ITEM 1.    BUSINESS.

OVERVIEW

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

We currently own interests in 43 retail properties, of which 40 are operating properties and three are development properties. The 40 operating properties, which are classified in continuing operations, include 35 enclosed malls and five power and strip centers, have a total of 30.4 million square feet and operate in 11 states. We and partnerships in which we own an interest own 23.6 million square feet at these properties (excluding space owned by anchors).

There are 33 operating retail properties in our portfolio that we consolidate for financial reporting purposes. These consolidated properties have a total of 25.8 million square feet, of which we own 20.5 million square feet. The seven operating retail properties that are owned by unconsolidated partnerships with third parties have a total of 4.6 million square feet, of which 3.1 million square feet are owned by such partnerships.

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

We are a fully integrated, self-managed and self-administered REIT that has elected to be treated as a REIT for federal income tax purposes. In general, we are required each year to distribute to our shareholders at least 90% of our net taxable income and to meet certain other requirements in order to maintain the favorable tax treatment associated with qualifying as a REIT.

PREIT’S BUSINESS

We are primarily engaged in the ownership, management, leasing, acquisition, redevelopment, development and disposition of enclosed malls. In general, our malls include tenants that are national or regional department stores, large format retailers or other anchors and a diverse mix of national, regional and local in-line stores offering apparel (women’s, family, teen, children’s, men’s), shoes, eyewear, cards and gifts, jewelry, sporting goods, home furnishings, drug stores, electronics and books/music/movies, among other things.

To enhance the experience for shoppers, most of our malls have restaurants and/or food courts, and some of the malls have multi-screen movie theaters and other entertainment options, either as part of the mall or on outparcels around the perimeter of the mall property. In addition, many of our malls have outparcels containing restaurants, banks or other stores. In their geographic trade areas, our malls frequently serve as a central place for community, promotional and charitable events.

The largest mall in our retail portfolio is 1.4  million square feet and contains 108 stores, and the smallest is 0.4  million square feet and contains 46 stores. The power and strip centers in our retail portfolio range from 285,000 to 780,000 square feet.

We derive the substantial majority of our revenue from rent received under leases with tenants for space at retail properties in our real estate portfolio. In-line stores typically generate a majority of the revenue of a mall, with a relatively small proportion coming from anchor tenants, junior anchors or large format retailers. In general, our leases require tenants to pay minimum rent, which is a fixed amount specified in the lease, and which is often subject to scheduled increases during the term of the lease for longer term leases. In 2013 , 80% of the new leases that we signed contained scheduled rent increases, and these increases, which are typically scheduled to occur on one or two occasions during the term, ranged from 1.3% to 215.0% with approximately 90% of the increases ranging from 2% to 5%. In addition or in the alternative, certain tenants are required to pay percentage rent, which can be either a percentage of their sales revenue that exceeds certain levels specified in their lease agreements, or a percentage of their total sales revenue.

Also, the majority of our leases provide that the tenant will reimburse us for certain expenses relating to the property for common area maintenance (“CAM”), real estate taxes, utilities, insurance and other operating expenses incurred in the operation of the property subject, in some cases, to certain limitations. The proportion of the expenses for which tenants are responsible is traditionally related to the tenant’s pro rata share of space at the property. As discussed below, we have begun to shift the provision in our leases that addresses these items to be a fixed amount, which gives greater predictability to tenants.

Retail real estate industry participants sometimes classify malls based on the average sales per square foot of non anchor mall tenants, the population and average household income of the trade area and the geographic market, the growth rates of the population and average household income in the trade area and geographic market, and numerous other factors. Based on these

factors, in general, malls that have high average sales per square foot and are in trade areas with large populations and high household incomes and/or growth rates are considered Class A malls, malls with average sales per square foot that are in the middle range of population or household income and/or growth rates are considered Class B malls, and malls with lower average sales and smaller populations and lower household incomes and/or growth rates are considered Class C malls. Although these classifications are defined differently by different market participants, in general, some of our malls are in the Class A range and many might be classified as Class B or Class C properties. The classification of a mall can change, and one of the goals of our current property strategic plans, remerchandising programs and non-core property disposition program is to increase the average sales per square foot of certain of our properties and correspondingly increase their rental income and cash flows, and thus potentially their class, in order to maximize the value of the property.

