PENNSYLVANIA REAL ESTATE INVESTMENT TRUST (Form: 10-Q, Received: 10/26/2012 15:45:54)

Large accelerated filer

Accelerated filer

Non-accelerated filer

¨ (Do not check if a smaller reporting company)

Smaller reporting company

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, 2012

¨	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 x No ¨

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

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

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

Common shares of beneficial interest, $1.00 par value per share, outstanding at October 24, 2012: 55,982,082

PENNSYLVANIA REAL ESTATE INVESTMENT TRUST

CONTENTS


		Page
PART I—FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited):

	Consolidated Balance Sheets – September 30, 2012 and December 31, 2011		1

	Consolidated Statements of Operations – Three and Nine Months Ended September 30, 2012 and 2011		2

	Consolidated Statements of Comprehensive Loss – Three and Nine Months Ended September 30, 2012 and 2011		4

	Consolidated Statements of Equity – Nine Months Ended September 30, 2012		5

	Consolidated Statements of Cash Flows – Nine Months Ended September 30, 2012 and 2011		6

	Notes to Unaudited Consolidated Financial Statements		7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		16

Item 3.	Quantitative and Qualitative Disclosures About Market Risk		38

Item 4.	Controls and Procedures		40

PART II—OTHER INFORMATION

Item 1.	Legal Proceedings		40

Item 1A.	Risk Factors		40

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		41

Item 3.	Not Applicable		—

Item 4.	Not Applicable		—

Item 5.	Not Applicable		—

Item 6.	Exhibits		42

Signatures			43

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.

PENNSYLVANIA REAL ESTATE INVESTMENT TRUST

CONSOLIDATED BALANCE SHEETS


(in thousands, except per share amounts)	September 30, 2012			December 31, 2011
	(Unaudited)
ASSETS:
INVESTMENTS IN REAL ESTATE, at cost:
Operating properties	$	3,527,364		$	3,470,167
Construction in progress		88,167			91,538
Land held for development		14,490			15,292

Total investments in real estate		3,630,021			3,576,997
Accumulated depreciation		(938,260	)		(844,010	)

Net investments in real estate		2,691,761			2,732,987

INVESTMENTS IN PARTNERSHIPS, at equity:		15,524			16,009
OTHER ASSETS:
Cash and cash equivalents		26,248			21,798
Tenant and other receivables (net of allowance for doubtful accounts of $15,873 and $17,930 at September 30, 2012 and December 31, 2011, respectively)		37,313			39,832
Intangible assets (net of accumulated amortization of $15,749 and $51,625 at September 30, 2012 and December 31, 2011, respectively)		8,898			9,921
Deferred costs and other assets		98,797			89,707

Total assets	$	2,878,541		$	2,910,254

LIABILITIES:
Mortgage loans payable (including debt premium of $282 at December 31, 2011)	$	1,822,404		$	1,691,381
Exchangeable Notes (net of debt discount of $849 at December 31, 2011)		—			136,051
Term Loans		240,000			240,000
Revolving Facility		15,000			95,000
Tenants’ deposits and deferred rent		11,689			13,278
Distributions in excess of partnership investments		62,818			64,938
Fair value of derivative instruments		13,805			21,112
Accrued expenses and other liabilities		68,602			60,456

Total liabilities		2,234,318			2,322,216
COMMITMENTS AND CONTINGENCIES (Note 6)
EQUITY:
Series A preferred shares, $.01 par value per share; 25,000 shares authorized; 4,600 shares issued and outstanding at September 30, 2012 and 0 shares issued and outstanding at December 31, 2011; liquidation preference of $115,000		46			—
Shares of beneficial interest, $1.00 par value per share; 200,000 shares authorized; 55,992 shares issued and outstanding at September 30, 2012 and 55,677 shares issued and outstanding at December 31, 2011		55,992			55,677
Capital contributed in excess of par		1,165,091			1,047,487
Accumulated other comprehensive loss		(26,322	)		(34,099	)
Distributions in excess of net income		(589,575	)		(524,738	)

Total equity—PREIT		605,232			544,327
Noncontrolling interest		38,991			43,711

Total equity		644,223			588,038

Total liabilities and equity	$	2,878,541		$	2,910,254

See accompanying notes to the unaudited consolidated financial statements.

PENNSYLVANIA REAL ESTATE INVESTMENT TRUST

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


	Three months ended September 30,						Nine months ended September 30,
(in thousands of dollars)	2012			2011			2012			2011
REVENUE:
Real estate revenue:
Base rent	$	73,419		$	71,797		$	217,862		$	214,489
Expense reimbursements		32,293			33,597			95,231			98,714
Percentage rent		698			805			2,124			2,501
Lease termination revenue		339			143			1,766			862
Other real estate revenue		3,519			3,420			10,377			10,150

Total real estate revenue		110,268			109,762			327,360			326,716
Interest and other income		2,608			3,981			4,254			5,708

Total revenue		112,876			113,743			331,614			332,424
EXPENSES:
Operating expenses:
CAM and real estate taxes		(36,434	)		(35,448	)		(108,583	)		(108,012	)
Utilities		(6,690	)		(6,987	)		(17,693	)		(18,896	)
Other operating expenses		(5,872	)		(5,363	)		(16,321	)		(17,450	)

Total operating expenses		(48,996	)		(47,798	)		(142,597	)		(144,358	)
Depreciation and amortization		(33,776	)		(34,681	)		(100,894	)		(105,806	)
Other expenses:
General and administrative expenses		(8,694	)		(8,495	)		(28,818	)		(28,511	)
Provision for employee separation expenses		(4,958	)		—			(5,754	)		—
Impairment of assets		—			(52,110	)		—			(52,335	)
Project costs and other expenses		(380	)		(161	)		(777	)		(433	)

Total other expenses		(14,032	)		(60,766	)		(35,349	)		(81,279	)
Interest expense, net		(31,097	)		(31,846	)		(94,562	)		(100,400	)

Total expenses		(127,901	)		(175,091	)		(373,402	)		(431,843	)
Loss before equity in income of partnerships and gains on sales of real estate		(15,025	)		(61,348	)		(41,788	)		(99,419	)
Equity in income of partnerships		2,164			1,924			6,110			4,614
Gains on sales of real estate		—			—			—			1,450

Net loss		(12,861	)		(59,424	)		(35,678	)		(93,355	)
Less: net loss attributable to noncontrolling interest		508			2,386			1,440			3,751

Net loss attributable to PREIT		(12,353	)		(57,038	)		(34,238	)		(89,604	)
Less: preferred share dividends		(2,372	)		—			(4,217	)		—

Net loss attributable to PREIT common shareholders	$	(14,725	)	$	(57,038	)	$	(38,455	)	$	(89,604	)

See accompanying notes to the unaudited consolidated financial statements.

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)	2012			2011			2012			2011
Net loss	$	(12,861	)	$	(59,424	)	$	(35,678	)	$	(93,355	)
Noncontrolling interest		508			2,386			1,440			3,751
Preferred share dividends		(2,372	)		—			(4,217	)		—
Dividends on unvested restricted shares		(132	)		(143	)		(321	)		(405	)

Loss used to calculate earnings per share—basic and diluted	$	(14,857	)	$	(57,181	)	$	(38,776	)	$	(90,009	)


Basic loss per share	$	(0.27	)	$	(1.05	)	$	(0.70	)	$	(1.65	)

Diluted loss per share	$	(0.27	)	$	(1.05	)	$	(0.70	)	$	(1.65	)

(in thousands of shares)
Weighted average shares outstanding—basic		55,190			54,701			55,081			54,612
Effect of common share equivalents ⁽¹⁾		—			—			—			—

Weighted average shares outstanding—diluted		55,190			54,701			55,081			54,612

⁽¹⁾

The Company had net losses from continuing operations for all periods presented. Therefore, the effect of common share equivalents of 982 and 165 for the three months ended September 30, 2012 and 2011, respectively, and 1,017 and 305 for the nine months ended September 30, 2012 and 2011, respectively, are excluded from the calculation of diluted loss per share for these periods because they would be antidilutive.

See accompanying notes to the unaudited consolidated financial statements.

PENNSYLVANIA REAL ESTATE INVESTMENT TRUST

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(Unaudited)


	Three months ended September 30,						Nine months ended September 30,
(in thousands of dollars)	2012			2011			2012			2011

Comprehensive loss:
Net loss	$	(12,861	)	$	(59,424	)	$	(35,678	)	$	(93,355	)
Unrealized gain on derivatives		3,030			933			7,307			2,708
Other		289			(562	)		797			(320	)

Total comprehensive loss		(9,542	)		(59,053	)		(27,574	)		(90,967	)
Less: Comprehensive loss attributable to noncontrolling interest		375			2,371			1,113			3,655

Comprehensive loss attributable to PREIT	$	(9,167	)	$	(56,682	)	$	(26,461	)	$	(87,312	)

See accompanying notes to the unaudited consolidated financial statements.

PENNSYLVANIA REAL ESTATE INVESTMENT TRUST

CONSOLIDATED STATEMENTS OF EQUITY

Nine Months Ended

September 30, 2012

(Unaudited)


				PREIT Shareholders
(in thousands of dollars, except per share amounts)	Total Equity			Series A Preferred Shares, $25 Liquidation Value		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, 2012	$	588,038		$	—	$	55,677	$	1,047,487		$	(34,099	)	$	(524,738	)	$	43,711
Total comprehensive loss		(27,574	)		—		—		—			7,777			(34,238	)		(1,113	)
Shares issued upon redemption of Operating Partnership Units		—			—		28		413			—			—			(441	)
Shares issued under distribution reinvestment and share purchase plan		869			—		21		848			—			—			—
Shares issued under employee share purchase plan		544			—		35		509			—			—			—
Shares issued under equity incentive plans, net of shares retired		(2,993	)		—		231		(3,224	)		—			—			—
Amortization of deferred compensation		8,208			—		—		8,208			—			—			—
Series A preferred share offering		110,896			46		—		110,850			—			—			—
Distributions paid to preferred shareholders ($0.8307 per share)		(3,821	)		—		—		—			—			(3,821	)		—
Distributions paid to common shareholders ($0.47 per share)		(26,778	)		—		—		—			—			(26,778	)		—
Noncontrolling interests:
Distributions to Operating Partnership unit holders ($0.47 per unit)		(1,099	)		—		—		—			—			—			(1,099	)
Amortization of historic tax credit		(1,810	)		—		—		—			—			—			(1,810	)
Other distributions to noncontrolling interest, net		(257	)		—		—		—			—			—			(257	)

Balance September 30, 2012	$	644,223		$	46	$	55,992	$	1,165,091		$	(26,322	)	$	(589,575	)	$	38,991

See accompanying notes to the unaudited consolidated financial statements.

PENNSYLVANIA REAL ESTATE INVESTMENT TRUST

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Nine months ended September 30,
(in thousands of dollars)	2012			2011
Cash flows from operating activities:
Net loss	$	(35,678	)	$	(93,355	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation		94,659			96,664
Amortization		11,655			14,113
Straight-line rent adjustments		(1,292	)		96
Provision for doubtful accounts		2,260			3,374
Amortization of historic tax credit		(1,810	)		(1,921	)
Impairment of assets		—			52,335
Amortization of deferred compensation		8,208			6,752
Gains on sales of real estate		—			(1,450	)
Change in assets and liabilities:
Net change in other assets		(8,997	)		(6,336	)
Net change in other liabilities		7,864			3,443

Net cash provided by operating activities		76,869			73,715

Cash flows from investing activities:
Additions to construction in progress		(32,008	)		(15,642	)
Investments in real estate improvements		(24,303	)		(26,567	)
Cash proceeds from sales of real estate		—			7,346
Additions to leasehold improvements		(693	)		(196	)
Investments in partnerships		(3,640	)		(122	)
Capitalized leasing costs		(4,137	)		(3,754	)
Decrease in cash escrows		151			1,438
Cash distributions from partnerships in excess of equity in income		2,005			33,549

Net cash used in investing activities		(62,625	)		(3,948	)

Cash flows from financing activities:
Net proceeds from issuance of Series A preferred shares		110,896			—
Repayment of Exchangeable Notes		(136,900	)		—
Net repayment of Revolving Facility		(80,000	)		(45,000	)
Paydown of 2010 Term Loan		—			(7,200	)
Proceeds from mortgage loans		467,750			27,700
Principal installments on mortgage loans		(15,714	)		(15,732	)
Repayment of mortgage loans		(320,731	)		(9,918	)
Payment of deferred financing costs		(1,817	)		(4,066	)
Dividends paid to common shareholders		(26,778	)		(25,034	)
Dividends paid to Series A preferred shareholders		(3,821	)		—
Distributions paid to Operating Partnership unit holders and noncontrolling interest		(1,099	)		(1,046	)
Shares of beneficial interest issued		1,413			432
Shares retired under equity incentive plans, net of shares issued		(2,993	)		(1,883	)

Net cash used in financing activities		(9,794	)		(81,747	)

Net change in cash and cash equivalents		4,450			(11,980	)
Cash and cash equivalents, beginning of period		21,798			42,327

Cash and cash equivalents, end of period	$	26,248		$	30,347

See accompanying notes to the unaudited the consolidated financial statements.

PENNSYLVANIA REAL ESTATE INVESTMENT TRUST

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2012

1. BASIS OF PRESENTATION

Nature of Operations

Pennsylvania Real Estate Investment Trust (“PREIT” or the “Company”) prepared the accompanying unaudited consolidated financial statements pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted pursuant to such rules and regulations, although we believe that the included disclosures are adequate to make the information presented not misleading. Our unaudited consolidated financial statements should be read in conjunction with the audited financial statements and the notes thereto included in PREIT’s Annual Report on Form 10-K, as amended, for the year ended December 31, 2011. In our opinion, all adjustments, consisting only of normal recurring adjustments, necessary to present fairly our consolidated financial position and the consolidated results of our operations and our cash flows are included. The results of operations for the interim periods presented are not necessarily indicative of the results for the full year.

PREIT, a Pennsylvania business trust founded in 1960 and one of the first equity real estate investment trusts (“REITs”) in the United States, has a primary investment focus on retail shopping malls located in the eastern half of the United States, primarily in the Mid-Atlantic region. As of September 30, 2012, our portfolio consisted of a total of 49 properties in 13 states, including 38 shopping malls, eight strip and power centers and three development properties, with two of the development properties classified as “mixed use” (a combination of retail and other uses) and one of the development properties classified as “other.”

We hold our interest in our portfolio of properties through our operating partnership, PREIT Associates, L.P. (“PREIT Associates” or the “Operating Partnership”). We are the sole general partner of the Operating Partnership and, as of September 30, 2012, we held a 96.0% interest in the Class A and Class B limited partnership units of the Operating Partnership, and consolidated it for reporting purposes. The presentation of consolidated financial statements does not itself imply that the assets of any consolidated entity (including any special-purpose entity formed for a particular project) are available to pay the liabilities of any other consolidated entity, or that the liabilities of any consolidated entity (including any special-purpose entity formed for a particular project) are obligations of any other consolidated entity.

Pursuant to the terms of the partnership agreement of the Operating Partnership, each of the limited partners has the right to redeem such partner’s units of limited partnership interest in the Operating Partnership (“OP Units”) for cash or, at our election, we may acquire such OP Units in exchange for our common shares on a one-for-one basis, in some cases beginning one year following the respective issue date of the OP Units and in other cases immediately. If all of the outstanding OP Units held by limited partners had been redeemed for cash as of September 30, 2012, the total amount that would have been distributed would have been $36.5 million, which is calculated using our September 28, 2012 closing share price on the New York Stock Exchange of $15.86 multiplied by the number of outstanding OP Units held by limited partners, which was 2,300,932 as of September 30, 2012.

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

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

Fair Value

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

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

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

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

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

New Accounting Developments

Effective January 1, 2012, in conjunction with our implementation of updates to the fair value measurements guidance, we made an accounting policy election to measure derivative financial instruments that are subject to master netting agreements on a net basis. This accounting policy election did not have a material effect on our financial statements.

2. REAL ESTATE ACTIVITIES

Investments in real estate as of September 30, 2012 and December 31, 2011 were comprised of the following:


(in thousands of dollars)	As of September 30, 2012			As of December 31, 2011
Buildings, improvements and construction in progress	$	3,108,328		$	3,060,095
Land, including land held for development		521,693			516,902

Total investments in real estate		3,630,021			3,576,997
Accumulated depreciation		(938,260	)		(844,010	)

Net investments in real estate	$	2,691,761		$	2,732,987

Capitalization of Costs

The following table summarizes our capitalized salaries, commissions and benefits, real estate taxes and interest for the three and nine months ended September 30, 2012 and 2011:


	Three months ended September 30,				Nine months ended September 30,
(in thousands of dollars)	2012		2011		2012		2011
Development/Redevelopment Activities:
Salaries and benefits	$	193	$	190	$	675	$	612
Real estate taxes		129		174		277		243
Interest		325		720		1,430		1,485
Leasing Activities:
Salaries, commissions and benefits		1,636		1,230		4,137		3,754

We expensed project costs that did not meet or no longer met our criteria for capitalization of $0.2 million and $0.1 million for the three months ended September 30, 2012 and 2011, respectively, and $0.5 million and $0.4 million for the nine months ended September 30, 2012 and 2011, respectively.

3. INVESTMENTS IN PARTNERSHIPS

The following table presents summarized financial information of the equity investments in our unconsolidated partnerships as of September 30, 2012 and December 31, 2011:


(in thousands of dollars)	As of September 30, 2012			As of December 31, 2011
ASSETS:
Investments in real estate, at cost:
Retail properties	$	412,527		$	404,219
Construction in progress		3,098			2,092

Total investments in real estate		415,625			406,311
Accumulated depreciation		(154,319	)		(144,671	)

Net investments in real estate		261,306			261,640
Cash and cash equivalents		11,119			11,379
Deferred costs and other assets, net		19,609			19,687

Total assets		292,034			292,706

LIABILITIES AND PARTNERS’ DEFICIT:
Mortgage loans payable		406,900			410,978
Other liabilities		6,512			6,645

Total liabilities		413,412			417,623

Net deficit		(121,378	)		(124,917	)
Partners’ share		(64,984	)		(66,667	)
PREIT’s share		(56,394	)		(58,250	)
Excess investment ⁽¹⁾		9,100			9,321

Net investments and advances	$	(47,294	)	$	(48,929	)

Investment in partnerships, at equity	$	15,524		$	16,009
Distributions in excess of partnership investments		(62,818	)		(64,938	)

Net investments and advances	$	(47,294	)	$	(48,929	)

⁽¹⁾

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

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

The following table summarizes our share of equity in income of partnerships for the three and nine months ended September 30, 2012 and 2011:


	Three months ended September 30,						Nine months ended September 30,
(in thousands of dollars)	2012			2011			2012			2011
Real estate revenue	$	19,530		$	18,740		$	57,594		$	56,067
Expenses:
Operating expenses		(5,755	)		(5,313	)		(17,006	)		(17,156	)
Interest expense		(5,640	)		(5,602	)		(16,939	)		(17,122	)
Depreciation and amortization		(3,600	)		(3,679	)		(10,801	)		(12,110	)

Total expenses		(14,995	)		(14,594	)		(44,746	)		(46,388	)

Net income		4,535			4,146			12,848			9,679
Less: Partners’ share		(2,267	)		(2,061	)		(6,422	)		(4,803	)

Company’s share		2,268			2,085			6,426			4,876
Amortization of excess investment		(104	)		(161	)		(316	)		(262	)

Equity in income of partnerships	$	2,164		$	1,924		$	6,110		$	4,614

The following table presents the mortgage loans secured by our unconsolidated properties entered into since January 1, 2012:


Financing Date	Property	Amount Financed (in millions of dollars)	Stated Rate	Maturity
July 2012	Pavilion East ⁽¹⁾	$9.4	LIBOR plus 2.75%	August 2017

⁽¹⁾	The unconsolidated entity that owns Pavilion East entered into the mortgage loan. Our interest in the unconsolidated entity is 40%. The mortgage loan has a term of five years.

4. FINANCING ACTIVITY

Amended, Restated and Consolidated Senior Secured Credit Agreement

Our credit facility consists of a revolving line of credit with a capacity of $250.0 million (the “Revolving Facility”) and term loans with an aggregate balance as of September 30, 2012 of $240.0 million (collectively, the “2010 Term Loan” and, together with the Revolving Facility and as amended, the “2010 Credit Facility”).

As of September 30, 2012, $15.0 million was outstanding under our Revolving Facility. No amounts were pledged as collateral for letters of credit, and the unused portion that was available to us was $235.0 million at September 30, 2012. We used a portion of the net proceeds from our Series B Preferred Share offering in October 2012 to repay all $15.0 million of then-outstanding borrowings under the Revolving Facility. Immediately after the repayment, there were no amounts outstanding under the Revolving Facility.

