have been swapped to a fixed ~~rate, one~~rates, two mortgage ~~loan bears~~loans bear interest at a variable ~~interest~~ rate, and one mortgage loan has been partially swapped to a fixed rate and partially bears interest at a variable rate.

The fixed ~~interest rate~~ mortgage loan balances, including mortgage loans that have variable interest rates based on LIBOR, the interest payments on which have been swapped to a fixed interest ~~rate,~~rates, have interest rates that range from 4.95% to 7.61% and had a weighted average interest rate of 5.81%. at June 30, 2011. The variable rate mortgage loans ~~have~~had a weighted average interest rate of ~~2.81%.~~2.57% (excluding the spread on the related debt) at June 30, 2011. The weighted average interest rate of all consolidated mortgage loans was ~~5.80%~~5.72% at ~~September~~June 30, ~~2010.~~2011. Mortgage loans for ~~properties owned by~~our unconsolidated ~~partnerships~~properties 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.

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

Changes in market interest rates have different effects on the fixed and variable 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 the fixed debt portfolio, which includes the effects of our interest rate ~~hedging~~swap agreements, assumes an immediate 100 basis point change in interest rates from their actual ~~September~~June 30, ~~2010~~2011 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 ~~$77.2~~$57.5 million at ~~September~~June 30, ~~2010.~~2011. A 100 basis point decrease in market interest rates would have resulted in an increase in our net financial instrument position of ~~$76.2~~$59.1 million at ~~September~~June 30, ~~2010.~~2011. Based on the variable rate debt included in our debt portfolio as of ~~September~~June 30, ~~2010,~~2011, a 100 basis point increase in interest rates would have resulted in an additional $0.6 million in interest annually. A 100 basis point decrease would have reduced interest incurred by $0.6 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 ~~were~~was issued directly. Conversely, if interest rates fall, the resulting costs would be expected to be higher. We 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 97 of the notes to our unaudited consolidated financial statements.

~~We have~~As of June 30, 2011, we had an aggregate ~~$732.6~~$687.5 million in notional amount of ~~current~~ swap ~~cap~~ agreements ~~and~~settling on various dates through November 2013. We also had an aggregate of $200.0 million in notional amount of forward starting interest rate swap agreements ~~that are expected to mature~~maturing on various dates through ~~November~~March 2013.

Because the information presented above includes only those exposures that existed as of ~~September~~June 30, ~~2010,~~2011, it does not consider changes, exposures or positions which 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,~~exist, our hedging strategies ~~at the time~~ and interest rates.

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, ~~2010,~~2011, 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.

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 are not expected to have a material adverse effect on our consolidated financial position or results of operations.

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, ~~2009.~~2010.

The following table shows the total number of shares that we acquired in the three months ended ~~September~~June 30, ~~2010~~2011 and the average price paid per share.

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		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)


			Page
PART I—FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited):

	Consolidated Balance Sheets – ~~September~~June 30, ~~2010~~2011 and December 31, ~~2009~~2010	1

	Consolidated Statements of Operations – Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2010~~2011 and ~~2009~~2010	2

	Consolidated Statements of Equity and Comprehensive Income – ~~Nine~~Six Months Ended ~~September~~June 30, ~~2010~~2011	4

	Consolidated Statements of Cash Flows – ~~Nine~~Six Months Ended ~~September~~June 30, ~~2010~~2011 and ~~2009~~2010	5

	Notes to Unaudited Consolidated Financial Statements	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2015

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4135

Item 4.	Controls and Procedures	4236

PART II—OTHER INFORMATION

Item 1.	Legal Proceedings	4236

Item 1A.	Risk Factors	4337

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4337

Item 3.	Not Applicable	—

Item 4.	Not Applicable	—

Item 5.	Not Applicable	—

Item 6.	Exhibits	4438

~~SIGNATURES~~ Signatures		4539


	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)	2010			2009			2010			2009			2011			2010			2011			2010
Loss from continuing operations	$	(23,259	)	$	(14,728	)	$	(66,532	)	$	(32,947	)	$	(19,011	)	$	(24,250	)	$	(33,930	)	$	(43,275	)
Noncontrolling interest in continuing operations		878			655			2,719			1,408			763			988			1,364			1,886
Dividends on unvested restricted shares		(174	)		(161	)		(441	)		(634	)		(144	)		(168	)		(262	)		(266	)