RECENT DEVELOPMENTS

Operating Performance

For the year ended December 31, 2013, we demonstrated progress over 2012 in a number of our key operating metrics.

Same Store net operating income (“Same Store NOI”), a non-GAAP measure, excluding lease termination revenue increased 2.7% compared to 2012. Same store NOI increased 2.6% over the prior year.

Funds From Operations (“FFO”) as adjusted, a non-GAAP measure, increased 19.6% from the prior year, and FFO as adjusted per share increased 4.9% over 2012, due in part to the effects of an underwritten public offering of common shares. Adjustments included employee separation expense, hedging loss and accelerated amortization of financing costs.

Net income was $37.2 million, an increase of $79.8 million compared to a net loss for 2012 of $42.6 million, primarily as a result of gains on sales and decreased interest expense.

Retail portfolio occupancy at year end was 95.0% , an increase of 60 basis points. Non anchor occupancy was 93.5% , an increase of 150 basis points. Same store mall occupancy was 95.0% , an increase of 60 basis points.

Seven properties generated sales per square foot in excess of $400, including consolidated and unconsolidated properties, up from six in 2012. Sales per square foot at our mall properties were $380 , essentially unchanged from 2012, including consolidated and unconsolidated properties.

Renewal spreads increased 4.3% for leases under 10,000 square feet. Renewal spreads increased 1.2% for all leases. Average gross rent increased 3.1% .

Since 2012, our Board of Trustees has raised the dividend on common shares by 25%.

Descriptions of each non-GAAP measure mentioned above and the related reconciliation to the comparable GAAP measures are located in "—Management's Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations—Reconciliation of GAAP Net Income (Loss) to Non-GAAP Measures."

Portfolio Stratification . As discussed in our 2012 Form 10-K for 2012 sales, when listing our malls in order by individual property 2013 sales per square foot, there is a group of six malls at the top of that list that collectively had an average sales per square foot of $526 , average non anchor occupancy of 97.1% and that contributed approximately 32.5% of our net operating income ("NOI") in 2013. This “premier” group includes such properties as Cherry Hill Mall in Cherry Hill, New Jersey and Willow Grove Park in suburban Philadelphia, Pennsylvania.

The next 18 properties on the list are a collection of solidly performing properties that had an average sales per square foot of $356 , average non anchor occupancy of 93.5% and contributed approximately 47.2% of our NOI in 2013. This “core growth” group includes such properties as Capital City Mall near Harrisburg, Pennsylvania and Valley Mall in Hagerstown, Maryland.

The next eight properties on the list, which exhibit moderate performance, had 2013 average sales per square foot of $266 , non anchor occupancy of 90.3% and contributed 11.2% of our NOI in 2013, and, we believe, present opportunities for improvement. This “opportunistic” group includes such properties as Lycoming Mall near Williamsport, Pennsylvania and New River Valley Mall in Christiansburg, Virginia.

The remaining three mall properties (Nittany Mall in State College, Pennsylvania, North Hanover Mall in Hanover, Pennsylvania and South Mall in Allentown, Pennsylvania) constitute “non-core” properties and contributed 2.9% of our NOI in 2013. As discussed below, we sold three mall properties and three power and strip centers that were non-core properties in 2013, and we have undertaken efforts to dispose of these other three non-core properties.

Our portfolio also includes five power and strip centers. These power and strip centers had total occupancy of 95.0% , and contributed approximately 4.0% of our NOI in 2013. The balance of our 2013 NOI came mostly from properties we sold during the year.

Financing Activity

Leverage . As of December 31, 2013, our ratio of Total Liabilities to Gross Asset Value under our 2013 Revolving Facility was 48.36% , down significantly from 62.44% at the end of 2012, and 66.87% at the end of 2011. This decrease was a result of certain transactions completed in 2013 and certain other actions, as described below.

2013 Unsecured Revolving Facility . In April, we entered into a Credit Agreement (the “2013 Revolving Facility”) with Wells Fargo Bank, National Association, and other financial institutions for a $400.0 million senior unsecured revolving credit facility. The 2013 Revolving Facility replaced the previously existing $250.0 million secured 2010 Credit Facility. The 2013 Revolving Facility provides for reduced interest rate margins at various leverage levels, a longer term until maturity and the use of lower capitalization rates in determining leverage for those properties meeting certain sales criteria.

