10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

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

For the quarterly period ended September 30, 2010

or

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

For the transition period from              to

Commission File Number: 1-6300

PENNSYLVANIA REAL ESTATE INVESTMENT TRUST

(Exact name of Registrant as specified in its charter)

Pennsylvania	23-6216339
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
200 South Broad Street Philadelphia, PA	19102
(Address of principal executive offices)	(Zip Code)

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

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

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  ¨    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.

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

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

PENNSYLVANIA REAL ESTATE INVESTMENT TRUST

CONTENTS

		Page
PART I—FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited):
	Consolidated Balance Sheets – September 30, 2010 and December 31, 2009		1
	Consolidated Statements of Operations – Three and Nine Months Ended September 30, 2010 and 2009		2
	Consolidated Statements of Equity and Comprehensive Income – Nine Months Ended September 30, 2010		4
	Consolidated Statements of Cash Flows – Nine Months Ended September 30, 2010 and 2009		5
	Notes to Unaudited Consolidated Financial Statements		6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		20
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		41
Item 4.	Controls and Procedures		42
PART II—OTHER INFORMATION
Item 1.	Legal Proceedings		42
Item 1A.	Risk Factors		43
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		43
Item 3.	Not Applicable
Item 4.	Not Applicable
Item 5.	Not Applicable
Item 6.	Exhibits		44
SIGNATURES			45

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.

PENNSYLVANIA REAL ESTATE INVESTMENT TRUST

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(in thousands of dollars, except share and per share amounts)	September 30, 2010			December 31, 2009
ASSETS:
INVESTMENTS IN REAL ESTATE, at cost:
Operating properties	$	3,404,454		$	3,459,745
Construction in progress		157,885			215,231
Land held for development		17,021			9,337
Total investments in real estate		3,579,360			3,684,313
Accumulated depreciation		(707,963	)		(623,309	)
Net investments in real estate		2,871,397			3,061,004
INVESTMENTS IN PARTNERSHIPS, at equity:		27,661			32,694
OTHER ASSETS:
Cash and cash equivalents		43,711			74,243
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
Deferred costs and other assets		96,724			84,358
Total assets	$	3,093,861		$	3,346,580
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
Tenants’ deposits and deferred rent		15,468			13,170
Distributions in excess of partnership investments		43,893			48,771
Accrued construction costs		1,063			11,778
Fair value of derivative instruments		33,289			14,610
Accrued expenses and other liabilities		57,826			58,090
Total liabilities		2,381,979			2,711,776
COMMITMENTS AND CONTINGENCIES (Note 8)
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
Capital contributed in excess of par		1,037,087			881,735
Accumulated other comprehensive loss		(46,346	)		(30,016	)
Distributions in excess of net income		(384,856	)		(317,682	)
Total equity—PREIT		661,262			578,653
Noncontrolling interest		50,620			56,151
Total equity		711,882			634,804
Total liabilities and equity	$	3,093,861		$	3,346,580

See accompanying notes to the unaudited consolidated financial statements.

1

PENNSYLVANIA REAL ESTATE INVESTMENT TRUST

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three months ended September 30,						Nine months ended September 30,
(in thousands of dollars)	2010			2009			2010			2009
REVENUE:
Base rent	$	71,842		$	70,926		$	214,696		$	211,515
Expense reimbursements		33,571			33,291			99,980			100,125
Percentage rent		767			918			2,292			2,378
Lease termination revenue		370			300			2,551			1,636
Other real estate revenue		3,301			3,270			9,762			9,982
Interest and other income		2,804			862			4,130			2,092
Total revenue		112,655			109,567			333,411			327,728
EXPENSES:
Operating expenses:
CAM and real estate taxes		(35,683	)		(34,304	)		(107,183	)		(101,285	)
Utilities		(7,587	)		(6,769	)		(20,053	)		(18,561	)
Other operating expenses		(6,926	)		(6,760	)		(19,063	)		(19,156	)
Total operating expenses		(50,196	)		(47,833	)		(146,299	)		(139,002	)
Depreciation and amortization		(41,673	)		(40,240	)		(122,677	)		(117,951	)
Other expenses:
General and administrative expenses		(8,958	)		(9,583	)		(28,261	)		(28,436	)
Impairment of assets		—			—			—			(70	)
Abandoned project costs, income taxes and other expenses		(558	)		(200	)		(1,012	)		(598	)
Total other expenses		(9,516	)		(9,783	)		(29,273	)		(29,104	)
Interest expense, net		(36,384	)		(32,961	)		(108,588	)		(97,774	)
Gain on extinguishment of debt		—			4,167			—			13,971
Total expenses		(137,769	)		(126,650	)		(406,837	)		(369,860	)
Loss before equity in income of partnerships, gains on sales of real estate, and discontinued operations		(25,114	)		(17,083	)		(73,426	)		(42,132	)
Equity in income of partnerships		1,855			2,355			6,894			7,531
Gain on sales of real estate		—			—			—			1,654
Loss from continuing operations		(23,259	)		(14,728	)		(66,532	)		(32,947	)
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		19,587			4,609			20,708			7,087
Net loss		(3,672	)		(10,119	)		(45,824	)		(25,860	)
Less: net loss attributed to noncontrolling interest		87			477			1,928			1,215
Net loss attributable to PREIT	$	(3,585	)	$	(9,642	)	$	(43,896	)	$	(24,645	)

See accompanying notes to the unaudited consolidated financial statements.

2

PENNSYLVANIA REAL ESTATE INVESTMENT TRUST

CONSOLIDATED STATEMENTS OF OPERATIONS—(continued)

EARNINGS PER SHARE

(Unaudited)

	Three months ended September 30,						Nine months ended September 30,
(in thousands of dollars, except per share amounts)	2010			2009			2010			2009
Loss from continuing operations	$	(23,259	)	$	(14,728	)	$	(66,532	)	$	(32,947	)
Noncontrolling interest in continuing operations		878			655			2,719			1,408
Dividends on unvested restricted shares		(174	)		(161	)		(441	)		(634	)
Loss from continuing operations used to calculate earnings per share—basic and diluted	$	(22,555	)	$	(14,234	)	$	(64,254	)	$	(32,173	)
Income from discontinued operations	$	19,587		$	4,609		$	20,708		$	7,087
Noncontrolling interest in discontinued operations		(791	)		(178	)		(791	)		(193	)
Income from discontinued operations used to calculate earnings per share—basic and diluted	$	18,976		$	4,431		$	19,917		$	6,894
Basic (loss) income per share
Loss from continuing operations	$	(0.42	)	$	(0.34	)	$	(1.30	)	$	(0.80	)
Income from discontinued operations		0.35			0.11			0.40			0.17
	$	(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	)
Income from discontinued operations		0.35			0.11			0.40			0.17
	$	(0.07	)	$	(0.23	)	$	(0.90	)	$	(0.63	)
(in thousands of shares)
Weighted average shares outstanding—basic		54,200			42,195			49,435			40,144
Effect of common share equivalents(1)		—			—			—			—
Weighted average shares outstanding—diluted		54,200			42,195			49,435			40,144

⁽¹⁾ The Company had net losses from continuing operations for all periods presented. Therefore, the effect of common share equivalents of 528 and 407 for the three and nine months ended September 30, 2010 are excluded from the calculation of diluted loss per share for these periods because they would be antidilutive. Common share equivalents were 0 for each of the three and nine months ended September 30, 2009.

See accompanying notes to the unaudited consolidated financial statements.

3

PENNSYLVANIA REAL ESTATE INVESTMENT TRUST

CONSOLIDATED STATEMENTS OF EQUITY

AND COMPREHENSIVE INCOME

Nine months ended

September 30, 2010

(Unaudited)

							PREIT Shareholders
(in thousands of dollars, except per share amounts)	Total Equity			Comprehensive Income (Loss)			Shares of Beneficial Interest $1.00 Par		Capital Contributed in Excess of Par			Accumulated Other Comprehensive Loss			Distributions in Excess  of Net Income			Non- controlling Interest
Balance January 1, 2010	$	634,804		$	—		$	44,616	$	881,735		$	(30,016	)	$	(317,682	)	$	56,151
Comprehensive income (loss):
Net loss		(45,824	)		(45,824	)							—			(43,896	)		(1,928	)
Unrealized loss on derivatives		(18,679	)		(18,679	)							(17,890	)		—			(789	)
Other comprehensive income		1,630			1,630								1,560			—			70
Total comprehensive loss	$	(62,873	)	$	(62,873	)													(2,647	)
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			—			—			—
Shares issued under employee share purchase plan		395						33		362			—			—			—
Shares issued under equity incentive plans, net of retirements		(1,011	)					359		(1,370	)		—			—			—
Amortization of deferred compensation		5,916						—		5,916			—			—			—
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	)
Other distributions to noncontrolling interest, net		(169	)					—		—			—			—			(169	)
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

See accompanying notes to the unaudited consolidated financial statements.

4

PENNSYLVANIA REAL ESTATE INVESTMENT TRUST

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

	Nine months ended September 30,
(in thousands of dollars)	2010			2009
Cash flows from operating activities:
Net loss	$	(45,824	)	$	(25,860	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation		103,400			97,416
Amortization		31,499			29,980
Straight-line rent adjustments		(1,269	)		(1,256	)
Provision for doubtful accounts		5,208			5,807
Amortization of deferred compensation		5,916			5,916
Gain on sales of real estate and discontinued operations		(19,151	)		(5,052	)
Gain on extinguishment of debt		—			(13,971	)
Change in assets and liabilities:
Net change in other assets		(2,769	)		(32	)
Net change in other liabilities		4,602			4,031
Net cash provided by operating activities		81,612			96,979
Cash flows from investing activities:
Repayment of note receivable from tenant		10,000			—
Additions to construction in progress		(19,375	)		(122,131	)
Investments in real estate improvements		(18,393	)		(16,705	)
Additions to leasehold improvements		(213	)		(257	)
Investments in partnerships		(6,122	)		(613	)
Capitalized leasing costs		(3,123	)		(3,149	)
Cash proceeds from sales of real estate investments		134,669			20,936
(Increase) decrease in cash escrows		(294	)		3,756
Cash distributions from partnerships in excess of equity in income		6,449			1,884
Net cash provided by (used in) investing activities		103,598			(116,279	)
Cash flows from financing activities:
Net proceeds from 2010 Term Loan and Revolving Facility		590,000			—
Shares of beneficial interest issued		161,233			561
Net (repayment of) borrowing from 2003 Credit Facility		(486,000	)		85,000
Repayment of senior unsecured 2008 Term Loan		(170,000	)		—
Repayment of 2010 Term Loan		(172,800	)		—
Net repayment of Revolving Facilities		(70,000	)		—
Proceeds from mortgage loans		64,500			70,143
Repayment of mortgage loans		(75,450	)		(18,058	)
Principal installments on mortgage loans		(15,664	)		(12,736	)
Repurchase of exchangeable notes		—			(7,893	)
Payment of deferred financing costs		(16,230	)		(1,776	)
Dividends paid to common shareholders		(23,278	)		(24,167	)
Distributions paid to Operating Partnership unitholders and noncontrolling interest		(1,017	)		(1,286	)
Shares of beneficial interest repurchased, other		(1,036	)		(114	)
Contributions from investor with noncontrolling interest in project		—			10,088
Net cash (used in) provided by financing activities		(215,742	)		99,762
Net change in cash and cash equivalents		(30,532	)		80,462
Cash and cash equivalents, beginning of period		74,243			9,786
Cash and cash equivalents, end of period	$	43,711		$	90,248

See accompanying notes to the unaudited consolidated financial statements

5

PENNSYLVANIA REAL ESTATE INVESTMENT TRUST

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2010

1. BASIS OF PRESENTATION

Nature of Operations

Pennsylvania Real Estate Investment Trust (“PREIT” or the “Company”) prepared the accompanying unaudited consolidated financial statements pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the included disclosures are adequate to make the information presented not misleading. The 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. In management’s opinion, all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the consolidated financial position of the Company and its subsidiaries and the consolidated results of its operations and its 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 30, 2010, the Company’s 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 interest in its portfolio of properties through its operating partnership, PREIT Associates, L.P. (“PREIT Associates” or the “Operating Partnership”). The Company is the sole general partner of the Operating Partnership and, as of September 30, 2010, the Company held a 96.0% interest in the Operating Partnership, and consolidates 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”), 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. In the event of the redemption of all of the outstanding OP Units held by limited partners for cash, the total amount that would have been distributed as of September 30, 2010 would have been $27.6 million in cash or the equivalent value of shares of PREIT, which is calculated using the Company’s September 30, 2010 closing share price on the New York Stock Exchange of $11.86 multiplied by the number of outstanding OP Units held by limited partners (2,328,554 as of September 30, 2010).

The Company provides its 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 for financial reporting purposes, and PREIT-RUBIN, Inc. (“PRI”), which generally develops and manages properties that the Company does not consolidate for financial reporting purposes, including properties

6

owned by partnerships in which the Company owns an interest and properties that are owned by third parties in which the Company does 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 continuing qualification as a REIT under federal tax law.

Fair Value

Fair value is a market-based measurement, not an entity-specific measurement. Therefore, a fair value measurement is determined based on the assumptions that market participants would use in pricing assets or liabilities. As a basis for considering market participant assumptions in fair value measurements, 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 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 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 are typically based on an entity’s own assumptions, as there is little, if any, related market activity.

In instances where 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 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 the fair value hierarchy in its accounting for derivatives (Level 2), financial instruments (Level 3) and in its impairment reviews of real estate assets (Level 3) and goodwill (Level 3).

2. RECENT ACCOUNTING PRONOUNCEMENTS

Accounting for Transfers of Financial Assets

On January 1, 2010, the Company adopted new accounting requirements relating to accounting for transfers of financial assets. The recognition and measurement provisions of these new accounting requirements are applied to transfers that occur on or after January 1, 2010. The disclosure provisions of these new accounting requirements are applied to transfers that occurred both before and after January 1, 2010. The adoption of these new accounting requirements did not have any effect on the Company’s consolidated financial statements.

Variable Interest Entities

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.

7

3. REAL ESTATE ACTIVITIES

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

(in thousands of dollars)	As of September 30, 2010			As of December 31, 2009
Buildings, improvements and construction in progress	$	3,052,749		$	3,129,354
Land, including land held for development		526,611			554,959
Total investments in real estate		3,579,360			3,684,313
Accumulated depreciation		(707,963	)		(623,309	)
Net investments in real estate	$	2,871,397		$	3,061,004

Acquisitions

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.

Dispositions

In September 2010, the Company sold its interests in Creekview Center in Warrington, Pennsylvania; Monroe Marketplace in Selinsgrove, Pennsylvania; New River Valley Center in Christiansburg, Virginia; Pitney Road Plaza in Lancaster, Pennsylvania; and Sunrise Plaza in Forked River, New Jersey for an aggregate sale price of $134.7 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 recognized a gain on the sale of these properties of $19.2 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 recognize this income by December 31, 2011.

Discontinued Operations

For the three and nine months ended September 30, 2010 and 2009, the Company has presented as discontinued operations the operating results of Creekview Center, Monroe Marketplace, New River Valley Center, Pitney Road Plaza and Sunrise Plaza, which were sold in September 2010. Also, for the three and nine months ended September 30, 2009, the Company has presented as discontinued operations the operating results of Crest Plaza and Northeast Tower Center, which were sold in 2009.

The following table summarizes revenue and expense information and gains on sales for the Company’s discontinued operations:

	Three months ended September 30,						Nine months ended September 30,
(in thousands of dollars)	2010			2009			2010			2009
Real estate revenue	$	3,149		$	4,380		$	9,497		$	12,969
Expenses:
Operating expenses		(733	)		(974	)		(2,107	)		(2,976	)
Depreciation and amortization		(1,306	)		(1,567	)		(3,907	)		(4,732	)
Interest		(674	)		(628	)		(1,926	)		(1,572	)
Total expenses		(2,713	)		(3,169	)		(7,940	)		(9,280	)
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	$	19,587		$	4,609		$	20,708		$	7,087

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Capitalization of Costs

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 capitalized salaries, commissions and benefits, real estate taxes and interest for the three and nine months ended September 30, 2010 and 2009:

	Three months  ended September 30,				Nine months  ended September 30,
(in thousands of dollars)	2010		2009		2010		2009
Development/Redevelopment Activities:
Salaries and benefits	$	186	$	339	$	802	$	1,715
Real estate taxes		83		94		414		939
Interest		504		1,344		1,982		4,601
Leasing Activities:
Salaries, commissions and benefits		982		999		3,123		3,149

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4. INVESTMENTS IN PARTNERSHIPS

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

(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	)

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

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

	Three months ended September 30,						Nine months ended September 30,
(in thousands of dollars)	2010			2009			2010			2009
Real estate revenue	$	18,519		$	18,210		$	56,593		$	55,400
Expenses:
Operating expenses		(5,665	)		(5,746	)		(17,722	)		(17,460	)
Interest expense		(5,162	)		(3,867	)		(12,105	)		(10,991	)
Depreciation and amortization		(3,947	)		(3,863	)		(11,884	)		(11,603	)
Total expenses		(14,774	)		(13,476	)		(41,711	)		(40,054	)
Net income		3,745			4,734			14,882			15,346
Less: Partners’ share		(1,859	)		(2,350	)		(7,401	)		(7,630	)
Company’s share		1,886			2,384			7,481			7,716
Amortization of excess investment		(31	)		(29	)		(587	)		(185	)
Equity in income of partnerships	$	1,855		$	2,355		$	6,894		$	7,531

Mortgage Loan Activity

In January 2010, the unconsolidated partnership that owns Springfield Park 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, Pennsylvania, entered into a $10.0 million 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 to a fixed interest rate of 5.39%.

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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. The Company owns a 50% 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.

5. FINANCING ACTIVITY

Amended, Restated and Consolidated Senior Secured Credit Agreement

On March 11, 2010, PREIT Associates and PRI (collectively, the “Borrower”), together with PR Gallery I Limited Partnership (“GLP”) and Keystone Philadelphia Properties, L.P. (“KPP”), two other subsidiaries 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 a $436.0 million term loan (“Term Loan A”) to the Borrower and a separate $84.0 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, the “2010 Credit Facility”) with Wells Fargo Bank, National Association, and the other financial institutions signatory thereto.

The 2010 Credit Facility replaced the previously existing $500.0 million unsecured revolving credit facility, as amended (the “2003 Credit Facility”), and a $170.0 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 Facility have the meanings ascribed to such terms in the 2010 Credit Facility.

The initial term of the 2010 Credit Facility is three years, and the Borrower has the right to one 12-month extension 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 the 2010 Credit Facility to repay outstanding balances under the 2003 Credit Facility 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 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 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 mortgages on the properties ground leased by GLP and KPP (the “Gallery Properties”). The foregoing properties constitute substantially all of the Company’s previously unencumbered retail properties.

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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 to be reduced by $33.0 million by March 11, 2011, by a cumulative total of $66.0 million by March 11, 2012 and by a cumulative total of $100.0 million by March 11, 2013 (if the Company exercises its right to extend the Termination Date), including all payments (except payments pertaining 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 under the 2010 Credit Facility, satisfying 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.

As of September 30, 2010, there were no amounts outstanding under the Revolving Facility. The Company had pledged $1.5 million under the Revolving Facility as collateral for letters of credit, and the unused portion of the Revolving Facility that was available to the Company was $148.5 million as of September 30, 2010. 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 30, 2010 was LIBOR plus 4.90%.

As of September 30, 2010, $347.2 million was outstanding under the 2010 Term Loan. The weighted average effective interest rate 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

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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 full 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 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), 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 to the 2010 Term Loan, would result in a Facility Debt Yield equal to 11.00% 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 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), and if a Facility Debt Yield 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. The Company is required to maintain its status as a REIT at all times. As of September 30, 2010 the Company was in compliance with all of these covenants.

Exchangeable Notes

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

Interest expense related to the Exchangeable Notes was $1.4 million and $2.1 million (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 and $0.2 million) for the three months ended September 30, 2010 and 2009, respectively.

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

Mortgage Loan Activity

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:

Financing Date	Property	Amount Financed (in  millions of dollars):		Stated Rate	Hedged Rate			Debt Maturity
January	New River Valley  Mall(1)(2)	$	30.0	LIBOR plus 4.50%		6.33	%		January 2013
March	Lycoming Mall(3)		2.5	6.84% fixed		N/A			June 2014
July	Valley View Mall(4)		32.0	5.95% fixed		N/A			June 2020

⁽¹⁾ Interest only.

⁽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, the Company 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. The Company took additional draws of $5.0 million in October 2009 and $2.5 million in March 2010.

⁽⁴⁾ In connection with the mortgage loan financing, the Company repaid a $33.8 million mortgage loan on Valley View Mall using proceeds from the new mortgage loan and available working capital.

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.

Fair Value of Financial Instruments

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.

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

	September 30, 2010				December 31, 2009
	Carrying Value		Fair Value		Carrying Value		Fair Value
Mortgage loans	$	1,749.6 million	$	1,659.2 million	$	1,777.1 million	$	1,549.6 million

The mortgage loans contain various affirmative and negative covenants customarily found in loans of that type. As of September 30, 2010, the Company was in compliance with all of these covenants.

6. EQUITY OFFERING

In May 2010, the Company issued 10,350,000 common shares in a public offering at $16.25 per share. The Company 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. 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 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, 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 of the 2010 Credit Facility.

7. CASH FLOW INFORMATION

Cash paid for interest was $99.7 million (net of capitalized interest of $2.0 million) and $93.4 million (net of capitalized interest of $4.6 million) for the nine months ended September 30, 2010 and 2009, respectively.

8. COMMITMENTS AND CONTINGENCIES

Redevelopment Activities and Capital Improvements

In connection with its redevelopment projects and capital improvements at certain other properties, the Company has made contractual 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 30, 2010, the remainder to be paid (excluding amounts already accrued) against such contractual and other commitments was $9.0 million, which is expected to be financed through the Revolving Facility, operating cash flows or through various other capital sources.

Legal Actions

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.

Environmental

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.

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9. DERIVATIVES

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

Cash Flow Hedges of Interest Rate Risk

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’s outstanding derivatives have been designated under accounting requirements as cash flow hedges. The effective portion of changes in the fair value of derivatives designated as, and that qualify as, cash flow hedges is recorded in “Accumulated other comprehensive 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 debt. During the next twelve months, the Company estimates that $16.9 million would be reclassified as an increase to interest expense in connection with derivatives.

Interest Rate Swaps and Cap

As of September 30, 2010, the Company had entered into 11 interest rate swap agreements, one interest rate cap agreement and two forward starting interest rate swap agreements on a notional amount of $732.6 million maturing on various dates through November 2013. Five interest rate swap agreements that were outstanding as of December 31, 2009 were settled in the nine months ended September 30, 2010.

The Company entered into these interest rate swap agreements 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 debt. The Company assessed the effectiveness of these swap agreements and cap agreement as hedges at inception and on September 30, 2010 and considered these swap agreements and cap agreement to be highly effective cash flow hedges. The Company’s interest rate swap agreements and cap agreement will be settled in cash.

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

Notional Value	Fair Value at September 30, 2010(1)	Fair Value at December 31, 2009(1)	Interest Rate(2)			Effective Date	Maturity Date
Interest Rate Swaps
$25.0 million	N/A	$ (0.2) million		2.86	%		March 20, 2010
75.0 million	N/A	(0.4) million		2.83	%		March 20, 2010
30.0 million	N/A	(0.2) million		2.79	%		March 20, 2010
40.0 million	N/A	(0.2) million		2.65	%		March 22, 2010
20.0 million	N/A	(0.2) million		3.41	%		June 1, 2010
200.0 million	$ (0.3) million	N/A		0.61	%		April 1, 2011
45.0 million	(1.2) million	(1.9) million		4.02	%		June 19, 2011
54.0 million	(1.5) million	(2.2) million		3.84	%		July 25, 2011
25.0 million	(0.7) million	N/A		1.83	%		December 31, 2012
60.0 million	(1.5) million	N/A		1.74	%		March 11, 2013
40.0 million	(1.1) million	N/A		1.82	%		March 11, 2013
65.0 million	(5.0) million	(2.5) million		3.60	%		September 9, 2013
68.0 million	(5.4) million	(2.8) million		3.69	%		September 9, 2013
56.3 million	(4.5) million	(2.4) million		3.73	%		September 9, 2013
55.0 million	(3.4) million	(0.9) million		2.90	%		November 29, 2013
48.0 million	(2.9) million	(0.7) million		2.90	%		November 29, 2013
Interest Rate Cap
16.3 million	(0.0) million	N/A		2.50	%		April 2, 2012
Forward Starting Interest Rate Swaps
200.0 million	(2.5) million	N/A		1.78	%	April 1, 2011	April 2, 2012
200.0 million	(3.3) million	N/A		2.96	%	April 2, 2012	March 11, 2013
	$(33.3) million	$(14.6) million

⁽¹⁾ As of September 30, 2010 and December 31, 2009, derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy. As of September 30, 2010 and December 31, 2009, the Company does not have any significant fair value measurements using significant unobservable inputs (Level 3).

⁽²⁾ Interest rate does not include the spread on the designated debt.

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The table below presents the effect of the Company’s derivative financial instruments on the Consolidated statement of operations as of September 30, 2010 and 2009.

	Three months ended		Nine months ended		Consolidated Statement of Operations location
	September 30, 2010	September 30, 2009	September 30, 2010	September 30, 2009
Derivatives in cash flow hedging relationships
Interest Rate Products
Loss recognized in Other comprehensive income on derivatives	$(10.0) million	$(7.3) million	$(31.1) million	$ (1.9) million	N/A
Gain reclassified from Accumulated other comprehensive loss into income (effective portion)	$ 4.2 million	$ 4.8 million	$ 13.2 million	$ 13.7 million	Interest expense
Gain (loss) recognized in income on derivatives (ineffective portion and amount excluded from effectiveness testing)	—	—	—	—	Interest expense

Credit-Risk-Related Contingent Features

The Company has agreements with some of its derivative counterparties that contain a provision pursuant to which, if the Company’s 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 could also be declared in default on its derivative obligations. As of September 30, 2010, the Company was not in default on any of its derivative obligations.

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

As of September 30, 2010, 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. If the Company had breached any of these provisions as of September 30, 2010, it would have been required to settle its obligations under the agreements at their termination value (including accrued interest) of $37.1 million. The Company has not breached any of the provisions as of September 30, 2010.

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Fair Value

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.

10. TENANT RECEIVABLES

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

11. HISTORIC TAX CREDITS

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.

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

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

OVERVIEW

Pennsylvania Real Estate Investment Trust, a Pennsylvania business trust founded in 1960 and one of the first equity 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 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 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 million square feet, of which we own approximately 22.9 million square feet. The operating retail properties that are owned by unconsolidated partnerships with third parties have a total of approximately 4.6 million square feet, of which 2.9 million square feet are owned by such partnerships.

Our primary business is owning and operating shopping malls and strip and power centers. Our current strategic initiatives include maintaining a leading position in the Philadelphia metropolitan area, promoting our mall locations as retail hubs in their trade areas, optimizing our portfolio by selling non-core assets as market conditions permit, and reducing our leverage through a variety of means available to us, subject to the terms of the 2010 Credit Facility, as further described below.

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 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 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”). We are the sole general partner of PREIT Associates and, as of September 30, 2010, 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 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 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.”

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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 items arising from these properties appear in “Equity in income of partnerships.”

For further information regarding our unconsolidated partnerships, see note 4 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

The downturn in the overall economy and the disruptions in the financial markets have reduced consumer confidence and negatively affected employment and consumer spending on retail goods. As a result, the sales performance of retailers in general and sales at our properties in particular have decreased from peak levels. 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 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.