Loss from continuing operations used to calculate earnings per share—basic and diluted	$	(22,555	)	$	(14,234	)	$	(64,254	)	$	(32,173	)	$	(18,392	)	$	(23,430	)	$	(32,828	)	$	(41,655	)

Income from discontinued operations	$	19,587		$	4,609		$	20,708		$	7,087		$	—		$	600		$	—		$	1,121
Noncontrolling interest in discontinued operations		(791	)		(178	)		(791	)		(193	)		—			(24	)		—			(44	)

Income from discontinued operations used to calculate earnings per share—basic and diluted	$	18,976		$	4,431		$	19,917		$	6,894		$	—		$	576		$	—		$	1,077


Basic (loss) income per share
Loss from continuing operations	$	(0.42	)	$	(0.34	)	$	(1.30	)	$	(0.80	)	$	(0.34	)	$	(0.46	)	$	(0.60	)	$	(0.88	)
Income from discontinued operations		0.35			0.11			0.40			0.17			—			0.01			—			0.02

													$	(0.34	)	$	(0.45	)	$	(0.60	)	$	(0.86	)
	$	(0.07	)	$	(0.23	)	$	(0.90	)	$	(0.63	)

Diluted (loss) income per share
Loss from continuing operations	$	(0.42	)	$	(0.34	)	$	(1.30	)	$	(0.80	)	$	(0.34	)	$	(0.46	)	$	(0.60	)	$	(0.88	)
Income from discontinued operations		0.35			0.11			0.40			0.17			—			0.01			—			0.02

	$	(0.07	)	$	(0.23	)	$	(0.90	)	$	(0.63	)	$	(0.34	)	$	(0.45	)	$	(0.60	)	$	(0.86	)

(in thousands of shares)
Weighted average shares outstanding—basic		54,200			42,195			49,435			40,144			54,680			50,317			54,567			47,013
Effect of common share equivalents⁽¹⁾		—			—			—			—			—			—			—			—

Weighted average shares outstanding—diluted		54,200			42,195			49,435			40,144			54,680			50,317			54,567			47,013


(in thousands of dollars)	As of September 30, 2010			As of December 31, 2009
ASSETS:
Investments in real estate, at cost:
Retail properties	$	400,792		$	393,197
Construction in progress		2,232			3,602

Total investments in real estate		403,024			396,799
Accumulated depreciation		(127,908	)		(116,313	)

Net investments in real estate		275,116			280,486
Cash and cash equivalents		7,999			5,856
Deferred costs and other assets, net		22,126			21,254

Total assets		305,241			307,596

LIABILITIES AND PARTNERS’ DEFICIT:
Mortgage loans payable		360,036			365,565
Other liabilities		14,515			13,858

Total liabilities		374,551			379,423

Net deficit		(69,310	)		(71,827	)
Partners’ share		(35,902	)		(37,382	)

Company’s share		(33,408	)		(34,445	)
Excess investment⁽¹⁾		13,250			13,733
Advances		3,926			4,635

Net investments and advances	$	(16,232	)	$	(16,077	)

Investment in partnerships, at equity	$	27,661		$	32,694
Distributions in excess of partnership investments		(43,893	)		(48,771	)

Net investments and advances	$	(16,232	)	$	(16,077	)


(in thousands of dollars)	Three months ended June 30, 2010			Six months ended June 30, 2010
Real estate revenue	$	3,155		$	6,348
Expenses:
Operating expenses		(604	)		(1,374	)
Depreciation and amortization		(1,324	)		(2,601	)
Interest		(627	)		(1,252	)