The weighted average interest rate on outstanding Revolving Facility borrowings as of September 30, 2012 was 3.75%. Interest expense related to the Revolving Facility was $0.7 million and $0.5 million for the three months ended September 30, 2012 and 2011, respectively, and $2.2 million and $1.2 million for the nine months ended September 30, 2012 and 2011, respectively, excluding non-cash amortization of deferred financing fees.

As of September 30, 2012, $240.0 million was outstanding under the 2010 Term Loan. We used a portion of the net proceeds from our Series B Preferred Share offering in October 2012 to repay $58.0 million of then-outstanding borrowings under the 2010 Term Loan. Immediately after the repayment, there was $182.0 million outstanding under the 2010 Term Loan. The weighted average effective interest rates based on amounts borrowed under the 2010 Term Loan for the three and nine months ended September 30, 2012 were 4.66% and 4.89%, respectively. Interest expense excluding non-cash amortization of deferred financing fees related to the 2010 Term Loan was $4.0 million and $3.4 million for the three months ended September 30, 2012 and 2011, respectively, and $11.2 million and $14.1 million for the nine months ended September 30, 2012 and 2011, respectively.

Deferred financing fee amortization associated with the 2010 Credit Facility was $0.9 million for each of the three months ended September 30, 2012 and 2011, respectively. Deferred financing fee amortization associated with the 2010 Credit Facility for the nine months ended September 30, 2012 and 2011 was $2.7 million and $2.8 million, respectively.

The 2010 Credit Facility contains affirmative and negative covenants of the type customarily found in credit facilities of this nature. As of September 30, 2012, we were in compliance with all financial covenants.

Exchangeable Notes

In June 2012, we repaid in full the $136.9 million in outstanding principal of our Exchangeable Notes upon their maturity and paid accrued interest of $2.7 million, using $74.6 million in cash and $65.0 million from our Revolving Facility.

Interest expense related to our Exchangeable Notes for the three months ended September 30, 2011 was $1.4 million, excluding the non-cash amortization of debt discount of $0.5 million, and the non-cash amortization of deferred financing fees of $0.2 million.

Interest expense related to our Exchangeable Notes for the nine months ended September 30, 2012 and 2011 was $2.3 million and $4.1 million, respectively, excluding the non-cash amortization of debt discount of $0.8 million and $1.5 million, respectively, and the non-cash amortization of deferred financing fees of $0.3 million and $0.5 million, respectively.

Mortgage Loans

The carrying value (including debt premium of $0.3 million as of December 31, 2011) and estimated fair values of mortgage loans based on interest rates and market conditions at September 30, 2012 and December 31, 2011 were as follows:


	September 30, 2012				December 31, 2011
(in millions of dollars)	Carrying Value		Fair Value		Carrying Value		Fair Value

Mortgage loans	$	1,822.4	$	1,840.5	$	1,691.4	$	1,683.4

The mortgage loans contain various customary default provisions. As of September 30, 2012, we were not in default on any of the mortgage loans.

Mortgage Loan Activity

The following table presents the mortgage loans that we have entered into since January 1, 2012 relating to our consolidated properties:


Financing Date	Property	Amount Financed (in millions of dollars)	Stated Rate	Maturity
January	New River Valley Mall	$ 28.1	LIBOR plus 3.00%	January 2019
February	Capital City Mall	65.8	5.30% fixed	March 2022
July	Christiana Center	50.0	4.64% fixed	August 2022
August	Cumberland Mall	52.0	4.40% fixed	August 2022
August	Cherry Hill Mall	300.0	3.90% fixed	September 2022

Other 2012 Activity

In June 2012, we exercised our remaining one-year extension option on the mortgage loan secured by Paxton Towne Centre in Harrisburg, Pennsylvania. In connection with the exercise of this extension option, we repaid $4.0 million of the outstanding balance, which reduced the principal balance to $50.0 million.

Interest Rate Risk

We follow established risk management policies designed to limit our interest rate risk on our interest bearing liabilities as further discussed in note 8 to our unaudited consolidated financial statements.

5. CASH FLOW INFORMATION

Cash paid for interest was $86.8 million (net of capitalized interest of $1.4 million) and $92.8 million (net of capitalized interest of $1.4 million) for the nine months ended September 30, 2012 and 2011, respectively.

In the nine months ended September 30, 2012, we retired $36.9 million of fully amortized intangible assets.

6. COMMITMENTS AND CONTINGENCIES

Contractual Obligations

As of September 30, 2012, we had unaccrued contractual and other commitments related to our capital improvement projects and development projects of $ 8.6 million in the form of tenant allowances, lease termination fees, and contracts with general service providers and other professional service providers.

Employment Agreements

In April 2012, we entered into amended employment agreements with Joseph F. Coradino and Ronald Rubin that became effective on June 7, 2012, the date that Mr. Coradino became our Chief Executive Officer and Mr. Rubin became our Executive Chairman.

Mr. Coradino’s employment agreement will have an initial term of two years, after which it will renew annually for one-year terms unless either party gives notice of non-renewal at least 120 days prior to the end of the then current term.

Mr. Rubin’s employment agreement will have an initial term of three years, after which it will renew annually for one-year terms unless either party gives notice of non-renewal at least 120 days prior to the end of the then current term.

Provision for Employee Separation Expenses

In connection with the appointment of Joseph F. Coradino as Chief Executive Officer in June 2012, conditions in the employment agreement of our former President and Chief Operating Officer, Edward A. Glickman, were triggered that caused us to record a provision for employee separation expense of $3.5 million and $4.0 million for the three and nine months ended September 30, 2012, respectively. Mr. Glickman left his position as the Company’s President and Chief Operating Officer effective August 31, 2012. Under the Company’s employment agreement with Mr. Glickman, in connection with his departure, he was entitled (i) to receive a payment of approximately $2.7 million, (ii) to receive additional amounts accrued under his supplemental retirement plan, (iii) to have his outstanding unvested restricted shares become vested, and (iv) to remain eligible to receive shares under the Company’s Restricted Share Unit programs based on the Company’s achievement of the performance metrics established by those programs as if his employment had not terminated.

In October 2012, Mr. Glickman resigned from his position as a trustee of the Company. To formally recognize and memorialize the terms of his departure from the Company as both a trustee and as an officer, the Company and Mr. Glickman entered into a separation agreement which included a mutual general release of all claims. Under the separation agreement, Mr. Glickman will receive a total cash separation payment (including the above-described $2.7 million to which he would have been entitled under his employment agreement) of $2.8 million.

Under Mr. Rubin’s amended employment agreement, we recorded a provision for employee separation expense of $1.1 million and $1.4 million for the three and nine months ended September 30, 2012, respectively. We expect to record a total provision for employee separation of $4.5 million ($2.6 million through December 2012 and an additional $1.9 million through June 2013) related to Mr. Rubin’s employment agreement.

In August 2012, we terminated certain employees. In connection with the departure of these employees, we recorded $0.4 million of employee separation expenses.

7. RELATED PARTY TRANSACTIONS

We lease our principal executive offices from Bellevue Associates (the “Landlord”), an entity in which certain of our officers/trustees have an interest. Under the original lease, our annual base rent was $1.5 million. Our total rent expense in 2011 was $1.8 million. The office lease had an initial 10 year term that commenced on November 1, 2004. We had the option to renew the office lease for up to two additional five year periods at the then-current fair market rate calculated in accordance with the terms of the office lease. Ronald Rubin and George F. Rubin, collectively with members of their immediate families and affiliated entities, own approximately a 50% interest in the Landlord.

Under the office lease, we also had the right on one occasion at any time during the seventh lease year to terminate the lease upon the satisfaction of certain conditions. In April 2012, we entered into an amendment to our office lease with the Landlord, effective June 1, 2012. The amendment was negotiated in light of the aforementioned termination right. Under this amendment, the term has been extended for five years to October 31, 2019, and we have the option to renew the amended office lease for up to two additional periods for an aggregate of 10 years, at the then-current market base rental rate calculated in accordance with the terms of the amended office lease. The first extension period shall be no less than three and no more than seven years, at our discretion, and the second shall be for 10 years less the number of years of the first extension. The base rent will be approximately $1.2 million per year, increasing incrementally to approximately $1.4 million in 2019. Total rent expense under this lease was $0.3 million and $0.4 million for the three months ended September 30, 2012 and 2011, respectively, and $1.2 million and $1.3 million for the nine months ended September 30, 2012 and 2011, respectively.

In accordance with PREIT’s related party transactions policy, PREIT’s Special Committee considered and approved the terms of the amended lease.

8. DERIVATIVES

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

Cash Flow Hedges of Interest Rate Risk

Our outstanding derivatives have been designated under applicable accounting authority as cash flow hedges. The effective portion of changes in the fair value of derivatives designated as, and that qualify as, cash flow hedges is recorded in “Accumulated other comprehensive 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.” We recognize all derivatives at fair value as either assets or liabilities in the accompanying consolidated balance sheets. Our derivative assets and liabilities are recorded in “Fair value of derivative instruments.”

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 our corresponding debt. During the next twelve months, we estimate that $14.0 million will be reclassified as an increase to interest expense in connection with derivatives.

Interest Rate Swaps and Cap

As of September 30, 2012, we had entered into nine interest rate swap agreements with a weighted average interest rate of 2.93% on a notional amount of $617.3 million maturing on various dates through November 2013, and two forward starting interest rate swap agreements with a weighted average interest rate of 1.25% on a notional amount of $53.1 million maturing on various dates through January 2017. We had entered into an interest rate cap that matured in April 2012.

We entered into these interest rate swap agreements (including the forward starting swap agreements) in order to hedge the interest payments associated with the 2010 Credit Facility and our issuances of variable interest rate long-term debt. We have assessed the effectiveness of these interest rate swap agreements as hedges at inception and on a quarterly basis. On September 30, 2012, we considered these interest rate swap agreements to be highly effective as cash flow hedges. The interest rate swap agreements are net settled monthly.

Accumulated other comprehensive loss as of September 30, 2012 includes a net loss of $9.6 million relating to forward-starting swaps that we cash settled in prior years that are being amortized over 10 year periods commencing on the closing dates of the debt instruments that are associated with these settled swaps. The following table summarizes the terms and estimated fair values of our interest rate swap, cap and forward starting swap derivative instruments at September 30, 2012 and December 31, 2011. The notional values provide an indication of the extent of our involvement in these instruments, but do not represent exposure to credit, interest rate or market risks. The fair values of our derivative instruments are recorded in “Fair value of derivative instruments” on our balance sheet.


(in millions of dollars) Notional Value	Fair Value at September 30, 2012 ⁽¹⁾			Fair Value at December 31, 2011 ⁽¹⁾			Interest Rate			Effective Date	Maturity Date
Interest Rate Swaps
$200.0	$	N/A		$	(0.7	)		1.78	%			April 2, 2012
25.0		(0.1	)		(0.3	)		1.83	%			December 31, 2012
60.0		(0.4	)		(0.9	)		1.74	%			March 11, 2013
200.0		(2.4	)		(4.5	)		2.96	%			March 11, 2013
40.0		(0.3	)		(0.6	)		1.82	%			March 11, 2013
65.0		(2.0	)		(3.2	)		3.60	%			September 9, 2013
68.0		(2.2	)		(3.5	)		3.69	%			September 9, 2013
56.3		(1.8	)		(2.9	)		3.73	%			September 9, 2013
55.0		(1.7	)		(2.4	)		2.90	%			November 29, 2013
48.0		(1.5	)		(2.1	)		2.90	%			November 29, 2013
Interest Rate Cap
15.3		N/A			(0.0	)		2.50	%			April 2, 2012
Forward Starting Interest Rate Swaps
28.1		(0.9	)		N/A			1.38	%	January 2, 2013		January 2, 2017
25.0		(0.5	)		N/A			1.10	%	March 12, 2013		July 31, 2016

	$	(13.8	)	$	(21.1	)

⁽¹⁾

As of September 30, 2012 and December 31, 2011, derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy. As of September 30, 2012 and December 31, 2011, we do not have any significant recurring fair value measurements related to derivative instruments using significant unobservable inputs (Level 3).

The table below presents the effect of our derivative financial instruments on our consolidated statements of operations for the three and nine months ended September 30, 2012 and 2011:


(in millions of dollars)	Three months ended September 30,						Nine months ended September 30,						Consolidated Statements of Operations location
(in millions of dollars)	2012			2011			2012			2011
Derivatives in cash flow hedging relationships
Interest rate products
Loss recognized in Other Comprehensive Loss on derivatives	$	(1.3	)	$	(3.8	)	$	(4.9	)	$	(10.8	)		N/A
Loss reclassified from Accumulated Other Comprehensive Loss into Income (effective portion)	$	4.6		$	4.2		$	13.0		$	13.2			Interest expense
Gain (loss) recognized in income on derivatives (ineffective portion and amount excluded from effectiveness testing)		—			—			—			—			Interest expense

Credit-Risk-Related Contingent Features

We have agreements with some of our derivative counterparties that contain a provision pursuant to which, if our entity that originated such derivative instruments defaults on any of its indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, then we could also be declared in default on those derivatives obligations. We have an agreement with a derivative counterparty that incorporates the loan covenant provisions of our loan agreement with a lender affiliated with the derivative counterparty. Failure to comply with the loan covenant provisions would result in us being in default on any derivative instrument obligations covered by the agreement. As of September 30, 2012, we were not in default on any of our derivative obligations.

As of September 30, 2012, the fair value of derivatives in a net liability position, which excludes accrued interest but includes any adjustment for nonperformance risk related to these agreements, was $13.8 million. If we had breached any of the default provisions in these agreements as of September 30, 2012, we might have been required to settle our obligations under the agreements at their termination value (including accrued interest) of $15.3 million. We had not breached any of these provisions as of September 30, 2012.

9. PREFERRED SHARE OFFERINGS

In April 2012, we issued 4,600,000 8.25% Series A Cumulative Redeemable Perpetual Preferred Shares (the “Series A Preferred Shares”) in a public offering at $25.00 per share. We received net proceeds from the offering of $110.9 million after deducting payment of the underwriting discount of $3.6 million ($0.7875 per Series A Preferred Share) and estimated offering expenses of $0.5 million. We used a portion of the net proceeds from this offering to repay all $30.0 million of then-outstanding borrowings under the Revolving Facility.

As of September 30, 2012, there was $0.4 million in accumulated but unpaid dividends relating to the Series A Preferred Shares. This amount was deducted from net loss to determine net loss attributable to common shareholders. This amount was not deducted from distributions in excess of net income as of September 30, 2012 because the dividend on the preferred shares was not yet declared at that time.

In October 2012, we issued 3,450,000 7.375% Series B Cumulative Redeemable Perpetual Preferred Shares (the “Series B Preferred Shares”) in a public offering at $25.00 per share. We received net proceeds from the offering of $83.2 million after deducting payment of the underwriting discount of $2.7 million ($0.7875 per Series B Preferred Share) and estimated offering expenses of $0.3 million. We used a portion of the net proceeds from this offering to repay all $15.0 million of then-outstanding borrowings under the Revolving Facility and $58.0 million of then-outstanding borrowings under the 2010 Term Loan. Immediately after the repayment, there were no amounts outstanding under the Revolving Facility and $182.0 million outstanding under the 2010 Term Loan.

We may not redeem the Series A Preferred Shares or the Series B Preferred Shares before April 20, 2017 and October 11, 2017, respectively, except to preserve our status as a real estate investment trust or upon the occurrence of a Change of Control, as defined in the Trust Agreement addendums designating the Series A and Series B Preferred Shares, respectively. On and after April 20, 2017 and October 11, 2017, we may redeem any or all of the Series A Preferred Shares or the Series B Preferred Shares, respectively, at $25.00 per share plus any accrued and unpaid dividends. In addition, upon the occurrence of a Change of Control, we may redeem any or all of the Series A Preferred Shares or the Series B Preferred Shares for cash within 120 days after the first date on which such Change of Control occurred at $25.00 per share plus any accrued and unpaid dividends. The Series A Preferred Shares and the Series B Preferred Shares have no stated maturity, are not subject to any sinking fund or mandatory redemption and will remain outstanding indefinitely unless we redeem or otherwise repurchase them or they are converted.

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

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

OVERVIEW

Pennsylvania Real Estate Investment Trust, a Pennsylvania business trust founded in 1960 and one of the first equity real estate investment trusts (“REITs”) in the United States, has a primary investment focus on retail shopping malls located in the eastern half of the United States, primarily in the Mid-Atlantic region. Our portfolio currently consists of a total of 49 properties in 13 states, including 38 enclosed malls, eight strip and power centers and three development properties. The operating retail properties have a total of approximately 33.2 million square feet. The operating retail properties that we consolidate for financial reporting purposes have a total of approximately 28.6 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 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 currently undertaking efforts to sell certain shopping malls and power centers that are not consistent with our current strategic objectives.

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

Our 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 leases) derived from our income producing properties. We also receive income from our real estate partnership investments and from the management and leasing services that PRI provides.

Net loss for the three months ended September 30, 2012 was $12.9 million, a decrease of $46.5 million compared to a net loss of $59.4 million for the three months ended September 30, 2011. This decrease was primarily due to $52.1 million of impairment charges during the three months ended September 30, 2011, partially offset by $5.0 million of employee separation expenses recorded in the three months ended September 30, 2012. Net loss for the nine months ended September 30, 2012 was $35.7 million, a decrease of $57.7 million compared to a net loss of $93.4 million for the nine months ended September 30, 2011. This decrease was primarily due to $52.3 million of impairment charges during the nine months ended September 30, 2011, lower depreciation and amortization expenses and lower interest expense, partially offset by $5.8 million of employee separation expenses recorded in the nine months ended September 30, 2012.

We evaluate operating results and allocate resources on a property-by-property basis, and do not distinguish or evaluate our consolidated operations on a geographic basis. We do not have any significant revenue or asset concentrations, and thus the individual properties have been aggregated into one reportable segment based upon their similarities with regard 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. We are the sole general partner of PREIT Associates and, as of September 30, 2012, held a 96.0% interest in the Class A and Class B limited partnership units of PREIT Associates. We consolidate PREIT Associates for financial reporting purposes. We hold our investments in seven of the 46 retail properties and one of the three development properties in our portfolio through unconsolidated partnerships with third parties in which we own a 40% to 50% interest. We hold a noncontrolling interest in each unconsolidated partnership, and account for such partnerships using the equity method of accounting. We do not control any of these equity method investees for the following reasons:

•

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

•

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

•

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

•

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

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

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

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

Current Economic Conditions and Our Leverage

The conditions in the economy and the disruptions in the financial markets have caused fluctuations and variations in business and consumer confidence, resulted in continued levels of relatively high unemployment and, in turn, have negatively affected consumer spending on retail goods. We continue to adjust our plans and actions to take into account the current economic environment. The conditions in the economy and their effect on retail sales, as well as our significant leverage resulting from the use of debt to fund our redevelopment program and other development activity, have combined to necessitate that we consider various approaches to obtaining, using and recycling capital. In light of these conditions, we are focusing on appropriately managing our liquidity. We intend to consider all of our available options for accessing the capital markets, given our position and constraints. We believe that we have access to sufficient capital to fund our remaining redevelopment project and our other foreseeable capital improvement projects.

We continue to contemplate ways to reduce our leverage through a variety of means available to us, subject to and in accordance with the terms of our Amended, Restated and Consolidated Senior Secured Credit Agreement (as amended, the “2010 Credit Facility”). These steps might include obtaining additional equity capital, including through the issuance of common or preferred equity securities if market conditions are favorable, through our contribution of assets to joint ventures or other partnerships or arrangements with institutional investors, private equity investors or other REITs, through sales of properties or interests in properties with values in excess of their mortgage loans or allocable debt and application of the excess proceeds to debt reduction, through refinancing of properties in amounts that exceed prior mortgage balances or through other actions.

Capital Improvements and Development Projects

We might make capital improvements at our operating properties. Such improvements vary in cost and complexity, and can include building out new or existing space for individual tenants, upgrading common areas or exterior areas such as parking lots, or redeveloping the entire property, among other projects. Project costs are accumulated in “Construction in progress” on our consolidated balance sheet until the asset is placed into service, and amounted to $88.2 million as of September 30, 2012.

We are also engaged in several types of development projects. However, we do not expect to make any significant investment in these projects in the short term. As of September 30, 2012, we had incurred $52.8 million of costs (net of impairment charges recorded in prior years) related to our activity at development properties.

As of September 30, 2012, we had unaccrued contractual and other commitments related to our capital improvement projects and development projects of $8.6 million in the form of tenant allowances, lease termination fees, and contracts with general service providers and other professional service providers.

CRITICAL ACCOUNTING POLICIES

Critical Accounting Policies are those that require the application of management’s most difficult, subjective, or complex judgments, often because of the need to make estimates about the effect of matters that are inherently uncertain and that might change in subsequent periods. In preparing the unaudited consolidated financial statements, management has made estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting periods. In preparing the financial statements, management has utilized available information, including our past history, industry standards and the current economic environment, among other factors, in forming its estimates and judgments, giving due consideration to materiality. Management has also considered events and changes in property, market and economic conditions, estimated future cash flows from property operations and the risk of loss on specific accounts or amounts in determining its estimates and judgments. Actual results may differ from these estimates. In addition, other companies may utilize different estimates, which may affect comparability of our results of operations to those of companies in similar businesses. The estimates and assumptions made by management in applying critical accounting policies have not changed materially during 2012 and 2011, except as otherwise noted, and none of these estimates or assumptions have proven to be materially incorrect or resulted in our recording any significant adjustments relating to prior periods. We will continue to monitor the key factors underlying our estimates and judgments, but no change is currently expected.