Common Share Offering . In May 2013, we issued 11,500,000 common shares in a public offering at $20.00 per share, near our high price for the year. We received net proceeds from the offering of $220.5 million , after deducting payment of the underwriting discount and offering expenses. We used a portion of the net proceeds from this offering to repay all $192.5 million of then-outstanding borrowings under our 2013 Revolving Facility.

2014 Unsecured Term Loans . In January 2014, we entered into two senior unsecured term loans for an aggregate amount of $250.0 million. We entered into a 5 Year Term Loan Agreement with Wells Fargo Bank, National Association, U.S. Bank National Association and other financial institutions, for $150.0 million, which may be expanded to $300.0 million, and a 7 Year Term Loan Agreement with Wells Fargo Bank, National Association, Capital One, National Association and other financial institutions, for $100.0 million, which may be expanded to $200.0 million (collectively, the “2014 Term Loans”). We made initial borrowings of $100.0 million under the 5 Year Term Loan Agreement and $30.0 million under the 7 Year Term Loan Agreement, and used the proceeds to repay the $130.0 million then-outstanding balance under our 2013 Revolving Facility.

Mortgage Loan Activity . In 2013, we completed $291.1 million of mortgage loan financings relating to five properties at a weighted average interest rate of 4.26% , a 127 basis point reduction versus the average interest rate on the previous mortgage loans on these properties, and yielding approximately $31.7 million in proceeds. The following table presents the mortgage loans that we have entered into or extended since January 1, 2013 relating to our consolidated properties:

Financing Date		Property		Amount Financed or Extended (in millions of dollars)		Stated Interest Rate		Maturity
February		Francis Scott Key Mall (1)(2)		$62.6		LIBOR plus 2.60%		March 2018
February		Lycoming Mall (3)		35.5		LIBOR plus 2.75%		March 2018
February		Viewmont Mall (1)		48.0		LIBOR plus 2.60%		March 2018
March		Dartmouth Mall		67.0		3.97% fixed		April 2018
September		Logan Valley Mall (4)		51.0		LIBOR plus 2.10%		September 2014
December		Wyoming Valley Mall (5)		78.0		5.17% fixed		December 2023

Also in 2013, we repaid in full an aggregate of $218.6 million of mortgage loans secured by four of our properties. These properties are currently unencumbered.

Repayment of Debt Using Sale Proceeds . In 2013, we sold two power centers, as described below, yielding net proceeds that we generally used to repay outstanding borrowings under various debt agreements.

Recent Dispositions and Acquisition

In continuing to execute our strategy of elevating the quality of our portfolio, in 2013 we disposed of three non-core mall properties, we acquired one property and we also realized the value of three of our power and strip center properties by selling them.

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

Sale Date		Property and Location		Description of Real Estate Sold		Capitalization Rate			Sale Price (in millions)				Gain/ (Loss)
									(in millions of dollars)
January		Phillipsburg Mall, Phillipsburg, New Jersey		Mall (1)		9.8	%		$	11.5			$	—
		Paxton Towne Centre, Harrisburg, Pennsylvania		Power center (2)(3)		6.9	%		76.8				32.7
February		Orlando Fashion Square, Orlando, Florida		Mall (4)		9.8	%		35.0				0.7
September		Commons at Magnolia, Florence, South Carolina		Strip Center (5)		8.9	%		12.3				4.3
		Christiana Center, Newark, Delaware		Power Center (2)(5)(6)		6.5	%		75.0				40.8
November		Chambersburg Mall, Chambersburg, Pennsylvania		Mall (7)		NM (8)			8.5				—

In addition, in September 2013, we sold a condominium interest in connection with a ground lease located at Voorhees Town Center in Voorhees, New Jersey for $10.5 million.

Acquisition . In April 2013, we acquired a building located contiguous to The Gallery at Market East in Philadelphia, Pennsylvania for $59.6 million, representing a capitalization rate of approximately 5.7%. In January 2014, the main tenant of the building announced that it is closing its store in the first half of 2014.

BUSINESS STRATEGY

Our primary objective is to maximize the long-term value of the Company for our shareholders. To that end, our business goals are to obtain the highest possible rental income, tenant sales and occupancy at our properties in order to maximize our cash flows, net operating income, funds from operations, funds available for distribution to shareholders and other operating measures and results, and ultimately to maximize the values of our properties.