Total expenses		(2,555	)		(5,227	)

Income from discontinued operations	$	600		$	1,121


~~Development Project~~	~~Invested as of~~ ~~September 30,~~ ~~2010~~
~~White Clay Point~~⁽¹⁾	$	~~43.7 million~~
~~Springhills~~⁽²⁾		~~34.0 million~~
~~Pavilion at Market East~~⁽³⁾		~~0.7 million~~

	$	~~78.4 million~~


	Occupancy as of September 30,
	Consolidated						Partnership⁽¹⁾
	2010			2009			2010			2009
Retail portfolio weighted average:
Total excluding anchors		84.4	%		83.4	%		93.1	%		87.4	%
Total including anchors		89.6	%		88.7	%		94.8	%		90.8	%
Enclosed malls weighted average:
Total excluding anchors		83.9	%		83.4	%		92.4	%		89.9	%
Total including anchors		89.3	%		88.7	%		94.0	%		92.0	%
Strip and power centers weighted average		96.8	%		86.8	%		95.3	%		90.1	%


	Three months ended September 30,						% Change 2009 to 2010				Nine months ended September 30,							% Change 2009 to 2010				Three months ended June 30,							% Change 2010 to 2011				Six months ended June 30,							% Change 2010 to 2011
(in thousands of dollars)	2010			2009						2010				2009				% Change 2009 to 2010			2011				2010				% Change 2010 to 2011			2011				2010				% Change 2010 to 2011
Revenue	$	112,655		$	109,567		% Change 2009 to 2010		3	%		$	333,411			$	327,728			2	%
Real estate revenue																						$	107,391			$	107,700			0%			$	216,953			$	219,430			(1%)
Interest and other income																							809				598			35%				1,727				1,326			30%
Operating expenses		(50,196	)		(47,833	)		5	%			(146,299	)			(139,002	)		5	%			(47,467	)			(47,446	)		0%				(96,560	)			(96,103	)		0%
Depreciation and amortization		(41,673	)		(40,240	)		4	%			(122,677	)			(117,951	)		4	%			(36,614	)			(40,274	)		(9%)				(71,124	)			(81,004	)		(12%)
General and administrative expenses, impairment of assets, abandoned project costs, income taxes and other		(9,516	)		(9,783	)		(3	)%			(29,273	)			(29,104	)		1	%
General and administrative expenses																							(10,433	)			(9,617	)		8%				(20,015	)			(19,303	)		4%
Project costs and other expenses																							(353	)			(161	)		119%				(497	)			(455	)		9%
Interest expense, net		(36,384	)		(32,961	)		10	%			(108,588	)			(97,774	)		11	%			(34,941	)			(37,998	)		(8%)				(68,554	)			(72,204	)		(5%)
Gain on extinguishment of debt		—			4,167			(100	)%			—				13,971			(100	)%
Gain on sales of real estate		—			—			—				—				1,654			(100	)%
Equity in income of partnerships		1,855			2,355			(21	)%			6,894				7,531			(8	)%			1,147				2,948			(61%)				2,690				5,038			(47%)
Gains on sales of real estate																							1,450				—			100%				1,450				—			100%
Income from discontinued operations		19,587			4,609			325	%			20,708				7,087			192	%			—				600			(100%)				—				1,121			(100%)

Net loss	$	(3,672	)	$	(10,119	)		(64	)%		$	(45,824	)		$	(25,860	)		77	%		$	(19,011	)		$	(23,650	)		(20%	)		$	(33,930	)		$	(42,154	)		(20%	)