Dispositions

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

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$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 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 our secured credit facility (the “2010 Credit Facility”), which totaled $57.4 million. We also used $10.0 million to repay borrowings under the Revolving Facility (as defined below) and $8.9 million to repay borrowings under the 2010 Term Loan (as defined below), both in accordance with the terms of the 2010 Credit Facility. We intend to use the remaining $18.7 million of the 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.

Acquisitions

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.

Development and Redevelopment

We have reached the last phase in our current redevelopment program. Over the past five years, we have invested approximately $1.0 billion in our portfolio. The current estimated project cost of Voorhees Town Center, our only remaining redevelopment property, is $83.0 million, and the amount invested as of September 30, 2010 was $70.1 million. Our projected share of estimated project costs is net of any expected tenant reimbursements, parcel sales, tax credits or other incentives. We may 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 30, 2010, we had incurred $78.4 million of costs 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:

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

⁽¹⁾ Amount invested as of September 30, 2010 does not reflect an $11.8 million impairment charge that we recorded in December 2008. See the notes to our consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2009 for further discussion of this charge.

⁽²⁾ Amount invested as of September 30, 2010 does not reflect an $11.5 million impairment charge that we recorded in December 2009. See the notes to our consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2009 for further discussion of this charge.

⁽³⁾ The property is unconsolidated. The amount shown represents our share.

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In connection with our redevelopment projects and capital improvements 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 30, 2010, the unaccrued remainder to be paid against these contractual and other commitments was $9.0 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 of $44.8 million.

OFF BALANCE SHEET ARRANGEMENTS

We have no material off-balance sheet items other than the partnerships described in note 4 to the unaudited consolidated financial statements and in the “Overview” section above.

RELATED PARTY TRANSACTIONS

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 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 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% interest in the Landlord.

CRITICAL ACCOUNTING POLICIES

Critical Accounting Policies are those that require the application of management’s most difficult, subjective, or complex judgments, often because of the need to make estimates about the effect of matters that are inherently uncertain and that might change in subsequent periods. In preparing the consolidated financial statements, management has made estimates and assumptions that affect the reported amounts of assets and instruments 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. Actual results may differ from these estimates. In addition, other companies may utilize different estimates, which may impact 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 and 2009, 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 “Critical Accounting Policies” in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2009.

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RESULTS OF OPERATIONS

Comparison of Three and Nine Months Ended September 30, 2010 and 2009

Overview

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.

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

	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	%

⁽¹⁾ Owned by partnerships in which we own a 50% interest.

The following information sets forth our results of operations for the three and nine months ended September 30, 2010 and 2009:

	Three months ended September 30,						% Change 2009 to 2010			Nine months ended September 30,						% Change 2009 to 2010
(in thousands of dollars)	2010			2009						2010			2009
Revenue	$	112,655		$	109,567			3	%	$	333,411		$	327,728			2	%
Operating expenses		(50,196	)		(47,833	)		5	%		(146,299	)		(139,002	)		5	%
Depreciation and amortization		(41,673	)		(40,240	)		4	%		(122,677	)		(117,951	)		4	%
General and administrative expenses, impairment of assets, abandoned project costs, income taxes and other		(9,516	)		(9,783	)		(3	)%		(29,273	)		(29,104	)		1	%
Interest expense, net		(36,384	)		(32,961	)		10	%		(108,588	)		(97,774	)		11	%
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	)%
Income from discontinued operations		19,587			4,609			325	%		20,708			7,087			192	%
Net loss	$	(3,672	)	$	(10,119	)		(64	)%	$	(45,824	)	$	(25,860	)		77	%

The operating results for our unconsolidated partnerships are presented under the equity method of accounting in the line item “Equity in income of partnerships.”

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Revenue

Revenue increased by $3.1 million, or 3%, in the three months ended September 30, 2010, 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 30, 2010 (“Third Quarter Same Store Properties”) increased by $1.1 million, primarily due to increases 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 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. 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 to being affected by store closings, our properties are experiencing a trend towards more gross leases (leases that provide that tenants pay a higher base rent amount 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. 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 real estate revenue decreased by $0.2 million, primarily due to a $0.3 million decrease in marketing revenue. The decrease in marketing revenue

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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 in the nine months ended September 30, 2010 compared to the nine 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.

Operating Expenses

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 in the three months ended September 30, 2010 compared to the three months ended September 30, 2009, primarily due to higher tax rates and increased property assessments at some of our properties. Non common area utility expense increased by $0.8 million, including a $0.5 million increase at four 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 increased as a result of two significant snowstorms that affected 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.

Depreciation and Amortization

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.

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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

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.

Discontinued Operations

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:

	Three months  ended September 30,						Nine months ended September 30,
(in thousands of dollars)	2010			2009			2010			2009
Operating results of:
Creekview Center	$	111		$	(108	)	$	(71	)	$	(319	)
Monroe Marketplace		216			338			755			905
New River Valley Center		(200	)		50			(77	)		401
Pitney Road Plaza		107			57			377			57
Sunrise Plaza		202			186			573			452
Crest Plaza		—			98			—			390
Northeast Tower Center		—			590			—			1,803
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	$	19,587		$	4,609		$	20,708		$	7,087

NET OPERATING INCOME

Net Operating Income (a non-GAAP measure) is derived from real estate revenue (determined in accordance with GAAP) minus operating expenses (determined in accordance with GAAP). 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 is it indicative of funds available for our cash needs, including our ability to make cash distributions. We believe that net

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income is the most directly comparable GAAP measurement to Net Operating Income. We believe that Net Operating Income 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.

Net Operating Income excludes interest and other income, general and administrative expenses, interest expense, depreciation and amortization, gains on sales of real estate, gains on sales of discontinued operations, gains on extinguishment of debt, impairment losses, abandoned project costs and other expenses.

The following tables present Net Operating Income results for the three and nine months ended September 30, 2010 and 2009. The results are presented using the “proportionate-consolidation method” (a non-GAAP measure), which includes 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. 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:

	Same Store									Non Same Store									Total
	Three months ended September 30,									Three months ended September 30,									Three months ended September 30,
(in thousands of dollars)	2010			2009			% Change			2010			2009			% Change			2010			2009			% Change
Real estate revenue	$	118,572		$	117,161			1	%	$	3,684		$	5,013			(27	)%	$	122,256		$	122,174			—
Operating expenses		(52,605	)		(50,184	)		5	%		(1,139	)		(1,456	)		(22	)%		(53,744	)		(51,640	)		4	%
Net Operating Income	$	65,967		$	66,977			(2	)%	$	2,545		$	3,557			(28	)%	$	68,512		$	70,534			(3	)%

Total Net Operating Income decreased by $2.0 million, or 3%, in the three months ended September 30, 2010 compared to the three months ended September 30, 2009. Same Store Net Operating Income decreased by $1.0 million, or 2%, including $0.4 million in lease termination revenue, in the three months ended September 30, 2010 compared to the three months ended September 30, 2009, which included $0.3 million in lease termination revenue. See “Results of Operations—Revenue” and “—Operating Expenses” for further discussion of these variances. Non Same Store Net Operating Income decreased by $1.0 million, or 28%, in the three months ended September 30, 2010 compared to the three months ended September 30, 2009, primarily due to the sales of Crest Plaza and Northeast Tower Center in 2009.

	Same Store									Non Same Store									Total
	Nine months ended September 30,									Nine months ended September 30,									Nine months ended September 30,
(in thousands of dollars)	2010			2009			% Change			2010			2009			% Change			2010			2009			% Change
Real estate revenue	$	355,984		$	351,392			1	%	$	11,085		$	14,872			(25	)%	$	367,069		$	366,264			—	%
Operating expenses		(153,941	)		(146,269	)		5	%		(3,279	)		(4,333	)		(24	)%		(157,220	)		(150,602	)		4	%
Net Operating Income	$	202,043		$	205,123			(2	)%	$	7,806		$	10,539			(26	)%	$	209,849		$	215,662			(3	)%

Total Net Operating Income decreased by $5.8 million, or 3%, in the nine months ended September 30, 2010 compared to the nine months ended September 30, 2009. Same Store Net Operating Income decreased by $3.1 million, or 2%, including $2.8 million in lease termination revenue, in the nine months ended September 30, 2010 compared to the nine months ended September 30, 2009, which included $1.8 million in lease termination revenue. See “Results of Operations—Revenue” and “—Operating Expenses” for further discussion of these variances. Non

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Same Store Net Operating Income decreased by $2.7 million, or 26%, in the nine months ended September 30, 2010 compared to the nine months ended September 30, 2009, primarily due to the sales of Crest Plaza and Northeast Tower Center in 2009.

The following information is provided to reconcile net loss to Net Operating Income:

	Three months ended September 30,						Nine months ended September 30,
(in thousands of dollars)	2010			2009			2010			2009
Net loss	$	(3,672	)	$	(10,119	)	$	(45,824	)	$	(25,860	)
Depreciation and amortization
Wholly owned and consolidated partnerships		41,673			40,240			122,677			117,951
Unconsolidated partnerships		2,020			1,983			6,581			6,056
Discontinued operations		1,306			1,567			3,907			4,732
Interest expense, net
Wholly owned and consolidated partnerships		36,384			32,961			108,588			97,774
Unconsolidated partnerships		2,566			1,918			6,002			5,448
Discontinued operations		674			628			1,926			1,572
General and administrative expenses, impairment of assets, abandoned project costs, income taxes and other expenses		9,516			9,783			29,273			29,104
Gain on sales of interests in real estate		—			—			—			(1,654	)
Gain on sales of discontinued operations		(19,151	)		(3,398	)		(19,151	)		(3,398	)
Gain on extinguishment of debt		—			(4,167	)		—			(13,971	)
Interest and other income		(2,804	)		(862	)		(4,130	)		(2,092	)
Net Operating Income	$	68,512		$	70,534		$	209,849		$	215,662

FUNDS FROM OPERATIONS

The National Association of Real Estate Investment Trusts (“NAREIT”) defines Funds From Operations (“FFO”), which is a non-GAAP measure, 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 OP Unit as supplemental non-GAAP measures to compare our Company’s performance for different periods to that of our industry peers. Similarly, FFO per diluted share 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 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. 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

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flow from operating activities (determined in accordance with GAAP) as a measure of our liquidity, nor is it indicative of funds available for our cash needs, including our ability to make cash distributions.

We believe that net income is the most directly comparable GAAP measurement to FFO. We 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.

FFO was $21.8 million for the three months ended September 30, 2010, a decrease of $8.0 million, or 27%, compared to $29.8 million for the three 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. 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 of common share equivalents.

The following information is provided to reconcile net loss to FFO, and to show the items included in our FFO for the periods indicated:

(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

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⁽¹⁾ Excludes depreciation of non-real estate assets and amortization of deferred financing costs.

⁽²⁾ Includes the non-cash effect of straight-line rent of $0.3 million and $0.5 million for the three months ended September 30, 2010 and September 30, 2009, respectively.

(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

⁽¹⁾ Excludes depreciation of non-real estate assets and amortization of deferred financing costs.

⁽²⁾ Includes the non-cash effect of straight-line rent of $1.2 million for each of the nine months ended September 30, 2010 and September 30, 2009.

LIQUIDITY AND CAPITAL RESOURCES

This “Liquidity and Capital Resources” section contains certain “forward-looking statements” that relate to expectations and projections that are not historical facts. These forward-looking statements reflect our current views about our future liquidity and capital resources, and are subject to risks and uncertainties that might cause our actual liquidity and capital resources to differ materially from the forward-looking statements. Additional factors that might affect our liquidity and capital resources include those discussed in the section entitled “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2009 filed with the Securities and Exchange Commission. We do not intend to update or revise any forward-looking statements about our liquidity and capital resources to reflect new information, future events or otherwise.

Capital Resources

We expect to meet our short-term liquidity requirements, including distributions to 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, 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

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in the nine months ended September 30, 2010 were $24.3 million, based on quarterly distributions of $0.15 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 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.

We expect to meet certain of our 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, 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 in the general economy and its effect on retail sales, as well as our significant leverage resulting from debt incurred to fund our redevelopment projects 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. 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 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 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 our $1.0 billion universal shelf registration statement, which was used for the May 2010 common equity offering, 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, if at all.

Equity Offering

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

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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)

On March 11, 2010, PREIT Associates and PRI (collectively, the “Borrower”), together with PR Gallery I Limited Partnership (“GLP”) and Keystone Philadelphia Properties, L.P. (“KPP”), two 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 a $436.0 million term loan (“Term Loan A”) to the Borrower and a separate $84.0 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, the “2010 Credit Facility”) with Wells Fargo Bank, National Association, and the other financial institutions signatory thereto.

The 2010 Credit Facility replaced the previously existing $500.0 million unsecured revolving credit facility, as amended (the “2003 Credit Facility”), and a $170.0 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 Facility have the meanings ascribed to such terms in the 2010 Credit Facility.

The initial term of the 2010 Credit Facility is three years, and we have the right to one 12-month extension 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 the 2010 Credit Facility to repay outstanding balances under the 2003 Credit Facility 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 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 of 0.40% per annum.

We have 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 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.

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 to be reduced by $33.0 million by March 11, 2011, by a cumulative total of $66.0 million by March 11, 2012 and by a cumulative total of $100.0 million by March 11, 2013 (if we exercise our right to extend the Termination Date), including all payments (except payments pertaining 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 under the 2010 Credit Facility, satisfying 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

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$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.

As of September 30, 2010, there were no amounts outstanding under the Revolving Facility. We pledged $1.5 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 million at September 30, 2010. 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 30, 2010 was LIBOR plus 4.90%.

As of September 30, 2010, $347.2 million was outstanding under the 2010 Term Loan. The weighted average effective interest rate 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:

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 our 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 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 full 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 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), 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 to the 2010 Term Loan, would result in a Facility Debt Yield equal to 11.00% 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

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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 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), and if a Facility Debt Yield 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.

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 with the 2010 Credit Facility immediately due and payable, and the Commitments of the lenders to make further loans under the 2010 Credit Facility will terminate. Upon the occurrence of a voluntary or involuntary bankruptcy proceeding of the Company, PREIT Associates, PRI, any owner of a Collateral Property or any Material Subsidiary, all outstanding amounts will automatically become immediately due and payable and the Commitments of the lenders to make further loans will automatically terminate.

Mortgage Loan Finance Activity

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:

Financing Date	Property	Amount Financed (in millions of dollars):		Stated Rate	Hedged Rate			Maturity
January	New River Valley Mall(1)(2)	$	30.0	LIBOR plus 4.50%		6.33	%		January 2013
March	Lycoming Mall(3)		2.5	6.84% fixed		N/A			June 2014
April	Springfield Park/Springfield  East(4)(5)		10.0	LIBOR plus 2.80%		5.39	%		March 2015
June	Lehigh Valley Mall(5)(6)		140.0	5.88% fixed		N/A			July 2020
July	Valley View Mall(7)		32.0	5.95% fixed		N/A			June 2020

⁽¹⁾ Interest only.

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⁽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 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 to a fixed interest rate of 5.39%.

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.

Interest Rate Derivative Agreements

As of September 30, 2010, we had entered into 11 interest rate swap agreements, one interest rate cap agreement and two forward starting interest rate swap agreements on a notional amount of $732.6 million maturing on various dates through November 2013. Five interest rate swap agreements that were outstanding as of December 31, 2009 were settled in the nine months ended September 30, 2010.

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We entered into these interest rate derivatives in order to hedge the interest payments associated with our 2010 Credit Facility and our issuances of variable interest rate long-term debt. We assessed the effectiveness of these swaps as hedges at inception and on September 30, 2010 and considered these swaps to be highly effective cash flow hedges. Our interest rate swaps are net settled monthly.

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

Mortgage Loans

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 of the mortgage loans bear interest at variable rates that have been swapped to a fixed rate, one mortgage loan bears interest at a variable rate, and 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 been swapped to a fixed interest rate, have interest rates that range from 4.95% to 7.61% and had a weighted average interest rate of 5.81% at September 30, 2010. The variable rate mortgage loans have a weighted average interest rate of 2.81%. The weighted average interest rate of all consolidated mortgage loans was 5.80% at September 30, 2010. Mortgage loans for properties owned by unconsolidated partnerships are accounted for in “Investments in partnerships, at equity” and “Distributions in excess of partnership investments” on the consolidated balance sheets and are not included in the table below.

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

	Payments by Period
(in thousands of dollars)	Total		2010		2011-2012		2013-2014		Thereafter
Principal payments	$	86,915	$	5,039	$	39,984	$	26,123	$	15,769
Balloon payments(1)		1,660,848		—		463,556		529,975		667,317
Total	$	1,747,763	$	5,039	$	503,540	$	556,098	$	683,086

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

Contractual Obligations

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

(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

⁽¹⁾ The 2010 Term Loan has a variable interest rate that is between 4.00% and 4.90% plus LIBOR, depending on our leverage. We have entered into interest rate swap agreements to fix $100.0 million of the underlying

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LIBOR associated with the term loans at a 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 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.

⁽²⁾ The timing of the payments of these amounts is uncertain. We estimate that such payments will be made in the upcoming year, but situations could arise at these development and redevelopment projects that could delay the settlement of these obligations.

CASH FLOWS

Net cash provided by operating activities totaled $81.6 million for the nine months ended September 30, 2010 compared to $97.0 million for the nine months ended September 30, 2009. The decrease in cash from operating activities in the nine months ended September 30, 2010 compared 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 net operating income in the first nine months of 2009) and a $6.3 million increase in cash paid for interest expense.

Cash flows provided by investing activities were $103.6 million for the nine months ended September 30, 2010 compared to cash flows used for investing activities of $116.3 million for the nine months ended September 30, 2009. Investing activities for 2010 reflect cash proceeds from the sale of five power centers of $134.7 million, investment in construction in progress of $19.4 million and real estate improvements of $18.4 million, primarily relating 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 of $10.0 million from the repayment of the note 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.

Cash flows used in financing activities were $215.7 million for the nine months ended September 30, 2010 compared to cash flows provided by financing activities of $99.8 million for the nine months ended September 30, 2009. In March 2010, 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 million in deferred financing costs in the nine months ended September 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. We also received $62.0 million in proceeds from new mortgage loans, and an additional $2.5 million draw from the existing mortgage loan on Lycoming Mall. We repaid the mortgage loan secured by Valley View Mall, which had a principal balance of $33.8 million. Cash flows from financing activities for the nine months ended September 30, 2010 were also affected by dividends and distributions of $24.3 million and principal installments on mortgage loans of $15.7 million.

COMMITMENTS

At September 30, 2010, we had $9.0 million of unaccrued contractual obligations to complete current redevelopment projects and capital improvements at certain other properties. Total remaining costs for the particular projects with such commitments are $44.8 million. We expect to finance these amounts through borrowings under the Revolving Facility, operating cash flows or through various other capital sources. See “—Liquidity and Capital Resources—Capital Resources.”

ENVIRONMENTAL

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 have environmental liability insurance coverage, which currently covers liability for pollution and on-site remediation of up to $10.0 million per occurrence and $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

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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 AND TENANT CREDIT RISK

Competition in the retail real estate industry is intense. We compete with other public and private retail real estate companies, including companies that own or manage malls, strip 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 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 owner-operators of retail properties.

Many of 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.

SEASONALITY

There is seasonality in the retail real estate industry. Retail property leases often provide for the payment of a portion of rent based on a percentage of a tenant’s sales revenue 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,

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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 of tenants vacating 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

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 operating expenses, as we have in recent periods, we might bear more costs if such expenses increase because of inflation.

FORWARD LOOKING STATEMENTS

This Quarterly Report on Form 10-Q for the quarter ended September 30, 2010, 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 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 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;

• our ability to refinance our existing indebtedness when it matures;

• our ability to raise capital, including through the issuance of equity 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 and its effect on consumer confidence and consumer spending, tenant business and leasing decisions and the value and potential impairment of our properties;

• 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 and political conditions, including credit market conditions, changes in interest rates or unemployment;

• 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

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• 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. We do not intend to update or revise any forward-looking statements to reflect new information, future events or otherwise.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

The analysis below presents the sensitivity of the market value of our financial instruments to selected changes in market interest rates. As of September 30, 2010, our consolidated debt portfolio consisted primarily of $347.2 million borrowed under our 2010 Term Loan which bore interest at a weighed average rate of 5.62% at September 30, 2010, $136.9 million of Exchangeable Notes, which bear interest at 4.00%, excluding debt discount of $3.3 million, and $1,749.6 million in fixed and variable rate mortgage loans, including $1.9 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 of the mortgage loans bear interest at variable rates that have been swapped to a fixed rate, one mortgage loan bears 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 been swapped to a fixed interest rate, have interest rates that range from 4.95% to 7.61% and had a weighted average interest rate of 5.81%. The variable rate mortgage loans have a weighted average interest rate of 2.81%. The weighted average interest rate of all consolidated mortgage loans was 5.80% at September 30, 2010. Mortgage loans for properties owned by unconsolidated partnerships are accounted for in “Investments in partnerships, at equity” and “Distributions in excess of partnership investments” on the consolidated balance sheets and are not included in the table below.

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:

	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	%	$	—		—	%
2011		119,791			5.82	%		4,918		1.56	%
2012		515,731	(3)		5.45	%		—		—	%
2013		741,612	(4)		5.56	%		50,250		5.21	%
2014		111,436			6.58	%		—		—	%
2015 and thereafter		683,086			5.66	%		—		—	%

⁽¹⁾ Includes $47.2 million of the 2010 Term Loan, $31.4 million of which has not been swapped to a fixed interest rate and $15.8 million of which is subject to a LIBOR cap with a strike rate of 2.50%. The LIBOR cap expires in March 2012.

⁽²⁾ Based on the weighted average interest rate in effect as of September 30, 2010.

⁽³⁾ Includes Exchangeable Notes of $136.9 million with a fixed interest rate of 4.00%.

⁽⁴⁾ Includes $300.0 million of the 2010 Term Loan. We have entered into interest rate swap agreements to effectively fix $100.0 million of the underlying LIBOR associated with the 2010 Term Loan at a 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.

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

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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 agreements, assumes an immediate 100 basis point change in interest rates from their actual September 30, 2010 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 million at September 30, 2010. A 100 basis point decrease in market interest rates would have resulted in an increase in our net financial instrument position of $76.2 million at September 30, 2010. Based on the variable rate debt included in our debt portfolio as of September 30, 2010, 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 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 9 of the notes to our unaudited consolidated financial statements.

We have an aggregate $732.6 million in notional amount of current swap, cap agreements and forward starting interest rate swap agreements that are expected to mature on various dates through November 2013.

Because the information presented above includes only those exposures that existed as of September 30, 2010, 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, our hedging strategies at the time and interest rates.

ITEM 4. CONTROLS AND PROCEDURES.

We are committed to providing accurate and timely disclosure in satisfaction of our SEC reporting obligations. In 2002, we established a Disclosure Committee to formalize our disclosure controls and procedures. Our Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2010, 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.

PART II—OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

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

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ITEM 1A. RISK FACTORS.

In addition to the other information set forth in this report, you should carefully consider the risks that could materially affect our business, financial condition or results of operations, which are discussed under the caption “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2009.

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

Issuer Purchases of Equity Securities

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

Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as part of Publicly Announced Plans or Programs		Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs(1)
July 1—July 31, 2010		649	$	12.60		—		—
August 1—August 31, 2010		—		—		—		—
September 1—September 30, 2010		—		—		—		—
Total		649	$	12.60		—	$	—

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ITEM 6. EXHIBITS.

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

* The Company agrees to furnish supplementally a copy of any omitted schedule and exhibit to the Securities and Exchange Commission upon request.

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SIGNATURE OF REGISTRANT

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

	PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
Date: November 8, 2010	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)

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Exhibit Index

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 the Chairman and Chief Executive Officer.
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	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.

* The Company agrees to furnish supplementally a copy of any omitted schedule and exhibit to the Securities and Exchange Commission upon request.

EX-2.1

Exhibit 2.1

AGREEMENT OF PURCHASE AND SALE

OF OWNERSHIP INTERESTS

by and between

PREIT ASSOCIATES, L.P., Seller

and

CEDAR SHOPPING CENTERS PARTNERSHIP, L.P., Buyer

August 13, 2010

TABLE OF CONTENTS

		Page
1.	Definitions		2
2.	Sale and Purchase		9
3.	Purchase Price		9
4.	Closing		9
5.	Condition of Title		9
6.	Possession, Assignment of Agreements and Leases		10
7.	Prorations; Adjustments		11
8.	Closing Costs		14
9.	Municipal Improvements/Notices		14
10.	Seller’s Representations		15
11.	Delivery of Property Documents		19
12.	Buyer Representations		20
13.	Seller Covenants		21
14.	Conditions Precedent to Closing		23
15.	Deliveries at Closing		26
16.	Default		29
17.	Notices; Computation of Periods		30
18.	Fire or Other Casualty		32
19.	Condemnation		33
20.	Assignability		34
21.	Inspections		34
22.	Brokers		35
23.	Condition of Ownership Interests and Properties		36
24.	Survival of Provisions		41
25.	Earnout Provision		42
26.	Sophistication of the Parties		43
27.	Limited Liability		43
28.	Attorneys’ Fees		44
29.	Waiver of Jury Trial		44
30.	Miscellaneous		45
31.	Sale of Excluded Parcels		47

i

Exhibits

“A” Owners; Purchase Price; Excluded Parcels

“B” Form of Assignment and Assumption of Ownership Interests

“B-1” Form of Assignment and Assumption of Ownership Interests

“C” Leasing Pipeline Schedule

“D” Leasing Guidelines

“E” Existing Leases and Security Deposits

“F” Title Reports

“G” Pending Litigation

“H” Tenant Estoppel Certificate

“H-1” Form of Seller Estoppel Certificate

“I” FIRPTA Certification

“J” Form of Title Company Affidavit

“K” Form of Leasing and Management Agreement

“L” Form of Deposit Escrow Agreement

“M” Intentionally Omitted

“N” Major Tenants

“O” Material Title Contracts and Counterparties

“P” Earnout Amount Sample Calculations

“Q” Tax Proceedings

“R” Rent Rolls

“S” Existing Contracts

“T” Leasing Agents and Commissions

“U” Memorandum of Option, Right of First Offer and Right of First Refusal

“V” Accounts Receivable Reports

“W” Material Title Contract Amendments and Closing Deliveries

“X” Example of Option Price Calculation

ii

AGREEMENT OF PURCHASE AND SALE OF OWNERSHIP INTERESTS

THIS AGREEMENT OF PURCHASE AND SALE OF OWNERSHIP INTERESTS is dated as of August 13, 2010, by and between PREIT ASSOCIATES, L.P., a Delaware limited partnership (“Seller”), having an office at 200 South Broad Street, Third Floor, Philadelphia, Pennsylvania 19102, and CEDAR SHOPPING CENTERS PARTNERSHIP, L.P., a Delaware limited partnership (“Buyer”), having an office at 44 South Bayles Avenue, Suite 304, Port Washington, New York 11050.