To achieve this primary goal, we have developed a business strategy focused on increasing the values of our properties, and ultimately of the Company, which includes:

Raising the Overall Level of Quality of the Assets in Our Portfolio

A key element of our strategy is to elevate the overall level of quality of our portfolio. We intend to accomplish this by enhancing the value of some of the properties (most of which are in our core growth group), as well as by disposing of lower productivity non-core properties.

Mall-Specific Plans . We believe that certain of our properties, including ones which are in trade areas around major cities or are leading properties in secondary markets, can benefit from strategic remerchandising strategies. Based on the demographics of the trade area or the relevant competition, we believe that this subset of properties provides opportunities for meaningful value creation at the property level. We believe that we can successfully implement particular strategies at these assets, such as adding restaurants, making fashion and certain fashion categories the focus of the retailers at the property, and relocating and right-sizing certain stores. We also continuously work to optimize the match between the demographics of the trade area, such as the household income level, and the nature and mix of tenants at the property. We strive to work closely with tenants to enhance their merchandising opportunities at our properties. We believe that these approaches can attract more national and other tenants to the property and can lead to higher occupancy and net operating income. In 2013, we developed specific plans for substantially all of our core growth properties, and began or continued to execute and deliver on these plans, with notable progress at malls such as Moorestown Mall, Viewmont Mall and Washington Crown Center.

Shopper Experiences . In addition to such property-wide remerchandising efforts, we also seek to offer unique shopper experiences at our properties by having tenants that provide products, services or interactions that are unlike other offerings in the trade area. In particular, we are striving to add the restaurants of recognized chefs or dining options with unique concepts, as studies indicate that mall restaurant customers spend more and stay on the property longer. We also seek to add first-to-market tenants, entertainment options, beauty and fashion purveyors, and unique tenants like a popular upscale flea market, as well as providing amenities like children’s play areas and mall shopping smartphone apps.

Portfolio Actions . Another avenue for raising the level of quality of our portfolio is to dispose of certain non-core assets, which have sales productivity or occupancy below the average for our portfolio. In January and February 2013, we sold Phillipsburg Mall and Orlando Fashion Square, respectively. In November 2013, we sold Chambersburg Mall. We are also seeking to sell a small number of other malls. We anticipate that the proposed disposition of these lower-performing properties, together with the property sales that have already closed, will result in improved operating metrics of the remaining collection of assets (other things being equal), which are measures of the quality of our portfolio. As discussed below under “—Improving the Operating Results of Our Properties,” we believe that this will also aid our bargaining position in lease negotiations and potentially help increase rental rates.

Improving the Operating Results of Our Properties

We aim to improve the overall performance of our portfolio of properties with a multi-pronged approach.

Occupancy . We continue to work to increase non anchor and total occupancy in our properties. In connection with the remerchandising plans at several of our properties described above in “—Raising the Overall Level of Quality of the Assets in Our Portfolio,” we are seeking or have obtained tenants for remerchandised space and for new space of different types such as pads or kiosks, and we are also seeking tenants that have not previously been prevalent at our mall properties. In addition, following our completed redevelopments of several properties in recent years, we gave high priority to our efforts to lease the available space at those assets, and have secured a number of new and renewal tenants to help increase or maintain occupancy at the redeveloped properties and throughout our portfolio. In connection with these efforts, over the past two years, non anchor occupancy at our malls increased by 290 basis points and total occupancy increased by 180 basis points.

Key Tenants; Mall Leasing . We continue to recruit, and expand our relationships with, certain high profile retailers, and to initiate and expand our relationships with other quality and first-to-market retailers or concepts. We coordinate closely with tenants on new store locations in an effort to position our properties for our tenants’ latest concept or store prototype, in order to

drive traffic to our malls and stimulate customer spending. We have added experienced new members to our team of veteran leasing representatives. We believe that increasing our occupancy in ways that are tailored to particular properties will be helpful to our leasing efforts and will help increase rental rates.

Rental Rates . For the year ended December 31, 2013, we generated sales per square foot of $ 380 from our properties, essentially consistent with the prior year level and higher than the $373 generated in 2011 and the $358 generated in 2010. This improved level has helped attract new tenants and helped us retain current tenants that seek to take advantage of the property’s increased productivity. We have worked to capitalize on the increase in sales per square foot over the past few years by seeking positive rent renewal spreads, including from renewals and new leases following expirations of leases entered into during the economic downturn of recent years. In 2013, renewal spreads increased 4.3% on leases under 10,000 square feet. More than half of the near-term lease expirations in our portfolio are in the premier and core growth groups of properties. Hence, we believe that there is a meaningful opportunity to increase rent and replace underperforming tenants at these properties, and potentially to increase their NOI and net asset values.