For additional information regarding our Critical Accounting Policies, see “Critical Accounting Policies” in Part II, Item 7 of our Annual Report on Form 10-K, as amended, for the year ended December 31, 2011.

OFF BALANCE SHEET ARRANGEMENTS

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

RESULTS OF OPERATIONS

Occupancy

The table below sets forth certain occupancy statistics for our properties as of September 30, 2012 and 2011:


	Occupancy ⁽¹⁾ as of September 30,
	Consolidated Properties						Unconsolidated Properties						Combined ⁽²⁾
	2012			2011			2012			2011			2012			2011
Retail portfolio weighted average:
Total excluding anchors		88.4	%		87.0	%		93.0	%		91.9	%		89.1	%		87.8	%
Total including anchors		92.6	%		91.6	%		95.0	%		93.9	%		92.9	%		91.9	%
Malls weighted average:
Total excluding anchors		88.1	%		86.9	%		93.9	%		93.5	%		88.5	%		87.3	%
Total including anchors		92.4	%		91.5	%		95.8	%		94.9	%		92.6	%		91.7	%
Strip and power centers weighted average		96.8	%		93.8	%		94.5	%		93.4	%		95.2	%		93.6	%

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

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

Leasing Activity

The table below sets forth summary leasing activity information with respect to our consolidated and unconsolidated properties for the nine months ended September 30, 2012:


					Average Base Rent psf				Increase (Decrease) in Base Rent psf						Annualized Tenant
	Number		GLA		Previous		New		Dollar			Percentage			Improvements psf ⁽¹⁾
New Leases—Previously Leased Space:
1st Quarter ⁽²⁾		32		119,188	$	20.58	$	21.54	$	0.96			4.7	%	$	3.02
2nd Quarter ⁽³⁾		33		103,243		31.36		29.49		(1.87	)		(6.0	%)		2.92
3rd Quarter ⁽⁴⁾		65		65,377		51.59		57.06		5.47			10.6	%		2.32

Total/Average		130		287,808	$	31.49	$	32.46	$	0.97			3.1	%	$	2.83

New Leases—Previously Vacant Space: ⁽⁵ ⁾
1st Quarter		35		124,425		N/A	$	28.60	$	28.60			N/A		$	3.82
2nd Quarter		35		168,069		N/A		17.98		17.98			N/A			3.79
3rd Quarter		31		129,921		N/A		18.33		18.33			N/A			1.49

Total/Average		101		422,415		N/A	$	21.22	$	21.22			N/A		$	3.09

Renewal: ⁽⁶⁾
1st Quarter ⁽²⁾		139		481,428	$	22.28	$	22.92	$	0.64			2.9	%	$	—
2nd Quarter ⁽³⁾		172		538,905		26.48		27.71		1.23			4.6	%		0.01
3rd Quarter ⁽⁴⁾		147		461,217		24.11		25.06		0.95			3.9	%		0.02

Total/Average		458		1,481,550	$	24.38	$	25.33	$	0.95			3.9	%	$	0.01

Anchor New:
1st Quarter		3		285,136		N/A	$	13.87	$	13.87			N/A		$	3.40
2nd Quarter		—		—		N/A		—		—			N/A			—
3rd Quarter		—		—		N/A		—		—			N/A			—

Total/Average		3		285,136		N/A	$	13.87	$	13.87			N/A		$	3.40

Anchor Renewal:
1st Quarter		1		100,115	$	3.13	$	3.13	$	—			—		$	—
2nd Quarter		1		212,000		0.35		0.35		—			—			—
3rd Quarter		4		353,671		2.94		2.94		—			—			—

Total/Average		6		665,786	$	2.14	$	2.14	$	—			—		$	—

⁽¹⁾	These leasing costs are presented as annualized costs per square foot and are spread uniformly over the initial lease term.

⁽²⁾	Leasing spreads on a gross rent basis (base rent plus common area maintenance, real estate taxes and other charges) were –1.3% for New Leases—Previously Leased Space and 0.0% for Renewals.

⁽³⁾	Leasing spreads on a gross basis were –8.1% for New Leases—Previously Leased Space and 1.5% for Renewals.

⁽⁴ ⁾	Leasing spreads on a gross basis were 5.4% for New Leases—Previously Leased Space and 4.5% for Renewals.

⁽⁵ ⁾	This category includes newly constructed and recommissioned space.

⁽⁶ ⁾	This category includes expansions, relocations and lease extensions.

As of September 30, 2012, for non-anchor leases, the average base rent per square foot as of the expiration date was $26.53 for the renewing leases in “Holdover” status and $28.58 for leases expiring in 2012.

The following information sets forth our results of operations for the three and nine months ended September 30, 2012 and 2011.

Financial Overview


	Three months ended September 30,						% Change 2011 to			Nine months ended September 30,						% Change 2011 to
(in thousands of dollars)	2012			2011			2012			2012			2011			2012
Real estate revenue	$	110,268		$	109,762			0	%	$	327,360		$	326,716			0	%
Interest and other income		2,608			3,981			(34	%)		4,254			5,708			(25	%)
Operating expenses		(48,996	)		(47,798	)		3	%		(142,597	)		(144,358	)		(1	%)
Depreciation and amortization		(33,776	)		(34,681	)		(3	%)		(100,894	)		(105,806	)		(5	%)
General and administrative expenses		(8,694	)		(8,495	)		2	%		(28,818	)		(28,511	)		1	%
Provision for employee separation expenses		(4,958	)		—			N/A			(5,754	)		—			N/A
Impairment of assets		—			(52,110	)		N/A			—			(52,335	)		N/A
Project costs and other expenses		(380	)		(161	)		136	%		(777	)		(433	)		79	%
Interest expense, net		(31,097	)		(31,846	)		(2	%)		(94,562	)		(100,400	)		(6	%)
Equity in income of partnerships		2,164			1,924			12	%		6,110			4,614			32	%
Gains on sales of real estate		—			—			—			—			1,450			N/A

Net loss	$	(12,861	)	$	(59,424	)		(78	%)	$	(35,678	)	$	(93,355	)		(62	%)

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

Real Estate Revenue

Real estate revenue increased by $0.5 million, or 0%, in the three months ended September 30, 2012 compared to the three months ended September 30, 2011, primarily due to:

•

an increase of $1.6 million in base rent, including $0.6 million associated with the July 2012 opening of the Philadelphia Media Network at The Gallery at Market East. Base rent also increased due to new store openings at Cherry Hill Mall, Jacksonville Mall and Crossroads Mall;

•

an increase of $0.2 million in lease terminations, primarily due to a termination payment received from one tenant totaling $0.2 million during the three months ended September 30, 2012; and

•

a decrease of $1.3 million in expense reimbursements, including decreases of $0.8 million in utility reimbursements and $0.5 million in common area maintenance and real estate tax reimbursements. The decrease in utility reimbursements was partially due a $0.3 million decrease in utilities expenses. In addition, during the three months ended September 30, 2011, utility reimbursements at three of our properties were affected by a temporary increase in tenant utility billing rates resulting in an additional $0.5 million of utility reimbursements that did not recur in 2012.

Real estate revenue increased by $0.6 million, or 0%, in the nine months ended September 30, 2012 compared to the nine months ended September 30, 2011, primarily due to:

•

an increase of $3.4 million in base rent, primarily due to increases at Cherry Hill Mall, Crossroads Mall, The Gallery at Market East and Jacksonville Mall due to new store openings. Also, base rent in the nine months ended September 30, 2011 was affected by straight line rent write-offs totaling $0.7 million associated with the Borders Group, Inc. liquidation;

•

an increase of $0.9 million in lease terminations, primarily due to termination payments received from three tenants totaling $1.1 million during the nine months ended September 30, 2012;

•

a decrease of $3.5 million in expense reimbursements, including decreases of $2.0 million in utility reimbursements and $1.5 million in common area maintenance and real estate tax reimbursements. The decrease in utility reimbursements was partially due a $1.2 million decrease in utilities expenses. In addition, during the nine months ended September 30, 2011, utility reimbursements at three of our properties were affected by a temporary increase in tenant utility billing rates resulting in an additional $0.5 million of utility reimbursements. Also, our properties continue to experience a trend towards more gross leases (leases that provide that tenants pay a higher minimum rent in lieu of contributing toward common area maintenance costs and real estate taxes); and

•

a decrease of $0.4 million in percentage rent, primarily due to lease renewals with higher base rent and corresponding higher sales breakpoints for calculating percentage rent.

Operating Expenses

Operating expenses increased by $1.2 million, or 3%, in the three months ended September 30, 2012 compared to the three months ended September 30, 2011, primarily due to:

•

an increase of $1.2 million in common area maintenance expenses, including increases of $0.4 million in repairs and maintenance, $0.4 million in insurance expense and $0.3 million in housekeeping and security as a result of stipulated contractual increases;

•

an increase of $0.3 million in bad debt expense. At Cherry Hill Mall, bad debt expense in the three months ended September 30, 2011 was favorably impacted by the collection of some previously reserved accounts receivable balances; and

•

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

Operating expenses decreased by $1.8 million, or 1%, in the nine months ended September 30, 2012 compared to the nine months ended September 30, 2011, primarily due to:

•

a decrease of $1.2 million in non-common area utility expense due in part to a mild winter with above average temperatures across the Mid-Atlantic states where many of our properties are located, and in part to lower electric rates as a result of deregulation and alternate supplier contracts executed over the past 12 months;

•

a decrease of $1.1 million in bad debt expense due to favorable collections resulting in lower accounts receivable balances, as well as fewer tenant bankruptcies compared to the nine months ended September 30, 2011; and

•

an increase of $0.4 million in common area maintenance expenses, including increases of $1.0 million in repairs and maintenance and $0.8 million in housekeeping and security, partially offset by a $1.6 million decrease in snow removal expense resulting from a mild and dry winter across the Mid-Atlantic states where many of our properties are located.

Net Operating Income (“NOI”)

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

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

The following table presents NOI for the three and nine months ended September 30, 2012 and 2011. The results are presented using the “proportionate-consolidation method” (a non-GAAP measure), which includes our share of the results of our partnership investments. Under GAAP, we account for our partnership investments under the equity method of accounting. Operating results for retail properties that we owned for the full periods presented (“Same Store”) exclude properties acquired or disposed of during the periods presented. A reconciliation of NOI to net loss determined in accordance with GAAP appears under the heading “Reconciliation of GAAP Net Loss to Non-GAAP Measures.”


	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)	2012			2011			% Change			2012			2011			% Change			2012			2011			% Change
Real estate revenue	$	119,470		$	118,621			1	%	$	484		$	457			6	%	$	119,954		$	119,078			1	%
Operating expenses		(51,444	)		(50,074	)		3	%		(415	)		(373	)		11	%		(51,859	)		(50,447	)		3	%

Net Operating Income	$	68,026		$	68,547			(1	%)	$	69		$	84			(18	%)	$	68,095		$	68,631			(1	%)


	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)	2012			2011			% Change			2012			2011			% Change			2012			2011			% Change
Real estate revenue	$	354,470		$	353,164			0	%	$	1,451		$	1,411			3	%	$	355,921		$	354,575			0	%
Operating expenses		(149,704	)		(151,572	)		(1	%)		(1,357	)		(1,324	)		2	%		(151,061	)		(152,896	)		(1	%)

Net Operating Income	$	204,766		$	201,592			2	%	$	94		$	87			8	%	$	204,860		$	201,679			2	%

Total NOI decreased by $0.5 million, or 1%, in the three months ended September 30, 2012 compared to the three months ended September 30, 2011, driven by a $0.5 million decrease in Same Store NOI. See “—Real Estate Revenue” and “—Operating Expenses” above for further information about our consolidated properties.

Total NOI increased by $3.2 million, or 2%, in the nine months ended September 30, 2012 compared to the nine months ended September 30, 2011, driven by a $3.2 million increase in Same Store NOI. See “—Real Estate Revenue” and “—Operating Expenses” above for further information about our consolidated properties.

NOI includes lease termination revenue of $0.3 million and $0.2 million for the three months ended September 30, 2012 and 2011, respectively, and $1.8 million and $0.9 million for the nine months ended September 30, 2012 and 2011, respectively.

Interest and Other Income

Interest and other income decreased by $1.4 million, or 34%, and by $1.5 million, or 25%, in the three and nine months ended September 30, 2012, respectively, compared to the three and nine months ended September 30, 2011, respectively. The decrease was primarily due to a $1.5 million bankruptcy settlement received in September 2011 in connection with our investment in the Valley View Downs project.

Depreciation and Amortization

Depreciation and amortization expense decreased by $0.9 million, or 3%, in the three months ended September 30, 2012 compared to the three months ended September 30, 2011, primarily due to:

•

a decrease of $1.0 million because certain lease intangibles at three properties purchased during 2004 and 2005 became fully amortized after September 30, 2011.

Depreciation and amortization expense decreased by $4.9 million, or 5%, in the nine months ended September 30, 2012 compared to the nine months ended September 30, 2011, primarily due to:

•

a decrease of $3.0 million because certain lease intangibles at four properties purchased during 2004 and 2005 became fully amortized after September 30, 2011; and

•

a decrease of $1.7 million resulting from tenant improvement and deferred leasing commission write-offs associated with the Borders Group, Inc. liquidation during the nine months ended September 30, 2011.

Provision for Employee Separation Expenses

Under the Company’s employment agreement with Mr. Glickman, in connection with his departure, he was entitled (i) to receive a payment of approximately $2.7 million, (ii) to receive additional amounts accrued under his supplemental retirement plan, (iii) to have his outstanding unvested restricted shares become vested, and (iv) to remain eligible to receive shares under the Company’s Restricted Share Unit programs based on the Company’s achievement of the performance metrics established by those programs as if his employment had not terminated.

In August 2012, we terminated certain employees. In connection with the departure of these employees, we recorded $0.4 million of employee separation expenses.

Impairment of Assets

In September 2011, we recorded impairment of assets of $28.0 million on Phillipsburg Mall in Phillipsburg, New Jersey and $24.1 million on North Hanover Mall in North Hanover, Pennsylvania.

Interest Expense

Interest expense decreased by $0.7 million, or 2%, for the three months ended September 30, 2012 compared to the three months ended September 30, 2011. This decrease was primarily due to lower applicable stated interest rates and lower weighted average debt balance. Our weighted average effective borrowing rate was 5.96% for the three months ended September 30, 2012 compared to 5.98% for the three months ended September 30, 2011. Our weighted average debt balance was $2,064.7 million for the three months ended September 30, 2012 compared to $2,176.0 million for the three months ended September 30, 2011.

Interest expense decreased by $5.8 million, or 6%, for the nine months ended September 30, 2012 compared to the nine months ended September 30, 2011. This decrease was primarily due to lower applicable stated interest rates and lower weighted average debt balance. Our weighted average borrowing rate was 6.03% for the nine months ended September 30, 2012 compared to 6.17% for the nine months ended September 30, 2011. Our weighted average debt balance was $2,121.2 million for the nine months ended September 30, 2012 compared to $2,200.3 million for the nine months ended September 30, 2011.

Equity in Income of Partnerships

Equity in income of partnerships increased by $0.2 million, or 12%, for the three months ended September 30, 2012 compared to the three months ended September 30, 2011. The increase was primarily due to an increase in partnership revenue of $0.4 million offset by a $0.2 million increase in property operating expenses.

Equity in income of partnerships increased by $1.5 million, or 32%, for the nine months ended September 30, 2012 compared to the nine months ended September 30, 2011. The increase was primarily due to an increase in partnership revenue of $0.8 million and a decrease of $0.7 million in depreciation and amortization expenses.

Funds From Operations

The National Association of Real Estate Investment Trusts (“NAREIT”) defines Funds From Operations (“FFO”), which is a non-GAAP measure commonly used by REITs, as net income excluding gains and losses on sales of operating properties (computed in accordance with GAAP), plus real estate depreciation and amortization; and after adjustments for unconsolidated partnerships and joint ventures to reflect funds from operations on the same basis. We compute FFO in accordance with standards established by NAREIT, which may not be comparable to FFO reported by other REITs that do not define the term in accordance with the current NAREIT definition, or that interpret the current NAREIT definition differently than we do. In 2011, NAREIT reiterated its established guidance that excluding impairment write downs of depreciable real estate is consistent with the NAREIT definition.

We use FFO and FFO per diluted share and unit of limited partnership interest in our operating partnership (“OP Unit”) in measuring our performance against our peers and as one of the performance measures for determining incentive compensation amounts earned under certain of our performance-based executive compensation programs. FFO is a commonly used measure of operating performance and profitability among REITs, and we use FFO and FFO per diluted share and OP Unit as supplemental non-GAAP measures to compare our performance for different periods to that of our industry peers. 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 NOI. FFO does not represent cash generated from operating activities in accordance with GAAP and should not be considered to be an alternative to net income (determined in accordance with GAAP) as an indication of our financial performance or to be an alternative to cash flow from operating activities (determined in accordance with GAAP) as a measure of our liquidity, nor is it indicative of funds available for our cash needs, including our ability to make cash distributions. We believe that net income is the most directly comparable GAAP measurement to FFO.

We also present Funds From Operations, as adjusted, and Funds From Operations per diluted share and OP Unit, as adjusted, which are non-GAAP measures, for the three and nine months ended September 30, 2012 and 2011 to show the effect of the provision for employee separation expenses, which had a significant effect on our results of operations, but is not, in our opinion, indicative of our operating performance.

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

The following table presents FFO and FFO per diluted share and OP Unit and FFO, as adjusted, and FFO per diluted share and OP Unit, as adjusted, for the three months ended September 30, 2012 and 2011:


(in thousands of dollars, except per share amounts)	Three Months Ended September 30, 2012		% Change 2011 to 2012			Three Months Ended September 30, 2011
Funds from operations ⁽¹⁾	$	20,132		(31	%)	$	29,026
Provision for employee separation expenses		4,958		—			—

Funds from operations, as adjusted	$	25,090		(14	%)	$	29,026

Funds from operations per diluted share and OP Unit	$	0.34		(33	%)	$	0.51
Provision for employee separation expenses		0.09		—			—

Funds from operations per diluted share and OP Unit, as adjusted	$	0.43		(16	%)	$	0.51

Weighted average number of shares outstanding		55,190					54,701
Weighted average effect of full conversion of OP Units		2,302					2,329
Effect of common share equivalents		982					165

Total weighted average shares outstanding, including OP Units		58,474					57,195

⁽¹⁾	In accordance with updated NAREIT guidance regarding the definition of FFO, impairment losses of depreciable real estate are excluded from FFO. Prior period FFO and FFO per diluted share and OP Unit amounts have been revised to reflect this updated NAREIT guidance.

FFO was $20.1 million for the three months ended September 30, 2012, a decrease of $8.9 million, or 31%, compared to $29.0 million for the three months ended September 30, 2011. This decrease primarily was due to:

•

provision for employee separation expenses of $5.0 million recorded in the three months ended September 30, 2012;

•

preferred dividends of $2.4 million related to the Series A Preferred Shares issued in April 2012;

•

a $1.5 million bankruptcy settlement received in September 2011 in connection with our investment in the Valley View Down project; and

•

a decrease of $0.5 million in NOI (presented using the “proportionate-consolidation” method; See “—Net Operating Income”); partially offset by

•

a decrease in interest expense of $0.8 million.

FFO per diluted share and OP Unit decreased $0.17 per share to $0.34 per share for the three months ended September 30, 2012, compared to $0.51 per share for the three months ended September 30, 2011.

The following table presents FFO and FFO per diluted share and OP Unit, and FFO, as adjusted, and FFO per diluted share and OP Unit, as adjusted, for the nine months ended September 30, 2012 and 2011:


(in thousands of dollars, except per share amounts)	Nine Months Ended September 30, 2012		% Change 2011 to 2012			Nine Months Ended September 30, 2011
Funds from operations ⁽¹⁾	$	65,932		(5	%)	$	69,557
Provision for employee separation expenses		5,754		—			—

Funds from operations, as adjusted	$	71,686		3	%	$	69,557

Funds from operations per diluted share and OP Unit	$	1.13		(7	%)	$	1.22
Provision for employee separation expenses		0.10		—			—

Funds from operations per diluted share and OP unit, as adjusted	$	1.23		1	%	$	1.22

Weighted average number of shares outstanding		55,081					54,612
Weighted average effect of full conversion of OP Units		2,313					2,329
Effect of common share equivalents		1,017					305

Total weighted average shares outstanding, including OP Units		58,411					57,246

⁽¹⁾	In accordance with updated NAREIT guidance regarding the definition of FFO, impairment losses of depreciable real estate are excluded from FFO. Prior period FFO and FFO per diluted share and OP Unit amounts have been revised to reflect this updated NAREIT guidance.