W I T N E S S E T H :

WHEREAS, Seller, directly or indirectly, wholly owns and controls (a) PR Monroe, LLC, a Delaware limited liability company, PR Monroe Holdings, LLC, a Delaware limited liability company, and PR Monroe Holdings, L.P., a Pennsylvania limited partnership (collectively, the “Monroe Indirect Owners”), which collectively wholly own and control, directly or indirectly, PR Monroe Limited Partnership, a Pennsylvania limited partnership (“Monroe Property Owner”); (b) PR Lancaster LLC, a Delaware limited liability company, and PR Lancaster Holdings Limited Partnership, a Pennsylvania limited partnership (collectively, the “Pitney Indirect Owners”), which collectively wholly own and control, directly or indirectly, PR Lancaster Limited Partnership, a Pennsylvania limited partnership (“Pitney Property Owner”); (c) PR Warrington LLC, a Pennsylvania limited liability company, and PR Titus LLC, a Pennsylvania limited liability company (collectively, the “Creekview Indirect Owners”; and together with the Monroe Indirect Owners and the Pitney Indirect Owners, the “Indirect Owners”), which together with Seller and PREIT–Rubin, Inc., a Delaware corporation wholly owned by Seller (“PRI”), wholly own and control, directly or indirectly, PR Warrington Limited Partnership, a Pennsylvania limited partnership, and PR Titus Limited Partnership, a Pennsylvania limited partnership, respectively (collectively, the “Creekview Property Owners”); (d) PR Lacey LLC, a New Jersey limited liability company (“Sunrise Plaza Property Owner”); and (e) PR New River LLC, a Virginia limited liability company (“New River Property Owner” and together with Monroe Property Owner, Pitney Property Owner, the Creekview Property Owners and Sunrise Plaza Property Owner, the “Property Owners”), as more particularly described in Exhibit “A”. The Property Owners, collectively, own fee title to five (5) separate power centers (each power center being referred to herein as, a “Property,” and collectively, the “Properties”) listed on Exhibit “A”. Each Property consists of the real property or the condominium interests in the real property more particularly described on Exhibit “A” (each, a “Parcel” and collectively, the “Parcels”) and the buildings, improvements and other structures constructed on each Parcel (individually as to a Parcel, and collectively, the “Improvements”), commonly known as Monroe Marketplace in Selinsgrove, Pennsylvania, Pitney Road Plaza in Lancaster, Pennsylvania, Creekview Center in Warrington, Pennsylvania, Sunrise Plaza in Forked River, New Jersey and New River Valley Center in Christiansburg, Virginia.

WHEREAS, Seller desires to sell to Buyer (a) one hundred percent (100%) of the ownership interests in the Monroe Indirect Owners, (b) one hundred percent (100%) of the ownership interests in the Pitney Indirect Owners, (c) one hundred percent (100%) of the ownership interests in the Creekview Indirect Owners, (d) one hundred percent (100%) of the

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limited partnership interests in each of the Creekview Property Owners, (e) one hundred percent (100%) of the ownership interests in the Sunrise Plaza Property Owner and (f) one hundred percent (100%) of the ownership interests in the New River Property Owner, and Buyer desires to purchase such ownership interests from Seller, in the manner and upon the terms and conditions hereinafter provided. The ownership interests being sold and purchased hereunder are referred to herein collectively as the “Ownership Interests”.

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Buyer and Seller agree as follows:

1. Definitions. Capitalized terms used herein shall have the meanings set forth below:

“Affiliate” shall mean any person or entity controlling, controlled by or under common control with a particular entity referred to in this Agreement.

“Agreement” shall mean this Agreement of Purchase and Sale of Ownership Interests between Buyer and Seller, and any amendments hereto made in accordance with Section 30(b) hereof.

“Assignments” shall mean the Assignments of Ownership Interests, in the forms attached hereto as Exhibit “B” and Exhibit “B-1”.

“Business Day” shall mean any day other than a Saturday, Sunday or any other day on which commercial banks in Philadelphia, Pennsylvania or New York, New York are authorized or required by law to close.

“Buyer” shall have the meaning set forth in the preamble hereof, and shall include any successors and assigns permitted under Section 20(a) hereof.

“Buyer Party” shall have the meaning set forth in Section 23(e)(i) hereof.

“Closing” shall mean the closing of the transfer of the Ownership Interests contemplated by this Agreement.

“Closing Date” shall mean September 29, 2010, or such other date to which the Closing shall be deferred pursuant to this Agreement.

“Closing Statement” shall mean the closing statement jointly prepared in accordance with Section 7(a)(x) hereof itemizing the closing adjustments, costs and prorations to be made at Closing.

“Contracts” shall mean (x) the Existing Contracts and (y) any other service, management, operating or maintenance agreements with respect to the Properties entered into in accordance with Section 6(b) hereof. “Contracts” shall not include any Title Contracts or Material Title Contracts.

2

“Corporate Obligations” shall mean Seller’s representations, warranties and covenants set forth in Sections 10(a)(i), (ii), (iii), (iv), (vii), (viii), (ix), (xii) and (xxiii) hereof and Buyer’s representations, warranties and covenants set forth in Section 12(a)-(f) hereof.

“Creekview Indirect Owners” shall have the meaning set forth in the recitals hereof.

“Creekview Property Owners” shall have the meaning set forth in the recitals hereof.

“Delinquent Rents” shall mean rents under any of the Leases which remain unpaid after their respective due date.

“Deposit” shall mean the deposit of Two Million Five Hundred Thousand Dollars ($2,500,000) by Buyer with the Title Company to secure Buyer’s obligations hereunder and under the Other Purchase Agreements, together with any interest earned thereon.

“Deposit Escrow Agreement” shall mean that certain Deposit Escrow Agreement of even date herewith by and among Seller, Buyer and Title Company in the form of Exhibit “L” hereto.

“Earnout Amount” shall have the meaning set forth in Section 25(c) hereof.

“Effective Date” shall mean the date of full execution of this Agreement and the Deposit Escrow Agreement by Buyer and Seller, which date Seller and Buyer will confirm in writing promptly upon the opening of Escrow.

“Environmental Law” shall mean any and all federal, state and local laws, statutes, regulations, ordinances, codes, rules and other governmental restrictions or requirements relating to health, industrial hygiene or environmental conditions or hazardous substances on or about the Properties or relating to the Properties, including, without limitation, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. §9601 et seq.; the Resource Conservation and Recovery Act of 1976 as amended, 42 U.S.C. §6901 et seq.; the Toxic Substance Control Act, as amended, 15 U.S.C. §2601 et seq.; the Clean Air Act, as amended, 42 U.S.C. §1857 et seq.; the Federal Water Pollution Control Act, as amended, 33 U.S.C. §1251 et seq.; the Federal Hazardous Materials Transportation Act, 49 U.S.C. §1801 et seq.; the Safe Drinking Water and Toxic Enforcement Act of 1986; and the laws, rules, regulations and ordinances of the U.S. Environmental Protection Agency, the Pennsylvania Department of Environmental Protection and of all other agencies, boards, commissions and other governmental bodies and officers having jurisdiction over a Property or the use or operation thereof.

“Escrow” shall have the meaning set forth in Section 4(a) hereof.

3

“Estoppel Percentage” shall mean Tenant Estoppel Certificates from tenants with respect to Leases demising not less than seventy-five percent (75%) of the leased space in each Property.

“Excluded Liabilities” shall have the meaning set forth in Section 23(e)(i) hereof.

“Excluded Parcel Lease” shall have the meaning set forth in Section 31(a)(i).

“Excluded Parcel Owner” shall have the meaning set forth in Section 14(a)(v) hereof.

“Excluded Parcels” shall mean the parcels listed as Excluded Parcels on Exhibit “A” hereto, if any.

“Existing Contracts” shall mean the service, operating or maintenance agreements for each Property, and all amendments and modifications thereto, in effect on the Effective Date and listed on Exhibit “S” hereto.

“Existing Leases” shall mean the leases affecting a Property, and all amendments and modifications thereto, in effect as of the Effective Date and listed on Exhibit “E” hereto. As of the Closing Date, Existing Leases shall include all Pre-Closing New Leases and all amendments and modifications of Existing Leases entered into in accordance with the provisions of this Agreement.

“Government Lists” shall mean (i) the Specially Designated Nationals and Blocked Persons List maintained by the OFAC, as such list is maintained from time to time, (ii) the Denied Persons List and the Entity List maintained by the United States Department of Commerce, (iii) the List of Terrorists and List of Disbarred Parties maintained by the United States Department of State, (iv) any other list of terrorists, terrorist organizations or narcotics traffickers maintained pursuant to any of the OFAC Laws and Regulations, (v) any other similar list maintained by the United States Department of State, the United States Department of Commerce or any other governmental authority or pursuant to any Executive Order of the President of the United States of America, and (vi) any list or qualifications of “Designated Nationals” as defined in the Cuban Assets Control Regulations, 31 C.F.R. Part 515, as all such Government Lists may be updated from time to time.

“Hazardous Materials” shall mean (i) those substances included within the definitions of “hazardous substances”, “hazardous materials,” “toxic substances,” or “solid waste” in the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. §9601 et seq., the Resource Conservation and Recovery Act of 1976, as amended, 42 U.S.C. §6901 et seq. and the Hazardous Materials Transportation Act, 49 U.S.C. Sections 1801 et seq. as amended, and in the regulations promulgated pursuant to said laws, (ii) those chemicals known to cause cancer or reproductive toxicity, as published pursuant to the Safe Drinking Water and Toxic Enforcement Act of 1986, Sections 25249.5 et seq. of the Health & Safety Code as amended, (iii) those substances listed in the United States Department of Transportation Table (49 CFR 172.101 and amendments thereto) or by the Environmental Protection

4

Agency (or any successor agency) as hazardous substances (40 CFR Part 302 and amendments thereto), (iv) any material, waste or substance which is (A) petroleum, (B) asbestos, (C) polychlorinated biphenyls, (D) designated as a “hazardous substance” pursuant to Section 311 of the Clean Water Act, 33 U.S.C. Section 1251 et seq. (33 U.S.C. Section 1321) or listed pursuant to Section 307 of the Clean Water Act (33 U.S.C. Section 1317); (E) flammable explosives; (F) radioactive materials, or (G) mold, spores and fungus, and (v) such other substances, materials and wastes which are or become regulated as hazardous or toxic under applicable local, state or Federal law, or by the United States government, or which are classified as hazardous or toxic under Federal, state, or local laws or regulations.

“Improvements” shall have the meaning set forth in the recitals hereof.

“Indirect Owners” shall have the meaning set forth in the recitals hereof.

“Intellectual Property” shall mean the interest, if any, of the applicable Property Owner in any trademarks, trade names, logos, names, coined words, abbreviations, designs, styles, certification marks, copyrights, industrial designs and other similar property relating solely to any Property; provided however, Intellectual Property shall not include “Pennsylvania Real Estate Investment Trust”, “PREIT” or any variations thereof.

“Leases” shall mean (i) all Existing Leases, (ii) all leases and renewals, extensions or expansions of Existing Leases and amendments of Existing Leases approved or deemed approved by Buyer in accordance with the provisions of Section 6(a) hereof, (iii) all renewals, extensions and expansions of Existing Leases exercised by the tenants thereunder as to which the consent of the landlord is not required, and (iv) all New Leases entered into prior to Closing as provided for or permitted herein.

“Leasing Costs” shall mean the landlord’s obligations under the Leases or the owner’s obligation under any other agreement to pay for leasing commissions, tenant improvement costs, moving costs, design costs, lease buyout costs and similar tenant inducements, and legal expenses incurred in connection with the Leases.

“Leasing Guidelines” shall mean the guidelines for New Leases set forth on Exhibit “D” attached hereto.

“Leasing Pipeline Schedule” shall mean the schedule of signed or pending leasing transactions attached hereto as Exhibit “C”, as the same may be updated at or before Closing as provided herein.

“Liabilities” shall have the meaning set forth in Section 23(e)(i) hereof.

“Major Tenants” shall mean those tenants listed on Exhibit “N” attached hereto, and any tenant leasing or occupying (or having affiliates leasing or occupying) at least 30,000 square feet of rentable square footage in the aggregate in the Properties and each other property to be conveyed pursuant to the Other Purchase Agreements.

5

“Management and Leasing Agreement” shall have the meaning set forth in Section 6(b) hereof.

“Material Title Contract” shall mean the agreements listed on Exhibit “O” attached hereto.

“Material Title Contract Counterparties” shall mean the parties listed on Exhibit “O” attached hereto.

“Material Title Contract Estoppel Certificate” shall have the meaning set forth in Section 14(a)(iv) hereof.

“Monroe Indirect Owners” shall have the meaning set forth in the recitals hereof.

“Monroe Property Owner” shall have the meaning set forth in the recitals hereof.

“New Lease” shall mean a lease for all or any portion of the vacant space listed in the Leasing Guidelines entered into prior to or after Closing as provided for or permitted herein.

“New River Property Owner” shall have the meaning set forth in the recitals hereof.

“OFAC” shall mean the Office of Foreign Assets Control, United States Department of the Treasury, or any other office, agency or department that succeeds to the duties of the Office of Foreign Assets Control, United States Department of the Treasury.

“OFAC Laws and Regulations” shall mean any lists, laws, rules, sanctions and regulations maintained by the OFAC pursuant to any authorizing statute, Executive Order or regulation, including the Trading with the Enemy Act, 50 U.S.C. App. 1-44, as amended from time to time, the Iraqi Sanctions Act, Publ. L. No. 101-513; United Nations Participation Act, 22 U.S.C. § 287c, as amended from time to time, the International Security and Development Cooperation Act, 22 U.S.C. § 2349 aa-9, as amended from time to time, the Cuban Democracy Act, 22 U.S.C. §§ 6001-10, as amended from time to time, the Cuban Liberty and Democratic Solidarity Act, 18 U.S.C. §§ 2332d and 2339b, as amended from time to time, and the Foreign Narcotics Kingpin Designation Act, Publ. L. No. 106-120, as amended from time to time.

“Other Purchase Agreements” shall mean collectively, the Agreements of Purchase and Sale for the purchase and sale of: (x) Whitehall Mall, Whitehall, Pennsylvania; and (y) Red Rose Commons, Lancaster, Pennsylvania, both of which have been executed concurrently herewith.

“Owners” shall mean the Property Owners and the Indirect Owners.

“Ownership Interests” shall have the meaning set forth in the recitals hereof.

6

“Parcel” shall have the meaning set forth in the recitals hereof.

“Patriot Act” means the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT ACT) Act of 2001, Public Law 107-56 (October 26, 2001), as the same may be amended from time to time, and corresponding provisions of future laws.

“Permitted Encumbrances” shall mean (i) the Existing Leases; (ii) any New Lease or a renewal, amendment, extension or expansion of an Existing Lease entered into in accordance with the terms of Section 6(a); (iii) the additional matters affecting each Property set forth in the marked-up Title Reports attached as Exhibit “F” hereto; and (iv) any matters created by or approved in writing by Buyer reflected on any update of the Title Reports.

“Pitney Indirect Owners” shall have the meaning set forth in the recitals hereof.

“Pitney Property Owner” shall have the meaning set forth in the recitals hereof.

“Post-Closing New Lease” shall have the meaning set forth in Section 25(b) hereof.

“Pre-Closing New Lease” shall have the meaning set forth in Section 25(a) hereof.

“PREIT” means Pennsylvania Real Estate Investment Trust, a Pennsylvania business trust.

“Preliminary Closing Statement” shall mean the draft closing statement itemizing the estimated closing adjustments, costs and prorations in accordance with Section 7(a)(ix) hereof.

“PRI” shall have the meaning set forth in the recitals hereof.

“Properties” shall mean the Parcels and the Improvements.

“Property Owners” shall have the meaning set forth in the recitals hereof.

“Purchase Price” shall mean the sums specified as the Purchase Price for the Ownership Interests corresponding to each Property on Exhibit “A”.

“Rent Roll” shall have the meaning set forth in Section 10(a)(vi) hereof.

“Reports” shall mean the current environmental, structural, soils, geologic, seismic, building inspection and/or engineering reports or other materials or reports relating to the Properties in Seller’s or any Owner’s possession or control and made available to Buyer pursuant to Section 11 hereof, excluding appraisals and any reports or materials which are subject to the attorney-client privilege.

7

“Securities Act” shall have the meaning set forth in Section 12(f) hereof.

“Seller” shall have the meaning set forth in the preamble hereof.

“Seller Estoppel Certificate” shall mean an estoppel certificate in the form of Exhibit “H-1” hereto executed by Seller and delivered in lieu of a Tenant Estoppel Certificate.

“Seller Party” shall have the meaning set forth in Section 23(e)(ii) hereof.

“Sunrise Plaza Property Owner” shall have the meaning set forth in the recitals hereof.

“Survival Period” shall mean the period commencing on Closing and ending (i) upon the expiration of the applicable statute of limitations with respect to Tax Obligations and the representations set forth in Section 10(a)(v) hereof, (ii) two (2) years after the Closing with respect to Corporate Obligations; and (iii) one (1) year after the Closing with respect to all other representations and warranties of Seller hereunder.

“Tax Obligations” shall mean Seller’s representations and warranties set forth in Sections 10(a)(x), and 10(a)(xi).

“Tax Proceedings” shall have the meaning set forth in Section 7(a)(vi) hereof.

“Tenant Estoppel Certificate” shall have the meaning set forth in Section 14(a)(iii) hereof.

“Third Party Material Title Contract Estoppel Certificate” shall have the meaning set forth in Section 14(a)(iv) hereof.

“Title Company” shall mean Commonwealth Land Title Insurance Company.

“Title Contracts” shall mean any declarations, reciprocal easement agreements, covenants, conditions, restrictions, easements and/or other written obligations that run with title to any Property.

“Title Policies” shall mean an American Land Title Association Extended Coverage standard form Owner’s Policies in the amount of the Purchase Price for each Property, subject only to the Permitted Encumbrances and with a non-imputation endorsement.

“Title Reports” shall mean the title commitments with respect to the Properties issued by the Title Company in favor of Buyer, marked copies of which are attached hereto as Exhibit “F”.

“Transaction Documents” shall have the meaning set forth in Section 23(a) hereof.

“Updated Rent Roll” shall have the meaning set forth in Section 15(a)(xii) hereof.

8

2. Sale and Purchase. In reliance upon the representations, warranties, covenants and agreements contained herein and subject to the terms and conditions hereof, Seller hereby agrees to sell, convey, transfer and deliver to Buyer, and Buyer hereby agrees to purchase from Seller, all right, title and interest in the Ownership Interests, for the Purchase Price.

3. Purchase Price. The Purchase Price to be paid by Buyer shall be paid as follows:

(a) Deposit. Buyer shall deposit the Deposit in immediately available federal funds into escrow with the Title Company by 5:00 p.m. local time on the second (2nd) Business Day immediately following the Effective Date. This Agreement shall terminate at Seller’s election if the Deposit is not so deposited by the time required. The Title Company shall, pending consummation or termination of this transaction, hold the Deposit in escrow in a segregated interest bearing account in accordance with the terms and provisions of the Deposit Escrow Agreement. All interest earned on the Deposit shall be added to and made a part of the Deposit for all purposes hereof. The Deposit shall be held under the Deposit Escrow Agreement and shall be applied against the Purchase Price of the last to close under this Agreement or the Other Purchase Agreements.

(b) Closing Payment. On the Closing Date, Buyer shall deposit the balance of the Purchase Price, adjusted as hereinafter provided, into escrow with the Title Company by wire transfer of immediately available federal funds.

4. Closing.

(a) Closing. The Closing shall be held and completed on or before the Closing Date through an escrow (“Escrow”) with the Title Company or in another mutually agreeable manner and location. Buyer and Seller agree to execute such separate mutual escrow instructions required by the Title Company which are consistent with this Agreement. In the event of any conflict between such separate escrow instructions and this Agreement, the terms of this Agreement shall control.

(b) Deferral of Closing. Neither party shall have the right to defer the Closing Date; provided, however, if Buyer’s lender extends the outside closing date under its financing commitment to Buyer, Seller and Buyer shall each have a one time right to defer the Closing for not more than thirty (30) days beyond the initially scheduled Closing Date for any reason or no reason at all, so long as Closing shall occur no later than the outside closing date set by Buyer’s lender. A party desiring such deferral shall give the other not less than five (5) Business Days’ notice of any such deferral prior to the scheduled Closing Date.

5. Condition of Title. Each Property Owner shall possess title to its Property at the completion of Closing, subject only to the Permitted Encumbrances and any exceptions resulting from the acts or omissions of Buyer. Title to each Property shall be in the condition as will be insured by the Title Company pursuant to the standard stipulations and conditions of the most current standard American Land Title Association form of Owner’s Title Insurance Policy in use in the state where the applicable Property is located, free and clear of all liens and encumbrances, except for the Permitted Encumbrances and any exceptions resulting from the acts or omissions

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of Buyer, with a non-imputation endorsement and such other endorsements as may reasonably be required by Buyer.

6. Possession, Assignment of Agreements and Leases.

(a) Existing Leases. Title to the Ownership Interests is to be given by Seller to Buyer at the completion of Closing by delivery of the Assignments. At Closing, each Property Owner shall possess the landlord’s interest in the Leases for each Property, without any representation or warranty whatsoever and without recourse (except as otherwise expressly set forth in Sections 7 and 10 hereof). During the period from the Effective Date through Closing (or earlier termination of this Agreement or default by Buyer hereunder), Seller shall not cause any Property Owner to enter into any lease of all or any portion of any Property or any renewal, amendment, extension or expansion thereof (including, without limitation, with respect to any Existing Lease) without the approval of Buyer, which approval shall be deemed given if the New Lease meets the Leasing Guidelines attached as Exhibit “D” hereto. If Buyer does not disapprove in writing of such proposed lease or renewal, amendment, extension or expansion of any Existing Lease which requires Buyer’s approval within five (5) days of Buyer’s receipt of a copy thereof, Seller shall give Buyer a second notice thereof and, if Buyer still has not disapproved in writing of such proposed lease or renewal, amendment, extension or expansion within five (5) days of the giving of such second notice, Buyer shall be deemed to have approved such proposed lease or renewal, amendment, extension or expansion.

(b) Existing Contracts. At Closing, the Contracts shall remain in effect, except any Contract that by its terms automatically terminates upon the transfer of the Ownership Interests. During the period from the Effective Date through Closing (or earlier termination of this Agreement or default by Buyer hereunder), Seller shall not cause any Owner to enter into or modify any service, management, operating or maintenance agreements (including, without limitation, the Existing Contracts) without Buyer’s approval, which shall not be unreasonably withheld or conditioned; provided, however, that Buyer’s approval shall not be required for any such agreement that is terminable, without penalty or premium, on or prior to the Closing. If Buyer does not disapprove in writing of such proposed new Contract which requires Buyer’s approval within five (5) days of Buyer’s receipt of a copy thereof, Seller shall give Buyer a second notice thereof and, if Buyer still has not disapproved in writing of such proposed new Contract within five (5) days of the giving of such second notice, Buyer shall be deemed to have approved such proposed new Contract. The termination or expiration of any of the Contracts prior to Closing shall not excuse Buyer from its obligation to complete Closing and to pay the full Purchase Price. All management and leasing contracts entered into by any Property Owner with respect to any Property shall be terminated as of the Closing Date and, at Closing, each Property Owner shall enter into new management and leasing agreements with PRI in the form attached hereto as Exhibit “K” (each, a “Management and Leasing Agreement”).

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7. Prorations; Adjustments.

(a) Generally.

(i) Cash Accounts. At Closing, Seller shall be entitled to receive all funds in the bank accounts of each Property Owner as of Closing. Upon Closing, each Property Owner shall close all previously existing bank accounts and shall open new bank accounts.

(ii) Rent. All rents, including, without limitation, fixed rent, prepaid rent, additional rent and percentage rent, if applicable, but specifically excluding any Delinquent Rents, shall be apportioned between Buyer and Seller as of the Closing Date in accordance with the provisions of this Section 7. After Closing, Buyer shall pay to Seller any Delinquent Rents that are collected by Buyer or any Property Owner after Closing to which Seller shall be entitled pursuant to this Section 7(a)(ii) (other than any items for which Seller received a credit at Closing pursuant to Section 7(a)(iv)). Unless otherwise required under the applicable Lease, all rent under the Leases collected by Buyer or any Property Owner after Closing that is not designated as to any particular period shall be applied first to the then current month’s rent, then to the previous months in reverse chronological order. If, following the Closing, Seller receives any payments of rent from tenants under the Leases, Seller shall forward the rents to Buyer, and rents shall be apportioned and applied as set forth in this Section 7(a)(ii).

(iii) Leasing Costs. Seller shall be liable for all outstanding Leasing Costs arising with respect to all Existing Leases (and amendments, renewals, extensions and expansions thereof), which have been fully executed by any Property Owner and the tenant thereunder as of the Effective Date for each Property. Seller shall be responsible for and pay all Leasing Costs for New Leases executed before the Closing Date. Buyer shall be responsible for and shall pay all Leasing Costs for New Leases executed after the Closing Date, such Leasing Costs to be deducted from the payment of any Earnout Amount for such New Leases.

(iv) CAM and Operating Charges. There shall be a credit given to Buyer on the Closing Date equal to the amount collected by Seller or any Property Owner for reimbursement of taxes, common area expenses, operating expenses or additional charges of any other nature in excess of amounts owed by tenants for such items with respect to the period prior to the Closing, as reasonably estimated by the parties, and there shall be a credit given to Seller on the Closing Date equal to the amount paid by Seller or any Property Owner for taxes, common area expenses, operating expenses or additional charges of any other nature in excess of amounts collected by Seller or such Property Owner from tenants for such items with respect to the period prior to the Closing, as reasonably estimated by the parties. Buyer shall indemnify, defend and hold Seller harmless with respect to any sums as to which Buyer receives a credit at Closing. Such credits to Seller shall be given only with respect to amounts collectable from tenants not in default under their leases at the time of Closing; provided, however, Buyer shall pay Seller any amounts not credited to Seller because a tenant was in default under its lease on the Closing Date if such tenant cures the default subsequent to Closing.

(v) Contracts and Title Contracts. Amounts payable under the Contracts and Title Contracts that do not terminate as of Closing shall be apportioned on the Closing Date. There shall be a credit given to Seller on the Closing Date equal to the amount paid by Seller or

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any Property Owner under such Contracts and Title Contracts with respect to the period after Closing. There shall be a credit given to Buyer on the Closing Date equal to any unpaid amounts under such Contracts and Title Contracts with respect to the period prior to Closing.

(vi) Real Estate Taxes and Assessments. Real estate taxes and assessments shall be apportioned on the Closing Date except for any portion of such real estate taxes or assessments that is payable directly by a tenant to the taxing authority, which portion shall not be apportioned between Seller and Buyer. If the tax bill for the real estate tax year in which the Closing occurs has not been issued on or before the Closing Date, the apportionment of taxes shall be computed based upon the tax bill for the prior period. If, on the Closing Date, bills for the real estate taxes imposed upon a Property for the real estate tax year in which Closing occurs have been issued but shall not have been paid, such taxes shall be paid at the time of Closing. Seller represents that no proceedings for the correction of the assessed valuation of any Property (“Tax Proceedings”) have been filed on any Property Owner’s behalf and are pending, other than as set forth in Exhibit “Q”. Neither party hereto shall agree (or cause any Property Owner to agree) to any settlement or termination of any Tax Proceedings with respect to the tax year in which the Closing occurs or any prior tax year without the prior written consent of the other party, which consent shall not be unreasonably withheld, except to the extent such settlement or termination is required pursuant to the terms of any Lease. If any refund shall be paid on account of real estate taxes for the tax year in which the Closing occurs, whether by means of settlement of any Tax Proceedings, or otherwise, then the net refund shall be apportioned between Seller and Buyer, as of the Closing Date, after deducting therefrom all costs and expenses, including reasonable attorneys’ fees, incurred in connection with such Tax Proceedings and after payment to tenants of any portion of such refund owed to them under their Leases. Any refund for prior tax years shall be remitted to Seller. Both parties agree to cooperate in good faith in connection with Tax Proceedings, but at no out-of-pocket expense to the other, and take such action and execute such documents at or after the date of the Closing as may be necessary to give effect to the provisions of this Section 7(a)(vi).

(vii) Percentage Rent. Notwithstanding the provisions of this Section 7(a) to the contrary, the apportionment of “percentage rent”, and the amounts due by Buyer to Seller, respectively, under the Leases with respect to percentage rent, shall be made and paid on or before the thirtieth (30th) day following the date when the last amount due on account of such percentage rent shall have been paid by the tenants under their respective Leases with respect to the percentage rent lease year (as defined in each such Lease) in which the Closing Date falls. The amount to be apportioned shall be the total of the amounts collected by both Buyer and Seller as percentage rent for such percentage rent lease year. Seller’s portion thereof shall be equal to the amount which bears the same ratio to the total percentage rent for the applicable percentage rent lease year as the number of days up to the Closing Date in such percentage rent lease year shall bear to the full number of days in such percentage rent lease year; and Buyer shall be entitled to the remaining portion.