As discussed above in “—Raising the Overall Level of Quality of the Assets in Our Portfolio,” we have sold three non-core malls in 2013 and are seeking to dispose of certain other non-core malls with lower sales productivity. We believe that the disposition of these less productive malls will help improve our negotiating position with retailers with multiple stores in our portfolio (including stores at these properties), and potentially enable us to obtain higher rental rates from them.

Specialty Leasing and Partnership Marketing . Some space at our properties might be available for a shorter period of time, pending a lease with a permanent tenant or in connection with a redevelopment. We strive to manage the use of this space through our specialty leasing function, which manages the short term leasing of stores and the licensing of income-generating carts and kiosks, with the goal of maximizing the rent we receive during the period when a space is not subject to a longer term lease.

In 2012 and 2013, we accelerated our efforts to generate ancillary revenue (such as sponsorship marketing revenue and promotional income) from the properties in our portfolio. In 2013, we have added further resources to this function, and we believe that increased efforts in this area can enable us to increase the proportion of net operating income derived from ancillary revenue.

Operating Expenses and CAM Charges . Our strategy for improving operating results also includes efforts to control or reduce the costs of operating our properties. With respect to operating expenses, we have taken steps to manage a significant proportion of them through contracts with third party vendors for housekeeping and maintenance, security services, landscaping and trash. These contracts provide reasonable control, certainty and predictability. For example, we renegotiated our security contract in 2013 to better control our operating expenses in the future. We also seek to contain certain expenses through our active programs for managing utility expense and real estate taxes. We have taken advantage of opportunities to buy electricity economically in states that have opened their energy markets to competition, thereby reducing operating expenses, and we expect to continue with this approach. We also review the annual tax assessments of our properties and, when appropriate, pursue appeals.

With respect to CAM charges, we have continued to offer tenants an option of fixed CAM, in contrast to the traditional pro rata CAM. Fixed CAM, while shifting some risk to us as landlord, can offer tenants increased predictability of their costs, decrease the number of items to be negotiated in a lease thus speeding lease execution, and reduce the need for detailed CAM billings, reconciliations and collections. It will take several years for all tenants of our properties to be subject to leases with a fixed CAM provision, but we believe there is an opportunity for costs to be reduced.

Taking Steps to Position the Company for Future Growth Opportunities

We are taking steps to position the Company to generate future growth. We have implemented processes designed to ensure strong internal discipline in the use, harvesting and recycling of our capital, and these processes will be applied in connection with proposals to acquire properties and to redevelop properties or to reposition properties with a mix of uses.

External Opportunities . We seek to acquire, in an opportunistic, selective and disciplined manner, properties that are well-located, that are in trade areas with growing or stable demographics, that have operating metrics that are better than or equal to our existing portfolio averages, and that we believe have strong potential for increased cash flows and appreciation in value if we call upon our relationships with retailers and apply our skills in asset management and redevelopment. We also seek to acquire additional parcels or properties that are included within, or adjacent to, the properties already in our portfolio in order to gain greater control over the merchandising and tenant mix of a property. Depending on the nature of the acquisition opportunity, we might involve a partner. Taking advantage of any such opportunities will likely involve some use of debt or equity capital.

We pursue development of retail and mixed use projects that we expect can meet the financial and strategic criteria we apply, given economic, market and other circumstances. We seek to leverage our skill sets in site selection, entitlement and planning, cost estimation and project management to develop new retail and mixed use properties. We seek properties in trade areas that we believe have sufficient demand for such properties, once developed, to generate cash flows that meet the financial thresholds we establish in the given environment. We manage all aspects of these undertakings, including market and trade area research, site selection, acquisition, preliminary development work, construction and leasing.

Organic Opportunities . We might also seek to increase the potential value of properties in our portfolio and to maintain or enhance their competitive positions by redeveloping them in order to attract more customers and retailers, which we expect to lead to increases in sales, occupancy and rental rates. Redevelopments are generally more involved than strategic property plans or remerchandising programs that include the elements described above under “—Improving the Operating Results of Our Properties,” and usually require some use of capital. To assist in these efforts, in 2013 we added an experienced senior development professional to our team.