	Occupancy⁽¹⁾ as of June 30,
	Consolidated Properties						Unconsolidated Properties						Combined⁽²⁾
	2011			2010			2011			2010			2011			2010
Retail portfolio weighted average:
Total excluding anchors		86.1	%		85.8	%		92.1	%		93.3	%		87.1	%		86.9	%
Total including anchors		90.3	%		90.2	%		94.1	%		94.9	%		90.8	%		90.8	%
Malls weighted average:
Total excluding anchors		85.8	%		85.4	%		94.1	%		93.4	%		86.3	%		85.9	%
Total including anchors		90.1	%		90.0	%		95.3	%		94.9	%		90.3	%		90.2	%
Strip and power centers weighted average		97.0	%		96.6	%		93.4	%		95.0	%		94.5	%		95.5	%


					Average Base Rent psf				Change in Base Rent psf						Annualized Tenant Improvements psf ⁽³⁾
	Number		GLA		Previous		New		Dollar			Percentage			Annualized Tenant Improvements psf ⁽³⁾
New Leases - Previously Leased Space:
1st Quarter⁽¹⁾		21		77,140	$	22.24	$	19.68	$	(2.56	)		(11.5	%)	$	1.39
2nd Quarter⁽²⁾		27		82,868		21.79		21.97		0.18			0.8	%		1.45

Total/Average		48		160,008	$	22.01	$	20.87	$	(1.14	)		(5.2	%)	$	1.42

New Leases - Previously Vacant Space:⁽⁴⁾
1st Quarter		20		86,463		N/A	$	16.86	$	16.86			N/A		$	2.05
2nd Quarter		39		110,003		N/A		18.38		18.38			N/A			3.40

Total/Average		59		196,466		N/A	$	17.71	$	17.71			N/A		$	2.81

Renewal:⁽⁵⁾
1st Quarter⁽¹⁾		81		310,673	$	22.22	$	22.23	$	0.01			0.0	%	$	0.09
2nd Quarter⁽²⁾		92		321,947		22.37		22.89		0.52			2.3	%		0.05

Total/Average		173		632,620	$	22.30	$	22.57	$	0.27			1.2	%	$	0.07

Anchor Renewal:
1st Quarter		5		367,162	$	2.73	$	2.73	$	—			0.0	%	$	—
2nd Quarter		4		436,916		2.40		2.40		—			0.0	%		—

Total/Average		9		804,078	$	2.55	$	2.55	$	—			0.0	%	$	—


	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)	2010			2009			% Change			2010			2009			% Change			2010			2009			% Change			2011			2010			% Change			2011			2010			% Change			2011			2010			% Change
Real estate revenue	$	118,572		$	117,161			1	%	$	3,684		$	5,013			(27	)%	$	122,256		$	122,174			—		$	116,166		$	116,971			(1	%)	$	470		$	3,681			(87	%)	$	116,636		$	120,652			(3	%)
Operating expenses		(52,605	)		(50,184	)		5	%		(1,139	)		(1,456	)		(22	)%		(53,744	)		(51,640	)		4	%		(49,884	)		(49,939	)		0	%		(465	)		(1,005	)		(54	%)		(50,349	)		(50,944	)		(1	%)

Net Operating Income	$	65,967		$	66,977			(2	)%	$	2,545		$	3,557			(28	)%	$	68,512		$	70,534			(3	)%	$	66,282		$	67,032			(1	%)	$	5		$	2,676			(100	%)	$	66,287		$	69,708			(5	%)


																												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)																												2011			2010			% Change			2011			2010			% Change			2011			2010			% Change
Real estate revenue																												$	234,543		$	237,412			(1	%)	$	954		$	7,401			(87	%)	$	235,497		$	244,813			(4	%)
Operating expenses																													(101,498	)		(101,335	)		0	%		(951	)		(2,141	)		(56	%)		(102,449	)		(103,476	)		(1	%)

Net Operating Income																												$	133,045		$	136,077			(2	%)	$	3		$	5,260			(100	%)	$	133,048		$	141,337			(6	%)


(in thousands of dollars)	Three months ended June 30, 2010			Six months ended June 30, 2010
Operating results of:
Creekview Center	$	(85	)	$	(182	)
Monroe Marketplace		292			540
New River Valley Center		67			123
Pitney Road Plaza		138			270
Sunrise Plaza		188			370