(viii) New River Adjustment. Seller shall be given a $400,000 credit with respect to tenant allowance rent being paid by Banfield Pet Hospital at New River Valley Center.

(ix) Preliminary Closing Statement. By the date five (5) Business Days prior to the Closing Date, Seller shall prepare, on a form reasonably acceptable to Buyer, a

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Preliminary Closing Statement on the basis of the Leases, real estate taxes and assessments and other sources of income and expenses for the Properties and each Property Owner and shall deliver the same to Buyer and the Title Company. All apportionments and prorations provided for in this Section 7 to be made as of Closing shall be made, on a per diem basis, as of 12:01 a.m. local time on the Closing Date; provided, however, that all rents and expenses apportioned or prorated under this Section 7 and attributable to the Closing Date shall be for the account of Buyer. The Preliminary Closing Statement and the apportionments and/or prorations reflected therein shall be based upon actual figures to the extent available. If any of the apportionments and/or prorations cannot be calculated accurately based on actual figures on the Closing Date, then (other than with respect to determination of real estate taxes that shall be computed as set forth in clause (vi) above) they shall be calculated based on Seller’s good faith estimates thereof, subject to reconciliation as hereinafter provided.

(x) Closing Statement. The Preliminary Closing Statement shall become the final and binding Closing Statement at the close of business on the day immediately prior to the Closing Date, unless Buyer objects in writing (which writing may be via email) to any portion of the Preliminary Closing Statement, specifying the basis for its objection and, to the extent Buyer possesses the necessary information, preparing an alternative allocation. If Buyer does object, Seller and Buyer shall in good faith reconcile any disputes with respect to the adjustments, prorations and costs set forth in the Preliminary Closing Statement in accordance with the requirements of this Section 7 to produce the final and binding Closing Statement by the close of business on the day immediately prior to the Closing Date and deliver the same to the Title Company.

(xi) Post-Closing Reconciliation. If there is an error on the Closing Statement or, if after the actual figures are available as to any items that were estimated on the Closing Statement (including, without limitation, common area maintenance, operating costs and real estate taxes that were computed in accordance with clause (vi) above), it is determined that any actual proration or apportionment varies from the amount thereof reflected on the Closing Statement, the proration or apportionment shall be adjusted based on the actual figures as soon as feasible but not later than eighteen (18) months following the Closing Date. Either party owing the other party a sum of money based on such subsequent proration(s) shall promptly pay said sum to the other party. Seller agrees to provide necessary information, backup material and other reasonable evidence with respect to its period of ownership during the calendar year in which Closing occurs for purposes of reconciling the tenant charges referenced in Section 7(a)(iv) hereof.

(b) Tenant Security Deposits. At Closing, Seller shall deliver or cause each Property Owner to deliver to Buyer (or give Buyer a credit for), without consideration, all security deposits (including interest thereon, if any) then held by or for each Property Owner under the Leases, which, in the case of the Existing Leases, are shown on Exhibit “E” hereto. To the extent any tenant provided a letter of credit to satisfy its security deposit obligation, Seller shall deliver to Buyer at Closing the original letter of credit. Buyer will cause the security deposits to be maintained after Closing in accordance with the requirements of applicable law and the applicable Lease, and shall indemnify and defend Seller from, and hold Seller harmless from, all claims of tenants with respect to the security deposits actually delivered to Buyer or for which Buyer received a credit at Closing.

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(c) Utility Readings. Seller shall obtain readings of all utility meters on each Property on a date no sooner than two (2) days prior to the Closing Date. At or prior to Closing, Seller shall pay all charges based upon such meter readings. However, if after reasonable efforts Seller is unable to obtain readings of any meters prior to Closing, Closing shall be completed without such readings. After Closing and upon obtaining such readings, Seller shall pay the charges incurred prior to Closing as reasonably determined by Seller and Buyer based upon such readings.

(d) Existing Financing. At or prior to Closing, Seller will pay or provide for the payment of all existing financing on each Property. If any existing financing remains outstanding on the Closing Date for any Property Owner, to the extent that Buyer pays or directly provides funds to the Property Owner to repay such existing financing, the Purchase Price shall be reduced by the amount so paid.

(e) Survival. The provisions of this Section 7 shall survive Closing and delivery of the Assignments.

8. Closing Costs.

(a) Buyer’s Costs. Buyer shall pay (i) the costs of its counsel, architect, engineers and other professionals and consultants, (ii) any recording and filing fees for documents securing Buyer’s loans, if any, (iii) the premium, search fees and other charges for the Title Policies, (iv) the cost of obtaining, updating or modifying any surveys, and (v) one-half of the Title Company’s fees and charges for the Escrow, if any.

(b) Seller’s Costs. Seller shall pay (i) the costs of its counsel and other professionals and architects, (ii) any recording and filing fees to satisfy of record or discharge documents securing the existing financing, if any, (iii) the costs of subdividing and conveying the Excluded Parcels as provided in Section 14(a)(v), including, without limitation, recording and filing fees, transfer taxes, and legal and other professional fees and expenses, and (iv) one-half of the Title Company’s fees and charges for the Escrow.

(c) Transfer Taxes. Buyer and Seller believe the transactions contemplated by this Agreement are not subject to any realty transfer tax, except for (i) the Pennsylvania and local realty transfer taxes with respect to the transfer of more than 90% of the Ownership Interests in the Creek View Property Owners, which shall be paid by Buyer; and (ii) the New Jersey controlling interest transfer tax, which shall be split equally between Buyer and Seller. Any other realty transfer taxes which are determined to be payable shall also be split equally between Buyer and Seller.

(d) Survival. The provisions of this Section 8 shall survive Closing and delivery of the Assignments.

9. Municipal Improvements/Notices.

(a) Assessments. Municipal improvement and other similar assessments shall be apportioned between Buyer and Seller in the same manner as real estate taxes as set forth in Section 7(a)(vi) hereof. Buyer shall pay all unpaid installments becoming due on or after the

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Closing Date in respect of assessments against a Property or any part thereof (including any fines, interest or penalties thereon due to the non-payment thereof), and Buyer shall indemnify, defend and save Seller harmless from any claims therefor or any liability, loss, cost or expense arising therefrom for any portion thereof for which Buyer is responsible under this Section 9.

(b) Survival. The provisions of this Section 9 shall survive Closing and delivery of the Assignments.

10. Seller’s Representations.

(a) Seller hereby represents to Buyer, as of the date hereof and as of Closing, as follows:

(i) Organization and Good Standing. Seller and the Owners are each duly organized, validly existing, and in good standing under the laws of the jurisdiction in which they were formed and each has all requisite power and authority to carry on its business as now conducted. Each Property Owner is in good standing and is authorized to transact business in the State or Commonwealth in which its Property is located.

(ii) Validity. Each of Seller and PRI has the requisite power, capacity and authority to enter into this Agreement and/or the Assignment to which it is a party and to sell the Ownership Interests in accordance with the terms hereof and to perform its obligations hereunder and thereunder. This Agreement has been (and at Closing, the Assignments and all other documents delivered by Seller at Closing will be) duly authorized and executed and delivered by Seller or PRI (as applicable) and constitutes (or will constitute, as the case may be) the legal, valid and binding obligation of Seller or PRI (as applicable) enforceable against it in accordance with its terms, except as the enforceability thereof may be limited by (A) bankruptcy, insolvency, reorganization or other similar laws affecting the enforcement of creditors’ rights generally or (B) by general equitable principles regardless of whether considered in a proceeding in equity or at law.

(iii) Consents. Seller has obtained all necessary consents (whether from a governmental authority or other third party) in order to consummate the transactions contemplated hereby.

(iv) No Violation or Conflict. The execution, delivery and performance of this Agreement, and the consummation of the transactions contemplated hereby, will not violate any of the organizational or governing documents of Seller, PRI or any Owner or any contract, agreement, commitment, order, judgment or decree which Seller, PRI or any Owner is a party to or by which Seller, PRI or any Owner is bound.

(v) Title to Ownership Interests. Seller, directly or indirectly, owns one hundred percent (100%) of the Ownership Interests in each Owner, free and clear of any encumbrances, pledges, liens or security interests. Exhibit “A” accurately reflects the ownership structure of each Owner. None of Seller, PRI or any Owner has granted to any person or entity any options or other agreements of any kind, whereby any person or entity other than Buyer will have acquired or will have any right to acquire title to all or any portion of any Ownership Interests in any Owner. There are no options, subscriptions, warrants, calls,

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preemptive rights, rights of first refusal or other rights, commitments or arrangements, written or oral, outstanding with respect to the Ownership Interests or any unissued equity interests in the Owners or any security convertible into or exchangeable or exercisable for any equity interests in the Owners. Except for the Ownership Interests, there are no other equity, economic or beneficial interests in any Owner held by any person or entity.

(vi) Leases. The list of Existing Leases set forth in Exhibit “E” hereto is true, correct and complete in all material respects and accurately reflects any security deposits held by Seller or any Property Owner. The updated list of Leases to be delivered at Closing pursuant to Section 15(a)(iii) shall be true, correct and complete in all material respects. There are no leases, licenses, permits, franchises, concessions or other occupancy agreements, written or oral, affecting the Properties, other than the Leases. The Leases are in full force and effect and have not been amended except as set forth in Exhibit “E” (as the same shall be updated as provided above). A true, correct and complete copy of the rent roll for each Property (each a “Rent Roll”) is attached hereto as Exhibit “R”. Each Rent Roll contains the name of each tenant, the rentable area of the leased premises, the expiration date of the lease term, the current minimum rent and the current billing of CAM and real estate tax charges, and such information is true and correct in all material respects as of the date of the Rent Roll. All information set forth in the Updated Rent Roll to be delivered by Seller to Buyer at Closing shall be true and correct in all material respects as of the date of the Updated Rent Roll. At the time of Closing, neither Seller nor any Owner shall have accepted any prepayment of rent under any of the Leases (except for rental for the current month and payments that are required to be made in advance pursuant to the terms and provisions of any Lease and advance rental payments reflected on the Closing Statement and the Updated Rent Rolls). At the time of Closing, neither Seller nor any Owner shall have entered into New Leases, or modified or terminated any of the Existing Leases subsequent to the Effective Date, except as expressly provided herein or otherwise with the consent or deemed consent of Buyer hereunder (except for a termination permitted by the terms of any such Lease, other than on account of acts or omissions of the applicable Property Owner). Seller has delivered or made available to Buyer true, correct and complete copies of the Leases (including all amendments thereto) in all material respects. A Property Owner is the landlord under each of the Leases and has not assigned, mortgaged, pledged, sublet, hypothecated or otherwise encumbered any of its rights or interests under any of the Leases, other than any such encumbrances that shall be satisfied and released of record at Closing. Neither the landlord nor, to Seller’s knowledge, any tenant is in default of any of its material obligations under the Leases. Attached hereto as Exhibit “V” is a schedule of accounts receivable under the Leases, which is true and correct in all material respects as of the date of such schedule. All information set forth in the update to Exhibit “V” to be delivered by Seller to Buyer at Closing shall be true and correct in all material respects as of the date thereof.

(vii) Litigation, Condemnation, Bankruptcy. There is no pending, or to its actual knowledge, threatened, litigation against Seller with respect to any Property, or against any Owner, except as described on Exhibit “G” hereto. There is not outstanding against Seller, any Owner or any Property any judgment, decree, injunction, rule or order of any court, governmental department, commission, agency or arbitrator, except as described on Exhibit “G” hereto. Neither Seller nor any Owner has been served in any condemnation proceedings related to any Property, nor do any of them have any knowledge of any threatened condemnation proceedings with respect to any Property. Neither Seller nor any Owner has (A) made a general

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assignment for the benefit of its creditors, (B) admitted in writing its inability to pay its debts as they mature, (C) had an attachment, execution or other judicial seizure of any property interest which remains in effect, or (D) become generally unable to meet its financial obligations as they accrue. There is not pending any case, proceeding or other action seeking reorganization, arrangement, adjustment, liquidation, dissolution or recomposition of Seller or any Owner or the debts of such parties under any law relating to bankruptcy, insolvency, reorganization or relief of debtors or seeking appointment of a receiver, trustee, custodian or other similar official for it or all or any substantial part of its property.

(viii) No Other Assets. Since its inception, no Owner has owned any assets other than its Property, any Excluded Parcels, parcels previously owned and sold to third parties, personal property, if any, and/or the Ownership Interests of another Owner, as applicable.

(ix) No Other Liabilities. No Owner has any liabilities that have not been disclosed to Buyer in writing, except for (A) those matters which are being defended against by insurance companies and described on Exhibit “G”, (B) real estate, franchise and income taxes not yet due and payable, (C) Leasing Costs, (D) other liabilities under the Existing Leases, and (E) liabilities under the Existing Contracts and Title Contracts in effect as of the Effective Date.

(x) Taxes. All tax returns required to be filed and relating in any manner to any Owner or any Property have been timely filed with the appropriate taxing authorities. All such tax returns (A) were prepared in the manner required by applicable law and (B) are true, correct and complete in all material respects. Tax returns with respect to calendar year 2009 are presently on extension. Each Owner has paid, or caused to be paid, all taxes due with respect to any Owner or any Property whether or not shown (or required to be shown) on a tax return, and such taxes paid include those for which Owner may be liable in its own right, or as the transferee of the assets of, or as successor to, any other entity. No Owner is currently the subject of an audit or other examination of taxes by the tax authorities of any nation, state or locality, no such audit or other examination is pending, or to Seller’s knowledge, threatened, and no Owner has received any written notice from any taxing authority relating to any issue which could have an adverse effect on the tax liability of an Owner. Each Owner is and has always been treated as a disregarded entity or a partnership for federal income tax purposes and does not have any liability as successor or otherwise pursuant to Treasury Regulations Section 301.7701-2T(c)(2)(iii).

(xi) Elections. Each Owner has complied with all applicable laws, rules and regulations and made all such elections necessary for such Owner to be a disregarded entity for tax purposes. No Owner is a party to any federal, state or local income tax sharing or allocation agreement with any other entity.

(xii) Employees. No Owner has ever had any employees.

(xiii) Environmental. Except as expressly set forth in the Reports, (A) neither Seller nor any Owner has received written notice from any person or entity of any material violation of any Environmental Laws or the presence of Hazardous Materials at any Property and (B) to Seller’s knowledge, no such material violation exists.

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(xiv) No Options. Except as set forth in the Leases, neither Seller nor any Owners have entered into any agreement, option, understanding or commitment, or granted any right or privilege (whether by law, pre-emptive or contractual) capable of becoming an agreement, option or commitment with any person or entity, for the purchase or ground lease of all or any portion of the Properties or any rights or interest therein, which remains outstanding.

(xv) Contracts. There are no service or maintenance contracts or management agreements relating to any Property other than the Existing Contracts set forth on Exhibit “S” and the other Contracts entered into in accordance with this Agreement. The updated list of Contracts to be delivered at Closing pursuant to Section 15(a)(iii) shall be true, correct and complete in all material respects. True, correct and complete copies of all of the Contracts, including all agreements, amendments, guarantees, side letters and other documents relating thereto, have been delivered or made available to Buyer. Except as expressly set forth therein, all Existing Contracts are terminable on thirty (30) days notice or less without the payment of any premium or termination fee. Each of the Contracts is in full force and effect and has not been amended except as set forth on Exhibit “S” and no notice of default has been sent, or received, by Seller or any Owner with respect to any Contracts which exceed $50,000 per year on an annualized basis, or, to Seller’s knowledge, any other Contracts, and, to Seller’s knowledge, none of the parties thereto is in default of any of its material obligations thereunder.

(xvi) Violations. To the knowledge of Seller, neither Seller nor any Owner has received any written notice that a Property, or any portion thereof, is in violation of any applicable building codes or any environmental, zoning, fire, life safety and land use or other laws, rules and regulations, which has not been fully cured and remedied of record. Seller has no knowledge that a Property is in violation of any applicable building codes or any environmental, zoning, fire, life safety and land use and other laws, rules and regulations.

(xvii) Anti-Terrorism/Anti-Money Laundering. Neither Seller nor any of its Affiliates (A) is listed on any Government Lists, (B) has been determined by competent authority to be subject to the prohibitions contained in Presidential Executive Order No. 13244 (September 23, 2001) or in any enabling or implementing legislation or other Presidential Executive Orders in respect thereof, (C) is a person or entity who has been previously indicted for or convicted of any felony involving a crime or crimes of moral turpitude or for any violation of the Patriot Act, or (D) is currently under investigation by any governmental authority for alleged criminal activity. Seller has no reason to believe that this transaction, including, without limitation, the source of its funds, would result in a violation by Buyer or Seller of the Patriot Act, OFAC Laws and Regulations, or any other anti-terrorism or anti-money laundering laws or regulations, including, without limitation, the Bank Secrecy Act, as amended, or the Money Laundering Control Act of 1986, as amended.

(xviii) Insurance. Neither Seller nor any Owner has received written notice from any insurance carrier of the existence of conditions at a Property which if not corrected would result in termination of insurance coverage.

(xix) Intellectual Property. To the knowledge of Seller as of the date of this Agreement, neither Seller nor any Owner has granted any licenses, rights or interests in the Intellectual Property, none of the Intellectual Property is subject to any licenses, rights or

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interests, and no payments are made by or to Seller or any Owner in respect of the use of the Intellectual Property.

(xx) Leasing Agents and Commissions. There are no existing agreements with leasing agents in respect of leasing space in the Properties nor, to Seller’s knowledge, are there any outstanding commissions payable to any brokers with respect to any Existing Leases, except as set forth on Exhibit “T” hereto.

(xxi) Non-Foreign Person. Neither Seller, PRI nor any Owner is a “foreign person” as defined in Section 1445 of the Internal Revenue Code, as amended.

(xxii) Material Title Contracts. The Material Title Contracts are in full force and effect and have not been amended except as set forth on Exhibit “O”. To Seller’s knowledge, none of Seller, any Affiliate of Seller, any Property Owner or any other Material Title Contract Counterparty is in default in any material respect with respect to any obligation under any Material Title Contract. There are no set-offs, claims, counterclaims and/or defenses being asserted by any Material Title Contract Party against the enforcement of any Property Owner’s rights and obligations under any Material Title Contract.

(xxiii) Owner Agreements. True, correct and complete copies of the organizational documents of each Owner as modified and/or amended have been delivered or made available to Buyer. The organizational documents of each Owner are in full force and effect and have not been further modified, supplemented or amended.

(b) All references in this Section 10 or elsewhere in this Agreement and/or in any other document or instrument executed by Seller in connection with or pursuant to this Agreement, to “its knowledge” or “to the knowledge of Seller” and words of similar import shall refer solely to facts within the actual knowledge of Jeffrey A. Linn, without independent investigation or inquiry on his part other than inquiry of the asset manager of each Property, and shall not be construed to refer to the knowledge of any other employee, officer, director, shareholder, partner, member or agent of Seller or any Affiliate of Seller, and shall in no event be deemed to include imputed or constructive knowledge.

(c) All representations and warranties of Seller under this Section 10 shall be deemed modified by any facts disclosed in any of the Reports or other materials delivered by Seller or its agents to Buyer or otherwise actually known (not imputed) by Buyer or discovered by Buyer prior to the Effective Date. Buyer shall be deemed to have knowledge of a fact or circumstance if the underlying information or facts relating to applicable representations and warranties were expressly disclosed in any document delivered or otherwise made available to Buyer by Seller prior to the Effective Date, including any Leases, Contracts, Title Contracts, Title Reports and underlying recorded exception documents, surveys, Reports, or this Agreement. If the subject Report was delivered or otherwise discovered by Buyer after the Effective Date and prior to Closing, then Buyer shall have the rights set forth in Section 24(c)(ii) hereof.

11. Delivery of Property Documents.

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(a) Deliveries. Seller has delivered or made available to Buyer the following, to the extent in the possession or control of Seller or any of its Affiliates (including, without limitation, PRI):

(i) The current books and records (excluding, however, internal memoranda, appraisals and documents and any other information covered by the attorney-client privilege) and other operating and maintenance documents and information customarily prepared by a property manager with respect to a property;

(ii) Copies of the Existing Leases and any other occupancy agreements currently in force with respect to the Properties, together with the Rent Rolls;

(iii) Copies of the Existing Contracts and the Material Title Contracts;

(iv) Schedules of the Existing Leases and the Existing Contracts;

(v) Copies of all Reports;

(vi) All material relating to outstanding litigation claims or proceedings;

(vii) A list of unexpired warranties, if available;

(viii) A copy of insurance policies, or certificates evidencing such policies, relating to the Properties, together with a claims history for the last year;

(ix) Tenant sales reports for the last fiscal year (if available); and

(x) Copies of as-built plans and specifications and operating permits and certificates of occupancy issued with respect to each Property to the extent currently in an Owner’s possession.

Seller shall make available for inspection by Buyer promptly upon request, without undue delay, such other documents and information reasonably requested by Buyer relating to any aspect of the Properties not included in the categories listed above, provided, however, Seller shall not be required to make available documents or other information not in the possession or control of Seller or a Property Owner or materials which Seller reasonably considers proprietary or confidential.

(b) NO WARRANTY. NOTWITHSTANDING ANY PROVISIONS OF THIS AGREEMENT TO THE CONTRARY, SELLER MAKES NO REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, AS TO THE COMPLETENESS, CONTENT OR ACCURACY OF THE MATERIALS DELIVERED TO BUYER EXCEPT AS EXPRESSLY PROVIDED IN SECTION 10 HEREOF.

12. Buyer Representations. Buyer hereby represents to Seller, as of the date hereof and as of the Closing Date, as follows:

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(a) Organization and Good Standing. Buyer is duly organized, validly existing, and in good standing under the laws of its state of formation and has all requisite power and authority to carry on its business as now conducted. If required under Pennsylvania law to perform its obligations under this Agreement, it shall be qualified at Closing to transact business in the Commonwealth of Pennsylvania.

(b) Validity. Buyer has the requisite power, capacity and authority to enter into this Agreement and the Assignments and to purchase the Ownership Interests in accordance with the terms hereof and to perform Buyer’s obligations hereunder and thereunder. This Agreement has been (and the Assignments, upon the Closing, will be) duly authorized and executed and delivered by Buyer and constitutes (or will constitute, as the case may be) the legal, valid and binding obligation of Buyer enforceable against Buyer in accordance with its terms, except as the enforceability thereof may be limited by (i) bankruptcy, insolvency, reorganization or other similar laws affecting the enforcement of creditors’ rights generally or (ii) by general equitable principles regardless of whether considered in a proceeding in equity or at law.

(c) Consents. Buyer has obtained all necessary consents (whether from a governmental authority or other third party) in order to consummate the transactions contemplated hereby.

(d) No Violation or Conflict. The execution, delivery and performance of this Agreement, and the consummation of the transactions contemplated hereby, will not violate any of its organizational or governing documents or any contract, agreement, commitment, order, judgment or decree which Buyer is a party to or by which it is bound.

(e) Anti-Terrorism/Anti-Money Laundering. Neither Buyer nor any of its Affiliates (i) is listed on any Government Lists, (ii) has been determined by competent authority to be subject to the prohibitions contained in Presidential Executive Order No. 13244 (September 23, 2001) or in any enabling or implementing legislation or other Presidential Executive Orders in respect thereof, (iii) is a person or entity who has been previously indicted for or convicted of any felony involving a crime or crimes of moral turpitude or for any violation of the Patriot Act, or (iv) is currently under investigation by any governmental authority for alleged criminal activity. Buyer has no reason to believe that this transaction, including, without limitation, the source of its funds, would result in a violation by Buyer or Seller of the Patriot Act, OFAC Laws and Regulations, or any other anti-terrorism or anti-money laundering laws or regulations, including, without limitation, the Bank Secrecy Act, as amended, or the Money Laundering Control Act of 1986, as amended.

(f) Investment. Buyer is not acquiring the Ownership Interests with a view to or for sale in connection with any distribution thereof within the meaning of the Securities Act of 1933, as amended (the “Securities Act”). Buyer acknowledges that the transfer of the Ownership Interests may be restricted under the Securities Act and various state securities laws.

13. Seller Covenants.

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(a) Pre-Closing Covenants. During the period from the Effective Date through and including the Closing, except as otherwise expressly provided in this Agreement, Seller shall, and shall cause each Owner to:

(i) not sell, encumber or transfer the Ownership Interests or any Property, including, without limitation, any personal property intended to be transferred pursuant to the transactions contemplated by this Agreement, except (x) for the transfer of Excluded Parcels to an Affiliate of Seller that is not an Owner in accordance with Section 14(a)(v) and (y) in the case of any personal property, to the extent in the ordinary course of business and such personal property is replaced prior to Closing with property of substantially similar quality and value;

(ii) not change (or permit to be changed) any tax election or treatment, in each case relating to any Property, any Owner or the Ownership Interests;

(iii) not amend or otherwise modify the organizational documents of any Owner or sell any Ownership Interests in any Owner, or any other securities or issue any securities convertible into or exchangeable for, options or warrants to purchase any Ownership Interests in any Owner or make any other changes in its capital structure;

(iv) keep Buyer informed as to all material developments with respect to each Property (in each case, as soon as readily available after the Effective Date), including providing Buyer with (A) prompt notice of all New Leases, Contracts and Title Contracts or modifications to Leases, Contracts and Title Contracts (together with copies thereof), and (B) copies of all written notices of default or termination received or given by Seller or any Owner with respect to any Lease, Contract, Title Contract or loan document, promptly following receipt or delivery;

(v) cause each Owner to remain in good standing in its state of formation;

(vi) maintain in effect the property casualty and liability insurance policies now in effect on the Properties (or substitute policies in equal or greater amounts);

(vii) maintain and operate each Property in substantially the same condition and manner as now maintained and operated, including performing or causing to be performed (A) all customary ordinary repairs to each Property as Seller has customarily previously performed or caused to be performed to maintain them in substantially the same condition as they are as of the Effective Date of this Agreement, as said condition shall be changed by wear and tear, damage by fire or other casualty, or vandalism, and (B) all customary ordinary repairs to each Property necessary to correct violations of applicable building codes. Notwithstanding the foregoing, neither Seller nor any Owner shall have any obligation to make any structural or extraordinary repairs or capital improvements to any Property between the Effective Date and Closing;

(viii) deliver promptly to Buyer any written notices of violation received by Seller or any Owner from any governmental authority or any Material Title Contract Counterparty with respect to any Owner or any Property;

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(ix) not negotiate, enter into, modify or terminate any Lease except as permitted by Section 6(a), and deliver to Buyer promptly any New Leases entered into pursuant to Section 6(a);

(x) not negotiate, enter into, modify or terminate any Contract except as permitted by Section 6(b), and deliver to Buyer promptly any new Contract entered into pursuant to Section 6(b);

(xi) not negotiate, enter into, modify or terminate any Title Contract without the prior written consent of Buyer;

(xii) notify Buyer promptly upon Seller’s discovery that any representation or warranty made by Seller herein is untrue, inaccurate or incorrect in any material respect; and

(xiii) complete the subdivision and conveyance of the Excluded Parcels in accordance with the provisions of Section 14(a)(v).

(b) Taxes. Seller shall prepare or cause to be prepared and filed all federal, state and local tax returns for 2009, the short tax year in which Closing occurs and all prior tax years, and, upon request of Buyer, promptly deliver to Buyer copies of all such tax returns filed after the Closing Date, including any amendments thereto. Seller shall pay all taxes owed for those tax years, and for any audits with respect to those tax years. The provisions of this Section 13(b) shall survive Closing and delivery of the Assignments.