In 2013, we acquired a building at 907 Market Street in Philadelphia, Pennsylvania that is located adjacent to The Gallery at Market East, which we own. This building was the last remaining major parcel that we did not already control along three city blocks on Market Street in Center City Philadelphia between City Hall, Reading Terminal Market, the Convention Center and the Historic District. We have begun researching and analyzing possible strategies and plans for redeveloping this group of properties. While there are several complex aspects to a redevelopment of this scale and with these unique attributes, we believe that this organic opportunity has significant potential for value creation.

In addition, we look for ways to maximize the value of our assets by adding a mix of uses, such as office or multi-family residential housing, initiated either by ourselves or with a partner, that are designed to attract a greater number of people to the property. Multiple constituencies, from local governments to city planners to citizen groups, have indicated a preference for in-place development, development near transportation hubs, the addition of uses to existing properties, and sustainable development, as opposed to locating, acquiring and developing new green field sites. Also, if appropriate, we will seek to attract certain nontraditional tenants to these properties, including tenants using the space for purposes such as entertainment, education, health care, government and child care, which can bring larger numbers of people to the property, as well as regional, local or nontraditional retailers. Such uses will, we believe, increase traffic and enable us to generate additional revenue and grow the value of the property.

Improving Our Balance Sheet by Reducing Debt and Leverage; Maintaining Liquidity

Leverage . As discussed above under “—Recent Developments —Financing Activity,” in 2013, we reduced our ratio of Total Liabilities to Gross Asset Value as defined under the 2013 Revolving Facility to 48.36% following certain transactions and events, including: our entry into the 2013 Revolving Facility, a common equity offering, the sale of certain properties with application of the net proceeds to debt repayment, and the refinancing of several mortgage loans with the use of proceeds for debt repayment. As a result, we believe that our leverage is more in line with peer companies in our market segment.

We continue to contemplate ways to reduce our leverage further through a variety of means available to us. These means might include selling properties or interests in properties with values in excess of their mortgage loans and applying any excess proceeds to debt reduction; issuing common or preferred equity or equity-related securities if market conditions are favorable; entering into joint ventures or other partnerships or arrangements involving our contribution of assets; or through other actions. We are also striving to reduce further our ratio of Total Liabilities to Gross Asset Value by increasing our Gross Asset Value through improving our operating performance. See “—Improving the Operating Results of Our Properties.”

Mortgage Loan Refinancings and Repayments . In addition, we might pursue opportunities to make favorable changes to individual mortgage loans on our properties. When we refinance such loans, we might seek a new term, better rates and excess proceeds. An aspect of our approach to debt financing is that we strive to lengthen and stagger the maturities of our debt obligations in order to better manage our future capital requirements. As we did in 2013, we might again seek to repay certain mortgage loans in full in order to unencumber the associated properties, which enables us to increase our pool of unencumbered assets and provide greater financial flexibility or support additional financing, like the unsecured 2013 Revolving Facility and the unsecured 2014 Term Loans.

Deployment of Capital . As discussed above under “—Taking Steps to Position the Company for Future Growth Opportunities,” our external and organic growth opportunities might require the use of capital, including debt or equity capital.

Liquidity . As of December 31, 2013, our balance sheet reflected $34.2 million in cash and cash equivalents. In addition, as of January 8, 2014, the 2013 Revolving Facility had the maximum availability of $400.0 million. We believe that our net cash

provided by operations, together with the available credit under the 2013 Revolving Facility and the 2014 Term Loans, provide sufficient liquidity to meet our liquidity requirements and to take advantage of opportunities in the short to intermediate term.

Capital Recycling . We regularly conduct portfolio property reviews and, if appropriate, we seek to dispose of properties or outparcels that we do not believe meet the financial and strategic criteria we apply, given economic, market and other circumstances. Disposing of these properties can enable us to redeploy or recycle our capital to other uses, such as to repay debt, to reinvest in other real estate assets and development and redevelopment projects, and for other corporate purposes.

CAPITAL STRATEGY

In support of the business strategies described above, our long-term corporate finance objective is to maximize the availability and minimize the cost of the capital we employ to fund our operations. In pursuit of this objective and for other business reasons, we seek the broadest range of funding sources (including commercial banks, institutional lenders, equity and debt investors and joint venture partners) and funding vehicles (including mortgage loans, commercial loans and debt and equity securities) available to us on the most favorable terms. We pursue this goal by maintaining relationships with various capital sources and utilizing a variety of financing instruments, enhancing our flexibility to execute our business strategy in different economic environments or at different points in the business cycle.