FFO was $65.9 million for the nine months ended September 30, 2012, a decrease of $3.7 million, or 5%, compared to $69.6 million for the nine months ended September 30, 2011. This decrease primarily was due to:

•

provision for employee separation expenses of $5.8 million recorded in the nine months ended September 30, 2012;

•

preferred dividends of $4.2 million related to the Series A Preferred Shares issued in April 2012;

•

a $1.5 million bankruptcy settlement received in September 2011 in connection with our investment in the Valley View Downs project; and

•

gains on sales of real estate of $0.7 million in the nine months ended September 30, 2011; partially offset by

•

a decrease in interest expense of $5.9 million; and

•

an increase of $3.2 million in NOI (presented using the “proportionate-consolidation” method; See “—Net Operating Income”).

FFO per diluted share and OP Unit decreased $0.09 per share to $1.13 per share for the nine months ended September 30, 2012, compared to $1.22 per share for the nine months ended September 30, 2011.

Reconciliation of GAAP Net Loss to Non-GAAP Measures

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

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


	Three months ended September 30, 2012
(in thousands of dollars)	Consolidated			PREIT’s share of unconsolidated partnerships			Total
Real estate revenue	$	110,268		$	9,686		$	119,954
Operating expenses		(48,996	)		(2,863	)		(51,859	)

Net operating income		61,272			6,823			68,095
General and administrative expenses		(8,694	)		—			(8,694	)
Provision for employee separation expenses		(4,958	)		—			(4,958	)
Interest and other income		2,608			—			2,608
Project costs and other expenses		(380	)		(1	)		(381	)
Interest expense, net		(31,097	)		(2,813	)		(33,910	)
Depreciation on non real estate assets		(256	)		—			(256	)
Preferred share dividends		(2,372	)		—			(2,372	)

Funds from operations		16,123			4,009			20,132
Depreciation on real estate assets		(33,520	)		(1,845	)		(35,365	)
Equity in income of partnerships		2,164			(2,164	)		—
Preferred share dividends		2,372			—			2,372

Net loss	$	(12,861	)	$	—		$	(12,861	)


	Three months ended September 30, 2011
(in thousands of dollars)	Consolidated			PREIT’s share of unconsolidated partnerships			Total
Real estate revenue	$	109,762		$	9,316		$	119,078
Operating expenses		(47,798	)		(2,649	)		(50,447	)

Net operating income		61,964			6,667			68,631
General and administrative expenses		(8,495	)		—			(8,495	)
Interest and other income		3,981			—			3,981
Project costs and other expenses		(161	)		—			(161	)
Interest expense, net		(31,846	)		(2,877	)		(34,723	)
Depreciation on non real estate assets		(207	)		—			(207	)

Funds from operations		25,236			3,790			29,026
Depreciation on real estate assets		(34,474	)		(1,866	)		(36,340	)
Impairment of assets		(52,110	)		—			(52,110	)
Equity in income of partnerships		1,924			(1,924	)		—

Net loss	$	(59,424	)	$	—		$	(59,424	)


	Nine months ended September 30, 2012
(in thousands of dollars)	Consolidated			PREIT’s share of unconsolidated partnerships			Total
Real estate revenue	$	327,360		$	28,561		$	355,921
Operating expenses		(142,597	)		(8,464	)		(151,061	)

Net operating income		184,763			20,097			204,860
General and administrative expenses		(28,818	)		—			(28,818	)
Provision for employee separation expenses		(5,754	)		—			(5,754	)
Interest and other income		4,254			—			4,254
Project costs and other expenses		(777	)		(1	)		(778	)
Interest expense, net		(94,562	)		(8,449	)		(103,011	)
Depreciation on non real estate assets		(604	)		—			(604	)
Preferred share dividends		(4,217	)		—			(4,217	)

Funds from operations		54,285			11,647			65,932
Depreciation on real estate assets		(100,290	)		(5,537	)		(105,827	)
Equity in income of partnerships		6,110			(6,110	)		—
Preferred share dividends		4,217			—			4,217

Net loss	$	(35,678	)	$	—		$	(35,678	)


	Nine months ended September 30, 2011
(in thousands of dollars)	Consolidated			PREIT’s share of unconsolidated partnerships			Total
Real estate revenue	$	326,716		$	27,859		$	354,575
Operating expenses		(144,358	)		(8,538	)		(152,896	)

Net operating income		182,358			19,321			201,679
General and administrative expenses		(28,511	)		—			(28,511	)
Interest and other income		5,708			—			5,708
Project costs and other expenses		(433	)		—			(433	)
Interest expense, net		(100,400	)		(8,514	)		(108,914	)
Gains on sales of non operating real estate		710			—			710
Depreciation on non real estate assets		(682	)		—			(682	)

Funds from operations		58,750			10,807			69,557
Gains on sales of real estate		740			—			740
Depreciation on real estate assets		(105,124	)		(6,193	)		(111,317	)
Impairment of assets		(52,335	)		—			(52,335	)
Equity in income of partnerships		4,614			(4,614	)		—

Net loss	$	(93,355	)	$	—		$	(93,355	)

LIQUIDITY AND CAPITAL RESOURCES

This “Liquidity and Capital Resources” section contains certain “forward-looking statements” that relate to expectations and projections that are not historical facts. These forward-looking statements reflect our current views about our future liquidity and capital resources, and are subject to risks and uncertainties that might cause our actual liquidity and capital resources to differ materially from the forward-looking statements. Additional factors that might affect our liquidity and capital resources include those discussed herein and in the section entitled “Item 1A. Risk Factors” in our Annual Report on Form 10-K, as amended, for the year ended December 31, 2011 filed with the Securities and Exchange Commission. We do not intend to update or revise any forward-looking statements about our liquidity and capital resources to reflect new information, future events or otherwise.

Capital Resources

We expect to meet our short-term liquidity requirements, including distributions to common and preferred shareholders, recurring capital expenditures, tenant improvements and leasing commissions, but excluding development and redevelopment projects, generally through our available working capital and net cash provided by operations, and subject to the terms and conditions of our 2010 Credit Facility. We believe that our net cash provided by operations will be sufficient to allow us to make any distributions necessary to enable us to continue to qualify as a REIT under the Internal Revenue Code of 1986, as amended. The aggregate distributions made to preferred shareholders, common shareholders and OP Unit holders for the first nine months of 2012 were $31.7 million, based on distributions of $0.8307 per Series A Preferred Share (in respect of the period from the April 2012 issuance date through September 30, 2012) and $0.47 per common share and OP Unit. The following are some of the factors that could affect our cash flows and require the funding of future cash distributions, recurring capital expenditures, tenant improvements or leasing commissions with sources other than operating cash flows:

•

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

•

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

•

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

•

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

•

increases in interest rates resulting in higher borrowing costs.

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

The conditions in the market for debt capital and commercial mortgage loans (including the commercial mortgage backed securities market and the state of domestic and international bank and life insurance company real estate lending), and the conditions in the economy and their effect on retail sales, as well as our significant leverage resulting from debt incurred to fund our redevelopment program and other development activity, have combined to necessitate that we consider various approaches to obtaining, using and recycling capital. In light of these conditions, we are focusing on appropriately managing our liquidity. We intend to consider all of our available options for accessing the capital markets, given our position and constraints. We believe that we have sufficient capital to fund foreseeable capital improvement projects.

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 as of September 30, 2012. 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 might limit our ability to obtain capital in this way. However, in October 2012, in connection with our repayment of a portion of the 2010 Term Loan using a portion of the net proceeds of the Series B Preferred Share offering, we obtained the release of security interests in two mall properties and one office property.

We continue to contemplate 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 equity capital, including through the issuance of common or preferred equity securities if market conditions are favorable, through our contribution of assets to joint ventures or other partnerships or arrangements with institutional investors, private equity investors or other REITs, through sales of properties or interests in properties with values in excess of their mortgage loans or allocable debt and application of the excess proceeds to debt reduction, through refinancing of properties in amounts that exceed current mortgage balances, or through other actions.

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

Amended, Restated and Consolidated Senior Secured Credit Agreement

Amounts borrowed under the 2010 Credit Facility bear interest at a rate between 2.75% and 4.00% per annum, depending on our leverage, in excess of LIBOR. The rate in effect at September 30, 2012 was 3.50% in excess of LIBOR. The following table presents the applicable credit spread over LIBOR at various leverage levels:


Credit Facility Leverage Ratio		Interest Rate Spread
Less than 50%		2.75%
Equal to or greater than 50% but less than 55%		3.00%
Equal to or greater than 55% but less than 60%		3.25%
Equal to or greater than 60% but less than 65%		3.50%
Equal to or greater than 65% but less than 70%		4.00%

Exchangeable Notes

Preferred Share Offerings

As of September 30, 2012, there was $0.4 million in accumulated but unpaid dividends relating to the Series A Preferred Shares. This amount was deducted from net loss to determine net loss attributable to common shareholders. This amount was not deducted from distributions in excess of net income as of September 30, 2012, because the dividend on the preferred shares was not yet declared at that time.

We may not redeem the Series A Preferred Shares or the Series B Preferred Shares before April 20, 2017 and October 11, 2017, respectively, except to preserve our status as a REIT or upon the occurrence of a Change of Control, as defined in the Trust Agreement addendums designating the Series A and Series B Preferred Shares, respectively. On and after April 20, 2017 and October 11, 2017, we may redeem any or all of the Series A Preferred Shares or the Series B Preferred Shares, respectively, at $25.00 per share plus any accrued and unpaid dividends. In addition, upon the occurrence of a Change of Control, we may redeem any or all of the Series A Preferred Shares or the Series B Preferred Shares for cash within 120 days after the first date on which such Change of Control occurred at $25.00 per share plus any accrued and unpaid dividends. The Series A Preferred Shares and the Series B Preferred Shares have no stated maturity, are not subject to any sinking fund or mandatory redemption and will remain outstanding indefinitely unless we redeem or otherwise repurchase them or they are converted.

Interest Rate Derivative Agreements

As of September 30, 2012, we had entered into nine interest rate swap agreements with a weighted average interest rate of 2.93% on a notional amount of $617.3 million maturing on various dates through November 2013, and two forward starting interest rate swap agreements that have a weighted average interest rate of 1.25% on a notional amount of $53.1 million maturing on various dates through January 2017. We had entered into an interest rate cap that matured in April 2012.

As of September 30, 2012, the aggregate estimated unrealized net loss attributed to these interest rate derivatives was $13.8 million. The carrying amount of the derivative assets is reflected in “Deferred costs and other assets,” the associated liabilities are reflected in “Accrued expenses and other liabilities” and the net unrealized loss is reflected in “Accumulated other comprehensive loss” in the accompanying balance sheets.

Mortgage Loan Activity

The following table presents the mortgage loans we have entered into since January 1, 2012 relating to our consolidated properties:


Financing Date	Property	Amount Financed (in millions of dollars)			Stated Rate	Maturity
January	New River Valley Mall		$	28.1	LIBOR plus 3.00%	January 2019
February	Capital City Mall			65.8	5.30% fixed	March 2022
July	Christiana Center			50.0	4.64% fixed	August 2022
August	Cumberland Mall			54.0	4.40% fixed	August 2022
August	Cherry Hill Mall			300.0	3.90% fixed	September 2022

Other 2012 Activity

In June 2012, we exercised our remaining one-year extension option on the mortgage loan secured by Paxton Town Centre in Harrisburg, Pennsylvania. In connection with the exercise of this extension option, we repaid $4.0 million of the outstanding balance, which reduced the principal balance to $50.0 million.

Mortgage Loans

Twenty-four mortgage loans, which are secured by 24 of our consolidated properties, are due in installments over various terms extending to the year 2032. Sixteen of the mortgage loans bear interest at a fixed rate and eight of the mortgage loans bear interest at variable rates.

The balances of the fixed rate mortgage loans have interest rates that range from 3.90% to 9.36% and had a weighted average interest rate of 5.36% at September 30, 2012. The eight variable rate mortgage loan balances had a weighted average interest rate of 2.47% at September 30, 2012. The weighted average interest rate of all consolidated mortgage loans was 4.74% at September 30, 2012. 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 related to our mortgage loans as of September 30, 2012:


	Payments by Period
(in thousands of dollars)	Total		2012		2013-2014		2015-2016		Thereafter
Principal payments	$	124,525	$	4,568	$	33,842	$	30,787	$	55,328
Balloon payments ⁽¹⁾		1,697,879		—		546,926		514,544		636,409

Total	$	1,822,404	$	4,568	$	580,768	$	545,331	$	691,737

⁽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.

The following table presents the mortgage loans secured by our unconsolidated properties entered into since January 1, 2012:


Financing Date	Property	Amount Financed (in millions of dollars)		Stated Rate	Maturity
July	Pavilion East ⁽¹⁾	$	9.4	LIBOR plus 2.75%	August 2017

⁽¹⁾	The unconsolidated entity that owns Pavilion East entered into the mortgage loan. Our interest in the unconsolidated entity is 40%. The mortgage loan has a term of five years.

Contractual Obligations

The following table presents our aggregate contractual obligations as of September 30, 2012 for the periods presented:


(in thousands of dollars)	Total		Remainder of 2012		2013-2014		2015-2016		Thereafter
Mortgage loans	$	1,822,404	$	4,568	$	580,768	$	545,331	$	691,737
2010 Term Loan ⁽¹ ⁾		240,000		—		240,000		—		—
Revolving Facility ⁽¹ ⁾		15,000		—		15,000		—		—
Interest on indebtedness ⁽² ⁾		431,906		28,140		179,552		94,733		129,481
Operating leases		10,900		518		3,634		2,927		3,821
Ground leases		43,120		158		1,295		1,310		40,357
Development and redevelopment commitments ⁽³ ⁾		8,563		7,331		1,232		—		—

Total	$	2,571,893	$	40,715	$	1,021,481	$	644,301	$	865,396

⁽¹⁾	The 2010 Credit Facility, which is comprised of the 2010 Term Loan and the Revolving Facility, has a variable interest rate that ranges between 2.75% and 4.00% plus LIBOR depending on our total leverage ratio.

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

⁽³⁾	The timing of the payments of these amounts is uncertain. We expect that the majority of such payments will be made prior to December 31, 2012, but cannot provide any assurances that changed circumstances at these projects will not delay the settlement of these obligations.

Preferred Share Dividends

Annual dividends on 4,600,000 of our 8.25% Series A Preferred Shares ($25.00 liquidation preference) for a full year are expected to be $9.5 million. In 2012, for the partial year period from the issuance date in April to year end, we expect to pay Series A Preferred Share dividends of $6.2 million, including $1.4 million paid in June 2012 and $2.4 paid in September 2012, and $2.4 million expected to be paid in December.

Annual dividends on 3,450,000 of our 7.375% Series B Preferred Shares ($25.00 liquidation preference) for a full year are expected to be $6.4 million. In 2012, for the partial year period from the issuance date in October to year end, we expect to pay Series B Preferred Share dividends of $1.1 million in December.

CASH FLOWS

Net cash provided by operating activities totaled $76.9 million for the nine months ended September 30, 2012 compared to $73.7 million for the nine months ended September 30, 2011. This increase in cash from operating activities was primarily due to increased net operating income, lower interest expense, and other working capital changes.

Cash flows used in investing activities were $62.6 million for the nine months ended September 30, 2012 compared to cash flows used in investing activities of $3.9 million for the nine months ended September 30, 2011. Investing activities for the nine months ended September 30, 2012 reflected investment in construction in progress of $32.0 million and real estate improvements of $24.3 million, primarily related to ongoing improvements at our properties. Investing activities for the nine months ended September 30, 2011 reflected investment in construction in progress of $15.6 million and real estate improvements of $26.6 million. Investing activities for the nine months ended September 30, 2011 reflected $7.3 million of proceeds from sales of real estate and $30.4 million in proceeds related to mortgage loans at three of our unconsolidated properties.

Cash flows used in financing activities were $9.8 million for the nine months ended September 30, 2012 compared to cash flows used in financing activities of $81.7 million for the nine months ended September 30, 2011. Cash flows used in financing activities for the nine months ended September 30, 2012 included the principal repayment of Exchangeable Notes of $136.9 million, a net $80.0 million pay down of the Revolving Facility, dividends and distributions of $31.7 million, and principal installments on mortgage loans of $15.7 million and a $4.0 million principal payment on one mortgage loan. We also received $110.9 million in net proceeds from the issuance of Series A Preferred Shares and $151.0 million in net proceeds from new mortgages loans on Capital City Mall, Cherry Hill Mall, Cumberland Mall and Christiana Center in the nine months ended September 30, 2012. Cash flows used in financing activities for the nine months ended September 30, 2011 reflected dividends and distributions of $26.1 million and principal installments on mortgage loans of $15.7 million.

COMMITMENTS

As of September 30, 2012, we had unaccrued contractual and other commitments related to our capital improvement projects and development projects of $8.6 million in the form of tenant allowances, lease termination fees, and contracts with general service providers and other professional service providers.

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. We have insurance coverage for certain environmental claims up to $10.0 million per occurrence and up to $20.0 million in the aggregate.

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 and other 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. Our tenants face competition from companies at the same and other properties and from other retail formats as well. This competition could have a material adverse effect on our ability to lease space and on the amount of rent and expense reimbursements that we receive.

The existence or development of competing retail properties and the related increased competition for tenants might, subject to the terms and conditions of the 2010 Credit Facility, require us to make capital improvements to properties that we would have deferred or would not have otherwise planned to make and might also affect the total sales, sales per square foot, occupancy and net operating income of such properties. Any such capital improvements, undertaken individually or collectively, would involve costs and expenses that could adversely affect our results of operations.

We compete with many other entities engaged in real estate investment activities for acquisitions of malls, other retail properties and other prime development sites, including institutional pension funds, other REITs and other owner-operators of retail properties. Our efforts to compete for acquisitions are also subject to the terms and conditions of our 2010 Credit Facility. Given current economic, capital market and retail industry conditions, however, there has been substantially less competition with respect to portfolio or property acquisition activity in recent quarters. When we seek to make acquisitions, competitors might drive up the price we must pay for properties, parcels, other assets or other companies or might themselves succeed in acquiring those properties, parcels, assets or companies. In addition, the owners of potential acquisition targets might find our competitors to be more attractive suitors if they have greater resources, are willing to pay more, or have a more compatible operating philosophy. In particular, larger REITs might enjoy significant competitive advantages that result from, among other things, a lower cost of capital, a better ability to raise capital, a better ability to finance an acquisition, and enhanced operating efficiencies. We might not succeed in acquiring retail properties or development sites that we seek, or, if we pay a higher price for a property and/or generate lower cash flow from an acquired property than we expect, our investment returns will be reduced, which will adversely affect the value of our securities.

We receive a substantial portion of our operating income as rent under leases with tenants. At any time, any tenant having space in one or more of our properties could experience a downturn in its business that might weaken its financial condition. Such tenants might enter into or renew leases with relatively shorter terms. Such tenants might also defer or fail to make rental payments when due, delay or defer lease commencement, voluntarily vacate the premises or declare bankruptcy, which could result in the termination of the tenant’s lease or preclude the collection of rent in connection with the space for a period of time, and could result in material losses to us and harm to our results of operations. Also, it might take time to terminate leases of underperforming or nonperforming tenants and we might incur costs to remove such tenants. Some of our tenants occupy stores at multiple locations in our portfolio, and so the effect of any bankruptcy or store closings of those tenants might be more significant to us than the bankruptcy or store closings of other tenants. Given current conditions in the economy, certain industries and the capital markets, in some instances retailers that have sought protection from creditors under bankruptcy law have had difficulty in obtaining debtor-in-possession financing, which has decreased the likelihood that such retailers will emerge from bankruptcy protection and has limited their alternatives. In addition, under many of our leases, our tenants pay rent based, in whole or in part, on a percentage of their sales. Accordingly, declines in these tenants’ sales directly affect our results of operations. Also, if tenants are unable to comply with the terms of their leases, or otherwise seek changes to the terms, including changes to the amount of rent, we might 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 during the December holiday season. Also, many new and temporary leases are entered into later in the year in anticipation of the holiday season and a higher number of tenants vacate their space early in the year. As a result, our occupancy and cash flows are generally higher in the fourth quarter and lower in the first quarter. 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 financial performance. Retail property leases often provide for the payment of rent based on a percentage of sales, which might increase with inflation. Leases may also provide for tenants to bear all or a portion of operating expenses, which might reduce the impact of such increases on us. However, rent increases might not keep up with inflation, or if we recover a smaller proportion of property operating expenses, we might bear more costs if such expenses increase because of inflation.