14. Conditions Precedent to Closing.

(a) Buyer’s Conditions. Buyer shall not be obligated to close under this Agreement unless each of the following conditions shall be satisfied or waived by Buyer on or prior to the Closing Date:

(i) Title Policies. The Title Company shall be irrevocably and unconditionally committed to issue the Title Policies naming each Property Owner as insured upon payment of the title premium therefor at Buyer’s sole cost and expense.

(ii) Accuracy of Representations. The representations and warranties made by Seller in this Agreement shall be true and correct in all material respects as of the Closing Date. The inaccuracy of such representations and warranties shall be deemed “material” pursuant to this Section 14(a)(ii) if collectively the inaccuracies could reasonably be estimated by Buyer to cause damages to Buyer in excess of $250,000, in which case the provisions of Section 24(c)(ii) shall apply. In determining whether an inaccuracy in any representation and warranty of Seller is “material” for purposes of this Section 14(a)(ii), any materiality qualifications in such representation and warranty shall be disregarded.

(iii) Estoppel Certificates. Seller shall have delivered to Buyer, at least five (5) days before Closing, a written statement (a “Tenant Estoppel Certificate”) from each Major Tenant and a sufficient number of other tenants such that Tenant Estoppel Certificates have been received for each Property with respect to not less than the Estoppel Percentage, in each case, (A) dated not more than forty-five (45) days prior to the applicable Closing Date, (B) in the

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specific form of tenant estoppel certificate required under their respective Leases and (C) consistent with the terms of the Leases and the representations and warranties of Seller set forth herein and disclosing no materially adverse matters. If Seller is unable to deliver conforming Tenant Estoppel Certificates from each Major Tenant or a sufficient amount of the other tenants at a Property to achieve the Estoppel Percentage, then Seller, at its option, but without any obligation to do so, may satisfy this requirement by delivering estoppel certificates executed by Seller (a “Seller Estoppel Certificate”) with respect to Leases in an amount which, together with the Tenant Estoppel Certificates executed by tenants would satisfy the Estoppel Percentage; provided, however, Seller shall not be permitted to deliver more than one (1) Seller Estoppel Certificate for each Property as to a Major Tenant at such Property. If no specific form of tenant estoppel certificate is required under a Lease, then the required Tenant Estoppel Certificate shall be in the form of the tenant estoppel certificate set forth on Exhibit “H” hereto. If a Seller Estoppel Certificate is delivered, such Seller Estoppel Certificate shall be in the form of the Seller Estoppel Certificate set forth on Exhibit “H-1” hereto. In determining whether the foregoing requirement has been satisfied, Buyer agrees not to object to (1) any non-material qualifications or modifications which a tenant may make to the form of Tenant Estoppel Certificate, or (2) any modification to a Tenant Estoppel Certificate made by a tenant to conform it to the requirements of its Lease. If any tenant indicates in its Tenant Estoppel Certificate that it has a claim which would entitle it to set-off the amount of the claim against rent due under its Lease and the amount of such claim is specified by the tenant as a specific dollar amount, Seller shall have the right, at its sole option, to give Buyer a credit against the Purchase Price in the amount of the claim or to deliver an indemnity reasonably acceptable to Buyer with respect thereto, in which event Buyer shall complete Closing subject to such claim. Seller’s failure to deliver sufficient Tenant Estoppel Certificates or Seller Estoppel Certificates to satisfy Buyer’s condition under this Section 14(a)(iii) shall not by itself constitute a default by Seller hereunder provided that Seller shall have requested Tenant Estoppel Certificates from all of the tenants at each Property and shall have exercised commercially reasonable efforts to obtain Tenant Estoppel Certificates satisfying Buyer’s condition under this Section 14(a)(iii). If the condition of this Section 14(a)(iii) is not satisfied by the date five (5) Business Days prior to Closing and neither Seller or Buyer has deferred Closing pursuant to the provisions of Section 4(b) hereof, Seller shall have the right, at its sole option, without any obligation, upon written notice to Buyer, to deliver a Seller Estoppel Certificate to the extent permitted herein. In the event of a failure of Seller to satisfy the condition of this Section 14(a)(iii) by the Closing Date, as it may be deferred, other than by reason of Seller’s failure to exercise commercially reasonable efforts to satisfy same which is governed by Section 16(b), Buyer’s sole remedy shall be to either (x) waive the estoppel requirement and proceed to Closing without any abatement in the Purchase Price, or (y) terminate this Agreement and the Other Purchase Agreements and receive a return of the Deposit. Seller shall promptly deliver to Buyer the executed Tenant Estoppel Certificates as and when they are received by Seller. Seller agrees that Seller shall reasonably cooperate with Buyer in obtaining any subordination, non-disturbance and attornment agreements which Buyer’s lender may require; provided, however, that the failure to deliver subordination, non-disturbance and attornment agreements executed by the tenants shall not excuse Buyer from proceeding to Closing or give rise to any rights in favor of Buyer to suspend, extend or defer the Closing.

(iv) Material Title Contract Estoppel Certificates. Seller shall have delivered to Buyer, at least five (5) Business Days before Closing, a written statement (a “Material Title

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Contract Estoppel Certificate”) from each Material Title Contract Counterparty with respect to each Material Title Contract to which it is a party, in each case, (A) dated not more than forty-five (45) days prior to the applicable Closing Date, (B) in the specific form of estoppel certificate required under its Material Title Contract(s) and (C) consistent with the terms of the Material Title Contracts and the representations and warranties of Seller set forth herein and disclosing no materially adverse matters. In determining whether the foregoing requirement has been satisfied, Buyer agrees not to object to (1) any non-material qualifications or modifications which a Material Title Contract Counterparty may make to the form of Material Title Contract Estoppel Certificate, or (2) any modification to a Material Title Contract Estoppel Certificate made by a Material Title Contract Counterparty to conform it to the requirements of its Material Title Contract(s). Seller’s failure to obtain any Material Title Contract Estoppel Certificate from a Material Title Contract Counterparty that is not an Affiliate of Seller (including any board of directors or other governing body controlled by or under common control with Seller) (each a “Third Party Material Title Contract Estoppel Certificate”), shall not by itself constitute a default by Seller hereunder, provided that Seller shall have exercised commercially reasonable efforts to obtain such Third Party Material Title Contract Estoppel Certificate. Seller’s failure to obtain a truthful Material Title Contract Estoppel Certificate from Seller or an Affiliate of Seller, including a Property Owner, shall constitute a willful default by Seller under this Agreement and the provisions of Section 16(b) shall apply. If any Third Party Title Contract Estoppel Certificate is not delivered to Buyer by the date five (5) Business Days prior to Closing, Seller shall have the right, at its sole option, without any obligation, upon written notice to Buyer, to defer the Closing for a period not exceeding thirty (30) days after the scheduled Closing Date to give Seller an opportunity, at Seller’s sole option, of attempting to obtain such Third Party Material Title Contract Estoppel Certificate. In the event of a failure of Seller to obtain any Third Party Material Title Contract Estoppel Certificate by the Closing Date, as may be deferred by Seller, other than by reason of Seller’s failure to exercise commercially reasonable efforts to obtain same which is governed by Section 16(b), Buyer’s sole remedy shall be to either (x) waive the estoppel requirement and proceed to Closing without any abatement in the Purchase Price, or (y) terminate this Agreement and the Other Purchase Agreements and receive a return of the Deposit. Seller shall promptly deliver to Buyer the executed Material Title Contract Estoppel Certificates as and when they are received by Seller.

(v) Subdivision of Excluded Parcels. Subject to Section 31, at Seller’s sole cost and expense, Seller shall have (x) legally separated the Excluded Parcels from the balance of the Parcels, if applicable, and (y) conveyed fee title to the Excluded Parcels to one or more indirect, wholly owned subsidiaries of Seller that are not Owners (each, an “Excluded Parcel Owner”) pursuant to instruments consistent with this Agreement in all respects and otherwise reasonably satisfactory to Buyer. Except as provided below and in Exhibit “A”, such conveyance of an Excluded Parcel shall not include any rights of the “declarant” or any “approving party” (or any similar rights) under any reciprocal easement agreement, condominium declaration or other similar agreement, it being intended that such rights would remain with the Property Owner. Notwithstanding the foregoing, the Excluded Parcel Owner of Unit 1 at the Monroe Marketplace shall be conveyed the right to require the declarant under the reciprocal easement agreement and/or condominium declaration at Monroe Marketplace to subdivide Unit 1 in to as many as three (3) separate condominium units and to designate a tenant/occupant of Unit 1 as an “approving party” if such tenant/occupant qualifies to be an

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approving party under the Declaration. These rights shall be included in the deed of such Excluded Parcel.

(vi) Other Purchase Agreements. Neither PREIT nor any Affiliate of PREIT shall have defaulted under any Other Purchase Agreement.

(vii) Seller’s Performance. Seller shall have performed its covenants, agreements and obligations under this Agreement, including, without limitation, the delivery of the documents set forth in Section 15(a) hereof.

In the event Closing does not occur by reason of the failure of any of the foregoing conditions of this Section 14(a) for any reasons other than a deferral pursuant to Section 4(b) hereof or the breach of this Agreement or the Other Purchase Agreements by Buyer, then upon the written election of Buyer, this Agreement and the Other Purchase Agreements shall terminate, the Deposit shall be returned to Buyer and neither Buyer nor Seller shall have any further liability under this Agreement except for those obligations which expressly survive termination of this Agreement or the termination of the Other Purchase Agreements; provided, however, that if the failure of the condition is due to a default of Seller hereunder, the provisions of Section 16(b) shall apply.

(b) Seller’s Conditions. Seller shall not be obligated to close under this Agreement unless each of the following conditions shall be satisfied or waived by Seller prior to the Closing Date:

(i) Accuracy of Representations. The representations and warranties made by Buyer in this Agreement shall be true and correct in all material respects as of the Closing Date.

(ii) Other Purchase Agreements. Buyer shall not have defaulted under any Other Purchase Agreement.

(iii) Buyer’s Performance. Buyer shall have performed its covenants, agreements and obligations under this Agreement, including, without limitation, delivery of the documents set forth in Section 15(b) hereof.

In the event Closing does not occur by reason of the failure of any of the foregoing conditions of this Section 14(b) for any reasons other than a deferral pursuant to Section 4(b) hereof or the breach of this Agreement or the Other Purchase Agreements by Seller, then upon the written election of Seller, this Agreement and the Other Purchase Agreements shall terminate, the Deposit shall be returned to Buyer and neither Buyer nor Seller shall have any further liability under this Agreement except for those obligations which expressly survive termination of this Agreement or the termination of the Other Purchase Agreements; provided, however, that if the failure of the condition is due to a default of Buyer hereunder, the provisions of Section 16(a) shall apply.

15. Deliveries at Closing.

(a) Seller’s Deliveries. On the Closing Date, Seller shall deliver to Buyer or, at Buyer’s direction, to the Title Company, the following:

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(i) Assignments. The Assignments executed by Seller or PRI, as applicable.

(ii) Management and Leasing Agreement. An executed copy of a Management and Leasing Agreement with respect to each Property in substantially the form attached hereto as Exhibit “K”.

(iii) Leases and Contracts. An updated list of Leases, which shall also list the amount of the security deposit held by each Property Owner under each Lease, in substantially the form of Exhibit “E” hereto, certified, to Seller’s knowledge, as true, correct and complete. An updated list of Contracts, in substantially the form of Exhibit “S” hereto, certified, to Seller’s knowledge, as true, correct and complete.

(iv) Leasing Pipeline Schedule. An updated Leasing Pipeline Schedule, provided that any such update shall have been approved by Buyer to the extent the same does not comply with the Leasing Guidelines.

(v) Authority Documents. If required by the Title Company or Buyer, evidence of required authority and an incumbency certificate to evidence the capacity of the signatory for Seller.

(vi) FIRPTA Certification and Title Affidavit. (A) Affidavits in the form of Exhibit “I” hereto with respect to compliance with the Foreign Investment in Real Property Tax Act (Internal Revenue Code Sec. 1445, as amended, and the regulations issued thereunder), executed and acknowledged by Seller and PRI; (B) an affidavit in favor of the Title Company in the form of Exhibit “J” hereto, executed and acknowledged by Seller; and (C) an affidavit in favor of the Title Company in the form of Exhibit “J-1” hereto required by the Title Company for the issuance of a non-imputation endorsement, executed and acknowledged by Seller.

(vii) Keys. To the extent in Seller’s or any Owner’s possession, all keys, codes, transponders and other security devices for each Property.

(viii) Books and Records. Copies (to the extent in Seller’s or any Owner’s possession) of all books and records reasonably required for the orderly transition of operation of the Properties.

(ix) Original Documents. The originals (to the extent in Seller’s or any Owner’s possession) or, if unavailable, copies certified, to Seller’s knowledge, to be true, correct and complete in all material respects, of all Leases and (to the extent in Seller’s or any Owner’s possession) copies of as-built plans and specifications for the improvements at the Properties, permits, licenses and other agreements and approvals relating to the maintenance and operation of the Properties.

(x) Closing Statement. The Closing Statement prepared in accordance with the terms of this Agreement, executed by Seller.

(xi) Update Certificate. A certificate of Seller, reasonably satisfactory to Buyer, updating as of the Closing Date, all of the Seller’s representations and warranties set forth

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in Section 10 and elsewhere in this Agreement, including any updates to the Exhibits of this Agreement required to be delivered hereunder.

(xii) Updated Rent Roll. An updated Rent Roll for each Property containing all of the categories of information set forth on the Rent Rolls attached hereto as Exhibit “R”, dated not more than five (5) days prior to the Closing Date (each an “Updated Rent Roll”).

(xiii) Updated Arrearages Report. An updated arrearages report for each Property containing all of the categories of information set forth on the reports attached hereto as Exhibit “V”, dated not more than five (5) days prior to the Closing Date.

(xiv) Excluded Parcels. An executed memorandum of options with respect to the Excluded Parcels in the form attached hereto as Exhibit “U”.

(xv) Material Title Contract Deliveries. Those certain amendments, notices and other deliveries relating to the Material Title Contracts that are more particularly described on Exhibit “W” attached hereto, all in form and substance reasonably satisfactory to Buyer.

(xvi) Other Documents. Any other documents which Seller is obligated to deliver to Buyer pursuant to this Agreement or that are necessary to effectuate the transfer of the Ownership Interests as contemplated by this Agreement in accordance with the terms of this Agreement or pursuant to applicable law, rule or regulation, including, without limitation, any original letters of credit and documents evidencing any other form of security deposit provided by tenants under the Leases and held by any Owner or Seller.

Location at the Properties on the Closing Date of any of the materials referred to in clauses (vii), (viii) and (ix) of this Section 15(a) shall be deemed delivery to Buyer.

(b) Buyer’s Deliveries. On the Closing Date, Buyer will deliver to Seller or, at Seller’s direction, to the Title Company, the following:

(i) Assignments. The Assignments executed by Buyer.

(ii) Management and Leasing Agreement. An executed copy of a Management and Leasing Agreement with respect to each Property.

(iii) Authority Documents. An authorizing resolution and an incumbency certificate, and such other documents as may be reasonably necessary to evidence the authority and capacity of Buyer and the authority of the signatory for Buyer.

(iv) Purchase Price. The balance of the Purchase Price, adjusted in accordance with Sections 7 and 25 hereof, payable at Closing.

(v) Closing Statement. The Closing Statement prepared in accordance with this Agreement, executed by Buyer.

(vi) Excluded Parcels. An executed memorandum of options with respect to the Excluded Parcels in the form attached hereto as Exhibit “U”.

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(vii) Other Documents. Any other documents (A) which Buyer is obligated to deliver to Seller pursuant to this Agreement, (B) that may be requested by the Title Company in order to issue the Title Policies and (C) that are necessary in order to effectuate the transfer of the Ownership Interests as contemplated by this Agreement (x) in accordance with the terms of this Agreement, or (y) pursuant to any applicable law, rule or regulation.

16. Default.

(a) Buyer Default. IF BUYER SHALL FAIL TO PERFORM ANY OF ITS MATERIAL OBLIGATIONS UNDER THIS AGREEMENT OR ANY OF THE OTHER PURCHASE AGREEMENTS IN ANY MATERIAL RESPECT, PRIOR TO CLOSING, AND BUYER FAILS TO CURE SUCH BREACH WITHIN TEN (10) BUSINESS DAYS AFTER BUYER’S RECEIPT OF WRITTEN NOTICE FROM SELLER SPECIFYING SUCH DEFAULT, THEN THE DEPOSIT SHALL BE PAID TO SELLER BY THE ESCROWEE IN ACCORDANCE WITH THE DEPOSIT ESCROW AGREEMENT, AS LIQUIDATED DAMAGES AND NOT AS A PENALTY. THE RETENTION OF THE DEPOSIT SHALL BE SELLER’S SOLE REMEDY IN THE EVENT OF BUYER’S DEFAULT AT OR PRIOR TO THE CLOSING DATE, AND SELLER IN SUCH EVENT HEREBY WAIVES ANY RIGHT, UNLESS CLOSING IS COMPLETED, TO RECOVER THE BALANCE OF THE PURCHASE PRICE. SELLER AND BUYER AGREE THAT THE ACTUAL DAMAGES TO SELLER IN THE EVENT OF SUCH BREACH ARE IMPRACTICAL TO ASCERTAIN AS OF THE DATE OF THIS AGREEMENT AND THE AMOUNT OF THE DEPOSIT IS A REASONABLE ESTIMATE THEREOF. UPON PAYMENT OF THE DEPOSIT TO SELLER AS LIQUIDATED DAMAGES, THIS AGREEMENT AND THE OTHER PURCHASE AGREEMENT SHALL (EXCEPT AS HEREIN OR THEREIN OTHERWISE EXPRESSLY PROVIDED) BE AND BECOME NULL AND VOID. NOTHING CONTAINED IN THIS SECTION 16(a) SHALL BE DEEMED TO LIMIT SELLER’S RIGHTS AGAINST BUYER BY REASON OF THE INDEMNITY OBLIGATIONS OF BUYER TO SELLER SET FORTH IN THIS AGREEMENT WHICH EXPRESSLY SURVIVE THE TERMINATION OF THIS AGREEMENT.

(b) Breach by Seller. If Seller shall fail to perform any of its material obligations under this Agreement or any of the Other Purchase Agreements, in any material respect, prior to Closing, and Seller fails to cure such breach within ten (10) Business Days after Seller’s receipt of written notice from Buyer specifying such default, as its sole and exclusive remedy, Buyer may either (i) terminate this Agreement and the Other Purchase Agreements and receive a refund of the Deposit, in which event Seller shall pay to Buyer its actual third party out-of-pocket costs and expenses incurred in connection with the transactions contemplated by this Agreement and the Other Purchase Agreements in an amount not to exceed $750,000 or (ii) pursue the remedy of specific performance of Seller’s obligations under this Agreement, Seller hereby waiving any defense it may have to an action for specific performance based upon the adequacy of Buyer’s remedies at law; provided, however, that (A) Buyer shall only be entitled to the remedy of specific performance if any suit for specific performance is filed within ninety (90) days after Seller’s failure to cure the applicable breach within ten (10) Business Days as aforesaid, and (B) if Buyer seeks specific performance under this Agreement, Buyer agrees to accept the Ownership Interests and each Owner’s assets, including, without limitation, the Properties, in accordance with the terms of this Agreement; provided further, that if Seller wrongfully sells a Property or

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any Ownership Interests in any Owner to a bona fide third party purchaser prior to Closing, such that the remedy of specific performance is not available, then, in addition to the refund of the Deposit and Seller’s payment to Buyer of its actual third party out-of-pocket costs and expenses incurred in connection with the transactions contemplated by this Agreement and the Other Purchase Agreements in an amount not to exceed $750,000, Seller shall pay to Buyer its actual damages as a result of such breach in an amount not to exceed One Million Seven Hundred Fifty Thousand Dollars ($1,750,000). Notwithstanding any of the foregoing to the contrary, in no event whatsoever, shall Buyer have the right to seek money damages of any kind as a result of any default by Seller under any of the terms of this Agreement other than as expressly provided in this Agreement, and in no event shall Seller be liable to Buyer for any punitive, speculative or consequential damages. The foregoing waiver shall not apply to claims based upon breach of representations and warranties, which are governed instead by the provisions of Section 24(c) hereof, or any claim for indemnification governed by Section 22 or Section 23(e)(i) or any of Seller’s post-closing obligations under any Transaction Document.

17. Notices; Computation of Periods.

(a) Notices. Except as expressly set forth in Section 21, all notices given by either party to the other shall be in writing and shall be sent either (i) by United States Postal Service registered or certified mail, postage prepaid, return receipt requested, or (ii) by prepaid nationally recognized overnight courier service for next business day delivery, addressed to the other party at the following addresses listed below, or (iii) via facsimile transmission to the facsimile numbers listed below or by email of a pdf copy of such notice to the email addresses listed below; provided, however, that if such communication is given via facsimile transmission or email, an original counterpart of such communication shall concurrently be sent in the manner specified in clause (ii) above. Mailing addresses, facsimile numbers and email addresses of the parties are as follows:

As to Seller:

PREIT Associates, L.P.

The Bellevue, 3^rd Floor

Broad and Walnut Streets

Philadelphia, PA 19102

Attention: Jeffrey A. Linn, Executive Vice President

Fax: (215) 546-0240

Email: linnj@preit.com

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with copies at the same time to:

PREIT Associates, L.P.

The Bellevue, 3^rd Floor

Broad and Walnut Streets

Philadelphia, PA 19102

Attention: Bruce Goldman, Esq., Executive Vice

President and General Counsel

Fax: (215) 546-7311

Email: goldmanb@preit.com

and

Drinker Biddle & Reath LLP

One Logan Square, 20th Floor

Philadelphia, Pennsylvania 19103-6996

Attention: Clifford H. Swain, Esq.

Fax: (215) 988-2757

Email: clifford.swain@dbr.com

As to Buyer:

Cedar Shopping Centers Partnership, L.P.

44 South Bayles Avenue, Suite 304

Port Washington, New York 11050-3765

Attention: Leo S. Ullman

Fax: (516) 767-6497

Email: LSU@cedarshoppingcenters.com

with copies at the same time to:

Cedar Shopping Centers Partnership, L.P.

44 South Bayles Avenue, Suite 304

Port Washington, New York 11050-3765

Attention: Stuart Widowski

Fax: (516) 767-6497

Email: SWidowski@cedarshoppingcenters.com

and

Stroock & Stroock & Lavan LLP

180 Maiden Lane

New York, New York 10038

Attention: Steven Moskowitz, Esq.

Fax: (212) 806-7899

Email: smoskowitz@stroock.com

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or to such other address as the respective parties may hereafter designate by notice in writing in the manner specified above. Any notice may be given on behalf of any party by its counsel. Notices given in the manner aforesaid shall be deemed sufficiently served or given for all purposes under this Agreement upon the earliest of (A) actual receipt by 5:00 p.m. local time on a Business Day (including receipt of a facsimile copy or a pdf copy, but only if an original of such facsimile or pdf copy is properly sent by overnight courier as provided above) or refusal of delivery by the addressee, or (B) three (3) Business Days following the date such notices, demands or requests shall be deposited in any Post Office, or branch Post Office regularly maintained by the United States Government, or (C) one (1) Business Day after delivered to the overnight courier service, as the case may be.

(b) Computation of Periods. If the final day of any period of time in any provision of this Agreement falls upon a day which is not a Business Day, then, the time of such period shall be extended to the next day which is a Business Day. Unless otherwise specified, in computing any period of time described in this Agreement, the day of the act or event on which the designated period of time begins to run is not to be included and the last day of the period as so computed is to be included, unless such last day is not a Business Day in which event the period shall run until the end of the next day which is a Business Day.

18. Fire or Other Casualty.

(a) Casualty Damage. If any portion of any Property shall be damaged or destroyed by fire or other casualty between the Effective Date and the Closing Date, Seller shall, promptly upon becoming aware of the same, give written notice thereof to Buyer. Subject to the right to terminate this Agreement as to such Property in accordance with Section 18(b) hereof, the obligation of Buyer to complete Closing under this Agreement shall in no way be voided or impaired by reason thereof, and Buyer shall be required to accept the Ownership Interests without abatement of the Purchase Price or any claim against Seller, other than a credit in an amount equal to the lesser of (i) the amount necessary to repair such casualty, which amount shall be determined by an independent contractor reasonably acceptable to Buyer and Seller, or (ii) any deductible under the applicable Property Owner’s insurance policies. In such case, the proceeds of all fire and extended coverage insurance policies attributable to such damage or destruction of the assets of the applicable Property Owner, including, without limitation, its Property, received by Seller or any Owner prior to the Closing Date and not used by Seller or any Owner for the protection of or repairs to the assets of such Property Owner, including, without limitation, its Property, (and Buyer hereby authorizes Seller and each Property Owner to use the proceeds for such purposes subject to Buyer’s reasonable approval of such work) shall be disbursed to Buyer at Closing. Seller shall have no right to any unpaid claims under such insurance policies attributable to such damage or destruction of the assets of such Property Owner, including, without limitation, its Property and Seller shall assign to Buyer all of Seller’s right, title and interest, if any, in and to any such unpaid claims. There shall be no reduction in the Purchase Price by reason of any such unpaid claim, other than a credit in an amount equal to the lesser of (A) the amount necessary to repair such casualty, which amount shall be determined by an independent contractor reasonably acceptable to Buyer and Seller, or (B) any deductible under the applicable Property Owner’s insurance policies. Seller shall not settle or compromise or permit any Owner to settle or compromise any claim for such insurance proceeds without the prior written consent of Buyer, which consent shall not be unreasonably withheld or delayed.

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(b) Right of Termination. Notwithstanding any of the preceding provisions of this Section 18, if substantial damage shall occur to the Improvements on a Property by fire or other insured casualty prior to the Closing Date, Buyer shall have the right to terminate this Agreement as to such Property by written notice to the Seller. If Buyer desires to terminate this Agreement as to such Property pursuant to this Section 18(b), Buyer must give a written notice of termination to Seller within fifteen (15) days after Buyer’s receipt of the written determination of an independent third-party real estate professional that such damage is “substantial” as provided herein. Upon such termination of this Agreement as to such Property, this Agreement shall become null and void as to such Property (except for the indemnity obligations of each party to the other set forth in this Agreement which shall survive the termination of this Agreement). Substantial damage shall mean such damage that would cost, in the judgment of an independent third-party real estate professional retained by Seller and reasonably approved by Buyer, at least $2,000,000 to repair or which would entitle a Major Tenant to terminate its Lease. If Buyer does not timely give notice of a termination, Buyer’s obligations hereunder shall remain in effect notwithstanding such casualty and Buyer shall remain obligated to consummate the purchase in accordance with the terms of this Agreement, including, without limitation, Section 18(a) hereof.

(c) Survival. The provisions of this Section 18 shall survive the Closing and delivery of the Assignments.

19. Condemnation.

(a) Immaterial Taking. If any governmental authority or other entity having condemnation authority shall institute an eminent domain proceeding or take any steps preliminary thereto (including the giving of any direct or indirect notice of intent to institute such proceedings) with regard to a Property, Seller shall deliver prompt written notice thereof to Buyer. If any part of a Property shall be taken by exercise of the power of eminent domain after the Effective Date that does not materially interfere with the use of such Property for the purposes for which it is currently used, this Agreement shall continue in full force and effect and there shall be no abatement of the Purchase Price, but (i) Seller shall have no right to any awards arising therefrom, (ii) Seller shall assign to Buyer all of Seller’s right, title and interest, if any, in and to any such awards, and (iii) Buyer shall receive a credit against the Purchase Price for any money theretofore received by Seller or any Owner on account thereof, net of any out-of-pocket expenses actually incurred by Seller or any Owner, including attorney’s fees of collecting the same. Seller shall promptly furnish Buyer with a copy of the declaration of taking promptly after Seller’s receipt thereof. Seller shall not settle or compromise or permit any Owner to settle or compromise any claim for such awards without the prior written consent of Buyer, which consent shall not be unreasonably withheld or delayed.