Income from discontinued operations	$	600		$	1,121


(in thousands, except per share amounts)	Three months ended June 30, 2011		Three Months Ended June 30, 2010
Funds from operations	$	18,999	$	19,672
Accelerated amortization of deferred financing costs		100		2,258
Impairment of assets		225		—

Funds from operations, as adjusted	$	19,324	$	21,930


Funds from operations per diluted share and OP Unit	$	0.33	$	0.37
Accelerated amortization of deferred financing costs		0.00		0.04
Impairment of assets		0.00		0.00

Funds from operations per diluted share and OP Unit, as adjusted	$	0.33	$	0.41


Weighted average number of shares outstanding		54,680		50,317
Weighted average effect of full conversion of OP Units		2,329		2,329
Effect of common share equivalents		851		587

Total weighted average shares outstanding, including OP Units		57,860		53,233


(in thousands, except per share amounts)	Six months ended June 30, 2011		Six months ended June 30, 2010
Funds from operations	$	40,308	$	45,196
Accelerated amortization of deferred financing costs		100		2,258
Impairment of assets		225		—

Funds from operations, as adjusted	$	40,633	$	47,454


Funds from operations per diluted share and OP Unit	$	0.70	$	0.91

Accelerated amortization of deferred financing costs		0.00		0.05
Impairment of assets		0.00		—

Funds from operations per diluted share and OP Unit, as adjusted	$	0.70	$	0.95


Weighted average number of shares outstanding		54,567		47,013
Weighted average effect of full conversion of OP Units		2,329		2,329
Effect of common share equivalents		922		349

Total weighted average shares outstanding, including OP Units		57,818		49,691


	Three months ended September 30,						Nine months ended September 30,						Three months ended June 30,						Six months ended June 30,
(in thousands of dollars)	2010			2009			2010			2009			2011			2010			2011			2010
Real estate revenue	$	18,519		$	18,210		$	56,593		$	55,400		$	18,604		$	19,596		$	37,312		$	37,748
Expenses:
Operating expenses		(5,665	)		(5,746	)		(17,722	)		(17,460	)		(5,795	)		(5,815	)		(11,841	)		(12,057	)
Interest expense		(5,162	)		(3,867	)		(12,105	)		(10,991	)		(5,750	)		(3,759	)		(11,337	)		(6,943	)
Depreciation and amortization		(3,947	)		(3,863	)		(11,884	)		(11,603	)		(4,625	)		(4,111	)		(8,470	)		(7,936	)

Total expenses		(14,774	)		(13,476	)		(41,711	)		(40,054	)		(16,170	)		(13,685	)		(31,648	)		(26,936	)

Net income		3,745			4,734			14,882			15,346			2,434			5,911			5,664			10,812
Less: Partners’ share		(1,859	)		(2,350	)		(7,401	)		(7,630	)		(1,204	)		(2,942	)		(2,807	)		(5,379	)

Company’s share		1,886			2,384			7,481			7,716			1,230			2,969			2,857			5,433
Amortization of excess investment		(31	)		(29	)		(587	)		(185	)		(83	)		(21	)		(167	)		(395	)

Equity in income of partnerships	$	1,855		$	2,355		$	6,894		$	7,531		$	1,147		$	2,948		$	2,690		$	5,038


(in thousands of dollars, except per share amounts)	Three months ended September 30, 2010			Per share (including OP Units)			Three months ended September 30, 2009			Per share (including OP Units)
Net loss	$	(3,672	)	$	(0.06	)	$	(10,119	)	$	(0.23	)
Gain on sale of discontinued operations		(19,151	)		(0.34	)		(3,398	)		(0.08	)
Depreciation and amortization:
Wholly owned and consolidated partnerships⁽¹⁾		41,331			0.72			39,758			0.90
Unconsolidated partnerships⁽¹⁾		2,020			0.04			1,983			0.04
Discontinued operations⁽¹⁾		1,306			0.02			1,567			0.04