FORWARD LOOKING STATEMENTS

This Quarterly Report on Form 10-Q for the quarter ended September 30, 2012, together with other statements and information publicly disseminated by us, contain certain “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements relate to expectations, beliefs, projections, future plans, strategies, anticipated events, trends and other matters that are not historical facts. These forward-looking statements reflect our current views about future events, achievements or results and are subject to risks, uncertainties and changes in circumstances that might cause future events, achievements or results to differ materially from those expressed or implied by the forward-looking statements. In particular, our business might be materially and adversely affected by uncertainties affecting real estate businesses generally as well as the following, among other factors:

•

our substantial debt and our high leverage ratio;

•

constraining leverage, interest and tangible net worth covenants under our 2010 Credit Facility;

•

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

•

potential losses on impairment of assets that we might be required to record in connection with any dispositions of assets;

•

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

•

our ability to refinance our existing indebtedness when it matures, on favorable terms or at all, due in part to the effects on us of dislocations and liquidity disruptions in the capital and credit markets;

•

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

•

our short- and long-term liquidity position;

•

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

•

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

•

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

•

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

•

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

•

risks relating to development and redevelopment activities;

•

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

•

concentration of our properties in the Mid-Atlantic region;

•

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

•

potential dilution from any capital raising transactions;

•

possible environmental liabilities;

•

our ability to obtain insurance at a reasonable cost; and

•

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

Additional factors that might cause future events, achievements or results to differ materially from those expressed or implied by our forward-looking statements include those discussed herein and in our Annual Report on Form 10-K for the year ended December 31, 2011, as amended, in the section entitled “Item 1A. Risk Factors.” We do not intend to update or revise any forward-looking statements to reflect new information, future events or otherwise.

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, 2012, our consolidated debt portfolio consisted primarily of $240.0 million borrowed under our 2010 Term Loan, which bore interest at a weighted average interest rate of 3.75%, $15.0 million borrowed under our Revolving Facility, which bore interest at a rate of 3.75% and $1,822.4 million in fixed and variable rate mortgage loans.

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


	Fixed Rate Debt					Variable Rate Debt
(in thousands of dollars) For the Year Ending December 31,	Principal Payments		Weighted Average Interest Rate			Principal Payments			Weighted Average Interest Rate ⁽¹⁾
2012	$	4,399		5.57	%	$	169			2.33	%
2013	$	126,776		5.10	%	$	337,933			2.59	%
2014	$	115,362		6.42	%	$	255,697	⁽²⁾		3.73	%
2015	$	290,115		5.75	%	$	727			2.33	%
2016 and thereafter	$	893,406		5.23	%	$	52,820			3.12	%

⁽¹⁾	Based on the weighted average interest rates in effect as of September 30, 2012.

⁽²⁾	Includes 2010 Term Loan borrowings of $240.0 million with a weighted average interest rate of 3.75% and Revolving Facility borrowings of $15.0 million with a weighted average interest rate of 3.75% as of September 30, 2012.

As of September 30, 2012, we had $647.3 million of variable rate debt. Also, as of September 30, 2012, we had entered into nine interest rate swap agreements with an aggregate weighted average interest rate of 2.93% on a notional amount of $617.3 million maturing on various dates through November 2013, and two forward starting interest rate swap agreements with a weighted average interest rate of 1.25% on a notional amount of $53.1 million maturing on various dates through January 2017. We entered into these interest rate swap agreements in order to hedge the interest payments associated with the 2010 Credit Facility and our issuances of variable interest rate long-term debt.

Changes in market interest rates have different effects on the fixed and variable rate portions of our debt portfolio. A change in market interest rates applicable to the fixed portion of the debt portfolio affects the fair value, but it has no

effect on interest incurred or cash flows. A change in market interest rates applicable to the variable portion of the debt portfolio affects the interest incurred and cash flows, but does not affect the fair value. The following sensitivity analysis related to our debt portfolio, which includes the effects of our interest rate swap agreements, assumes an immediate 100 basis point change in interest rates from their actual September 30, 2012 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 $67.4 million at September 30, 2012. A 100 basis point decrease in market interest rates would have resulted in an increase in our net financial instrument position of $69.2 million at September 30, 2012. Based on the variable rate debt included in our debt portfolio at September 30, 2012, a 100 basis point increase in interest rates would have resulted in an additional $0.3 million in interest annually. A 100 basis point decrease would have reduced interest incurred by $0.3 million annually.

To manage interest rate risk and limit overall interest cost, we may employ interest rate swaps, options, forwards, caps and floors, or a combination thereof, depending on the underlying exposure. Interest rate differentials that arise under swap contracts are recognized in interest expense over the life of the contracts. If interest rates rise, the resulting cost of funds is expected to be lower than that which would have been available if debt with matching characteristics was issued directly. Conversely, if interest rates fall, the resulting costs would be expected to be, and in some cases have been, 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 8 of the notes to our unaudited consolidated financial statements.

Because the information presented above includes only those exposures that existed as of September 30, 2012, it does not consider changes, exposures or positions which have arisen or could arise after that date. The information presented herein has limited predictive value. As a result, the ultimate realized gain or loss or expense with respect to interest rate fluctuations will depend on the exposures that arise during the period, our hedging strategies at the time and interest rates.

ITEM 4.

CONTROLS AND PROCEDURES.

We are committed to providing accurate and timely disclosure in satisfaction of our SEC reporting obligations. In 2002, we established a Disclosure Committee to formalize our disclosure controls and procedures. Our Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2012, 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 is not expected to have a material adverse effect on our consolidated financial position or results of operations.

ITEM 1A.

RISK FACTORS.

In addition to the other information set forth in this report, you should carefully consider the risks that could materially affect our business, financial condition or results of operations, which are discussed under the caption “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K, as amended, for the year ended December 31, 2011, as well as the following:

Our recently announced management changes could impact our business and our prospects.

On June 7, 2012, Joseph F. Coradino, formerly President of PREIT Services, LLC and PREIT-RUBIN, Inc., became our Chief Executive Officer, replacing Ronald Rubin, who retired from that position, but remains our Executive Chairman. On August 31, 2012, Edward A. Glickman, the Company’s President and Chief Operating Officer, left his position as an officer of the Company, and on October 15, 2012, he resigned from his position as a trustee of the Company. We continue to evaluate our needs and may make additional management changes or hires in the future. Our future success depends upon the ability of our corporate management team to implement these management changes and to continue to execute our business strategies. If we fail to implement these management changes successfully or if our management team is unable to execute the Company’s business strategies, there would be a negative impact on our business and our prospects.

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, 2012 and the average price paid per share.


Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as part of Publicly Announced Plans or Programs		Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs
July 1—July 31, 2012		431	$	15.24		—	$	—
August 1—August 31, 2012		29,266		15.69		—		—
September 1—September 30, 2012		—		—		—		—

Total		29,697	$	15.68		—	$	—

ITEM 6.

EXHIBITS.


3.1		Amended and Restated Trust Agreement dated December 18, 2008.

3.2		Designating Amendment to Trust Agreement Designating the Rights, Preferences, Privileges, Qualifications, Limitations and Restrictions of PREIT’s 8.25% Series A Cumulative Redeemable Perpetual Preferred Shares.

3.3		Amendment dated June 7, 2012 to Trust Agreement dated December 18, 2008.

3.4		Second Designating Amendment to Trust Agreement Designating the Rights, Preferences, Privileges, Qualifications, Limitations and Restrictions of PREIT’s 7.375% Series B Cumulative Redeemable Perpetual Preferred Shares.

10.1		Form of Annual Incentive Compensation Opportunity Award for the Company’s Chief Executive Officer, Vice Chairman, and Chief Financial Officer.

10.2		Form of Annual Incentive Compensation Opportunity Award for Officers other than the Named Executive Officers.

10.3		Promissory Note, dated August 15, 2012, in the principal amount of $150.0 million, issued by Cherry Hill Center, LLC and PR Cherry Hill STW LLC in favor of New York Life Insurance Company.

10.4		Promissory Note, dated August 15, 2012, in the principal amount of $150.0 million, issued by Cherry Hill Center, LLC and PR Cherry Hill STW LLC in favor of Teachers Insurance and Annuity Association of America.

10.5		Purchase Agreement dated October 1, 2012, by and among PREIT, PREIT Associates, Wells Fargo Securities, LLC, Citigroup Global Markets Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as representatives of the several Underwriters listed on Schedule A attached thereto, filed as Exhibit 1.1 to PREIT’s Current Report on Form 8-K filed on October 5, 2012, is incorporated herein by reference.

10.6		Second Addendum to First Amended and Restated Agreement of Limited Partnership of PREIT Associates, L.P. designating the rights, obligations, duties and preferences of Series B Preferred Units, filed as Exhibit 10.1 to PREIT’s Current Report on Form 8-K filed on October 11, 2012, is incorporated herein by reference.

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

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

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

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

101*		Pursuant to Rule 405 of Regulation S-T, the following financial information from the Company’s Quarterly Report on Form 10-Q for the period ended September 30, 2012 is formatted in XBRL interactive data files: (i) Consolidated Statements of Operations for the three and nine months ended September 30, 2012 and 2011; (ii) Consolidated Statement of Comprehensive Loss for the three and nine months ended September 30, 2012 and 2011; (iii) Consolidated Balance Sheets as of September 30, 2012 and December 31, 2011; (iv) Consolidated Statements of Equity for the nine months ended September 30, 2012; (v) Consolidated Statements of Cash Flows for the nine months ended September 30, 2012 and 2011; and (vi) Notes to Unaudited Consolidated Financial Statements.

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

SIGNATURE OF REGISTRANT

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


	PENNSYLVANIA REAL ESTATE INVESTMENT TRUST

Date: October 26, 2012
	By:	/s/ Joseph F. Coradino
		Joseph F. Coradino Chief Executive Officer

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

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

Exhibit Index


3.1*		Amended and Restated Trust Agreement dated December 18, 2008.

3.2*		Designating Amendment to Trust Agreement Designating the Rights, Preferences, Privileges, Qualifications, Limitations and Restrictions of PREIT’s 8.25% Series A Cumulative Redeemable Perpetual Preferred Shares.

3.3*		Amendment dated June 7, 2012 to Trust Agreement dated December 18, 2008.

3.4*		Second Designating Amendment to Trust Agreement Designating the Rights, Preferences, Privileges, Qualifications, Limitations and Restrictions of PREIT’s 7.375% Series B Cumulative Redeemable Perpetual Preferred Shares.

10.1*		Form of Annual Incentive Compensation Opportunity Award for the Company’s Chief Executive Officer, Vice Chairman, and Chief Financial Officer.

10.2*		Form of Annual Incentive Compensation Opportunity Award for Officers other than the Named Executive Officers.

10.3*		Promissory Note, dated August 15, 2012, in the principal amount of $150.0 million, issued by Cherry Hill Center, LLC and PR Cherry Hill STW LLC in favor of New York Life Insurance Company.

10.4*		Promissory Note, dated August 15, 2012, in the principal amount of $150.0 million, issued by Cherry Hill Center, LLC and PR Cherry Hill STW LLC in favor of Teachers Insurance and Annuity Association of America.

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

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

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

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

101***		Pursuant to Rule 405 of Regulation S-T, the following financial information from the Company’s Quarterly Report on Form 10-Q for the period ended September 30, 2012 is formatted in XBRL interactive data files: (i) Consolidated Statements of Operations for the three and nine months ended September 30, 2012 and 2011; (ii) Consolidated Statement of Comprehensive Loss for the three and nine months ended September 30, 2012 and 2011; (iii) Consolidated Balance Sheets as of September 30, 2012 and December 31, 2011; (iv) Consolidated Statements of Equity for the nine months ended September 30, 2012; (v) Consolidated Statements of Cash Flows for the nine months ended September 30, 2012 and 2011; and (vi) Notes to Unaudited Consolidated Financial Statements.

*	filed herewith

**	furnished herewith

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

Exhibit 3.1

PENNSYLVANIA REAL ESTATE

INVESTMENT TRUST

TRUST AGREEMENT AS

AMENDED AND RESTATED

DECEMBER 18, 2008

PENNSYLVANIA REAL ESTATE INVESTMENT TRUST

TRUST AGREEMENT AS AMENDED

AND RESTATED DECEMBER 18, 2008

Pennsylvania Real Estate Investment Trust on this 8th day of April 2008, hereby amends the Trust Agreement made December 27, 1960, and amended February 10, 1961, February 14, 1962, August 7, 1962, May 8, 1963, December 13, 1967, February 24, 1970, October 10, 1985, November 7, 1985, February 13, 1986, December 16, 1987, September 29, 1997, December 16, 1997, November 14, 2003, December 15, 2005, July 26, 2007, and April 8, 2008 and the same as amended hereby shall be restated as follows:

1. NAME OF TRUST; REGISTERED OFFICE; DEFINITIONS

Certain trustees acting under this Trust Agreement have heretofore formed a Trust which is designated “Pennsylvania Real Estate Investment Trust” (hereinafter referred to as the “Trust” or “PREIT”). PREIT shall conduct all business and the Trustees, and others authorized hereby or pursuant to the provisions hereof, shall sign all instruments necessary or desirable and appropriate to the performance of the purposes of PREIT.

PREIT shall exist subject to 15 Pa. C.S. Chapter 95, as amended from time to time, and any successor statute thereto.

The address of the registered office of PREIT in the Commonwealth of Pennsylvania is The Bellevue, 200 South Broad Street, Philadelphia, Pennsylvania 19102.

The following terms, when used in this Trust Agreement or in the By-laws, shall have the meanings indicated.

The term “record form” shall mean inscribed on a tangible medium or stored in an electronic or other medium and retrievable in perceivable form.

The term “Trustees” or “trustees” shall mean the individuals serving at the time as trustees of PREIT under this Trust Agreement.

The term “Trust Property” shall mean all property, of all kinds, owned by PREIT.

The term “Shareholders” or “shareholders” shall mean holders of record of Shares authorized by the first paragraph of Paragraph 8 and the holders of Preferred Shares to the extent, if any, provided in the designating amendment effected pursuant to the provisions of the second paragraph of Paragraph 8.

The term “sign” means, with present intent to authenticate or adopt a record, to (i) sign manually or adopt a tangible symbol, or (ii) attach to, or logically associate with, a record, an electronic sound, symbol or process.

2. TRUSTEES

The following provisions shall apply to Trustees serving under this Trust Agreement:

A. NUMBER

The Trustees shall have the right at any time, and from time to time, to increase or decrease the number of Trustees then empowered to serve to a number not in excess of fifteen (15) nor less than five (5). Commencing with the Annual Meeting of Shareholders in 1970 and until the division of Trustees into classes is terminated as provided in Paragraph 2.B below, the Trustees shall be divided into three approximately equal classes each consisting of not fewer than one (1) nor more than five (5) individuals.

B. TERM OF OFFICE

The term of office of each Trustee serving prior to the Annual Meeting of Shareholders in 1970 shall terminate upon the election of his successor. At such Annual Meeting one class of Trustees (“Class A Trustees”) shall be elected, each member of which is to hold office for a term of one year, one class of Trustees (“Class B Trustees”) shall be elected, each member of which is to hold office for a term of two years, and one class of Trustees (“Class C Trustees”) shall be elected, each member of which is to hold office for a term of three years, and in each case and in each class such members shall serve until their respective successors shall have been duly elected and qualified.

Commencing with the Annual Meeting in 1971, and ending at the Annual Meeting in 2007, one class of Trustees, which shall be the class whose terms expire that year, shall be elected, each member of which is to hold office for a term of three years and until his respective successor is elected and qualified.

At the 2008 Annual Meeting, the Class A Trustees shall be elected for terms expiring at the 2009 Annual Meeting; at the 2009 Annual Meeting, both the Class A Trustees and Class B Trustees shall be elected for terms expiring at the 2010 Annual Meeting; and at the 2010 Annual Meeting and at each Annual Meeting thereafter, all Trustees shall be elected for terms expiring at the next Annual Meeting or, in each case, until his or her successor shall be elected and qualified. From and after the 2010 Annual Meeting, the Trustees shall no longer be divided into classes.

C. NOMINATION OF TRUSTEES

Nominations for election to the office of Trustee at any Annual or Special Meeting of Shareholders shall be made exclusively as provided in Paragraph 11.J of this Trust Agreement.

D. ADDITIONAL AND SUCCESSOR TRUSTEES; VACANCIES

The death, incapacity, resignation or removal of any or all of the Trustees shall not terminate PREIT’s existence or in any way affect its continuity.

Vacancies shall be deemed to have occurred as a result of an increase in the number of Trustees, or by reason of the death, resignation or incapacity of any of the Trustees (unless the vacancy is eliminated by reduction in the number of Trustees), and they shall be filled by persons to be elected by the remaining Trustees. Any new Trustee elected to fill a vacancy created by reason of the death, resignation or incapacity of a Trustee, or as a result of an increase in the number of Trustees, shall hold office until the next Annual or Special Meeting of Shareholders and until his or her successor is elected and qualified. Any Trustee standing for election at such meeting who has been elected to fill a vacancy created by reason of the death, resignation or incapacity of a Trustee shall stand for election for a term equal to the remaining term of the former Trustee and until his or her successor is elected and qualified. A vacancy caused by the removal of any Trustee shall be filled only by the Shareholders at an Annual or Special Meeting, unless by reason of the removal of the Trustee the number of Trustees is reduced to less than five (5), in which event the next succeeding paragraph of this Paragraph 2.D shall apply.

Until vacancies are filled the remaining Trustees shall be empowered to exercise all powers granted all Trustees hereunder, except that in the event that the number of Trustees shall fall below five (5), the Trustees shall forthwith nominate and elect at least as many Trustees as may be required to bring the total number of trustees to five (5).

Upon the election of any Trustee or additional or successor Trustee, the said Trustee so elected shall sign an Acceptance of Trust in record form, which together with a certificate of such election signed by two other Trustees, shall be filed with legal counsel for PREIT. Upon the delivery of such Acceptance, the said Trustee shall have all the rights, powers and duties of a Trustee hereunder.

E. RESIGNATION OF TRUSTEES

Any Trustee may resign at any time by delivering to any other Trustee and to the office of PREIT notification in record form of his or her resignation, which resignation shall be effective when received, but if the effect of such resignation shall be to reduce the number of Trustees below five (5), no such resignation shall be effective until a successor shall have been elected by the remaining Trustees.

F. REMOVAL OF TRUSTEES

A Trustee may be removed by a vote of the Trustees only for cause (as defined in the next paragraph) and only at a regular meeting of the Trustees, or at a meeting specially called for that purpose.

Any individual Trustee may be removed for cause (as herein defined) by a vote of the Shareholders at any meeting of Shareholders called for the purpose by the affirmative vote of Shareholders entitled to cast at least a majority of the votes of the Shares then outstanding and entitled to vote at the annual election of Trustees. Cause for removal shall exist only if the Trustee whose removal is proposed has been convicted of a felony by a court of competent jurisdiction or if the Trustee has been adjudged by a court of competent jurisdiction to be liable for negligence or misconduct in the performance of his or her duty to PREIT in a matter of substantial importance to PREIT.

No Trustee shall be removed at any meeting of Trustees or Shareholders unless written notice of such meeting stating this purpose shall be given or mailed to those entitled to vote thereon at least seven (7) days prior to such meeting.

G. WAIVER OF BOND

No Trustee acting hereunder shall be required to furnish a bond in any jurisdiction in which said Trustees may act.

H. MEETINGS

The Trustees shall hold an Annual Meeting immediately following the Annual Meeting of Shareholders. No notice shall be required for the Annual Meeting of Trustees. At that meeting, they shall elect officers, including a President, a Secretary, and such other officers as they shall from time to time deem necessary. Officers so elected by them shall remain in office until the next Annual Meeting of Trustees, unless removed by the vote of two-thirds of the Trustees then in office at any special meeting called on seven (7) days notice for that purpose. Special Meetings of the Trustees shall be called by the Chairman or by two or more of the other Trustees and shall be held at such time and in such place as shall be designated in the notice of the meeting. Such notice shall be given by or at the direction of the person or persons authorized to call such meeting to each Trustee at least two (2) days prior to the day named for the meeting, unless a different notice period is provided for hereunder based upon the subject matter of such meeting. Any Trustee may waive notice of any meeting of Trustees by a waiver in record form signed by the Trustee prior to or after such meeting. Attendance by a Trustee at a meeting of Trustees without objecting at the beginning of the meeting to the lack of notice shall constitute a waiver of notice of such meeting.

I. QUORUM

A majority of the Trustees, provided that the majority consists of at least four (4) Trustees, shall constitute a quorum. Trustees shall be deemed present at a meeting if by means of conference telephone or similar communications equipment all persons participating in the meeting can hear each other. If there are fewer than five (5) Trustees, the remainder constitutes a quorum and must act to fill vacancies to bring the total number of Trustees to at least five (5). If a quorum is not present at any meeting, a majority of the Trustees present at the meeting may adjourn the meeting to any later date and the meeting may be held at such later date without any further notice.

J. VOTING REQUIREMENTS

Except as otherwise required by law and except as otherwise contemplated by Paragraph 3.R, the concurrence of a majority of the Trustees present at any meeting at which a quorum is present shall be necessary to the validity of any action taken by them. In lieu of a meeting, action may be taken by consents in record form signed by at least seventy-five percent (75%) of the Trustees then serving. In any event, the concurrence or consent of at least four (4) Trustees shall be necessary to the validity of any action taken. The minimum voting requirements specified in this paragraph shall apply, as a minimum requirement, with respect to any and all action taken by the Trustees under this Trust Agreement.