(b) Material Taking. If any taking of a portion of a Property materially interferes with the use of such Property for the purposes for which it is currently used or materially and adversely affects the financeability of a Property, or would entitle a Major Tenant to terminate its Lease, Buyer may terminate this Agreement as to such Property, by written notice to Seller within fifteen (15) days of Seller’s notice to Buyer of such a taking. Upon the giving of such termination notice, this Agreement shall become null and void as to such Property, except for the indemnity obligations of each party to the other and each Owner set forth in this Agreement which will survive termination of this Agreement. If Buyer does not timely give notice of

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termination, Buyer’s obligations hereunder shall remain in effect notwithstanding such condemnation and Buyer shall remain obligated to consummate the purchase in accordance with the terms of this Agreement, including, without limitation, Section 19(a) hereof.

(c) Survival. The provisions of this Section 19 shall survive the Closing and delivery of the Assignments.

20. Assignability.

(a) Assignments Prohibited. Buyer may not, directly or indirectly by operation of law or otherwise, assign or suffer an assignment of this Agreement and/or its rights under this Agreement, without the prior written consent of Seller, which consent Seller may deny in its sole and absolute discretion. Any assignment made without such prior written consent shall be deemed voidable and a breach of this Agreement entitling Seller to terminate this Agreement. In no event shall any transfer of direct or indirect interests in any entity that was not formed solely for the purpose of acquiring and owning the Ownership Interests be deemed any assignment of this Agreement, including, without limitation, interests in Buyer, RioCan Holdings USA, Inc., RC Cedar PA Holdings LLC and RC Cedar REIT Property Subsidiary LP (collectively, the “Permitted Assignees”). Notwithstanding the foregoing, Buyer may assign this Agreement to an entity jointly owned, directly or indirectly, by Buyer and RioCan Holdings USA, Inc. or to any Affiliate of Buyer or such jointly owned entity, or Buyer may designate any such party to take title to the Ownership Interests at Closing. No assignment shall be effective unless and until (i) Buyer shall have furnished to Seller both a fully executed copy of the assignment and a fully executed assumption agreement, in form reasonably satisfactory to Seller, by the assignee to assume, perform and be responsible, jointly and severally with the Buyer named herein, for the performance of all of the obligations of Buyer under this Agreement, and which contains a representation by the assignee that all of the representations and warranties made by Buyer in this Agreement are true and correct with respect to the assignee as of the date of the assumption agreement, and (ii) Buyer shall have delivered to Seller such information reasonably requested by Seller to verify such assignee’s compliance with the representations set forth in Section 12 hereof and Seller shall have determined such assignee’s compliance with such representations. In no event shall Buyer be relieved of any liability hereunder by reason of an assignment of its rights hereunder and the express terms of any assignment by Buyer shall reaffirm Buyer’s obligations hereunder.

(b) Successors and Assigns. Subject to the foregoing limitations, this Agreement shall extend to, and shall bind, the respective heirs, executors, personal representatives, successors and assigns of Seller and Buyer.

21. Inspections.

(a) Right to Inspect. Buyer, and Buyer’s agents and representatives, shall have the right, from time to time prior to the Closing Date or earlier termination of this Agreement, during normal business hours, to enter upon any Property for the purpose of conducting visual inspections of such Property, testing of machinery and equipment, taking of measurements, making of surveys, interviewing tenants and generally for the reasonable ascertainment of matters relating to such Property; provided, however, that Buyer shall (i) give Seller reasonable

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prior written or oral notice of the time and place of such entry in order to permit a representative of Seller to accompany Buyer; (ii) use reasonable commercial efforts not to interfere with the operations of any Property or any tenant thereof; (iii) restore any damage to any Property or any adjacent property caused by such actions; (iv) indemnify, defend and save Seller and each Owner and, as the case may be, their respective partners, trustees, shareholders, directors, members, officers, employees and agents harmless of and from any and all claims and/or liabilities which Seller and each Owner and their respective partners, trustees, shareholders, directors, members, officers, employees and agents may suffer or be subject by reason of, or in any manner relating to, such entry and such activities, including, without limitation, any claims by tenants and/or invitees of any Property; provided, however, that Buyer shall have no obligation to so indemnify Seller or any Owner with respect to any adverse matter or condition discovered by Buyer with respect to a Property not caused by Buyer; (v) not enter into any tenant’s leased premises or communicate with any tenant prior to the Closing Date without prior written notice to Seller and the provision to Seller of copies of all written correspondence between Buyer and such tenant occurring prior to the Closing Date; (vi) prior to entry onto a Property, furnish Seller with a certificate of general liability and property damage insurance maintained by Buyer with single occurrence coverage of at least $1,000,000 (and aggregate coverage of at least $2,000,000) and naming Seller, each Property Owner, each Property Owner’s property manager and such other entities as Seller shall designate, as additional insureds; (vii) not conduct any further environmental investigations or testing, without prior execution of, and compliance with Seller’s standard form of Environmental Testing Access Agreement; and (viii) not conduct any invasive testing, without the prior written consent of Seller, which may be withheld in its sole and absolute discretion. Seller shall make available to Buyer, and Buyer’s agents and representatives, for review the corporate books and records, financial statements and tax records with respect to each Owner and each Property. All inspection rights under this Section 21(a) shall be subject to the rights of tenants under the Leases.

(b) No Liens Permitted. Nothing contained in this Agreement shall be deemed or construed in any way as constituting the consent or request of Seller or any Owner, express or implied by inference or otherwise, to any party for the performance of any labor or the furnishing of any materials to a Property or any part thereof, nor as giving Buyer any right, power or authority to contract for or permit the rendering of any services or the furnishing of any materials that would give rise to the filing of any liens against a Property or any part thereof. Buyer agrees to promptly cause the removal of, and indemnify, defend and hold Seller and each Owner harmless with respect to, any mechanic’s or similar lien filed against any Property or any part thereof by any party performing any labor or services at such Property or supplying any materials to such Property at Buyer’s request.

(c) Survival. The provisions of this Section 21 shall survive termination of this Agreement and/or the Closing and delivery of the Assignments.

22. Brokers. Seller and Buyer each represents and warrants to the other that it has dealt with no broker or other intermediary in connection with this transaction. If any broker or other intermediary claims to be entitled to a fee or commission by reason of having dealt with Seller or Buyer in connection with this transaction, or having introduced any Property to Buyer for sale, or having been the inducing cause to the sale, the party with whom such broker claims to have dealt shall indemnify, defend and save harmless the other party of and from any claim for

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commission or compensation by such broker or other intermediary. This Section 22 shall survive the termination of this Agreement and/or the Closing and delivery of the Assignment.

23. Condition of Ownership Interests and Properties.

(a) NO WARRANTIES. THE ENTIRE AGREEMENT BETWEEN THE SELLER AND BUYER WITH RESPECT TO THE OWNERSHIP INTERESTS, THE SALE THEREOF, AND THE PROPERTIES IS EXPRESSLY SET FORTH IN THIS AGREEMENT, THE DEPOSIT ESCROW AGREEMENT, THE ASSIGNMENTS, THE OTHER EXHIBITS ATTACHED HERETO AND EACH OTHER DOCUMENT TO BE DELIVERED BY SELLER AT CLOSING (COLLECTIVELY, THE “TRANSACTION DOCUMENTS”). THE PARTIES ARE NOT BOUND BY ANY AGREEMENTS, UNDERSTANDINGS, PROVISIONS, CONDITIONS, REPRESENTATIONS OR WARRANTIES (WHETHER WRITTEN OR ORAL AND WHETHER MADE BY SELLER OR ANY AGENT, EMPLOYEE, MEMBER, OFFICER OR PRINCIPAL OF SELLER OR ANY OTHER PARTY) OTHER THAN AS ARE EXPRESSLY SET FORTH AND STIPULATED IN ANY OF THE TRANSACTION DOCUMENTS. WITHOUT IN ANY MANNER LIMITING THE GENERALITY OF THE FOREGOING, BUYER ACKNOWLEDGES THAT PRIOR TO EXECUTION OF THIS AGREEMENT IT INSPECTED THE FINANCIAL CONDITION, FORMATION DOCUMENTS AND OTHER RECORDS OF OWNERS, THE PROPERTIES, AND THE LEASES OR WAS PROVIDED WITH AN ADEQUATE OPPORTUNITY TO DO SO, AND EXCEPT AS SET FORTH IN ANY OF THE TRANSACTION DOCUMENTS, THAT THE OWNERSHIP INTERESTS AND THEREBY OWNERS’ ASSETS SHALL BE PURCHASED BY BUYER IN AN “AS IS” AND “WHERE IS” CONDITION AND WITH ALL EXISTING DEFECTS (PATENT AND LATENT) AS A RESULT OF SUCH INSPECTIONS AND INVESTIGATIONS AND, EXCEPT FOR THE COVENANTS, AGREEMENTS, REPRESENTATIONS AND WARRANTIES EXPRESSLY SET FORTH IN ANY OF THE TRANSACTION DOCUMENTS, NOT IN RELIANCE ON ANY AGREEMENT, UNDERSTANDING, CONDITION, WARRANTY (INCLUDING, WITHOUT LIMITATION, WARRANTIES OF HABITABILITY, MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE) OR REPRESENTATION MADE BY SELLER, ANY OWNER OR ANY AGENT, EMPLOYEE, MEMBER, OFFICER OR PRINCIPAL OF SELLER OR ANY OWNER OR ANY OTHER PARTY AS TO THE OWNERSHIP INTERESTS OR THE FINANCIAL OR PHYSICAL (INCLUDING, WITHOUT LIMITATION, ENVIRONMENTAL) CONDITION OF THE ASSETS OF ANY OWNER, INCLUDING, WITHOUT LIMITATION, THE PROPERTIES OR THE AREAS SURROUNDING THE PROPERTIES, OR AS TO ANY OTHER MATTER WHATSOEVER, INCLUDING, WITHOUT LIMITATION, (A) THE VALUE, NATURE, QUALITY OR CONDITION OF THE PROPERTIES, INCLUDING, WITHOUT LIMITATION, THE WATER, SOIL AND GEOLOGY, (B) ANY INCOME TO BE DERIVED FROM THE PROPERTIES, (C) THE SUITABILITY OF THE PROPERTIES FOR ANY AND ALL ACTIVITIES AND USES WHICH BUYER MAY CONDUCT THEREON, (D) THE COMPLIANCE OF OR BY OWNERS OR THE PROPERTIES OR THEIR OPERATION WITH ANY LAWS, RULES, ORDINANCES OR REGULATIONS OF ANY APPLICABLE GOVERNMENTAL AUTHORITY OR BODY, (E) THE HABITABILITY, MERCHANTABILITY, MARKETABILITY, PROFITABILITY OR FITNESS FOR A PARTICULAR PURPOSE OF THE PROPERTIES (BUYER AFFIRMING THAT BUYER HAS NOT RELIED ON

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SELLER’S SKILL OR JUDGMENT TO SELECT OR FURNISH THE PROPERTIES FOR ANY PARTICULAR PURPOSE, AND THAT SELLER MAKES NO WARRANTY THAT THE PROPERTIES ARE FIT FOR ANY PARTICULAR PURPOSE), (F) THE MANNER OR QUALITY OF THE CONSTRUCTION OR MATERIALS INCORPORATED INTO THE PROPERTIES, (G) THE MANNER, QUALITY, STATE OF REPAIR OR LACK OF REPAIR OF THE PROPERTIES, (H) COMPLIANCE WITH ANY ENVIRONMENTAL REQUIREMENTS, ENVIRONMENTAL PROTECTION, POLLUTION OR LAND USE LAWS, RULES, REGULATIONS, ORDERS OR OTHER REQUIREMENTS, INCLUDING THE EXISTENCE IN, ON, UNDER, OR IN THE VICINITY OF THE PROPERTIES OF HAZARDOUS MATERIALS, (I) ZONING TO WHICH THE PROPERTIES OR ANY PORTION THEREOF MAY BE SUBJECT, (J) THE AVAILABILITY OF PARKING OR ANY UTILITIES TO THE PROPERTIES OR ANY PORTION THEREOF INCLUDING, WITHOUT LIMITATION, WATER, SEWAGE, GAS AND ELECTRIC, (K) USAGES OF THE ADJOINING PROPERTIES, (L) ACCESS TO THE PROPERTIES OR ANY PORTION THEREOF, (M) THE VALUE, COMPLIANCE WITH THE PLANS AND SPECIFICATIONS, SIZE, LOCATION, AGE, USE, DESIGN, QUALITY, DESCRIPTION, DURABILITY, STRUCTURAL INTEGRITY, OPERATION, TITLE TO, OR PHYSICAL OR FINANCIAL CONDITION OF THE PROPERTIES OR ANY PORTION THEREOF, OR ANY INCOME, EXPENSES, CHARGES, LIENS, ENCUMBRANCES, RIGHTS OF CLAIMS ON OR AFFECTING OR PERTAINING TO THE PROPERTIES OR ANY PART THEREOF, (N) THE CONDITION OR USE OF THE PROPERTIES OR COMPLIANCE OF THE PROPERTIES WITH ANY OR ALL PAST, PRESENT OR FUTURE FEDERAL, STATE OR LOCAL ORDINANCES, RULES, REGULATIONS OR LAWS, BUILDING, FIRE OR ZONING ORDINANCES, CODES OR OTHER SIMILAR LAWS, (O) THE EXISTENCE OR NON-EXISTENCE OF UNDERGROUND STORAGE TANKS OR THE CONDITION THEREOF OR THE EXISTENCE OR STATUS OF ANY PERMITS THEREFOR, (P) ANY OTHER MATTER AFFECTING THE STABILITY OR INTEGRITY OF THE LAND OR IMPROVEMENTS, (Q) THE POTENTIAL FOR FURTHER DEVELOPMENT OF THE PROPERTIES, (R) THE EXISTENCE OF VESTED LAND USE, ZONING OR BUILDING ENTITLEMENTS AFFECTING THE PROPERTIES, OR (T) ANY OTHER ATTRIBUTE OR MATTER OF OR RELATING TO THE PROPERTIES. BUYER ACKNOWLEDGES THAT, EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN ANY OF THE TRANSACTION DOCUMENTS, NEITHER SELLER OR ANY OWNER, NOR ANY AGENT, MEMBER, OFFICER, EMPLOYEE OR PRINCIPAL OF SELLER OR ANY OWNER NOR ANY OTHER PARTY ACTING ON BEHALF OF SELLER OR ANY OWNER HAS MADE OR SHALL BE DEEMED TO HAVE MADE ANY SUCH AGREEMENT, COVENANT, REPRESENTATION OR WARRANTY EITHER EXPRESSED OR IMPLIED. THIS SECTION SHALL SURVIVE CLOSING AND DELIVERY OF THE ASSIGNMENTS, AND SHALL BE DEEMED INCORPORATED BY REFERENCE AND MADE A PART OF ALL DOCUMENTS DELIVERED BY SELLER TO BUYER IN CONNECTION WITH THE SALE OF THE OWNERSHIP INTERESTS.

(b) CHANGE OF CONDITIONS. SUBJECT TO SELLER’S OBLIGATIONS UNDER SECTION 13(a)(vii) HEREOF AND EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN THE TRANSACTION DOCUMENTS, BUYER SHALL ACCEPT THE OWNER’S ASSETS AT THE TIME OF CLOSING IN THE SAME CONDITION AS THE SAME ARE AS OF THE DATE OF THIS AGREEMENT, AS SUCH CONDITION SHALL

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HAVE CHANGED BY REASON OF NORMAL WEAR AND TEAR AND NATURAL DETERIORATION AND, SUBJECT TO SECTIONS 18 AND 19 HEREOF, CONDEMNATION OR DAMAGE BY FIRE OR OTHER CASUALTY.

(c) RELEASE. WITHOUT LIMITING THE PROVISIONS OF SECTION 23(a) HEREOF AND, SUBJECT ONLY TO SELLER’S BREACH OF ITS REPRESENTATIONS, WARRANTIES, COVENANTS OR AGREEMENTS SET FORTH IN ANY OF THE TRANSACTION DOCUMENTS, BUYER, FOR ITSELF AND ITS AGENTS, AFFILIATES, SUCCESSORS AND ASSIGNS, HEREBY RELEASES, ACQUITS AND FOREVER DISCHARGES SELLER AND ITS OFFICERS, DIRECTORS, MEMBERS, SHAREHOLDERS, TRUSTEES, PARTNERS, EMPLOYEES, MANAGERS, AGENTS AND AFFILIATES FROM ANY AND ALL CLAIMS WHICH BUYER HAS OR MAY HAVE IN THE FUTURE, ARISING FROM OR RELATING TO (i) ANY DEFECTS (PATENT OR LATENT), ERRORS OR OMISSIONS IN THE DESIGN OR CONSTRUCTION OF THE PROPERTIES WHETHER THE SAME ARE THE RESULT OF NEGLIGENCE OR OTHERWISE, OR (ii) ANY OTHER CONDITIONS, INCLUDING, WITHOUT LIMITATION, ENVIRONMENTAL AND OTHER PHYSICAL CONDITIONS, AFFECTING THE PROPERTIES WHETHER THE SAME ARE A RESULT OF NEGLIGENCE OR OTHERWISE, INCLUDING SPECIFICALLY, BUT WITHOUT LIMITATION, ANY CLAIM FOR INDEMNIFICATION OR CONTRIBUTION ARISING UNDER THE COMPREHENSIVE ENVIRONMENTAL RESPONSE, COMPENSATION AND LIABILITY ACT (42 U.S.C. SECTION 9601, ET SEQ.) OR ANY OTHER FEDERAL, STATE OR LOCAL STATUTE, RULE OR ORDINANCE RELATING TO LIABILITY OF PROPERTY OWNERS FOR ENVIRONMENTAL MATTERS, WHETHER ARISING BASED ON EVENTS THAT OCCURRED BEFORE, DURING, OR AFTER SELLER’S PERIOD OF OWNERSHIP OF THE OWNERSHIP INTERESTS AND WHETHER BASED ON THEORIES OF INDEMNIFICATION, CONTRIBUTION OR OTHERWISE. THE RELEASE SET FORTH IN THIS SECTION SPECIFICALLY INCLUDES, WITHOUT LIMITATION, ANY CLAIMS UNDER ANY ENVIRONMENTAL LAWS OF THE UNITED STATES, THE STATE IN WHICH A PROPERTY IS LOCATED OR ANY POLITICAL SUBDIVISION THEREOF OR UNDER THE AMERICANS WITH DISABILITIES ACT OF 1990, AS ANY OF THOSE LAWS MAY BE AMENDED FROM TIME TO TIME AND ANY REGULATIONS, ORDERS, RULES OF PROCEDURES OR GUIDELINES PROMULGATED IN CONNECTION WITH SUCH LAWS, REGARDLESS OF WHETHER THEY ARE IN EXISTENCE ON THE DATE OF THIS AGREEMENT. BUYER ACKNOWLEDGES THAT BUYER HAS BEEN REPRESENTED BY INDEPENDENT LEGAL COUNSEL OF BUYER’S SELECTION AND BUYER IS GRANTING THIS RELEASE OF ITS OWN VOLITION AND AFTER CONSULTATION WITH BUYER’S COUNSEL. THE RELEASE SET FORTH HEREIN DOES NOT APPLY TO THE REPRESENTATIONS, WARRANTIES, COVENANTS OR AGREEMENTS OF SELLER EXPRESSLY SET FORTH IN ANY OF THE TRANSACTION DOCUMENTS OR TO ANY DEFAULT BY SELLER HEREUNDER. AS PART OF THE PROVISIONS OF THIS SECTION, BUT NOT AS A LIMITATION THEREON, BUYER HEREBY AGREES, REPRESENTS AND WARRANTS THAT THE MATTERS RELEASED HEREIN ARE NOT LIMITED TO MATTERS WHICH ARE KNOWN OR DISCLOSED, AND BUYER HEREBY WAIVES ANY AND ALL RIGHTS AND BENEFITS WHICH IT NOW HAS, OR IN THE FUTURE MAY HAVE CONFERRED UPON IT, BY VIRTUE OF THE PROVISIONS OF FEDERAL, STATE OR LOCAL LAW,

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RULES OR REGULATIONS. NOTWITHSTANDING ANYTHING CONTAINED HEREIN TO THE CONTRARY, THE FOREGOING RELEASE SHALL NOT BE APPLICABLE TO CLAIMS ARISING OUT OF ANY ACTS OR OMISSIONS OF SELLER OR ANY OF ITS AFFILIATES AFTER CLOSING, OR TO BUYER’S RIGHT TO IMPLEAD OR OTHERWISE SEEK JOINDER OF SELLER SOLELY WITH RESPECT TO ANY CLAIMS BROUGHT AGAINST BUYER, ANY OWNER, OR A PROPERTY BY A THIRD PARTY UNAFFILIATED WITH BUYER ARISING OUT OF ACTIONS, OMISSIONS OR CIRCUMSTANCES DURING SELLER’S PERIOD OF OWNERSHIP OF THE OWNERSHIP INTERESTS, AND SHALL NOT IMPAIR OR LIMIT BUYER’S RIGHTS UNDER SECTION 23(e)(i) TO BE INDEMNIFIED, DEFENDED AND HELD HARMLESS.

IN THIS CONNECTION AND TO THE EXTENT PERMITTED BY LAW, BUYER HEREBY AGREES, REPRESENTS AND WARRANTS THAT BUYER REALIZES AND ACKNOWLEDGES THAT FACTUAL MATTERS NOW UNKNOWN TO IT MAY HAVE GIVEN OR MAY HEREAFTER GIVE RISE TO CAUSES OF ACTION, CLAIMS, DEMANDS, DEBTS, CONTROVERSIES, DAMAGES, LIABILITIES, OBLIGATIONS, COSTS, LOSSES AND EXPENSES WHICH ARE PRESENTLY UNKNOWN, UNANTICIPATED AND UNSUSPECTED, AND BUYER FURTHER AGREES, REPRESENTS AND WARRANTS THAT THE WAIVERS AND RELEASES HEREIN HAVE BEEN NEGOTIATED AND AGREED UPON IN LIGHT OF THAT REALIZATION AND THAT BUYER NEVERTHELESS HEREBY INTENDS TO RELEASE, DISCHARGE AND ACQUIT SELLER AND EACH OF THE OTHER SELLER PARTIES FROM ANY SUCH UNKNOWN CAUSES OF ACTION, CLAIMS, DEMANDS, DEBTS, CONTROVERSIES, DAMAGES, LIABILITIES, OBLIGATIONS, COSTS, LOSSES AND EXPENSES WHICH MIGHT IN ANY WAY BE INCLUDED IN THE WAIVERS AND MATTERS RELEASED AS SET FORTH IN THIS SECTION. THE PROVISIONS OF THIS SECTION ARE MATERIAL AND INCLUDED AS A MATERIAL PORTION OF THE CONSIDERATION GIVEN TO SELLER BY BUYER IN EXCHANGE FOR SELLER’S PERFORMANCE HEREUNDER. THE PROVISIONS OF THIS SECTION SHALL SURVIVE THE CLOSING OF THE TRANSACTIONS CONTEMPLATED HEREUNDER OR THE TERMINATION OF THIS AGREEMENT.

SELLER HAS GIVEN BUYER MATERIAL CONCESSIONS REGARDING THIS TRANSACTION IN EXCHANGE FOR BUYER AGREEING TO THE PROVISIONS OF THIS SECTION. SELLER AND BUYER HAVE EACH INITIALED THIS SECTION TO FURTHER INDICATE THEIR AWARENESS AND ACCEPTANCE OF EACH AND EVERY PROVISION HEREOF.

BUYER’S INITIALS: /s/  LSU             SELLER’S INITIALS: /s/  JAL            

(d) Seller Reports. Buyer acknowledges that, except to the extent set forth in Section 10 hereof, Seller makes no warranties or representations regarding the adequacy, accuracy or completeness of the Reports or other documents relating to the Properties, and Buyer shall have no claim against Seller based upon the form, contents or substance (or lack thereof) or inadequacy, inaccuracy, incompleteness, errors or omissions contained in the Reports or such other documents relating to any Property or Buyer’s reliance thereon. Buyer further acknowledges that it has had full opportunity to perform such physical inspections,

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environmental and engineering investigations and appraisals as Buyer deems appropriate prior to Closing, and Buyer obtained its own physical inspections, environmental and engineering Reports and appraisals of the Properties. Buyer agrees to promptly provide Seller (without any representation or warranty whatsoever and without any liability with respect to the content thereof) with copies of all environmental reports obtained by Buyer prior to the Effective Date with respect to the Properties.

(e) Indemnities.

(i) Notwithstanding anything to the contrary contained in this Agreement, Seller shall indemnify, defend and hold harmless each Owner, Buyer, each of Buyer’s nominees and/or designees that shall take title to any Ownership Interests, and the direct and indirect members, partners, shareholders, principals, officers, directors and employees of each of the foregoing (collectively, the “Buyer Parties” and each, individually, a “Buyer Party”) from and against any and all losses, claims, damages, liabilities, fees, fines, costs and expenses (including reasonable attorney’s fees and disbursements), and actions with respect thereto, regardless of whether foreseeable, unforeseeable, past, present or future, asserted against, incurred or suffered by any Buyer Party in connection with, related to or arising from any Liabilities of any Owner accruing or arising from claims, events or occurrences taking place prior to the Closing Date, provided that the indemnity set forth in this Section 23(e)(i) shall not apply to Excluded Liabilities. For purposes of this Section 23(e), (x) “Liabilities” shall mean debts, liabilities, obligations, guarantees, indemnities, duties and responsibilities of any kind and description, whether absolute or contingent, monetary or non-monetary, direct or indirect, known or unknown or matured or unmatured, or of any other nature, and (y) “Excluded Liabilities” shall mean Liabilities relating in any way to the physical or environmental condition of the Premises, other than any third party tort claims.

(ii) Notwithstanding anything to the contrary contained in this Agreement, Buyer shall indemnify, defend and hold harmless each Seller, any Affiliate of Seller, and the direct and indirect members, partners, shareholders, principals, officers, directors and employees of each of the foregoing (collectively, the “Seller Parties” and each, individually, a “Seller Party”) from and against any and all losses, claims, damages, liabilities, fees, fines, costs and expenses (including reasonable attorney’s fees and disbursements), and actions with respect thereto, regardless of whether foreseeable, unforeseeable, past, present or future, asserted against, incurred or suffered by any Seller Party in connection with, related to or arising from any Liabilities of any Owner accruing or arising from claims, events or occurrences taking place on or after the Closing Date.

(f) Effect of Disclaimers. Buyer acknowledges and agrees that the Purchase Price has been negotiated to take into account that the Ownership Interests are being sold subject to the provisions of this Section 23 and that the disclaimers and other provisions of this Section 23 were a material consideration in Seller entering into this Agreement and accepting the Purchase Price set forth in this Agreement for the Ownership Interests.

(g) Survival. The provisions of this Section 23 shall survive Closing and delivery of the Assignments.

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24. Survival of Provisions.

(a) Acceptance by Buyer and Seller of the Assignments at Closing shall constitute an acknowledgment by each party of full performance by the other party of all of such other party’s obligations under this Agreement, except for those obligations which are expressly provided in this Agreement to survive Closing.

(b) Any of the obligations of Buyer or Seller under this Agreement that are expressly provided in this Agreement to survive Closing or that shall possibly imply performance or observance after the Closing Date shall survive Closing and delivery of the Assignments, notwithstanding any presumption to the contrary.

(c)

(i) Notwithstanding any provision to the contrary set forth in this Agreement, the representations of Seller expressly set forth in Section 10 hereof shall survive Closing under this Agreement until the expiration of the applicable Survival Period; provided, however, that (y) such representations are, and are intended to be, given as of the date(s) set forth in Section 10 hereof, and (z) the representations of Seller set forth in this Agreement with respect to Leases, to the extent expressly confirmed without qualification as to the knowledge of the tenant in a Tenant Estoppel Certificate satisfying the requirements of Section 14(a)(iii), shall not survive Closing.