Funds from operations⁽²⁾	$	21,834		$	0.38		$	29,791		$	0.67

Accelerated amortization of deferred financing costs		1,394			0.03			—			—
Gain on extinguishment of debt		—			—			(4,167	)		(0.09	)

Funds from operations as adjusted	$	23,228		$	0.41		$	25,622		$	0.58


(in thousands of shares)
Weighted average number of shares outstanding		54,200						42,195
Weighted average effect of full conversion of OP Units		2,329						2,329
Effect of common share equivalents		528						—

Total weighted average shares outstanding, including OP Units		57,057						44,524


	Three months ended June 30, 2011
(in thousands of dollars)	Consolidated			Share of unconsolidated partnerships			Discontinued operations		Total
Real estate revenue	$	107,391		$	9,245		$	—	$	116,636
Operating expenses		(47,467	)		(2,882	)		—		(50,349	)


Net operating income		59,924			6,363			—		66,287
General and administrative expenses		(10,433	)		—			—		(10,433	)

Interest and other income		809			—			—		809
Project costs and other expenses		(353	)		—			—		(353	)
Interest expense, net		(34,941	)		(2,858	)		—		(37,799	)
Gains on sales of non operating real estate		710			—			—		710
Depreciation on non real estate assets		(222	)		—			—		(222	)


Funds from operations		15,494			3,505			—		18,999
Gains on sales of real estate		740			—			—		740
Depreciation on real estate assets		(36,392	)		(2,358	)		—		(38,750	)
Equity in income of partnerships		1,147			(1,147	)		—		—

Net loss	$	(19,011	)	$	—		$	—	$	(19,011	)


(in thousands of dollars, except per share amounts)	Nine months ended September 30, 2010			Per share (including OP Units)			Nine months ended September 30, 2009			Per share (including OP Units)
Net loss	$	(45,824	)	$	(0.88	)	$	(25,860	)	$	(0.61	)
Gain on sale of interest in operating real estate		—			—			(923	)		(0.02	)
Gain on sale of discontinued operations		(19,151	)		(0.37	)		(3,398	)		(0.08	)
Depreciation and amortization:
Wholly owned and consolidated partnerships⁽¹⁾		121,518			2.33			116,312			2.75
Unconsolidated partnerships⁽¹⁾		6,581			0.13			6,056			0.14
Discontinued operations⁽¹⁾		3,907			0.07			4,732			0.11

Funds from operations⁽²⁾	$	67,031		$	1.28		$	96,919		$	2.29

Accelerated amortization of deferred financing costs		3,652			0.07			—			—
Impairment of assets		—			—			70			—
Gain on extinguishment of debt		—			—			(13,971	)		(0.33	)

Funds from operations as adjusted	$	70,683		$	1.35		$	83,018		$	1.96

(in thousands of shares)
Weighted average number of shares outstanding		49,435						40,144
Weighted average effect of full conversion of OP Units		2,329						2,248
Effect of common share equivalents		407						—

Total weighted average shares outstanding, including OP Units		52,171						42,392


	Six months ended June 30, 2010
(in thousands of dollars)	Consolidated			Share of unconsolidated partnerships			Discontinued operations			Total
Real estate revenue	$	219,430		$	19,035		$	6,348		$	244,813
Operating expenses		(96,103	)		(5,999	)		(1,374	)		(103,476	)


Net operating income		123,327			13,036			4,974			141,337
General and administrative expenses		(19,303	)		—			—			(19,303	)
Interest and other income		1,326			—			—			1,326
Project costs and other expenses		(455	)		—			—			(455	)
Interest expense, net		(72,204	)		(3,437	)		(1,252	)		(76,893	)
Depreciation on non real estate assets		(816	)		—			—			(816	)