K. TRUSTEES’ DEALINGS WITH PREIT

Any Trustee may be employed by PREIT to hold any office, or to perform any special business, financial or other service, and shall be entitled to receive such additional reasonable compensation as the Trustees may fix and determine. Moreover, no Trustee shall be disqualified by his or her position as a Trustee from selling to, buying from or dealing with PREIT either directly or indirectly as a director, officer, member, affiliate, shareholder or fiduciary of any other party to such a transaction. No such contract or transaction shall be void or voidable solely because of such a relationship with or interest of a Trustee, or solely because such a Trustee is present at or participates in the meeting of the Board of Trustees that authorizes (or ratifies) the transaction, or solely because his or her votes are counted for that purpose if the material facts as to the relationship or interest are disclosed or are known to the Trustees and the Board of Trustees authorizes (or ratifies) such contract or transaction by the affirmative votes of a majority of the Trustees not having an interest therein, even though the Trustees not having an interest in the contract or transaction are less than a quorum. No Trustee shall have any liability for such a contract or transaction so approved (or ratified) by a majority of the Trustees not having an interest in such contract or transaction except for bad faith or gross negligence. Those Trustees having an interest in such a transaction may be counted in determining the existence of a quorum at any meeting of the Board of Trustees which shall authorize (or ratify) any such contract or transaction.

L . The provisions of this Paragraph 2 are subject to the rights of the holders of any series or class of Preferred Shares to elect or appoint or to cause the election or appointment of one or more Trustees upon the terms and conditions set forth in the designating Amendment to this Agreement effected by the Trustees with respect to the applicable series or class of Preferred Shares.

3. ACTIVITIES OF PREIT; POWERS OF THE TRUSTEES

The business activities of PREIT, which shall be conducted by or under the direction of the Trustees on behalf of PREIT, shall be (i) the acquisition, ownership, operation, leasing, management, development and disposition of real property and related personal property, either directly or indirectly, and the ownership of interests in trusts, partnerships or other entities which acquire own, operate, lease, manage, develop and dispose of real property and related personal

property, and (ii) all things that the Trustees shall deem necessary or desirable and appropriate to the foregoing.

In furtherance of the business activities of PREIT and in addition to any powers conferred upon the Trustees by law and by other provisions of this Trust Agreement, the Trustees shall have the following powers, unless otherwise restricted by any other provision of this Trust Agreement.

A. To invest in assets of any kind and nature without being limited to so-called “legal investments,” provided the amount, type or classification will not disqualify PREIT from qualifying as a Real Estate Investment Trust under the pertinent provisions of the Internal Revenue Code and Regulations thereunder.

B. To make investments incorporating a variety of real property financing techniques, including, without limitation, sale and leasebacks, net lease financings, purchase and installment salebacks, high credit lease-secured mortgages, convertible mortgages and mortgages of special interests including, without limitation, leaseholds, air rights and condominiums. PREIT’s investment policy may also include new investment techniques subsequently developed which satisfy the real estate investment trust requirements of the Internal Revenue Code and Regulations thereunder.

C. To improve, manage, protect, subdivide, sell, mortgage, pledge, encumber, grant easements or charges against or otherwise deal in real estate assets and interests in real property.

D. To make such contracts as they deem expedient in the conduct of the business of PREIT and to engage in any type of business necessary or incidental thereto, except such business as would disqualify PREIT as a Real Estate Investment Trust under the pertinent provisions of the Internal Revenue Code and Regulations thereunder.

E. To borrow money to further PREIT’s purposes and to pledge the Trust Property as security therefor, provided, however, that no liability shall be incurred except such as may be incidental to the proper management of the property and business of PREIT and the proper execution of PREIT’s purposes.

F. To raise monies or acquire assets consistent with the purposes of PREIT by the issuance of securities and subscriptions, options and warrants relating thereto.

G. To receive or sue for all monies at any time becoming due to PREIT.

H. To compromise or refer to arbitration any claims against or rights of PREIT.

I. To employ any persons (including Trustees) to assist the Trustees in the conduct of the business of PREIT and to confer upon such persons such titles, power and authority as the Trustees may deem expedient. Those persons who are elected and serve as officers of PREIT in accordance with Paragraph 2.H of this Trust Agreement or otherwise shall have such powers and duties as a resolution adopted by the Trustees or PREIT’s By-laws may provide.

J. To authorize the signature and delivery of any and all instruments which they may deem advisable to carry out the purposes of PREIT. In connection with the signature of any documents, the Trustees may, from time to time, designate one or more of the Trustees as such or as officers of PREIT, or such other officer or person or officers or persons to sign documents on behalf of PREIT, and such signature shall be valid for all purposes.

K. To manage, conduct and operate PREIT under such assumed or fictitious name or names as they, from time to time, designate and in connection therewith, to do all things necessary to register such fictitious name or names on behalf of PREIT and its Shareholders.

L. In accordance with applicable law, to determine whether monies or things shall, for the purposes of these presents, be considered as principal or income, or what constitutes gross income or net income in any year, or part of the year, and to determine the mode in which expenses or disbursements shall be charged between principal or income.

M. To do all and such other things and incur such other obligations as in their judgment will advance PREIT’s purposes.

N. To sign and deliver any regulatory agreement or assumption of regulatory agreement and any other instrument approved by the Trustees required by the Federal Housing Commissioner in case of the purchase of any property subject to a mortgage insured by the Federal Housing Administration.

O. To adopt, amend and repeal such By-Laws for the conduct of the business of their meetings and of PREIT as they shall deem necessary, but all such By-Laws shall be subordinate to and not inconsistent with the provisions of this Agreement.

P. To determine the value of all or any part of the Trust Property and of any services, securities, property or other consideration to be furnished to or acquired by PREIT, and to revalue all or any part of the foregoing.

Q. To sell, assign, or otherwise transfer all or substantially all or any part of the Trust Property, to merge PREIT with another business trust or entity, and, to the extent permitted by law, to elect not to have PREIT exist subject to 15 Pa. C.S. CHAPTER 95, or any successor thereto; provided that, unless (i) in the case of a merger, either (a) the merger is with an entity in which PREIT owned, directly or indirectly, prior to the merger ownership interests having at least 80% of the voting power of all ownership interests or (b) the persons that were the Shareholders of PREIT immediately prior to the merger will own, directly or indirectly, immediately following the merger all of the ownership interests in the surviving entity, and (ii) in the case of such a sale, assignment or other transfer, the transferee is an entity directly or indirectly controlled by PREIT, no such merger or sale, assignment or other transfer shall be effected without the affirmative vote of the holders of a majority of votes cast by all Shareholders entitled to vote thereon (excluding holders of Preferred Shares that are entitled to vote thereon exclusively as a class) at a meeting called for that purpose pursuant to a resolution adopted by a majority of the Trustees then in office. If any class or series of Preferred Shares is entitled to vote thereon as a class, the affirmative vote of a majority of the votes cast in each class vote shall

also be required. No vote of Shareholders shall be required under this Paragraph 3.Q if there shall have previously been an affirmative vote of the Shareholders to dissolve the Trust pursuant to Paragraph 16.

R. To establish one or more committees to consist of one or more Trustees and to delegate such authority of the Trustees to those committees as is permitted by law. The establishment of such committees and the delegation of authority thereto shall be done only by resolution of a majority of all of the Trustees then serving, and no such committee shall have the authority to (i) amend or repeal any provision of this Agreement or the By-laws, (ii) remove any Trustee from the Board of Trustees, or (iii) create or fill any vacancies in the Board of Trustees.

S. In addition to the authority in Paragraph 8, to create and issue (whether or not in connection with the issuance of Shares or other securities), and to authorize the creation and issuance by subsidiaries and affiliates of PREIT of, option rights or securities having conversion or option rights entitling the holders thereof to purchase or acquire Shares, option rights, securities having conversion or option rights, or obligations, of any class or series, or assets of PREIT, or to purchase or acquire from PREIT equity securities, option rights, securities having conversion or option rights, or obligations, of any class or series, owned by PREIT and issued by any other person or entity. The securities, contracts, warrants or other instruments evidencing Shares, option rights, securities having option or conversion rights, or obligations of PREIT, may contain such terms as are fixed by the Trustees, including, without limiting the generality of such authority, restrictions, provisions providing for adjustment of terms upon the happening of certain events, pricing and payment terms, and conditions, including, but not limited to, conditions that preclude any person or persons owning or offering to acquire a specified number or percentage of Shares or any class or series thereof or option rights, securities having conversion or option rights, or obligations of PREIT or any class or series of the foregoing or any transferee or transferees of the person or persons from exercising, converting, transferring or receiving the Shares or other equity securities, option rights, securities having conversion or option rights, obligations or assets. The provisions of this Paragraph 3.S shall not be construed to effect a change in the fiduciary relationship between a Trustee and PREIT or to change the standard of care of a Trustee as provided for in Paragraph 5 of this Agreement, 15 Pa. C.S. Section 9506, as amended from time to time, and Subchapter B of Chapter 17 of the Pennsylvania Business Corporation Law of 1988, as amended from time to time.

T. To adopt and implement executive compensation, pension, profit sharing, share option, share bonus, share purchase, share appreciation rights, savings, thrift, retirement, incentive or benefit plans, trusts or provisions applicable to any or all Trustees, officers, employees or agents of PREIT or trustees, directors, officers, employees or agents of any of PREIT’s subsidiaries or affiliates or other entities in which PREIT maintains an investment and, without limiting the foregoing authority, to create and issue rights and options to Trustees, officers, employees and agents of PREIT and trustees, directors, officers, employees or agents of any of PREIT’s subsidiaries or affiliates or other entities in which PREIT maintains an investment as an incentive for service or continued service with PREIT or any of its subsidiaries or affiliates or other entities in which PREIT maintains an investment or for such other purposes and upon such terms as the Trustees, who may benefit by their action, deem advantageous to PREIT.

U. To determine and alter, from time to time, the fiscal year of PREIT.

V. To grant rights to holders of equity interests in entities controlled by PREIT to vote on matters to be voted upon by the Shareholders of PREIT, either as a separate class or with the Shareholders and on any such basis as the Board shall determine.

4. PROTECTION OF PERSONS DEALING WITH PREIT

A resolution of the Trustees, certified by any Trustee or by any officer of PREIT, authorizing a particular act shall be conclusive evidence to anyone, including strangers to PREIT, that such act is within the powers of the Trustees. Any instrument signed by any Trustee or by the Chairman, any Vice Chairman, the Chief Executive Officer, President, Chief Operating Officer or any Vice President of PREIT shall be conclusive evidence to anyone, including strangers to PREIT, that said persons are in fact authorized to sign said instrument on behalf of PREIT and a resolution accompanying such instrument shall not be necessary for this purpose. A certification of incumbency of Trustees and officers of PREIT, signed by any other Trustee or by any other officer of PREIT shall be conclusive evidence to anyone, including strangers to PREIT, that the Trustees and the officers of PREIT named therein are at the time stated therein then serving under this Trust Agreement. No purchaser from PREIT shall be bound to see to the application of the money or other consideration paid by the purchaser to PREIT.

5. LIMITATION OF TRUSTEES’ AND OFFICERS’ LIABILITY

A. The Trustees, when acting in such capacity, shall not be personally liable to any person or entity for any act, omission or obligation of PREIT.

B. The Trustees shall stand in a fiduciary relationship to PREIT. The provisions of 15 Pa. C.S. Subchapter B and, specifically, Section 1715, shall be applicable to the Trustees with respect to the fiduciary relationship and the discharge of duties arising therefrom. No Trustee shall be personally liable for monetary damages for any action taken, or any failure to take any action, except that a Trustee shall remain personally liable for monetary damages to the same extent that a director of a Pennsylvania business corporation remains liable under the provisions of 15 Pa. C.S. Section 1713. In furtherance of the purposes of the preceding sentence, such sentence shall be deemed to have the effect of a bylaw adopted by the Shareholders (as that term is used in 15 Pa. C.S. Section 1713).

C. An officer of PREIT shall perform his or her duties as an officer of PREIT in good faith, in a manner he or she reasonably believes to be in the best interests of PREIT and with such care, including reasonable inquiry, skill and diligence, as a person of ordinary prudence would use under similar circumstances. A person who so performs his or her duties shall not be liable by reason of having been an officer of PREIT.

D. It is the intention of this Trust Agreement to limit the liability of the Trustees to the fullest extent permitted by applicable law, as amended or supplemented. No amendment of this Agreement or repeal of any of its provisions shall adversely affect any right or protection of any Trustee or officer of PREIT provided for hereunder for or with respect to any acts, omissions

or obligations of PREIT or any Trustee or officer of PREIT occurring or incurred prior to such amendment or repeal.

6. RECORDS

The Trustees shall keep a record of all meetings of the Trustees and committees of the Trustees and of the Shareholders and the officers of PREIT shall keep books of account showing the receipts and disbursements of PREIT. The Trust shall prepare and furnish to the Shareholders the annual and other reports required to be so furnished by the Securities Exchange Act of 1934, as amended. In addition, the Trustees, or their appointed institutional agents, shall maintain proper transfer books and a register of the names and interests of the Shareholders and any other security holders of PREIT.

7. LEGAL TITLE

Legal title to all Trust Property shall be held by PREIT (to the extent permitted by law) or by the Trustees as such, or by any of them or by such other nominee or nominees as the Trustees may from time to time designate to hold legal title for PREIT. The Trustees shall have absolute control over the management and disposition of the Trust Property, subject only to such limitations as are set forth herein. The Trustees shall have complete control of the conduct of the business and affairs of PREIT.

Any enumeration of specific duties and powers shall not be deemed a limitation upon the general powers herein conferred.

8. BENEFICIAL INTERESTS

The beneficial interests in PREIT, in addition to Preferred Shares issued pursuant to the following paragraph of this Paragraph 8 and Excess Shares issued pursuant to Paragraph 9.C that may be outstanding, shall be divided into a maximum of One-Hundred Million (100,000,000) shares outstanding at any time, each having a par value of $1.00 per share (herein referred to as “Shares”). The Trustees may sell or exchange such Shares for such sums or other consideration and on such terms as they may deem expedient, provided that in no event shall Shares be sold for a consideration less than par, and the Shares shall be issued only upon the payment of an amount at least equal to such par value; provided that, in the case of Shares sold for non-cash consideration, the value received shall be deemed to be an amount at least equal to the par value thereof if the sale was authorized by the Trustees and, in the case of Shares issued upon conversion or upon exercise of rights to acquire Shares, such Shares shall be deemed to have been issued for an amount at least equal to the par value thereof if, at the time such convertible security was issued or at the time such exercise right was granted, such issuance or grant was authorized by the Trustees. The said Shares when so issued shall be fully paid and non-assessable. PREIT shall issue or cause to be issued to subscribers for or purchasers of such Shares, certificates in such form as the Trustees deem proper evidencing the beneficial interest of such Share owners. The Shares shall be personal property and, except as otherwise provided herein and subject to the rights of holders of Preferred Shares, shall entitle the owners thereof to participate in all dividends and other distributions of income or principal in the proportion which

the number of Shares of each owner bears to the total number of Shares issued and outstanding. Shareholders’ rights shall be limited to those specifically set forth in this Trust Agreement.

The Trustees shall have the power from time to time by a designating amendment to this Agreement (a) to issue, classify or reclassify shares (separately referred to herein as “Preferred Shares”), in one or more series or classes, (b) to determine and alter the par value of each series or class of Preferred Shares and to determine and alter all rights, preferences, privileges, qualifications, limitations and restrictions thereof (including, without limitation, voting, distribution, liquidation, conversion and/or redemption rights, and limitations and/or exclusions thereof) granted to or imposed upon any wholly unissued series or class of Preferred Shares and the number of Preferred Shares constituting any such series or class, and (c) to increase or decrease (but not below the number of Preferred Shares of such series or class then outstanding) the number of Preferred Shares of any series or class subsequent to the issue of Preferred Shares of that series or class. No more than twenty-five million (25,000,000) Preferred Shares may be outstanding at any time. The rights of a holder of Preferred Shares shall be limited to those specifically set forth in the designating amendment effected by the Trustees with respect to the relevant series or class of Preferred Shares. A holder of Preferred Shares shall be deemed a Shareholder under this Agreement only to the extent that the designating Amendment to this Agreement designating the relevant series or class of Preferred Shares held by such holder so provides. Preferred Shares shall be included within the term “Shares” for purposes of the provisions of this Agreement only to the extent that the designating amendment to this Agreement designating the relevant series or class so provides. The shares shall be subject to all of the rights, preferences, privileges, qualifications, limitations and restrictions of the Preferred Shares as set forth in the designating Amendment to this Agreement effected by the Trustees with respect to the applicable series or class of Preferred Shares.

Any Trustee hereunder may acquire, hold and dispose of Shares to the same extent and in the same manner as if such person were not a Trustee and without affecting in any way such person’s status or powers as such.

A. CHANGE IN PAR VALUE OF SHARES

The Trustees may from time to time change the par value of the Shares outstanding or unissued, or any class or series thereof, if in their opinion the same shall be necessary or desirable and appropriate to further PREIT’s purposes.

B. PRE-EMPTIVE RIGHTS WAIVED

No Shareholder shall have any pre-emptive right because of his shareholdings to have first offered to him any part of any Shares or debentures, bonds or securities convertible into or exchangeable, with or without further consideration, for Shares of PREIT hereinafter issued, including those now authorized and those authorized by amendments hereto.

C. TRANSFER OF SHARES

(i) Shares may be transferred by the holders thereof in person, or by duly authorized attorney.

(ii) A holder or transferee of certificated or uncertificated Shares shall be deemed to have agreed to be bound by the provisions of this Trust Agreement, as the same may be amended or supplemented, and any other document or instrument authorized hereunder pertaining to such Shares or a holder or transferee of Shares.

(iii) No transfer of Shares shall be binding upon PREIT until it has been recorded on the transfer books maintained by PREIT or its transfer agent. Moreover, PREIT may deem the person in whose name a Share certificate is at the time registered upon the books maintained by the transfer agent designated by PREIT, or who is shown as the holder of uncertificated shares on such books, to be the absolute owner of the Shares for all purposes whatsoever, and PREIT shall not be affected by any notice to the contrary. All transfers of Shares shall be subject to Paragraph 9 of this Trust Agreement.

D. DEATH OF A SHAREHOLDER

The death of a Shareholder during the continuance of PREIT shall not terminate PREIT’s existence or entitle the legal representative of such Shareholder to any action in the courts or otherwise against the Trust Property, PREIT or the Trustees by virtue of the fact of death alone. The executors, administrators, heirs, legatees or assigns of a deceased Shareholder shall succeed to the rights and be subject to the liabilities of the deceased Shareholder as a holder of Shares.

E. LOST OR DESTROYED CERTIFICATES

In the event of the loss or destruction of a certificate, PREIT may, in its discretion, issue a new certificate representing the interest evidenced by the lost or destroyed certificate upon satisfactory proof of its loss or destruction and the furnishing of sufficient indemnity, in the form of a bond, if required, for the benefit of all interested parties.

F. UNCERTIFICATED SHARES

All Shares of each class and series may be certificated or uncertificated, except as may be expressly provided in the terms of any class or series. The rights and obligations of the holders of Shares represented by certificates and the rights and obligations of holders of uncertificated Shares of the same class and series shall be identical.

Within a reasonable time after the issue or transfer of shares without certificates, PREIT shall send the Shareholder a statement in record form evidencing the beneficial interest of such Share owner and containing the information required by Paragraph 9.M and such other information as the Trustees deem proper.

9. RESTRICTIONS ON OWNERSHIP AND TRANSFER OF SHARES; EXCHANGE FOR EXCESS SHARES

A. DEFINITIONS . For the purposes of this Paragraph 9, the following terms shall have the following meanings:

“Beneficial Ownership” shall mean ownership of Shares either directly or constructively through the application of Section 544 of the Internal Revenue Code of 1986, as amended from time to time (the “Code”), as modified by Section 856(h)(1)(B) of the Code. The terms “Beneficial Owner,” “Beneficially Owns” and “Beneficially Owned” shall have correlative meanings. Accordingly, for purposes hereof, Beneficial Ownership expressed as a percentage shall be calculated for any Person by dividing two numbers (determined, separately, for Common Shares and for each class or series of Preferred Shares), (a) the number that is the numerator being the sum of (i) the number of outstanding Shares beneficially owned by such Person plus (ii) the maximum number of Shares issuable upon the exercise or conversion of outstanding warrants, options or other securities exercisable for or convertible into Shares beneficially owned by such Person and (b) the number that is the denominator being the sum of (i) all outstanding Shares plus (ii) the maximum number of Shares issuable upon the exercise or conversion of outstanding warrants, options or other securities exercisable for or convertible into Shares beneficially owned by such Person; provided that the Trustees shall retain full authority to adopt such other formula for determining Beneficial Ownership as they may deem appropriate.