(ii) If Buyer determines after the Effective Date and prior to the Closing that any of the representations of Seller in Section 10 hereof and in the seller’s representation section of the Other Purchase Agreements were not true when given and Buyer’s reasonably estimated damages for all such breaches collectively aggregate more than $750,000, Buyer’s sole right and remedy shall be to terminate this Agreement by giving to Seller written notice of such termination, in which event Buyer shall receive a refund of the Deposit, and Seller shall pay to Buyer its actual third party out-of-pocket costs and expenses incurred in connection with the transactions contemplated by this Agreement and the Other Purchase Agreements in an amount not to exceed $750,000. If Buyer’s damages for all such breaches collectively aggregate $750,000 or less and more than $250,000, then Seller shall grant to Buyer a credit against the Purchase Price in the amount of such aggregate damages, in which case Buyer shall be obligated to proceed to closing with such credit. If Buyer’s damages for all such breaches collectively aggregate $250,000 or less, then Buyer shall proceed to Closing without credit or offset against the Purchase Price. For purposes of this Section 24(c)(ii), in determining whether there exists a breach by Seller of any of its representations and warranties or the amount of Buyer’s damages resulting from such breach, any materiality qualifications in such representation and warranty shall be disregarded.

(iii) Except as expressly set forth herein, Seller shall have no liability to Buyer by reason of a breach or default of any of Seller’s representations set forth in Section 10, unless the Closing shall have occurred and Buyer shall have given to Seller written notice of such breach or default within the applicable Survival Period, and Buyer shall have given to Seller an opportunity to cure any such breach or default within a reasonable period of time after Seller shall have received such written notice, not to exceed ninety (90) days. No claim for breach of

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any representation or warranty of Seller set forth in Section 10 shall be actionable or payable unless the valid claims for all such breaches collectively aggregate more than $250,000, in which event the full amount of such claims shall be actionable; provided, however, that in no event shall Seller be liable to Buyer on account any breach of any representation or warranty set forth in Section 10 in excess of Two Million Five Hundred Thousand Dollars ($2,500,000) in the aggregate; provided, however, that the provisions of this Section 24(c)(iii) shall not apply to Seller’s breach of a representation regarding a Tax or Corporate Obligation or the representation set forth in Section 10(a)(v), or any claim for indemnification governed by Section 22 or Section 23(e)(i), for which there shall be no limitations. Seller’s liability shall be limited to actual damages and shall not include punitive, speculative or consequential damages. In determining the dollar limits set forth in this Section 24 for the purposes of the basket, the termination threshold and the total liability limitation, breaches of representations and warranties under the Other Purchase Agreements shall be aggregated with those under Section 10 of this Agreement.

(iv) Survival. The provisions of this Section 24 shall survive Closing and delivery of the Assignments.

25. Earnout Provision.

(a) Leases Entered Prior to Closing. The Purchase Price payable at Closing shall be increased by one hundred percent (100%) of the Earnout Amount for each New Lease which is signed by a Property Owner and a tenant prior to the Closing Date (each a “Pre-Closing New Lease”) and which (x) is with the tenant named in and upon the terms listed in the Leasing Pipeline Schedule, and complies with the Leasing Guidelines attached as Exhibit “D” hereto or (y) is otherwise approved by Buyer.

(b) Leases Entered After Closing. Each Property Owner shall pay to Seller an amount equal to (x) 100% of the Earnout Amount for each New Lease which is signed by such Property Owner and a tenant between the Closing Date and the second anniversary of the Closing Date (each a “Post-Closing New Lease”) and which is with the tenant named in and upon the terms listed in the Leasing Pipeline Schedule and otherwise complies with the Leasing Guidelines and (y) 75% of the Earnout Amount for each Post-Closing New Lease which is signed between the Closing Date and the second anniversary of the Closing Date by such Property Owner and a tenant that is not named in the Leasing Pipeline Schedule, but complies with the Leasing Guidelines or is otherwise approved by Buyer. Payment of the amounts required to be paid under this Section 25(b) shall be conditioned upon the satisfaction of the following conditions precedent on or before the third anniversary of the Closing Date: (x) the tenant shall be in occupancy and open for business; (y) the tenant shall have commenced the payment of regularly scheduled rent; and (z) the tenant shall have delivered a Tenant Estoppel Certificate which conforms to the provisions required by Section 14(a)(iii) hereof. If such conditions are satisfied on or before the third anniversary of the Closing Date, payment of the Earnout Amount will be made by the applicable Property Owner to Seller within thirty (30) days following Buyer’s receipt of evidence of such satisfaction. The parties acknowledge and agree that if the conditions set forth in this Section 25(b) are not satisfied on or prior to the third anniversary of the Closing Date with respect to any Post-Closing New Lease, no Earnout Amount shall be owed by Buyer with respect thereto.

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(c) Calculation of the Earnout Amount. As used in this Section 25, the “Earnout Amount” for any New Lease shall be an amount equal to (x) the estimated annualized revenue attributable to such New Lease, i.e. minimum rent, percentage rent, concession revenue, and estimated CAM, real estate tax and other reimbursements, less (y) a management fee of 3.5% on the gross receipts to be generated from the applicable tenant, capitalized at 7.64%. If the New Lease provides for annual minimum or other rent escalations, the capitalization shall be based on the estimated revenue for the first 12 months in which full minimum rent is payable. If a tenant under a New Lease is in occupancy, open for business and has delivered a satisfactory estoppel, but is entitled to a period of free or reduced rent, the amount payable pursuant to Section 25(a) or (b) will be calculated and paid as if rent had commenced and was being paid, but the Earnout Amount will be reduced by the present value of the installments of free or reduced rent to which the tenant is entitled discounted at (x) 7.64% on all New Leases where 100% of the Earnout Amount is payable, or (y) 10.19% (7.64% ÷ 75% = 10.19%) on all New Leases where 75% of the Earnout Amount is payable. A sample calculation of the Earnout Amount is attached hereto and made a part hereof as Exhibit “P”.

(d) Leasing Costs. Seller shall remain responsible for all Leasing Costs for all Pre-Closing New Leases. Each Property Owner shall be responsible for all Leasing Costs for all Post-Closing New Leases; however, the amount of such Leasing Costs (including, without limitation, any leasing commissions or other amounts payable under any Management and Leasing Agreement with respect to the execution of such Post-Closing New Leases) shall be deducted from the amounts to be paid by such Property Owner to Seller.

(e) Refusal to Sign a Lease. If Seller tenders a lease meeting the criteria set forth in Section 25(b) above, but the applicable Property Owner unreasonably refuses to sign it, an Earnout Amount will be payable as if the lease was fully executed and all conditions for the payment of the Earnout Amount had been satisfied.

(f) No Duplication. Anything contained in this Section 25 to the contrary notwithstanding, Seller shall not be entitled to any Earnout Amount with respect to all or any portion of any Property for which an Earnout Amount shall have previously been paid.

(g) Survival. The provisions of this Section 25 shall survive Closing and the delivery of the Assignments.

26. Sophistication of the Parties. Each party hereto hereby acknowledges and agrees that it has consulted legal counsel in connection with the negotiation of this Agreement and that it has bargaining power equal to that of the other parties hereto in connection with the negotiation and execution of this Agreement. Accordingly, the parties hereto agree the rule of contract construction to the effect that an agreement shall be construed against the draftsman shall have no application in the construction or interpretation of this Agreement.

27. Limited Liability.

(a) Neither Buyer nor any constituent partner in or agent of Buyer, nor any advisor, trustee, director, officer, employee, beneficiary, shareholder, member, partner, participant, representative or agent of any partnership, limited liability company, corporation, trust or other

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entity that has or acquires a direct or indirect interest in Buyer, shall have any personal liability, directly or indirectly, under or in connection with this Agreement or any agreement made or entered into under or pursuant to the provisions of this Agreement, or any amendment or amendments to any of the foregoing made at any time or times, heretofore or hereafter, and Seller, its successors and assigns and, without limitation, all other persons and entities shall look solely to the Deposit for any performance, and Seller, on behalf of itself and its successors and assigns, hereby waives any and all such personal liability.

(b) No constituent partner in or agent of Seller, nor any advisor, trustee, director, officer, employee, beneficiary, shareholder, member, partner, participant, representative or agent of any partnership, limited liability company, corporation, trust or other entity that has or acquires a direct or indirect interest in Seller, shall have any personal liability, directly or indirectly, under or in connection with this Agreement or any agreement made or entered into under or pursuant to the provisions of this Agreement, or any amendment or amendments to any of the foregoing made at any time or times, heretofore or hereafter, and Buyer, its successors and assigns and, without limitation, all other persons and entities shall look, following Closing and subject to the limitations set forth herein, solely to Seller’s assets for payment of any claim or for any performance, and Buyer, on behalf of itself and its successors and assigns, hereby waives any and all such personal liability. Notwithstanding anything to the contrary contained in this Agreement, neither the negative capital account of any constituent member or partner in Seller (or in any other constituent member or partner of Seller), nor any obligation of any constituent member or partner in Seller (or in any other constituent member or partner of Seller) to restore a negative capital account or to contribute capital to Seller (or to any other constituent member or partner of Seller), shall at any time be deemed to be the property or an asset of Seller or any such other constituent member or partner (and neither Buyer nor any of its successors or assigns shall have any right to collect, enforce or proceed against or with respect to any such negative capital account of a member’s or partner’s obligation to restore or contribute). The foregoing shall be in addition to, and not in limitation of, any further limitation of liability that might otherwise apply (whether by reason of Buyer’s waiver, relinquishment or release of any applicable rights or otherwise).

28. Attorneys’ Fees. If any litigation arises between the parties hereto under or concerning this Agreement, then the non-prevailing party shall pay any and all costs and expenses incurred by the other party on account of such litigation, including, without limitation, court costs and reasonable attorneys’ fees and disbursements. Any such attorneys’ fees and other expenses incurred by either party in enforcing a judgment in its favor under this Agreement shall be recoverable separately from and in addition to any other amount included in such judgment, and such attorneys’ fees obligation is intended to be severable from the other provisions of this Agreement and to survive and not be merged into any such judgment. The provisions of this Section 28 shall survive Closing and delivery of the Assignments or the earlier termination of this Agreement.

29. Waiver of Jury Trial. SELLER AND BUYER HEREBY KNOWINGLY, VOLUNTARILY, INTENTIONALLY, UNCONDITIONALLY AND IRREVOCABLY WAIVE ANY RIGHT EACH MAY HAVE TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER ARISING IN TORT OR CONTRACT) BROUGHT BY EITHER AGAINST THE OTHER ON ANY MATTER ARISING OUT OF OR

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IN ANY WAY CONNECTED WITH THIS AGREEMENT OR ANY OTHER DOCUMENT EXECUTED AND DELIVERED BY A PARTY IN CONNECTION HEREWITH (INCLUDING ANY ACTION TO RESCIND OR CANCEL THIS AGREEMENT BASED ON A CLAIM THAT THIS AGREEMENT WAS FRAUDULENTLY INDUCED OR IS OTHERWISE VOID OR VOIDABLE).

30. Miscellaneous.

(a) Captions or Headings; Interpretation. Section or subsection captions or headings contained in this Agreement are for convenience only, and shall not control or affect the meaning or construction of any of the terms or provisions of this Agreement. Wherever in this Agreement the singular number is used, the same shall include the plural and vice versa and the masculine gender shall include the feminine gender and vice versa as the context shall require.

(b) Amendments and Waivers. No change, alteration, amendment, modification or waiver of any of the terms or provisions of this Agreement shall be valid, unless the same shall be in writing and signed by Buyer and Seller.

(c) Counterparts. This Agreement may be executed by facsimile signature and in multiple counterparts each of which shall be deemed an original but together shall constitute one agreement.

(d) Applicable Law. This Agreement shall be governed and construed according to the laws of the Commonwealth of Pennsylvania.

(e) Right to Waive Conditions or Contingency. Either party may waive any of the terms and conditions of this Agreement made for its benefit provided such waiver is in writing and signed by the party waiving such term or condition.

(f) Partial Invalidity. If any term, covenant, condition or provision of this Agreement or the application thereof to any person or circumstance shall be invalid or unenforceable, at any time or to any extent, the remainder of this Agreement, or the application of such term or provision to persons or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby, unless such invalidity or unenforceability materially frustrates the intent of the parties as set forth herein. Each term, covenant, condition and provision of this Agreement shall be valid and enforced to the fullest extent permitted by law.

(g) Confidentiality. Buyer agrees to treat all information received with respect to an Owner and/or a Property, whether such information is obtained from Seller or from Buyer’s own due diligence investigations, in a confidential manner. Buyer shall not disclose any such information to any third parties, other than such disclosure to Buyer’s counsel, consultants, accountants, investors, lenders and advisers as may be required in connection with the transactions contemplated hereby (such disclosure to be made expressly subject to this confidentiality requirement) or as may be required by law. Seller and Buyer agree to keep this Agreement confidential and not make any public announcements or disclosures with respect to the subject matter of this Agreement prior to Closing without the written consent of the other party or as may be required by law. Notwithstanding the foregoing, Buyer and Seller each recognize that their respective entities are part of a chain of ownership which includes public

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companies, and shall have the right to make any press release or SEC filing with respect to the transactions described in this Agreement as its General Counsel, or external SEC counsel, deem appropriate or required by law, regulation or the requirements of the NYSE.

(h) Due Diligence Items. In the event this Agreement is terminated without Buyer acquiring the Ownership Interests, Buyer shall, within five (5) Business Days thereafter, deliver to Seller or destroy all due diligence items provided to Buyer from Seller and deliver copies of all engineering and environmental reports obtained and/or prepared by unaffiliated third parties engaged by Buyer, in each case, without representation or warranty.

(i) Agreement Not To Be Recorded. This Agreement shall not be filed of record by or on behalf of Buyer in any office or place of public record. If Buyer fails to comply with the terms hereof by recording or attempting to record this Agreement or a notice thereof, such act shall not operate to bind or cloud the title to any Property. Seller shall, nevertheless, have the right forthwith to institute appropriate legal proceedings to have the same removed from record. If Buyer or any agent, broker or counsel acting for Buyer shall cause or permit this Agreement or a copy thereof to be filed in an office or place of public record, Seller, at its option, and in addition to Seller’s other rights and remedies, may treat such act as a material default of this Agreement on the part of Buyer. However, the filing of this Agreement in any lawsuit or other proceedings in which such document is relevant or material shall not be deemed to be a violation of this Section 30. The provisions of this Section 30(i) shall not apply to the filing or recordation of a Memorandum pursuant to Section 31(e).

(j) Exhibits and Schedules. Each of the Exhibits and Schedules referred to herein and attached hereto is incorporated herein by this reference.

(k) Time of the Essence. Subject to rights of Buyer and Seller to defer Closing pursuant to the provisions of Section 4(b) hereof, time shall be of the essence with respect to all time periods and deadlines under this Agreement, including, without limitation, the Closing Date.

(l) Cooperation with Respect to Excluded Parcels. After Closing, Buyer and each Owner, as applicable, shall reasonably cooperate with, and not oppose, Seller and Seller shall reasonably cooperate with and not oppose Buyer or an Owner, with respect to the development of their respective properties, at no cost or expense to the other; provided, that the foregoing shall not obligate either party to amend or modify any applicable restrictions contained in the Title Contracts or the Leases or otherwise incur any expense or liability. In particular, Buyer agrees that Seller may develop the Excluded Parcels adjacent to the Monroe Marketplace for any use permitted by applicable zoning, as the same may be revised or a variance obtained therefrom, subject to the terms and provisions of the Title Contracts and the Leases. Such use may be for a non-retail use and/or may include any retail use which does not (x) violate any existing exclusive use covenant at the Monroe Marketplace or (y) constitute a nuisance. The provision of this Section 30(l) shall survive Closing and the delivery of the Assignments.

(m) Further Assurances. Buyer and Seller agree to execute all documents and instruments reasonably required in order to consummate the purchase and sale herein contemplated, provided no obligations are incurred thereby which are not previously provided

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for herein. The provisions of this Section 30(m) shall survive Closing and delivery of the Assignments.

(n) Tax Allocations. Buyer and Seller shall allocate the Purchase Price set forth on Exhibit “A” with respect to each Property among the assets that are deemed sold for federal income tax purposes in accordance with a schedule to be jointly prepared by Buyer and Seller within 60 days of the Closing Date. Buyer and Seller shall report, act and file tax returns in all respects and for all purposes consistent with such allocation schedule. Neither Buyer nor Seller shall take any position (whether in audits, tax returns, or otherwise) that is inconsistent with such allocation schedule unless required to do so by applicable law. Buyer and Seller agree to timely update such allocation schedule to take account of any adjustments to the Purchase Price, including, without limitation, as a result of the payment of any Earnout Amounts. The provisions of this Section 30(n) shall survive Closing and delivery of the Assignments.

31. Sale of Excluded Parcels.

(a) Option to Purchase.

(i) If at any time during the Option Period (as hereinafter defined) any Excluded Parcel Owner shall enter into a lease, license or other occupancy agreement having a term in excess of six (6) months (an “Excluded Parcel Lease”) for any portion of an Excluded Parcel, then Seller shall cause the Excluded Parcel Owner, within thirty (30) days following execution of the Excluded Parcel Lease, to send Buyer written notice (each, an “Option Offer Notice”) offering to sell such Excluded Parcel in its entirety (each, an “Option Property”) to Buyer for the Option Price (as hereinafter defined) in accordance with the terms and conditions of this Section 31(a). The Option Offer Notice shall set forth the Option Price, including a reasonably detailed calculation thereof prepared by the Excluded Parcel Owner, and true, correct and complete copies of the Excluded Parcel Lease. Buyer shall have sixty (60) days after receipt of an Option Offer Notice within which to exercise its right to acquire the Option Property (the “Option”) by giving written notice of exercise thereof to the Excluded Parcel Owner (each, an “Option Exercise Notice”). Should Buyer fail to timely deliver an Option Exercise Notice, the Option shall expire automatically and be of no further force and effect with respect to such Option Property and all other Excluded Parcels for which Buyer has not delivered an Option Exercise Notice; provided, however, that such Option Property and such other Excluded Parcels shall remain subject to the Right of First Offer (as hereinafter defined) and the Right of First Refusal (as hereinafter defined).

(ii) The “Option Price” for any Excluded Parcel shall mean a gross purchase price equal to (x) the estimated annualized revenue attributable to the Excluded Parcel Lease demising such Excluded Parcel, i.e. minimum rent, percentage rent, concession revenue, and estimated CAM, real estate tax and other reimbursements, less (y) the tenant’s pro-rata share of estimated CAM, real estate tax and other expense and less (z) a management fee of 3.5% on the annualized gross receipts to be generated from the applicable tenants, capitalized at 7.64%. If the Excluded Parcel Lease provides for annual minimum or other rent escalations, the foregoing capitalization shall be based on the estimated revenue for the first 12 months in which minimum rent is payable. If the tenant under the Excluded Parcel Lease is in occupancy, open for business

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and has delivered a satisfactory estoppel, but is entitled to a period of free or reduced rent, the Option Price will be calculated and paid as if rent had commenced and was being paid, but the Option Price will be reduced by the present value of the installments of free or reduced rent to which the tenant is entitled discounted at 7.64%. An example of the Option Price is attached hereto and made a part hereof as Exhibit “X”.

(iii) After receipt of an Option Exercise Notice, Seller shall cause the related Excluded Parcel Owner to prepare, and the Excluded Parcel Owner and Buyer shall enter into, a purchase and sale agreement covering the Option Property (each, an “Option Contract”) in form and substance consistent with this Agreement, provided that (a) the purchase and sale of the Option Property shall be consummated by deed transfer, unless the parties mutually agree to structure the same as a sale of one hundred percent (100%) of the direct or indirect interests in the Excluded Parcel Owner; (b) an earnest money deposit equal to two percent (2%) of the purchase price shall be required under any Option Contract; (c) the provisions of Section 25 shall be inapplicable to the purchase and sale of any Option Property; (d) each Option Contract shall provide that Buyer’s obligation to close thereunder shall be conditioned upon, inter alia, the satisfaction of the following conditions precedent on or before the first (1st) anniversary of the date of the Option Contract: (A) construction of the improvements on the Excluded Parcel shall be finally complete, (B) the tenant under the Excluded Parcel Lease shall be in occupancy and open for business; (C) the tenant under the Excluded Parcel Lease shall have commenced the payment of regularly scheduled rent; and (D) the tenant under the Excluded Parcel Lease shall have delivered a Tenant Estoppel Certificate which conforms to the provisions required by Section 14(a)(iii) of this Agreement (which provision shall be included in such Option Contract); and (e) the closing thereunder shall be consummated on a date selected by Buyer within sixty (60) days following Buyer’s receipt of evidence satisfactory to Buyer that each of the conditions set forth in clause (d) above shall have been satisfied.

(iv) For purposes of this Agreement, “Option Period” shall mean the period commencing on the Closing Date and expiring on (a) the date which is two (2) years following the Closing Date, with respect each Excluded Parcel other than Unit 4A at Monroe Marketplace, or (b) the date which is nineteen (19) years following the Closing Date, with respect to Unit 4A at Monroe Marketplace.

(b) Right of First Offer.

(i) If at any time during the ROFO Period (as hereinafter defined) any Excluded Parcel Owner desires to sell all or any portion of an Excluded Parcel that is subject to an Excluded Parcel Lease, Seller shall cause the Excluded Parcel Owner to first notify Buyer (each, a “ROFO Offer Notice”), in writing, of the Excluded Parcel Owner’s intention to do so, setting forth the purchase price and all other material terms and conditions by which such Excluded Parcel (each, a “ROFO Property”) will be sold (the “Sale Terms”). The Sale Terms shall be for an all cash sale and shall include only the ROFO Property (or 100% of the direct or indirect interests in the Excluded Parcel Owner) and no other property or assets. Buyer shall have the right, at its option, exercisable as hereinafter provided, to purchase the ROFO Property on the Sale Terms (the “Right of First Offer”).

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(ii) The Right of First Offer shall be exercised, if at all, by Buyer giving written notice of exercise thereof (a “ROFO Exercise Notice”) to Seller within sixty (60) days after receipt by Buyer of the ROFO Offer Notice. If Buyer shall deliver a ROFO Exercise Notice within such sixty (60) day period, Seller shall cause the Excluded Parcel Owner to prepare, and the Excluded Parcel Owner and Buyer shall enter into, a purchase and sale agreement covering the ROFO Property (each, a “ROFO Contract”) on the Sale Terms and otherwise in form and substance consistent with this Agreement.

(iii) Should Buyer fail to deliver a ROFO Exercise Notice within said sixty (60) day period, the Excluded Parcel Owner shall thereafter have the right to sell such ROFO Property to an unaffiliated third party for a purchase price that is not less than ninety-five percent (95%) of the purchase price contained in the Sale Terms and otherwise in accordance with the Sale Terms. If the Excluded Parcel Owner is not successful in consummating the closing of such sale on the Sale Terms within twelve (12) months after the ROFO Offer Notice, the Right of First Offer granted Buyer herein shall be automatically reinstated with respect to the applicable ROFO Property and the Excluded Parcel Owner will be required to undergo the same process as described hereinabove in connection with the sale of such ROFO Property. Seller shall cause any contract entered into by the Excluded Parcel Owner and any third party to be expressly subject to the provisions of this Section 31(b). In the event of any sale to a third party in accordance with the requirements of this Section 31(b), upon the closing of such sale this Right of First Offer and the Right of First Refusal shall be deemed to expire automatically solely with respect to the applicable ROFO Property.

(iv) The Right of First Offer with respect to any Excluded Parcel shall commence upon the expiration of the Option with respect to such Excluded Parcel and shall expire and be of no further force and effect on the date which is fourteen (14) years following the Closing Date (such period being herein called the “ROFO Period”). Any exercise of the Right of First Offer by Buyer within the ROFO Period shall be effective even if the closing with respect to the subject ROFO Property shall occur after the expiration of the ROFO Period.

(c) Right of First Refusal.

(i) If at any time during the ROFR Period (as hereinafter defined) any Excluded Parcel Owner receives an offer from a bona fide unaffiliated third party (an “Offeror”) to purchase an Excluded Parcel that is not subject to an Excluded Parcel Lease (the “ROFR Property”) and the Excluded Parcel Owner is able to reach agreement with such Offeror concerning all the material terms upon which the Excluded Parcel Owner would be willing to sell such ROFR Property to such Offeror, Seller shall cause the Excluded Parcel Owner to give prompt written notice (each, a “ROFR Offer Notice”) to Buyer of such offer with a copy of such agreement attached (the “Offer”). Buyer shall have the right, at its option, exercisable as hereinafter provided, to purchase the ROFR Property pursuant to the terms and conditions set forth in the Offer (the “Right of First Refusal”).

(ii) The Right of First Refusal shall be exercised, if at all, by Buyer giving written notice of exercise thereof (a “ROFR Exercise Notice”) to Seller within twenty one (21) days after receipt by Buyer of the ROFR Offer Notice and a copy of the Offer as set forth in Section 31(c)(i). If Buyer shall deliver a ROFR Exercise Notice within such twenty one (21) day

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period, Seller shall cause the Excluded Parcel Owner to prepare, and the Excluded Parcel Owner and Buyer shall enter into, a purchase and sale agreement covering the ROFR Property (each, a “ROFR Contract”) on the terms and conditions of the Offer and otherwise in form and substance consistent with this Agreement.

(iii) Should Buyer fail to deliver a ROFR Exercise Notice to the Excluded Parcel Owner within said twenty one (21) day period, the Excluded Parcel Owner may sell the ROFR Property covered by the subject Offer to the subject Offeror strictly in accordance with such Offer. If the Excluded Parcel Owner and such Offeror thereafter amend or modify the terms of the Offer presented to Buyer to decrease the purchase price by more than five percent (5%) or otherwise provide for terms materially more favorable to the subject Offeror, then such amended or modified Offer shall constitute a new Offer hereunder and Buyer’s Right of First Refusal shall apply thereto, obligating Seller to cause the Excluded Parcel Owner to present such new Offer to Buyer and entitling Buyer the right to exercise the Right of First Refusal as to such new Offer in the manner hereinbefore provided. Seller shall cause any contract entered into by the Excluded Parcel Owner and any Offeror to be expressly subject to the provisions of this Section 31(c). In the event of any sale to an Offeror in accordance with the requirements of this Section 31(c), upon the closing of such sale this Right of First Refusal and the Right of First Offer shall be deemed to expire automatically solely with respect to the applicable ROFR Property. If the subject Offeror fails to consummate the purchase of the ROFR Property pursuant to the Offer within twelve (12) months after the date the Offer is executed, then the ROFR Property shall continue to be subject to the Right of First Refusal.

(iv) The Right of First Refusal with respect to any Excluded Parcel shall commence upon the Closing Date and shall expire and be of no further force and effect on the date which is fourteen (14) years following the Closing Date (such period being herein called the “ROFR Period”). Any exercise of the Right of First Refusal by Buyer within the ROFR Period shall be effective even if the closing of the subject ROFR Property shall occur following the expiration of the ROFR Period.

(d) No Other Transfers. Except as set forth in the next following sentence, it is the intent of Buyer and Seller under this Section 31 that Buyer shall have the option rights, first offer rights and first refusal rights with respect to the Excluded Parcels as set forth in Subsections 31(a), 31(b) and 31(c) above and Seller shall not circumvent such rights through an entity transfer, ground lease (other than a ground lease to a user or occupier) or other method of direct or indirect transfer. Notwithstanding the provisions of this Section 31 to the contrary, Seller shall have the right to sell or transfer, directly or indirectly, any Excluded Parcel without compliance with the provisions of Subsections 31(b) or 31(c) if such sale or transfer is in connection with a merger of Seller, the sale of all or substantially all of the assets of Seller or a bulk sale by Seller of all assets of a specific type. In such circumstances, the rights of Buyer under this Section 31 shall survive such sale or transfer and shall be binding upon the buyer or transferee.