Funds from operations		31,875			9,599			3,722			45,196
Depreciation on real estate assets		(80,188	)		(4,561	)		(2,601	)		(87,350	)
Equity in income of partnerships		5,038			(5,038	)		—			—
Income from discontinued operations		1,121			—			(1,121	)		—

Net loss	$	(42,154	)	$	—		$	—		$	(42,154	)


	Payments by Period										Payments by Period
(in thousands of dollars)	Total		2010		2011-2012		2013-2014		Thereafter		Total		2011		2012-2013		2014-2015		Thereafter
Principal payments	$	86,915	$	5,039	$	39,984	$	26,123	$	15,769	$	72,256	$	10,794	$	33,459	$	23,516	$	4,487
Balloon payments⁽¹⁾		1,660,848		—		463,556		529,975		667,317		1,660,107		58,918		834,668		369,879		396,642

Total	$	1,747,763	$	5,039	$	503,540	$	556,098	$	683,086	$	1,732,363	$	69,712	$	868,127	$	393,395	$	401,129


(in thousands of dollars)	Total		Remainder of 2010		2011-2012		2013-2014		Thereafter
Mortgage loans	$	1,747,763	$	5,039	$	503,540	$	556,098	$	683,086
Interest on mortgage loans		381,038		25,437		183,468		121,113		51,020
Exchangeable Notes		136,900		—		136,900		—		—
Interest on Exchangeable Notes		9,127		1,369		7,758		—		—
2010 Term Loan⁽¹⁾		347,200		—		—		347,200		—
Interest on 2010 Term Loan		57,430		5,039		46,177		6,214		—
Operating leases		7,855		580		4,211		3,060		4
Ground leases		52,698		247		1,845		1,460		49,146
Development and redevelopment commitments⁽²⁾		8,974		3,421		5,553		—		—

Total	$	2,748,985	$	41,132	$	889,452	$	1,035,145	$	783,256


(in thousands of dollars)	Total		Remainder of 2011		2012-2013		2014-2015		Thereafter
Mortgage loans⁽¹⁾	$	1,732,363	$	69,712	$	868,127	$	393,395	$	401,129
Exchangeable Notes⁽²⁾		136,900		—		136,900		—		—
2010 Term Loan⁽³⁾		240,000		—		—		240,000		—
Revolving Facility⁽³⁾		70,000		—		—		70,000		—
Interest on indebtedness⁽⁴⁾		370,643		61,397		200,487		85,040		23,719
Operating leases		6,628		1,154		4,021		1,450		3
Ground leases		50,492		470		1,463		1,368		47,191
Development and redevelopment commitments⁽⁵⁾		10,898		10,458		440		—		—

Total	$	2,617,924	$	143,191	$	1,211,438	$	791,253	$	472,042


	Fixed Rate Debt						Variable Rate Debt					Fixed Rate Debt						Variable Rate Debt
(in thousands of dollars) Year Ended December 31,	Principal Payments			Weighted Average Interest Rate			Principal Payments⁽¹⁾		Weighted Average Interest Rate⁽²⁾
2010	$	5,039			5.81	%	$	—		—	%
(in thousands of dollars) Year ending December 31,												Principal Payments			Weighted Average Interest Rate			Principal Payments			Weighted Average Interest Rate
2011		119,791			5.82	%		4,918		1.56	%	$	64,429			5.83	%	$	5,283			1.59	%⁽¹⁾
2012		515,731	⁽³⁾		5.45	%		—		—	%	$	515,731	⁽²⁾		5.45	%	$	44,635			2.55	%
2013		741,612	⁽⁴⁾		5.56	%		50,250		5.21	%	$	441,612			5.48	%	$	3,0500	⁽⁴⁾		4.75	%⁽¹⁾
2014		111,436			6.58	%		—		—	%	$	411,436	⁽³⁾		6.04	%	$	10,000	⁽³⁾		4.19	%
2015 and thereafter		683,086			5.66	%		—		—	%
2015												$	281,959			5.81	%		—			—
2016 and thereafter												$	401,128			5.65	%		—			—