In the past year, as discussed above, we entered into a number of new mortgage loans, repaid other mortgage loans, issued common equity in a public offering and entered into a new unsecured revolving facility and two unsecured term loans.

Through the end of 2014, one mortgage loan with a balance of $51.0 million secured by a consolidated property is scheduled to mature, but we expect to be able to extend the maturity date pursuant to the applicable loan agreement, subject to lender approval. Three mortgage loans with an aggregate balance of $283.7 million secured by consolidated properties are scheduled to mature in 2015, and we expect to be able to refinance these mortgage loans. We believe that, in the aggregate, the values of these properties will be sufficient to support replacement financing. While mortgage interest rates remain relatively low, we will seek to extend these mortgage loans to the maximum extent possible, or to replace them with longer term mortgage loans. See “Item 1A. Risk Factors” and “—Business Strategy—Improving Our Balance Sheet by Reducing Debt and Leverage; Maintaining Liquidity.”

In general, in determining the amount and type of debt capital to employ in our business, we consider several factors, including: general economic conditions, the capital market environment, prevailing and forecasted interest rates for various debt instruments, the cost of equity capital, property values, capitalization rates for mall properties, our financing needs for acquisition, redevelopment and development opportunities, the debt ratios of other mall REITs and publicly-traded real estate companies, and the federal tax law requirement that REITs distribute at least 90% of net taxable income, among other factors.

In the normal course of business, we are exposed to financial market risks, including interest rate risk on our interest-bearing liabilities. We attempt to limit these risks by following established risk management policies, procedures and strategies, including the use of various types of financial instruments. 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 our underlying exposure, and subject to our ability to satisfy collateral requirements.

Capital Availability

To maintain our status as a REIT, we are required, under federal tax laws, to distribute to shareholders 90% of our net taxable income, which generally leaves insufficient funds to finance major initiatives internally. Because of these requirements, we ordinarily fund most of our significant capital requirements, such as the capital for acquisitions, redevelopments and developments, through secured and unsecured indebtedness and, when appropriate, the issuance of additional debt, equity or equity-related securities.

In April 2013, we entered into the 2013 Revolving Facility, for a $400.0 million senior unsecured revolving credit facility. The 2013 Revolving Facility replaced our prior $250.0 million secured credit facility. In January 2014, we entered into two senior unsecured term loans for an aggregate amount of $250.0 million, a five year agreement for a $150.0 million facility, expandable to $300.0 million, and a seven year agreement for a $100.0 million facility, expandable to $200.0 million. During the term of the 2013 Revolving Facility and the 2014 Term Loans, certain covenants and provisions might restrict our ability to use our cash flows and any debt or equity capital we obtain to execute our strategy.

In addition, our ability to finance our growth using these sources depends, in part, on our creditworthiness, the availability of credit to us or the market for our securities at the time or times we need capital. Uncertainty in the capital and credit markets might negatively affect our ability to access additional financing at reasonable terms, which might negatively affect our ability

to fund our long-term strategies and other business initiatives. See “Item 1A. Risk Factors—Risks Related to Our Indebtedness and Our Financing.”

OWNERSHIP STRUCTURE

We hold our interests in our portfolio of properties through our operating partnership, PREIT Associates. We are the sole general partner of PREIT Associates and, as of December 31, 2013, held a 97.0% controlling interest in PREIT Associates. We consolidate PREIT Associates for financial reporting purposes. We own our interests in our properties through various ownership structures, including partnerships and tenancy in common arrangements (collectively, “partnerships”). PREIT owns interests in some of these properties directly and has pledged the entire economic benefit of ownership to PREIT Associates. PREIT Associates’ direct or indirect economic interest in the properties ranges from 40% or 50% (for eight partnership properties) up to 100%. See “Item 2. Properties—Retail Properties.”

We provide our management, leasing and real estate development services through our subsidiaries PREIT Services, LLC (“PREIT Services”), which generally develops and manages properties that we consolidate for financial reporting purposes, and 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 own 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.