(e) Memorandum. Prior to the conveyance of any Excluded Parcel to an Excluded Parcel Owner, Seller shall cause the transferring Property Owner to execute, acknowledge and record against such Excluded Parcel a memorandum of the terms set forth in this Section 31 (each, a “Memorandum”) in the form annexed hereto as Exhibit “U”. Upon the expiration or

50

termination of the all of the rights of Buyer set forth in this Section 31 with respect to an Excluded Parcel, Buyer agrees, when so requested by Seller, to execute, acknowledge and deliver to Seller an agreement reasonably acceptable to the parties removing the applicable Memorandum from the land records.

(f) Personal Rights. Buyer’s rights set forth in this Section 31 are personal to Buyer, Affiliates of Buyer and the Permitted Assignees named in Section 20 (a) hereof and are: (i) not assignable or transferable by Buyer except as specifically provided herein; and (ii) shall terminate with respect to an applicable Excluded Parcel upon a sale or transfer, direct or indirect, by Buyer of its Ownership Interests in any Property Owner of a Parcel adjacent to such Excluded Parcel (other than to a Permitted Assignee or any Affiliate of Buyer). Notwithstanding the foregoing, (A) the rights of Buyer under this Section 31 shall be assignable and transferrable in the case of a merger of Buyer, the sale of all or substantially all of the assets of Buyer or Affiliates of Buyer which own a Property Owner, the merger or sale of all or substantially all of the assets of a Permitted Assignee named in Section 20 (a) hereof or a bulk sale of the portfolio of the Properties and (B) no transfer of direct or indirect ownership interests in any Property Owner shall be deemed to have occurred for purposes of this Section 31(f) so long as such Property Owner shall continue to be controlled, directly or indirectly by Buyer, RioCan Holdings USA, Inc. and/or any of their respective Affiliates.

(g) Survival. The provisions of this Section 31 shall survive the Closing.

[Remainder of page left intentionally blank]

51

IN WITNESS WHEREOF, the parties hereto, intending legally to be bound hereby, have executed this Agreement as of the date first above written.

SELLER:
PREIT ASSOCIATES, L.P.,
a Delaware limited partnership
By:	Pennsylvania Real Estate Investment Trust, its General Partner
By:	/s/ Jeffrey A. Linn
Name:	Jeffrey A. Linn
Title:	Executive Vice President
CEDAR SHOPPING CENTERS PARTNERSHIP, L.P.,
a Delaware limited partnership
By:	Cedar Shopping Centers, Inc.,
	its General Partner
By:	/s/ L.S. Ullman
Name:	L.S. Ullman
Title:	President

52

EX-10.1

Exhibit 10.1

Pennsylvania Real Estate Investment Trust

2010 Incentive Compensation Opportunity Award

for [Insert Name of Executive],

[Insert Executive’s Position(s)]

2010 Incentive Opportunity2 2010 Incentive Range3 - % of Salary

Threshold4

Target4

Outperformance4

%

%

%

2010 Base Salary1

$

Measure5

Threshold7

Target7

Outperformance7

FFO Per Share6

$

$

$

2010 INCENTIVE OPPORTUNITY:*

$

$

$

The amount payable under this award will be paid in cash during the period January 1, 2011 through March 15, 2011. Except as may be otherwise provided in your employment agreement or determined by the Executive Compensation and Human Resources Committee of the Board of Trustees of PREIT (the “Committee”), the payment of any 2010 Incentive Compensation to you is conditioned on your continued employment by PREIT or one of its subsidiaries through the date that 2010 Incentive Compensation is paid to our officers generally.

The Grantee has read and understands this award, including the endnotes which describe the terms of the award, and agrees to be bound by such terms. Further, the Grantee agrees that any amount awarded and paid to the Grantee under this award shall be subject to PREIT’s “Recoupment Policy” as in effect on the date the Committee granted this award, and as such policy is subsequently amended.

IN WITNESS WHEREOF, PREIT has caused this 2010 Incentive Compensation Opportunity Award to be duly executed by its duly authorized officer and the Grantee has hereunto set his hand on                  , 2010.

PENNSYLVANIA REAL ESTATE INVESTMENT TRUST

By:

Grantee

ENDNOTES

¹ “2010 Base Salary” means your regular, basic compensation from Pennsylvania Real Estate Investment Trust (“PREIT”) and/or a PREIT affiliate for 2010, not including bonuses or other additional compensation, but including contributions made by PREIT and/or a PREIT affiliate on your behalf, by salary reduction pursuant to your election, (i) to an arrangement described in section 401(k) of the Internal Revenue Code of 1986, as amended (the “Code”), (ii) to a “cafeteria plan” (as defined in section 125(d) of the Code), and (iii) for a “qualified transportation fringe” (as defined in section 132(f) of the Code).

² “2010 Incentive Opportunity” means the opportunity to earn incentive compensation for 2010, up to     % of your Base Salary, in the event certain performances are achieved. Performance relates to PREIT’s cumulative performance with respect to one measure of its financial results for 2010.

³ “2010 Incentive Range” means, depending on the level of performance achieved (i.e., Threshold, Target or Outperformance), the percentage of your Base Salary that you may earn under this 2010 Incentive Compensation Opportunity Award. If the performance is between the Threshold level and the Target level, or between the Target level and the Outperformance level, the percentage will be interpolated accordingly.

⁴ “Threshold” signifies a solid achievement, which is expected to have a reasonably high probability of achievement, but which may fall short of expectations. Threshold performance represents the level of performance that has to be achieved before any of your potential 2010 Incentive Compensation is earned. If the Threshold performance level is achieved, you will earn at least     % of your 2010 Base Salary as your 2010 Incentive Compensation. If the Threshold performance level is not met, you will not receive any 2010 Incentive Compensation.

“Target” generally signifies that the business objectives for the year, which are expected to have a reasonable probability of achievement, have been met. For purposes of this award, this represents approximately the mid-range of the revised estimate for FFO Per Share publicly announced by PREIT on May 10, 2010. If the Target performance level is achieved, you will earn at least     % of your 2010 Base Salary as your 2010 Incentive Compensation.

“Outperformance” signifies an outstanding achievement, an extraordinary performance by industry standards, and which is expected to have a modest probability of achievement. If the Outperformance level is achieved, you will earn     % of your 2010 Base Salary as your 2010 Incentive Compensation.

⁵ The “Measure” is the business criterion on which performance is based.

⁶ “FFO Per Share” means, with respect to each diluted share of beneficial interest in PREIT, “funds from operations” of PREIT, as reported to the public by PREIT for 2010.

⁷ The Executive Compensation and Human Resources Committee (the “Committee”) shall have the authority, in its sole discretion, to adjust the Threshold, Target and Outperformance levels set forth in this award if and to the extent that, in the sole judgment of the Committee, the reported FFO Per Share does not reflect the performance of PREIT for 2010 in a manner consistent with the purposes of this award due to the effect of any unusual or nonrecurring transaction or occurrence on the reported FFO Per Share. Any such adjustment shall be made to the 2010 Incentive Compensation Opportunity Awards granted to all officers of PREIT and PREIT affiliates. The Committee shall not be obligated to make any adjustment. If the Committee elects to make an adjustment, it shall be free to take such factors into account as it deems appropriate under the circumstances in its sole discretion. Further, in the case of a transaction or occurrence that also constitutes a “Change of Control” of PREIT (as defined in your employment agreement), the Committee shall have the authority, in its sole discretion, to accelerate the payment of your 2010 Incentive Compensation.

- 2 -

EX-10.2

Exhibit 10.2

Pennsylvania Real Estate Investment Trust

2010 Incentive Compensation Opportunity Award

For [Insert Name of Executive],

[Insert Executive’s Position].

2010 Incentive Opportunity2 2010 Incentive Range3 - % of Salary

Threshold4

Target4

Outperformance4

%

%

%

2010 Base Salary1

$

Measure5

Threshold7

Target7

Outperformance7

FFO Per Share6

$

$

$

2010 INCENTIVE OPPORTUNITY:*

$

$

$

* The amount payable under this award will be paid in cash during the period January 1, 2011 through March 15, 2011. Except as may be otherwise provided in your employment agreement or determined by the Executive Compensation and Human Resources Committee of the Board of Trustees of PREIT(the “Committee”), the payment of any 2010 Incentive Compensation to you is conditioned on your continued employment by PREIT or one of its subsidiaries through the date that 2010 Incentive Compensation is paid to our officers generally.

The Grantee has read and understands this award, including the endnotes which describe the terms of the award, and agrees to be bound by such terms. Further, the Grantee agrees that any amount awarded and paid to the Grantee under this award shall be subject to PREIT’s “Recoupment Policy” as in effect on the date the Committee granted this award, and as such policy is subsequently amended.

IN WITNESS WHEREOF, PREIT has caused this 2010 Incentive Compensation Opportunity Award to be duly executed by its duly authorized officer and the Grantee has hereunto set his hand on                  , 2010.

PENNSYLVANIA REAL ESTATE INVESTMENT TRUST

By:

Grantee

ENDNOTES

¹ “2010 Base Salary” means your regular, basic compensation from Pennsylvania Real Estate Investment Trust (“PREIT”) and/or a PREIT affiliate for 2010, not including bonuses or other additional compensation, but including contributions made by PREIT and/or a PREIT affiliate on your behalf, by salary reduction pursuant to your election, (i) to an arrangement described in section 401(k) of the Internal Revenue Code of 1986, as amended (the “Code”), (ii) to a “cafeteria plan” (as defined in section 125(d) of the Code), and (iii) for a “qualified transportation fringe” (as defined in section 132(f) of the Code).

² “2010 Incentive Opportunity” means the opportunity to earn incentive compensation for 2010, up to     % of your Base Salary, in the event certain performances are achieved. Performance relates to PREIT’s cumulative performance with respect to one measure of its financial results for 2010.

³ “2010 Incentive Range” means, depending on the level of performance achieved (i.e., Threshold, Target or Outperformance), the percentage of your Base Salary that you may earn under this 2010 Incentive Compensation Opportunity Award. If the performance is between the Threshold level and the Target level, or between the Target level and the Outperformance level, the percentage will be interpolated accordingly.

⁴ “Threshold” signifies a solid achievement, which is expected to have a reasonably high probability of achievement, but which may fall short of expectations. Threshold performance represents the level of performance that has to be achieved before any of your potential 2010 Incentive Compensation is earned. If the Threshold performance level is achieved, you will earn at least     % of your 2010 Base Salary as your 2010 Incentive Compensation. If the Threshold performance level is not met, you will not receive any 2010 Incentive Compensation.

“Target” generally signifies that the business objectives for the year, which are expected to have a reasonable probability of achievement, have been met. For purposes of this award, this represents approximately the mid-range of the revised estimate for FFO Per Share publicly announced by PREIT on May 10, 2010. If the Target performance level is achieved, you will earn at least     % of your 2010 Base Salary as your 2010 Incentive Compensation.

“Outperformance” signifies an outstanding achievement, an extraordinary performance by industry standards, and which is expected to have a modest probability of achievement. If the Outperformance level is achieved, you will earn     % of your 2010 Base Salary as your 2010 Incentive Compensation.

⁵ The “Measure” is the business criterion on which performance is based.

⁶ “FFO Per Share” means, with respect to each diluted share of beneficial interest in PREIT, “funds from operations” of PREIT, as reported to the public by PREIT for 2010.

⁷ The Executive Compensation and Human Resources Committee (the “Committee”) shall have the authority, in its sole discretion, to adjust the Threshold, Target and Outperformance levels set forth in this award if and to the extent that, in the sole judgment of the Committee, the reported FFO Per Share does not reflect the performance of PREIT for 2010 in a manner consistent with the purposes of this award due to the effect of any unusual or nonrecurring transaction or occurrence on the reported FFO Per Share. Any such adjustment shall be made to the 2010 Incentive Compensation Opportunity Awards granted to all officers of PREIT and PREIT affiliates. The Committee shall not be obligated to make any adjustment. If the Committee elects to make an adjustment, it shall be free to take such factors into account as it deems appropriate under the circumstances in its sole discretion. Further, in the case of a transaction or occurrence that also constitutes a “Change of Control” of PREIT (as defined in your employment agreement), the Committee shall have the authority, in its sole discretion, to accelerate the payment of your 2010 Incentive Compensation.

-2-

EX-10.3

Exhibit 10.3

Pennsylvania Real Estate Investment Trust

2010 Incentive Compensation Opportunity Award

for [Insert Name of Executive],

Executive Vice President

2010 Incentive Opportunity2 2010 Incentive Range3 - % of Salary

Threshold4

Target4

Outperformance4

%

%

%

2010 Base Salary1

$

Performance Measurement Allocation5

Corporate

Individual

%

%

CORPORATE –     %

Measure6

Threshold8

Target8

Outperformance8

FFO Per Share7

$

$

$

TOTAL 2010 CORPORATE OPPORTUNITY:

$

$

$

INDIVIDUAL –     %

Measure

Threshold

Target

Outperformance

Compensation Committee Discretion1

Committee Discretion

Committee Discretion

Committee Discretion

TOTAL 2010 INDIVIDUAL OPPORTUNITY:

$

$

$

TOTAL 2010 INCENTIVE OPPORTUNITY:*

$

$

$

* The amount payable under this award will be paid in cash during the period January 1, 2011 through March 15, 2011. Except as may be otherwise provided in your employment agreement or determined by the Executive Compensation and Human Resources Committee of the Board of Trustees of PREIT the Committee”), the payment of any 2010 Incentive Compensation to you is conditioned on your continued employment by PREIT or one of its subsidiaries through the date that 2010 Incentive Compensation is paid to our officers generally.

The Grantee has read and understands this award, including the endnotes which describe the terms of the award, and agrees to be bound by such terms. Further, the Grantee agrees that any amount awarded and paid to the Grantee under this award shall be subject to PREIT’s “Recoupment Policy” as in effect on the date the Committee granted this award, and as such policy is subsequently amended.

IN WITNESS WHEREOF, PREIT has caused this 2010 Incentive Compensation Opportunity Award to be duly executed by its duly authorized officer and the Grantee has hereunto set his hand on                  , 2010.

PENNSYLVANIA REAL ESTATE INVESTMENT TRUST

By:

Grantee

ENDNOTES

¹ “2010 Base Salary” means your regular, basic compensation from Pennsylvania Real Estate Investment Trust (“PREIT”) and/or a PREIT affiliate for 2010, not including bonuses or other additional compensation, but including contributions made by PREIT and/or a PREIT affiliate on your behalf, by salary reduction pursuant to your election, (i) to an arrangement described in section 401(k) of the Internal Revenue Code of 1986, as amended (the “Code”), (ii) to a “cafeteria plan” (as defined in section 125(d) of the Code), and (iii) for a “qualified transportation fringe” (as defined in section 132(f) of the Code).

² “2010 Incentive Opportunity” means the opportunity to earn incentive compensation for 2010, up to     % of your Base Salary, in the event certain corporate and individual performances are achieved. Corporate performance relates to PREIT’s cumulative performance with respect to one measure of its financial results for 2010, while individual performance relates to your performance within the scope of your responsibilities as an employee of PREIT and/or a PREIT affiliate.

³ “2010 Incentive Range” means, depending on the level of corporate and individual performance achieved (i.e., Threshold, Target or Outperformance), the percentage of your Base Salary that you may earn under this 2010 Incentive Compensation Opportunity Award. If the corporate performance is between the Threshold level and the Target level, or between the Target level and the Outperformance level, the percentage will be interpolated accordingly.

⁴ With respect to corporate performance, “Threshold” signifies a solid achievement, which is expected to have a reasonably high probability of achievement, but which may fall short of expectations. Threshold performance represents the level of performance that has to be achieved before any of your potential 2010 Incentive Compensation is earned. The Executive Compensation and Human Resources Committee (the “Committee”) will decide whether you have met what the Committee determines to be the “Threshold” level for purposes of your individual performance. If the Threshold performance level is achieved with respect to corporate and individual performance, you will earn at least     % of your 2010 Base Salary as your 2010 Incentive Compensation allocated to such performances (see note 5). If the Threshold performance level is not met with respect to corporate performance or your individual performance, you will not receive any 2010 Incentive Compensation allocated to such corporate performance or individual performance, as applicable.

With respect to corporate performance, “Target” generally signifies that the business objectives for the year, which are expected to have a reasonable probability of achievement have been met. For purposes of this award, this represents approximately the mid-range of the revised estimate for FFO Per Share publicly announced by PREIT on May 10, 2010. The Committee will decide whether you have met what the Committee determines to be the “Target” level for purposes of your individual performance. If the Target performance level is achieved with respect to corporate and individual performance, you will earn at least     % of your 2010 Base Salary as your 2010 Incentive Compensation allocated to such performances (see note 5).

With respect to corporate performance, “Outperformance” signifies an outstanding achievement, an extraordinary performance by industry standards, and which is expected to have a modest probability of achievement. The Committee will decide whether you have met what the Committee determines to be the “Outperformance” level for purposes of your individual performance. If the Outperformance level is achieved with respect to corporate and individual performance, you will earn     % of your 2010 Base Salary as your 2010 Incentive Compensation allocated to such performances (see note 5).

⁵ “Performance Measurement Allocation” means the percent by which your 2010 Incentive Compensation is allocated between corporate performance and your individual performance. For example, if your base salary is $200,000, and     % of your 2010 Incentive Compensation is allocated to corporate performance and     % is allocated to your individual performance, you will earn $             (    % of 100% of $200,000) of your 2010 Incentive Compensation if the Outperformance level of the corporate performance is achieved and $             (    % of 100% of $200,000) of your 2010 Incentive Compensation if the Outperformance level of your individual performance is achieved.

⁶ The “Measure” is the business criterion on which corporate performance is based.

⁷ “FFO Per Share” means, with respect to each diluted share of beneficial interest in PREIT, “funds from operations” of PREIT, as reported to the public by PREIT for 2010.

⁸ The Executive Compensation and Human Resources Committee (the “Committee”) shall have the authority, in its sole discretion, to adjust the Threshold, Target and Outperformance levels set forth in this award if and to the extent that, in the sole judgment of the Committee, the reported FFO Per Share does not reflect the performance of PREIT for 2010 in a manner consistent with the purposes of this award due to the effect of any unusual or nonrecurring transaction or occurrence on the reported FFO Per Share. Any such adjustment shall be made to the 2010 Incentive Compensation Opportunity Awards granted to all officers of PREIT and PREIT affiliates. The Committee shall not be obligated to make any adjustment(s). If the Committee elects to make an adjustment, it shall be free to take such factors into account as it deems appropriate under the circumstances in its sole discretion. Further, in the case of a transaction or occurrence that also constitutes a “Change of Control” of PREIT (as defined in your employment agreement), the Committee shall have the authority, in its sole discretion, to accelerate the payment of your 2010 Incentive Compensation.

⁹ The Committee has the sole discretion to set the measure for your individual performance for 2010 and to determine the level of individual performance you have achieved. However, regardless of your individual performance, no 2010 Incentive Compensation based on your individual performance will be paid if FFO Per Share (see note 7) is less than $             (subject to adjustment by the Committee – in connection with an adjustment made under note 8).

EX-10.4

Exhibit 10.4

Pennsylvania Real Estate Investment Trust

2010 Incentive Compensation Opportunity Award

for Jonathen Bell,

Senior Vice President and Chief Accounting Officer

2010 Incentive Opportunity2 2010 Incentive Range3 - % of Salary

Threshold4

Target4

Outperformance4

%

%

%

2010 Base Salary1

$

Performance Measurement Allocation5

Corporate

Individual

%

%

CORPORATE –%

Measure6

Threshold8

Target8

Outperformance8

FFO Per Share7

$

$

$

TOTAL 2010 CORPORATE OPPORTUNITY

$

$

$

INDIVIDUAL –%

Measure

Threshold

Target

Outperformance

KPIs9

KPIs

KPIs

KPIs

TOTAL 2010 INDIVIDUAL OPPORTUNITY

$

$

$

TOTAL 2010 INCENTIVE OPPORTUNITY:*

$

$

$

* The amount payable under this award will be paid in cash during the period January 1, 2011 through March 15, 2011. Except as may be otherwise provided in your employment agreement or determined by the Executive Compensation and Human Resources Committee of the Board of Trustees of PREIT (the “Committee”), the payment of any 2010 Incentive Compensation to you is conditioned on your continued employment by PREIT or one of its subsidiaries through the date that 2010 Incentive Compensation is paid to our officers generally.

The Grantee has read and understands this award, including the endnotes which describe the terms of the award, and agrees to be bound by such terms. Further, the Grantee agrees that any amount awarded and paid to the Grantee under this award shall be subject to PREIT’s “Recoupment Policy” as in effect on the date the Committee granted this award, and as such policy is subsequently amended.

IN WITNESS WHEREOF, PREIT has caused this 2010 Incentive Compensation Opportunity Award to be duly executed by its duly authorized officer and the Grantee has hereunto set his hand on                  , 2010.

PENNSYLVANIA REAL ESTATE INVESTMENT TRUST

By:

Grantee

ENDNOTES

¹ “2010 Base Salary” means your regular, basic compensation from Pennsylvania Real Estate Investment Trust (“PREIT”) and/or a PREIT affiliate for 2010, not including bonuses or other additional compensation, but including contributions made by PREIT and/or a PREIT affiliate on your behalf, by salary reduction pursuant to your election, (i) to an arrangement described in section 401(k) of the Internal Revenue Code of 1986, as amended (the “Code”), (ii) to a “cafeteria plan” (as defined in section 125(d) of the Code), and (iii) for a “qualified transportation fringe” (as defined in section 132(f) of the Code).

² “2010 Incentive Opportunity” means the opportunity to earn incentive compensation for 2010, up to     % of your Base Salary, in the event certain corporate and individual performances are achieved. Corporate performance relates to PREIT’s cumulative performance with respect to one measure of its financial results for 2010, while individual performance relates to your performance within the scope of your responsibilities as an employee of PREIT and/or a PREIT affiliate.

^{3 “}2010 Incentive Range” means, depending on the level of corporate and individual performance achieved (i.e., Threshold, Target or Outperformance), the percentage of your Base Salary that you may earn under this 2010 Incentive Compensation Opportunity Award. If the corporate performance is between the Threshold level and the Target level, or between the Target level and the Outperformance level, the percentage will be interpolated accordingly.

⁴ With respect to corporate performance, “Threshold” signifies a solid achievement, which is expected to have a reasonably high probability of achievement, but which may fall short of expectations. Threshold performance represents the level of performance that has to be achieved before any of your potential 2010 Incentive Compensation is earned. The Executive Compensation and Human Resources Committee (the “Committee”) (after considering the recommendations of the senior management of PREIT) will decide whether you have met what the senior management determines to be the “Threshold” level for purposes of your individual performance. If the Threshold performance level is achieved with respect to corporate and individual performance, you will earn at least     % of your 2010 Base Salary as your 2010 Incentive Compensation allocated to such performances (see note 5). If the Threshold performance level is not met with respect to corporate performance or your individual performance, you will not receive any 2010 Incentive Compensation allocated to such corporate performance or individual performance, as applicable.

With respect to corporate performance, “Target” generally signifies that the business objectives for the year, which are expected to have a reasonable probability of achievement have been met. For purposes of this award, this represents approximately the mid-range of the revised estimate for FFO Per Share publicly announced by PREIT on May 10, 2010. The Committee will decide whether you have met what the Committee determines to be the “Target” level for purposes of your individual performance. If the Target performance level is achieved with respect to corporate and individual performance, you will earn at least     % of your 2010 Base Salary as your 2010 Incentive Compensation allocated to such performances (see note 5).

With respect to corporate performance, “Outperformance” signifies an outstanding achievement, an extraordinary performance by industry standards, and which is expected to have a modest probability of achievement. The Committee (after considering the recommendations of the senior management of PREIT) will decide whether you have met what the senior management determines to be the “Outperformance” level for purposes of your individual performance. If the Outperformance level is achieved with respect to corporate and individual performance, you will earn     % of your 2010 Base Salary as your 2010 Incentive Compensation allocated to such performances (see note 5).

⁵ “Performance Measurement Allocation” means the percent by which your 2010 Incentive Compensation is allocated between corporate performance and your individual performance. For example, if your base salary is $             and     % of your 2010 Incentive Compensation is allocated to corporate performance and     % is allocated to your individual performance, you will earn $             (    % of     % of $            ) of your 2010 Incentive Compensation if the Outperformance level of the corporate performance is achieved and $             (    % of     % of $            ) of your 2010 Incentive Compensation if the Outperformance level of your individual performance is achieved.

⁶ The “Measure” is the business criterion on which corporate performance is based.

⁷ “FFO Per Share” means, with respect to each diluted share of beneficial interest in PREIT, “funds from operations” of PREIT, as reported to the public by PREIT for 2010.

⁸ The Executive Compensation and Human Resources Committee (the “Committee”) shall have the authority, in its sole discretion, to adjust the Threshold, Target and Outperformance levels set forth in this award if and to the extent that, in the sole judgment of the Committee, the reported FFO Per Share does not reflect the performance of PREIT for 2010 in a manner consistent with the purposes of this award due to the effect of any unusual or nonrecurring transaction or occurrence on the reported FFO Per Share. Any such adjustment shall be made to the 2010 Incentive Compensation Opportunity Awards granted to all officers of PREIT and PREIT affiliates. The Committee shall not be obligated to make any adjustment(s). If the Committee elects to make an adjustment, it shall be free to take such factors into account as it deems appropriate under the circumstances in its sole discretion. Further, in the case of a transaction or occurrence that also constitutes a “Change of Control” of PREIT (as defined in PREIT’s 2003 Equity Incentive Plan), the Committee shall have the authority, in its sole discretion, to accelerate the payment of your 2010 Incentive Compensation.

⁹ The Committee has the sole discretion to set the measure for your individual performance for 2010 and to determine the level of individual performance you have achieved. However, regardless of your individual performance, no 2010 Incentive Compensation based on your individual performance will be paid if FFO Per Share (see note 7) is less than $             (subject to adjustment by the Committee – in connection with an adjustment made under note 8).

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Ronald Rubin, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Pennsylvania Real Estate Investment Trust;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of trustees (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 8, 2010		/s/    Ronald Rubin
	Name:	Ronald Rubin
	Title:	Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Robert F. McCadden, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Pennsylvania Real Estate Investment Trust;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of trustees (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 8, 2010		/s/    Robert F. McCadden
	Name:	Robert F. McCadden
	Title:	Executive Vice President and Chief Financial Officer

EX-32.1

Exhibit 32.1

Certification of Chief Executive Officer

Pursuant to Section 906 of Sarbanes-Oxley Act of 2002

I, Ronald Rubin, the Chief Executive Officer of Pennsylvania Real Estate Investment Trust (the “Company”), hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

(1) the Form 10-Q of the Company for the quarter ended September 30, 2010 as filed with the Securities and Exchange Commission on the date hereof (the “Form 10-Q”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and

(2) the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 8, 2010		/s/    Ronald Rubin
	Name:	Ronald Rubin
	Title:	Chief Executive Officer

EX-32.2

Exhibit 32.2

Certification of Chief Financial Officer

Pursuant to Section 906 of Sarbanes-Oxley Act of 2002

I, Robert F. McCadden, the Executive Vice President and Chief Financial Officer of Pennsylvania Real Estate Investment Trust (the “Company”), hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

(1) the Form 10-Q of the Company for the quarter ended September 30, 2010 as filed with the Securities and Exchange Commission on the date hereof (the “Form 10-Q”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and

(2) the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 8, 2010		/s/    Robert F. McCadden
	Name:	Robert F. McCadden
	Title:	Executive Vice President and Chief Financial Officer