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⁽¹⁾
July 1—July 31, 2010		649	$	12.60		—		—
August 1—August 31, 2010		—		—		—		—
September 1—September 30, 2010		—		—		—		—

Total		649	$	12.60		—	$	—


2.1*		~~Agreement of Purchase and Sale of Ownership Interest dated August 13, 2010, by and between PREIT Associates, L.P. and Cedar Shopping Centers Partnership, L.P.~~

10.1		Form of Annual Incentive Compensation Opportunity Award for Officers other than the ~~Chairman and Chief~~Named Executive ~~Officer.~~Officers.

10.2		Form of Annual Incentive Compensation Opportunity Award for the ~~Other Members~~Company’s Chief Executive Officer, the three other members of the Company’s Office of the Chair and the Chief Financial ~~Officer.~~Officer, filed as Exhibit 10.1 to the Current Report on Form 8-K dated July 26, 2011, is incorporated herein reference.

10.3		First Amendment dated June 29, 2011 to Amended, Restated and Consolidated Credit Agreement dated as of March 11, 2010 by and among PREIT Associates, L.P. and PREIT-RUBIN, Inc., PR Gallery I Limited Partnership and Keystone Philadelphia Properties, L.P., Pennsylvania Real Estate Investment Trust, and the financial institutions party thereto, filed as Exhibit 10.1 to the Current Report on Form ~~of Annual Incentive Compensation Opportunity Award for Executive Vice Presidents.~~8-K dated June 29, 2011, is incorporated herein reference.

~~10.4~~		~~Form of Annual Incentive Compensation Opportunity Award for Jonathen Bell, Senior Vice President.~~

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 June 30, 2011 is formatted in XBRL interactive data files: (i) Consolidated Statements of Operations for the three and six months ended June 30, 2011 and 2010; (ii) Consolidated Balance Sheets as of June 30, 2011 and December 31, 2010; (iii) Consolidated Statements of Equity and Comprehensive Income for the three and six months ended June 30, 2011 and 2010; (iv) Consolidated Statements of Cash Flows for the six months ended June 30, 2011 and 2010; and (v) Notes to Unaudited Consolidated Financial Statements.*


		PENNSYLVANIA REAL ESTATE INVESTMENT TRUST

Date: ~~November 8, 2010~~	August 1, 2011	By:	/s/ Ronald Rubin
			Ronald Rubin 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—Chief Accounting Officer (Principal Accounting Officer)


2.1*		~~Agreement of Purchase and Sale of Ownership Interest dated August 13, 2010, by and between PREIT Associates, L.P. and Cedar Shopping Centers Partnership, L.P.~~

~~10.1~~10.1*		Form of Annual Incentive Compensation Opportunity Award for Officers other than the ~~Chairman and Chief~~Named Executive ~~Officer.~~Officers.

~~10.2~~		~~Form of Annual Incentive Compensation Opportunity Award for the Other Members of the Office of the Chair and the Chief Financial Officer.~~

~~10.3~~		~~Form of Annual Incentive Compensation Opportunity Award for Executive Vice Presidents.~~

~~10.4~~		~~Form of Annual Incentive Compensation Opportunity Award for Jonathen Bell, Senior Vice President.~~

~~31.1~~ 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~~ 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~~ 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~~ 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 June 30, 2011 is formatted in XBRL interactive data files: (i) Consolidated Statements of Operations for the three and six months ended June 30, 2011 and 2010; (ii) Consolidated Balance Sheets as of June 30, 2011 and December 31, 2010; (iii) Consolidated Statements of Equity and Comprehensive Income for the three and six months ended June 30, 2011 and 2010; (iv) Consolidated Statements of Cash Flows for the six months ended June 30, 2011 and 2010; and (v) Notes to Unaudited Consolidated Financial Statements.

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