COMPETITION

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

The existence or development of competing retail properties and the related increased competition for tenants might, subject to the terms and conditions of our Credit Agreements, lead us to make capital improvements to properties that we would have deferred or would not have otherwise planned to make and might affect occupancy and net operating income of such properties. Any such capital improvements, undertaken individually or collectively, would involve costs and expenses that could adversely affect our results of operations.

We compete with many other entities engaged in real estate investment activities for acquisitions of malls, other retail properties and prime development sites or sites adjacent to our properties, including institutional pension funds, other REITs and other owner-operators of retail properties. When we seek to make acquisitions, competitors might drive up the price we must pay for properties, parcels, other assets or other companies or might themselves succeed in acquiring those properties, parcels, assets or companies. In addition, 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 or site, or generate lower cash flow from an acquired property or site than we expect, our investment returns will be reduced, which will adversely affect the value of our securities.

ENVIRONMENTAL

Under various federal, state and local laws, ordinances, regulations and case law, an owner, former owner or operator of real estate might be liable for the costs of removal or remediation of hazardous or toxic substances present at, on, under, in or released from its property, regardless of whether the owner, operator or other responsible party knew of or was at fault for the release or presence of hazardous or toxic substances. Contamination might adversely affect the owner’s ability to sell or lease real estate or borrow with real estate as collateral. In connection with our ownership, operation, management, development and redevelopment of properties, or any other properties we acquire in the future, we might be liable under these laws and might incur costs in responding to these liabilities.

Each of our retail properties has been subjected to a Phase I or similar environmental audit (which involves a visual property inspection and a review of records, but not soil sampling or ground water analysis) by environmental consultants. These audits have not revealed, and we are not aware of, any environmental liability that we believe would have a material adverse effect on our results of operations. It is possible, however, that there are material environmental liabilities of which we are unaware.

We are aware of certain past environmental matters at some of our properties. We have, in the past, investigated and, where appropriate, performed remediation of such environmental matters, but we might be required in the future to perform testing relating to these matters and further remediation might be required, or we might incur liability as a result of such environmental matters. See “Item 1A. Risk Factors—We might incur costs to comply with environmental laws, which could have an adverse effect on our results of operations.”

EMPLOYEES

We had 610 employees at our properties and in our corporate office as of December 31, 2013 . None of our employees are represented by a labor union.

INSURANCE

We have comprehensive liability, fire, flood, terrorism, extended coverage and rental loss insurance that we believe is adequate and consistent with the level of coverage that is standard in our industry. We cannot assure you, however, that our insurance coverage will be adequate to protect against a loss of our invested capital or anticipated profits, or that we will be able to obtain adequate coverage at a reasonable cost in the future.

STATUS AS A REIT

We conduct our operations in a manner intended to maintain our qualification as a REIT under the Internal Revenue Code of 1986, as amended. Generally, as a REIT, we will not be subject to federal or state income taxes on our net taxable income that we currently distribute to our shareholders. Our qualification and taxation as a REIT depend on our ability to meet various qualification tests (including dividend distribution, asset ownership and income tests) and certain share ownership requirements prescribed in the Internal Revenue Code.

CORPORATE HEADQUARTERS

Our principal executive offices are located at The Bellevue, 200 South Broad Street, Philadelphia, Pennsylvania 19102.

SEASONALITY

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

AVAILABLE INFORMATION

We maintain a website with the address www.preit.com. We are not including or incorporating by reference the information contained on our website into this report. We make available on our website, free of charge and as soon as practicable after filing with the SEC, copies of our most recently filed Annual Report on Form 10-K, all Quarterly Reports on Form 10-Q and all Current Reports on Form 8-K filed during each year, including all amendments to these reports, if any. Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to these reports are also available on the SEC’s website at http://www.sec.gov . In addition, copies of our corporate governance guidelines, codes of business conduct and ethics (which include the code of ethics applicable to our chief executive officer, principal financial officer and principal accounting officer) and the governing charters for the audit, nominating and governance, and executive compensation and human resources committees of our Board of Trustees are available free of charge on our website, as well as in print to any shareholder upon request. The public may read and copy any materials we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. We intend to comply with the requirements of Item 5.05 of Form 8-K regarding amendments to and waivers under the code of business conduct and ethics applicable to our chief executive officer, principal financial officer and principal accounting officer by providing such information on our website within four days after effecting any amendment to, or granting any waiver under, that code, and we will maintain such information on our website for at least twelve months.