“Common Shares” shall mean all Shares authorized by the first paragraph of Paragraph 8 hereof, exclusive of Preferred Shares.

“Constructive Ownership” shall mean ownership of Shares either directly or constructively through the application of Section 318(a) of the Code, as modified by Section 856(d)(5) of the Code. The terms “Constructive Owner,” “Constructively Owns” and “Constructively Owned” shall have correlative meanings. Accordingly, for purposes hereof, Constructive Ownership expressed as a percentage shall be calculated for any Person by dividing two numbers (determined, separately, for Common Shares and for each class or series of Preferred Shares), (a) the number that is the numerator being the sum of (i) the number of outstanding Shares beneficially owned by such Person plus (ii) the maximum number of Shares issuable upon the exercise or conversion of outstanding warrants, options or other securities exercisable for or convertible into Shares owned by such Person and (b) the number that is the denominator being the sum of (i) all outstanding Shares plus (ii) the maximum number of Shares issuable upon the exercise or conversion of outstanding warrants, options or other securities exercisable for or convertible into Shares owned by such Person; provided that the Trustees shall retain full authority to adopt such other formula for determining Constructive Ownership as it may deem appropriate.

“Event” shall have the meaning assigned to it in Paragraph 9.C(iii).

“Excess Common Shares” shall mean Excess Shares that would, under Paragraph 9.N(v)(a), automatically be exchanged for Common Shares in the event of a transfer of an interest in the Special Trust in which such Excess Shares are held.

“Excess Preferred Shares” shall mean Excess Shares that would, under Paragraph 9.N(v)(a), automatically be exchanged for Preferred Shares in the event of a transfer of an interest in the Special Trust in which such Excess Shares are held.

“Excess Shares” shall mean, as applicable, Excess Common Shares or Excess Preferred Shares.

“Market Price” shall mean the last reported sales price reported on the New York Stock Exchange of the Shares on the trading day immediately preceding the relevant date, or if the Shares are not then traded on the New York Stock Exchange, the last reported sales price of the Shares on the trading day immediately preceding the relevant date as reported on any exchange or quotation system over which the Shares may be traded, or if the Shares are not then traded over any exchange or quotation system, then the fair market value of the Shares on the relevant date as determined in good faith by the Trustees.

“Ownership Limit” shall mean, separately as to the Common Shares and each class or series of Preferred Shares, 9.9% in value of the outstanding Common Shares or outstanding Preferred Shares of such class or series.

“Ownership Limitation Termination Date” shall mean the first day after the date on which the Trustees determine that it is no longer in the best interests of PREIT to attempt to, or continue to, qualify as a REIT.

“Person” shall mean an individual, corporation, partnership, limited liability company, estate, trust (including a trust qualified under Section 401(a) or 501(c)(17) of the Code), a portion of a trust permanently set aside for or to be used exclusively for the purposes described in Section 642(c) of the Code, association, private foundation within the meaning of Section 509(a) of the Code, joint stock company or other entity or any government or agency or political subdivision thereof and also includes a group as that term is used for purposes of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended, but does not include an underwriter which participates in a public offering of Shares for a period of 25 days following the purchase by such underwriter of those Shares.

“Purported Beneficial Holder” shall mean, with respect to any event other than a purported Transfer which results in Excess Shares, the Person for whom the Purported Record Holder of the Shares that were, pursuant to Paragraph 9.C, automatically exchanged for Excess Shares upon the occurrence of such event held such Shares.

“Purported Beneficial Transferee” shall mean, with respect to any purported Transfer which results in Excess Shares, the purported beneficial transferee for whom the Purported

Record Transferee would have acquired Shares, if such Transfer had been valid under Paragraph 9.B.

“Purported Record Holder” shall mean, with respect to any event other than a purported Transfer which results in Excess Shares, the record holder of the Shares that were, pursuant to Paragraph 9.C, automatically exchanged for Excess Shares upon the occurrence of such event.

“Purported Record Transferee” shall mean, with respect to any purported Transfer which results in Excess Shares, the record holder of the Shares if such Transfer had been valid under Paragraph 9.C.

“REIT” shall mean a real estate investment trust under Section 856 of the Code.

“Section 544 Subsidiary” of any individual or entity shall mean any entity, over 50% of the ownership interest in which is owned, directly or indirectly (applying the principles of Section 544 of the Code) by the individual or entity in question.

“Special Beneficiary” shall mean the beneficiary of the Special Trust as determined pursuant to Paragraph 9.N(v).

“Special Trust” shall mean the trust created pursuant to Paragraph 9.N(i).

“Transfer” shall mean any issuance, sale, transfer, gift, assignment, devise or other disposition of Shares or capital stock of any Person (including but not limited to (i) the granting of any option or entering into any agreement for the sale, transfer or other disposition of Shares, (ii) the sale, transfer, exercise, assignment or other disposition of any securities or rights convertible into or exchangeable for Shares or (iii) the establishment of a put or the granting to a third party of a call right with respect to Shares), whether voluntary or involuntary, whether of record or beneficially and whether by operation of law or otherwise.

B. RESTRICTIONS ON OWNERSHIP AND TRANSFER

(i) Except as provided in Paragraph 9.K, prior to the Ownership Limitation Termination Date, no Person shall Beneficially Own or Constructively Own any Shares to the extent such ownership would exceed the Ownership Limit.

(ii) Except as provided in Paragraph 9.K, prior to the Ownership Limitation Termination Date, any Transfer that, if effective, would result in any Person Beneficially Owning or Constructively Owning Shares in excess of the Ownership Limit shall be void ab initio as to the Transfer of such Shares which would be otherwise Beneficially Owned or Constructively Owned by such Person in excess of such Ownership Limit; and the intended transferee shall acquire no rights in or to such Shares.

(iii) Prior to the Ownership Limitation Termination Date, any Transfer that, if effective, would result in Shares being beneficially owned by less than 100 Persons (determined without reference to any rules of attribution) shall be void ab initio as to the Transfer

of such Shares which would be otherwise beneficially owned by the transferee; and the intended transferee shall acquire no rights in such Shares.

(iv) Prior to the Ownership Limitation Termination Date, any Transfer that, if effective, would result in PREIT being “closely held” within the meaning of Section 856(h) of the Code shall be void ab initio as to the Transfer of the Shares which would cause PREIT to be “closely held” within the meaning of Section 856(h) of the Code; and the intended transferee shall acquire no rights in such Shares.

(v) The Trustees shall have the authority to select the Ownership Limitation Termination Date.

C. EXCHANGE FOR EXCESS SHARES

(i) If, notwithstanding the other provisions contained in this Paragraph 9, at any time prior to the Ownership Limitation Termination Date, there is a purported Transfer such that any Person would Beneficially Own or Constructively Own Shares in excess of the Ownership Limit, then, except as otherwise provided in Paragraph 9.K, such number of Shares in excess of such Ownership Limit (rounded up to the nearest whole Share), shall be automatically exchanged for an equal number of Excess Shares. Such exchange shall be effective as of the close of business on the business day prior to the date of the Transfer.

(ii) If, notwithstanding the other provisions contained in this Paragraph 9, at any time prior to the Ownership Limitation Termination Date, there is a purported Transfer which, if effective, would cause PREIT to become “closely held” within the meaning of Section 856(h) of the Code, then the Shares being Transferred which would cause PREIT to be “closely held” within the meaning of Section 856(h) of the Code (rounded up to the nearest whole Share) shall be automatically exchanged for an equal number of Excess Shares. Such exchange shall be effective as of the close of business on the business day prior to the date of the Transfer.

(iii) If, notwithstanding the other provisions contained in this Paragraph 9, at any time prior to the Ownership Limitation Termination Date, an event other than a purported Transfer (an “Event”) occurs which would cause any Person to Beneficially Own or Constructively Own Shares in excess of the Ownership Limit, then, except as otherwise provided in Paragraph 9.K, Shares Beneficially Owned or Constructively Owned by such Person (rounded up to the nearest whole Share) shall be automatically exchanged for an equal number of Excess Shares to the extent necessary to eliminate such excess ownership. Such exchange shall be effective as of the close of business on the business day prior to the date of the Event. In determining which Shares are exchanged, Shares directly held or Beneficially Owned by any Person who caused the Event to occur shall be exchanged before any Shares not so held are exchanged. Where several such Persons exist, the exchange shall be pro rata based upon the number of Shares Beneficially Owned and Constructively Owned by such Persons.

D. REMEDIES FOR BREACH . If the Trustees or their designee(s) shall at any time determine that a Transfer has taken place in violation of Paragraph 9.B or that a Person intends to acquire or has attempted to acquire beneficial ownership (determined without reference to any

rules of attribution) of any Shares that would result in Shares being beneficially owned by less than 100 persons as contemplated by Paragraph 9.B(iii), or in Beneficial Ownership or Constructive Ownership of any Shares in violation of Paragraph 9.B, the Trustees or their designee(s) shall take such action as they deem advisable to refuse to give effect to or to prevent such Transfer (or any Transfer related to such intent), including, but not limited to, refusing to give effect to such Transfer on the books of PREIT or instituting proceedings to enjoin such Transfer; provided, however, that any Transfers or attempted Transfers in violation of Paragraphs 9.B (ii), (iii) or (iv) shall automatically result in the exchange described in Paragraph 9.C, irrespective of any action (or non-action) by the Trustees or its designees.

E. NOTICE OF OWNERSHIP OR ATTEMPTED OWNERSHIP IN VIOLATION OF PARAGRAPH 9.B . Any Person who acquires or attempts to acquire Beneficial Ownership or Constructive Ownership of Shares in violation of Paragraph 9.B shall immediately give written notice to PREIT of such acquisition or attempted acquisition and shall provide to PREIT such other information as PREIT may request in order to determine the effect, if any, of such acquisition or attempted acquisition on PREIT’s status as a REIT.

F. OWNERS REQUIRED TO PROVIDE INFORMATION . Prior to the Ownership Limitation Termination Date:

(i) every Beneficial Owner or Constructive Owner of 1% or more in value of outstanding Common Shares or Shares of any class or series of Preferred Shares shall, within 30 days after January 1 of each year, give written notice to PREIT stating the name and address of such Beneficial Owner or Constructive Owner, the number of Shares Beneficially Owned or Constructively Owned, and a description of how such Shares are held. Each such Beneficial Owner or Constructive Owner shall provide to PREIT such additional information as PREIT may request in order to determine the effect, if any, of such Beneficial Ownership or Constructive Ownership on PREIT’s status as a REIT.

(ii) Each Person who is a Beneficial Owner or Constructive Owner of Shares and each Person (including the shareholder of record) who is holding Shares for a Beneficial Owner or Constructive Owner shall provide to PREIT such information as PREIT may request in order to determine PREIT’s status as a REIT or to comply with regulations promulgated under the REIT provisions of the Code.

G. REMEDIES NOT LIMITED . Nothing contained in this Paragraph 9 shall limit the authority of the Trustees to take such other action as they deem necessary or advisable to protect PREIT and the interests of Shareholders by preserving PREIT’s REIT status.

H. AMBIGUITY . In the case of an ambiguity in the application of any of the provisions of this Paragraph 9 including any definition contained in Paragraph 9.A and any ambiguity with respect to which Shares are to be exchanged for Excess Shares in a given situation, the Trustees shall have the authority to determine the application of the provisions of this Paragraph 9 with respect to any situation based on the facts known to the Trustees.

I. INCREASE IN OWNERSHIP LIMIT . Subject to the limitations provided in Paragraph 9.J the Trustees may from time to time increase the Ownership Limit.

J. LIMITATIONS ON MODIFICATIONS.

(i) The Ownership Limit may not be increased if, after giving effect to such increase, five (5) Beneficial Owners of Shares would Beneficially Own, in the aggregate, more than 49.9% of the value of the outstanding Shares.

(ii) Prior to an increase in the Ownership Limit pursuant to Paragraph 9.I, the Trustees may require such opinions of counsel or PREIT’s tax accountants, affidavits, undertakings or agreements as it may deem necessary or advisable in order to determine or ensure PREIT’s status as a REIT.

K. EXCEPTIONS . The Trustees, with a ruling from the Internal Revenue Service or an opinion of counsel or PREIT’s tax accountants to the effect that such exemption will not result in PREIT being “closely held” within the meaning of Section 856(h) of the Code, may exempt a Person from the Ownership Limit if the Trustees obtain such representations and undertakings from such Person as the Trustees may deem appropriate and such Person agrees that any violation or attempted violation of any of such representations or undertakings will result in, to the extent necessary or otherwise deemed appropriate by the Trustees, the exchange of Shares held by such Person for Excess Shares in accordance with Paragraph 9.C.

L. NEW YORK STOCK EXCHANGE TRANSACTIONS . Nothing in this Paragraph 9 shall preclude the settlement of any transaction entered into through the facilities of the New York Stock Exchange, any successor exchange or quotation system thereto, or any other exchange or quotation system over which the Shares may be traded from time to time.

M. LEGEND.

(i) Each certificate for Common Shares hereafter issued shall bear the following legend:

“The Shares represented by this certificate are subject to restrictions on ownership and transfer for the purpose of the Trust’s maintenance of its status as a real estate investment trust under the Internal Revenue Code of 1986, as amended (the “Code”). No Person may Beneficially own or Constructively Own Shares in excess of 9.9% in value (or such greater percentage as may be determined by the Board of Trustees) of the outstanding Shares (exclusive of any Preferred Shares) of the Trust. Any Person who attempts to Beneficially Own or Constructively Own Shares in excess of the above limitation must immediately notify the Trust. In addition, if any Person attempts to acquire beneficial ownership of any Shares and the result of such acquisition would be Shares being beneficially owned by fewer than 100 persons, such purported transfer shall be void ab initio and the intended transferee shall acquire no rights to such Shares. All capitalized terms used in this legend have the meanings set forth in the Trust Agreement, a copy of

which, including the restrictions on ownership and transfer, will be sent without charge to each Shareholder who so requests. If the restrictions on ownership and transfer are violated, the Shares represented hereby will be automatically exchanged for Excess Shares which will be held in trust by the Trust.”

(ii) Each certificate for Preferred Shares hereafter issued shall bear the following legend:

“The Preferred Shares represented by this certificate are subject to restrictions on ownership and transfer for the purpose of the Trust’s maintenance of its status as a real estate investment trust under the Internal Revenue Code of 1986, as amended (the “Code”). No Person may Beneficially Own or Constructively Own Shares of any series or class of Preferred Shares in excess of 9.9% in value (or such greater percentage as may be determined by the Board of Trustees) of the outstanding Shares of such series or class. Any Person who attempts to Beneficially Own or Constructively Own Shares in excess of the above limitations must immediately notify the Trust. All capitalized terms used in this legend have the meanings set forth in the Trust Agreement, a copy of which, including the restrictions on ownership and transfer, will be sent without charge to each Shareholder who so requests. If the restrictions on ownership and transfer are violated, the Preferred Shares represented hereby will be automatically exchanged for Excess Shares which will be held in trust by the Trust.”

(iii) Each statement required by Paragraph 8.F hereafter issued shall contain the following information:

“Shares are subject to restrictions on ownership and transfer for the purpose of the Trust’s maintenance of its status as a real estate investment trust under the Internal Revenue Code of 1986, as amended (the “Code”). No Person may Beneficially Own or Constructively Own Shares in excess of 9.9% in value (or such greater percentage as may be determined by the Board of Trustees) of the outstanding Shares (exclusive of any Preferred Shares) of the Trust. Any Person who attempts to Beneficially Own or Constructively Own Shares in excess of the above limitation must immediately notify the Trust. In addition, if any Person attempts to acquire beneficial ownership of any Shares and the result of such acquisition would be Shares being beneficially owned by fewer than 100 persons, such purported transfer will be void ab initio and the intended transferee will acquire no rights to such Shares. All capitalized terms used herein have the meaning set forth in the Trust Agreement, a copy of which, including the restrictions on ownership and transfer, will be sent without charge to each Shareholder who so requests. If the restrictions on ownership and transfer are

violated, the Shares involved will be automatically exchanged for Excess Shares which will be held in trust by the Trust.”

N. EXCESS SHARES.

(i) Ownership in Trust . Upon any purported Transfer or Event that results in an exchange of Shares for Excess Shares pursuant to Paragraph 9.C, such Excess Shares shall be deemed to have been transferred to PREIT, as trustee of a Special Trust for the exclusive benefit of the Special Beneficiary or Special Beneficiaries to whom an interest in such Excess Shares may later be transferred pursuant to Paragraph 9.N(v). Excess Shares so held in trust shall be issued and outstanding Shares of PREIT. The Purported Record Transferee or Purported Record Holder shall have no rights in such Excess Shares except as and to the extent provided in this Paragraph 9.N.

(ii) Dividend Rights . Excess Shares shall not be entitled to any dividends or distributions. Any dividend or distribution paid prior to the discovery by PREIT that the Shares with respect to which the dividend or distribution was made had been exchanged for Excess Shares shall be repaid to PREIT upon demand. Any dividend or distribution declared by PREIT and not yet paid with respect to Shares that have been exchanged for Excess Shares shall be void ab initio with respect to such Shares.

(iii) Rights Upon Liquidation . In the event of any voluntary or involuntary liquidation, dissolution or winding up of, or any distribution of the assets of, PREIT, (a) subject to the preferential rights of the Preferred Shares, if any, as may be determined by the Board of Trustees pursuant to Paragraph 8 and the preferential rights of the Excess Preferred Shares, if any, each holder of Excess Common Shares shall be entitled to receive, ratably with each other holder of Common Shares and Excess Common Shares, that portion of the assets of PREIT available for distribution to the holders of Common Shares or Excess Common Shares which bears the same relation to the total amount of such assets of PREIT as the number of Excess Common Shares held by such holder bears to the total number of Common Shares and Excess Common Shares then outstanding and (b) each holder of Excess Preferred Shares shall be entitled to receive that portion of the assets of PREIT which a holder of the Preferred Shares that were exchanged for such Excess Preferred Shares would have been entitled to receive had such Preferred Shares remained outstanding. PREIT, as holder of the Excess Shares in trust, or if PREIT shall have been dissolved, any trustee appointed by PREIT prior to its dissolution, shall distribute ratably to the Special Beneficiaries of the Special Trust, when determined, any such assets received in respect of the Excess Shares in any liquidation, dissolution or winding up of, or any distribution of the assets of PREIT.

(iv) Voting Rights . The holders of Excess Shares shall not be entitled to vote with respect to such Shares on any matters (except as required by law).

(v) Restrictions On Transfer: Designation of Special Beneficiary .

(a) Excess Shares shall not be transferable. The Purported Record Transferee or Purported Record Holder may freely designate a Special Beneficiary of an

interest in the Special Trust (representing the number of Excess Shares held by the Special Trust attributable to a purported Transfer or Event that resulted in the Excess Shares) if (i) the Excess Shares held in the Special Trust would not be Excess Shares in the hands of such Special Beneficiary and (ii) the Purported Beneficial Transferee or Purported Beneficial Holder does not receive a price, as determined on a Share-by-Share basis, for designating such Special Beneficiary that reflects a price for such Excess Shares that, (I) in the case of a Purported Beneficial Transferee, exceeds (x) the price such Purported Beneficial Transferee paid for the Shares in the purported Transfer that resulted in the exchanges of Shares for Excess Shares, or (y) if the Purported Beneficial Transferee did not give value for such Shares (having received such Shares pursuant to a gift, devise or other transaction), the Market Price of such Shares on the date of the purported Transfer that resulted in the exchange of Shares for Excess Shares or (II) in the case of a Purported Beneficial Holder, exceeds the Market Price of the Shares that were automatically exchanged for such Excess Shares on the date of such exchange. Upon such a transfer of an interest in the Special Trust, the corresponding shares of Excess Shares in the Special Trust shall be automatically exchanged for an equal number of Common Shares or Preferred Shares (depending upon the character of the Shares that were originally exchanged for such Excess Shares), and such Common Shares or Preferred Shares shall be transferred of record to the transferee of the interest in the Special Trust if such Common Shares or Preferred Shares would not be Excess Shares in the hands of such transferee. Prior to any transfer of any interest in the Special Trust, the Purported Record Transferee or Purported Record Holder, as the case may be, must give advance notice to PREIT of the intended transfer and PREIT must have waived in record form its purchase rights under Paragraph 9.N(vi).

(b) Notwithstanding the foregoing, if a Purported Beneficial Transferee or Purported Beneficial Holder receives a price for designating a Special Beneficiary of an interest in the Special Trust that exceeds the amounts allowable under Paragraph 9.N(v)(a), such Purported Beneficial Transferee or Purported Beneficial Holder shall pay, or cause such Special Beneficiary to pay, such excess to PREIT.

(vi) Purchase Right in Excess Shares . Excess Shares shall be deemed to have been offered for sale to PREIT, or its designee, at a price per share equal to, (I) in the case of Excess Shares resulting from a purported Transfer, the lesser of (i) the price per share in the transaction that created such Excess Shares (or, in the case of a gift, devise or other transaction, the Market Price at the time of such gift, devise or other transaction) or (ii) the Market Price on the date PREIT, or its designee, accepts such offer or (II) in the case of Excess Shares created by an Event, the lesser of (i) the Market Price of the Shares originally exchanged for the Excess Shares on the date of such exchange or (ii) the Market Price of such Shares on the date PREIT, or its designee, accepts such offer. PREIT shall have the right to accept such offer for a period of ninety (90) days after the later of (i) the date of the purported Transfer or Event which resulted in an exchange of Shares for such Excess Shares and (ii) the date the Trustees determine that a purported Transfer or other event resulting in an exchange of Shares for such Excess Shares has occurred, if PREIT does not receive a notice of any such Transfer pursuant to Paragraph 9.E.

O. SEVERABILITY; AGENT FOR TRUST . If any provision of this Paragraph 9 or any application of any such provision is determined to be invalid by any federal or state court

having jurisdiction over the issue, the validity of the remaining provisions shall not be affected and other applications of such provision shall be affected only to the extent necessary to comply with the determination of such court. In any event, to the extent such court holds the Purported Record Transferee to be the record and beneficial owner of Shares which, had the provisions of Paragraph 9 been enforced, would have been exchanged for Excess Shares, such Purported Record Transferee shall be deemed, at the option of PREIT, to have acted as agent on behalf of PREIT in acquiring such transferred Shares and to hold such Shares on behalf of PREIT.

10. DISTRIBUTIONS

PREIT shall distribute to the Shareholders from the income or capital of PREIT such sums as they shall determine. The amounts to be distributed and the time of the distribution shall rest in the discretion of the Trustees. However, the Trustees shall attempt to make such distribution so that PREIT will continue to qualify as a real estate investment trust under pertinent provisions of the Internal Revenue Code and Regulations thereunder. All other income may be distributed or accumulated in the Trustees’ sole discretion. The Shareholders shall share in all distributions from PREIT on the record date established by the Trustees for the purpose of determining the percentage ownership of the holders; or, if required for tax purposes, they shall share such distributions in such manner as may be necessary so that PREIT continues to so qualify as a real estate investment trust.

11. SHAREHOLDERS

A. ANNUAL MEETINGS

The Annual Meeting of the Shareholders entitled to vote in the election of Trustees shall be held at the principal office of PREIT or at such other place as the Trustees shall by notice designate, no later than the second Wednesday of the sixth month following the end of each fiscal year (other than the fiscal period ending December 31, 1997), or, if that day falls on a holiday, the next business day following, or on such other day as may be fixed by the Trustees. If the Annual Meeting has not been held during a calendar year (other than the 1998 calendar year), any Shareholder may call such meeting at any time thereafter, by following the procedure set forth in Paragraph 11.B hereof.

At said Annual Meeting, the Shareholders entitled to vote thereat shall elect individuals to the office of Trustee as provided in Paragraph 2.B of this Trust Agreement and shall at such meeting exercise and discharge any other powers or duties vested in them by the Trust Agreement.

B. SPECIAL MEETINGS

Special Meetings of Shareholders may be called at any time by the Chairman, or by the Trustees, or by the Shareholders entitled to cast at least forty percent (40%) of the votes at the particular meeting. Upon written request of any person or persons who have duly called a Special Meeting, the Secretary shall affix the date of the meeting to be held not more than sixty (60) days after receipt of the request and give due notice to the Shareholders entitled to vote

thereat. If the Secretary shall neglect or refuse to fix such date or give such notice, the person or persons calling the meeting may do so.

C. NOTICE OF MEETINGS

Notice of meetings of the Shareholders shall be given in accordance with the By-laws.

When a meeting of Shareholders is adjourned it shall not be necessary to give any notice of the adjourned meeting or of the business to be transacted at an adjourned meeting, other than by announcement at the meeting at which the adjournment is taken, unless the Trustees fix a new record date for the adjourned meeting.

D. RECORD DATE

The Trustees may fix in advance a date as the record date for the determination of Shareholders entitled to notice of, or to vote at, any meeting of Shareholders or Shareholders entitled to receive payment of any dividend or distribution, or in order to make a determination of Shareholders for any other purpose, such date in any case to be not more than sixty (60) days and, in case of a meeting of Shareholders, not less than ten (10) days, prior to the date for which such determination of Shareholders is necessary or proper. In the absence of such record date fixed by the Trustees, all Shareholders entitled to vote thereat shall be entitled to notice, except transferees of shares transferred on the books within thirty (30) days next preceding the date of the said meeting. The Trustees shall not be required to set a new record date with respect to an adjourned meeting of Shareholders.

E. QUORUM

The owners of a majority of the Shares entitled to vote thereat or their proxies shall constitute a quorum for the purpose of any meeting. At any meeting where a quorum is present, a majority of the Shares present and voting shall be required to adopt any resolution which is within the province of the Shareholders unless a greater or different vote shall be required by this Agreement or by the Board in its authorizing resolution. In the event that a quorum is not present at the time designated for any Shareholders Meeting, annual or special, the same shall be adjourned without any further notice until a quorum shall be present.

F. VOTING RIGHTS AND ACTS OF SHAREHOLDERS

Unless otherwise provided in this Agreement, at all Shareholders Meetings, annual or special, each Shareholder shall be entitled to one vote for each Share standing in his name on the books of PREIT.

Unless a greater or different vote shall be required by this Agreement or by the Board in its authorizing resolution as to a particular matter or under any agreement authorized by the Board pursuant to Paragraph 3.V, an act authorized by the vote of the holders of a majority of Shares present in person or by proxy and casting a vote on the matter at a duly organized meeting

shall be the act of the Shareholders. For purposes of the foregoing, abstentions and non-votes on a particular matter shall not be deemed to be votes cast on the matter.

G. PROXIES

At all meetings of Shareholders, a Shareholder entitled to vote on a particular matter may vote in person or may authorize another person or persons to act for him by proxy. Every proxy shall be in record form and shall be signed by the Shareholder or by a duly authorized attorney in fact. Such proxies shall be filed with the Secretary of PREIT before or at the time of the meeting. A proxy, unless coupled with an interest, shall be revocable at will, notwithstanding any other agreement or any provision in the proxy to the contrary, but the revocation of the proxy shall not be effective until notice thereof has been given to the Secretary of PREIT.

H. VOTING FOR TRUSTEES

Cumulative voting shall not be permitted. The candidates receiving the highest number of votes, up to the number of Trustees to be elected, shall be elected.

I. ADJOURNMENT

Any annual, regular or special meeting of Shareholders, including one at which Trustees are to be elected, may be adjourned for such period as the Shareholders present and entitled to vote shall direct.

J. NOMINATIONS OF TRUSTEES AND PROPOSALS OF OTHER BUSINESS

(i) General Rule . Nominations for the election of Trustees and proposals of other business to be considered by Shareholders may be made, in the case of nominations, only at an Annual Meeting or at a Special Meeting called for the election of Trustees and, in the case of proposals of other business, at an Annual or Special Meeting, in each case only (i) pursuant to the Trust’s notice of meeting, (ii) by or at the direction of the Board of Trustees, (iii) in the case of proposed business, by the chair of the meeting, unless a majority of the Trustees then in office object to such business being conducted at the meeting, or (iv) by notice in writing delivered to the Secretary of PREIT prior to such Shareholders’ meeting, as provided below, signed by a Shareholder or Shareholders entitled to vote at the meeting and holding, individually or collectively, at least two percent (2%) of the Shares outstanding on the date of such notice (each such signatory a “Qualified Shareholder” and collectively the “Qualified Shareholders”) and who comply with the notice procedures set forth in this Paragraph 11.J. Clause (iv) of the preceding sentence shall be the exclusive means for a Shareholder to make nominations or submit other business before an Annual or Special Meeting of Shareholders (other than as provided in Paragraph 11.J(iv)) and, for the avoidance of doubt, shall be applicable to nominations or proposals contained in proxy statements prepared and furnished by or on behalf of any Shareholder. No matter may be brought before a meeting unless such matter is a proper matter for Shareholder action at the meeting.

(ii) Shareholder Nominations .

(a) Qualified Shareholders entitled to vote in the election of Trustees may nominate one or more individuals for election as Trustees at a meeting only if written notice of such Qualified Shareholders’ intention to make such nomination or nominations has been delivered personally to, or been mailed to and received by, the Trust at the principal executive office of the Trust, addressed to the attention of the Secretary, (i) with respect to an election to be held at an Annual Meeting that is called for a date that is within 30 days before or after the anniversary date of the immediately preceding Annual Meeting of Shareholders, not less than 90 days nor more than 120 days prior to such anniversary date, and (ii) with respect either to an election to be held at an Annual Meeting that is called for a date that is not within 30 days before or after the anniversary date of the immediately preceding Annual Meeting, or with respect to a Special Meeting of Shareholders called for the purpose of electing Trustees, not later than the close of business on the tenth day following the day on which notice of the date of the meeting was mailed or public disclosure of the date of the meeting was made, whichever occurs first. In no event shall any adjournment or postponement of an Annual or Special Meeting or announcement thereof commence a new time period for the giving of notice as described above.

(b) Each such notice shall set forth: (i) the name and address of each Qualified Shareholder intending to make the nomination and of the individual or individuals to be nominated; (ii) a representation as to the class, series and number of Shares of the Trust that such Qualified Shareholder owns of record or beneficially and the respective date or dates on which such Qualified Shareholder acquired such ownership; (iii) the nominee holders for, and number of, Shares of the Trust owned beneficially but not of record by such Qualified Shareholder; (iv) a representation that such Qualified Shareholder shall appear in person or by proxy at the meeting to nominate the individual or individuals specified in the notice; (v) a description of all proxies, agreements, arrangements or understandings between any Qualified Shareholder and each nominee and any other person or entity (naming each such person or entity) pursuant to which any Qualified Shareholder has a right to vote any Shares of the Trust, or pursuant to which any such nominee or Qualified Shareholder may be entitled to compensation, reimbursement of expenses or indemnification by reason of such nomination or service as a Trustee (including, without limitation, all information that would be required to be disclosed under Item 404 of Regulation S-K, or any successor provision, if the Qualified Shareholder or Shareholder Associated Person (as defined below) were the “registrant” and the nominee were a director or executive officer); (vi) such other information regarding each nominee proposed by such Qualified Shareholder as would have been required to be included in a proxy statement filed pursuant to the proxy rules of the Securities and Exchange Commission had the nominee been nominated by the Board of Trustees; (vii) as to any Shareholder Associated Person, (A) the class, series and number of all Shares of the Trust that are owned of record or beneficially by such Shareholder Associated Person, if any, and the date on which such Shareholder Associated Person acquired such ownership and (B) the nominee holder for, and number of, Shares of the Trust owned beneficially but not of record by such Shareholder Associated Person; (viii) with respect to any Qualified Shareholder and Shareholder Associated Person, whether and the extent to which any hedging or other transaction or series of transactions has been entered into by or on behalf of, or any other agreement, arrangement or understanding (including, without limitation,

any put, short position, hedged position, borrowing or lending of Shares, synthetic or temporary ownership technique, swap, securities loan, option, warrant, convertible security, stock appreciation right, or any other right or security with a value derived, in part or in whole, from the value of any class or series of Shares of the Trust, directly or indirectly owned by such Qualified Shareholder or Shareholder Associated Person) has been made, the effect or intent of which is to (A) mitigate loss to, or manage risk or benefit of Share price changes for, or to increase or decrease the voting power of, such Qualified Shareholder or any such Shareholder Associated Person with respect to any Shares of the Trust, or (B) provide the Qualified Shareholder or Shareholder Associated Person with an opportunity to receive directly or indirectly any gain from an increase or decrease in the value of the Shares of the Trust; and (ix) the written consent of each nominee to serve as a Trustee of the Trust if so elected. Additionally, the Trust may require any proposed nominee to furnish such additional information as may reasonably be requested to determine the eligibility of such proposed nominee to serve as an independent Trustee, or that could be material to a reasonable Shareholder’s understanding of the independence, or lack thereof, of such nominee, and to complete and sign a questionnaire in form and substance determined by the Trust in its sole discretion. The Qualified Shareholder shall advise the Secretary of the Trust in writing of any change in the information set forth in the notice promptly after the occurrence of such change.

(c) For purposes of this Paragraph 11.J, “Shareholder Associated Person” of any Shareholder shall mean (i) any person or entity controlling, controlled by, under common control with, or acting in concert with, such Shareholder, (ii) any beneficial owner of Shares of the Trust owned of record or beneficially by such Shareholder, (iii) any entity of which such Shareholder is an employee, officer, member, partner, trustee, director or, except for entities the Shares of which are registered under the Securities Exchange Act of 1934 (the “Exchange Act”), a Shareholder, and (iv) any person or entity controlling, controlled by or under common control with, a Shareholder Associated Person as defined by clause (i), (ii) or (iii).

(d) Only such persons who are nominated in accordance with the procedures set forth in this Paragraph 11.J shall be eligible to serve as Trustees. The chair of the meeting may, in his or her judgment, declare invalid any nomination (i) not made in compliance with the foregoing procedure or (ii) made in connection with a notice that shall be inaccurate or incomplete. Such invalid nomination shall then be disregarded.

(iii) Shareholder Proposals of Other Business .

a) Any Qualified Shareholder entitled to vote at an Annual or Special Meeting may propose business to be considered by the Shareholders at that meeting only if written notice of such Qualified Shareholders’ intention to propose such business has been delivered personally to, or been mailed to and received by, the Trust at the principal executive office of the Trust, addressed to the attention of the Secretary, (i) with respect to an Annual Meeting that is called for a date that is within 30 days before or after the anniversary date of the immediately preceding Annual Meeting of Shareholders, not less than 90 days nor more than 120 days prior to such anniversary date, and (ii) with respect to an Annual Meeting that is called for a date that is not within 30 days before or after the anniversary date of the immediately preceding

Annual Meeting, or with respect to a Special Meeting of Shareholders, not later than the close of business on the tenth day following the day on which notice of the date of the meeting was mailed or public disclosure of the date of the meeting was made, whichever occurs first. In no event shall any adjournment or postponement of an Annual or Special Meeting or announcement thereof commence a new time period for the giving of notice as described above.

(b) Each such notice must set forth: (i) the name and address of each Qualified Shareholder intending to bring the business before the meeting; (ii) a representation as to the class, series and number of Shares of the Trust that such Qualified Shareholder owns of record or beneficially and the respective date or dates on which such Qualified Shareholder acquired such ownership; (iii) the nominee holder for, and number of, Shares of the Trust owned beneficially but not of record by such Qualified Shareholder; (iv) a representation that such Qualified Shareholder shall appear in person or by proxy at the meeting to propose the consideration of such business; (v) a description of all proxies, agreements, arrangements or understandings between any Qualified Shareholder and any other person or entity (naming each such person or entity) pursuant to which any Qualified Shareholder has any right to vote any Shares of the Trust; (vi) the general nature of the business which such Qualified Shareholder seeks to bring before the meeting and the text of the resolution or resolutions which the Qualified Shareholder proposes that the Shareholders adopt; (vii) any material interest in such business by any such Qualified Shareholder or Shareholder Associated Person, individually or in the aggregate, including any anticipated benefit to any Qualified Shareholder or any Shareholder Associated Person therefrom; (viii) as to any Shareholder Associated Person, (A) the class, series and number of all Shares of the Trust that are owned by such Shareholder Associated Person, if any, and the date on which such Shareholder Associated Person acquired such ownership and (B) the nominee holder for, and number of, Shares owned beneficially but not of record by such Shareholder Associated Person; and (ix) with respect to any Qualified Shareholder and Shareholder Associated Person, whether and the extent to which any hedging or other transaction or series of transactions has been entered into by or on behalf of, or any other agreement, arrangement or understanding (including, without limitation, any put, short position, hedged position, borrowing or lending of Shares, synthetic or temporary ownership technique, swap, securities loan, option, warrant, convertible security, stock appreciation right, or any other right or security with a value derived, in part or in whole, from the value of any class or series of Shares of the Trust, directly or indirectly owned by such Qualified Shareholder or Shareholder Associated Person) has been made, the effect or intent of which is to (A) mitigate loss to, or manage risk or benefit of Share price changes for, or to increase or decrease the voting power of, such Qualified Shareholder or any such Shareholder Associated Person with respect to any Shares of the Trust, or (B) provide the Qualified Shareholder or Shareholder Associated Person with an opportunity to receive directly or indirectly any gain from an increase or decrease in the value of the Shares of the Trust. The Qualified Shareholder shall advise the Secretary of the Trust in writing of any change in the information set forth in the notice promptly after the occurrence of such change.

(c) Only such business shall be conducted at a meeting of Shareholders as shall have been brought before the meeting in accordance with the procedures set forth in this Paragraph 11.J. The chair of the meeting may, in his or her judgment, determine

whether any business proposed to be brought before the meeting was proposed in compliance with the foregoing procedures, and, if any proposed business (i) is not proposed in compliance with this Paragraph 11.J or (ii) is made in connection with a notice that shall be inaccurate or incomplete, declare such proposal to be invalid. Such invalid proposal shall then be disregarded.

(iv) Application of Other Law . Notwithstanding the foregoing provisions of this Paragraph 11.J, a Shareholder shall also comply with all applicable requirements of state law and of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth in this Paragraph 11.J. Nothing in this Paragraph 11.J shall be deemed to affect any right of a Shareholder to request inclusion of proposals in, nor the right of the Trust to omit a proposal from, the Trust’s proxy statement pursuant to Rule 14a-8 (or any successor provision) under the Exchange Act; nor shall this Paragraph 11.J affect the right of any Shareholder to make recommendations to the Nominating and Governance Committee of persons to be considered for nomination as Trustees pursuant to a policy, if any, adopted by such Committee or the Board of Trustees and then in effect.

(v) No Implied Right of Proxy Access . Except only as and to the extent required by applicable law, no nomination or proposal by a Shareholder made under Paragraph 11.J or otherwise shall be included in any proxy statement of the Trust.

12. LIMITED LIABILITY OF SHAREHOLDERS

A. The Trustees shall have no power to bind the Shareholders to personal liability. All persons dealing with PREIT, or with any agent of PREIT and/or the Trustees, shall look only to the Trust Property for the payment of any sums due as a result of such dealing and personal liability shall not attach to any Shareholder for any act, omission or liability of a Trustee or PREIT.

B. An obligation of PREIT based upon a writing may be limited to a specific fund or other identified pool or group of assets of PREIT.

It is the intention of this Trust Agreement to limit the liability of Shareholders for the obligations of PREIT to the fullest extent permitted by applicable law, as amended or supplemented.

13. EXPRESS EXCULPATORY LANGUAGE IN INSTRUMENTS

Neither the Shareholders nor the Trustees, officers, employees or agents of PREIT shall be liable under any agreement or instrument creating an obligation of PREIT, and all persons shall look solely to the Trust Property for the payment of any claim under or for the performance of that agreement or instrument. The omission of the foregoing exculpatory language from any agreement or instrument shall not affect the validity or enforceability of such agreement or instrument and shall not render any Shareholder, Trustee, officer, employee or agent of PREIT liable thereunder to any third party; nor shall the Trustees or any officer, employee or agent of PREIT be liable to anyone for such omission.

14. INDEMNITY; INSURANCE

A. RIGHT TO INDEMNIFICATION OF TRUSTEES AND OFFICERS

Every Trustee and officer of PREIT shall be entitled as of right to be indemnified by PREIT against reasonable expense and any liability paid or incurred by such person in connection with an actual (whether pending or completed) or threatened claim, action, suit or proceeding, civil, criminal, administrative, investigative or other, whether brought by or in the right of PREIT or otherwise, in which he or she may be involved, as a party or otherwise, by reason of such person’s being or having been a Trustee or officer of PREIT or by reason of the fact that such person is or was serving in any capacity at the request of PREIT as a trustee, director, officer, employee, agent, partner, fiduciary or other representative of another real estate investment trust, corporation, partnership, joint venture, trust, employee benefit plan or other entity (such claim, action, suit or proceeding being referred to in this Paragraph 14 as “action”); provided, however, that no such right of indemnification shall exist with respect to an action brought by a Trustee or Officer against PREIT (other than a suit for indemnification as provided in Paragraph B of this Paragraph 14). Such indemnification shall include the right to have expenses incurred by such person in connection with an action paid in advance by PREIT prior to final disposition of such action promptly, and without the need for approval by the Board of Trustees, upon delivery to PREIT of an undertaking by or on behalf of such person, to repay all amounts so advanced without interest if it shall ultimately be determined in the manner provided in the last sentence of this Paragraph 14.A that such person is not entitled to be indemnified under this Paragraph 14.A. Persons who are not Trustees or officers of PREIT may be indemnified in respect of service to PREIT or to another such entity at the request of PREIT to the extent the Board of Trustees at any time denominates such person as entitled to some or all of the benefits of this Paragraph as the Trustees shall determine as to each such Person. As used herein, “expense” shall include fees and expenses of counsel selected by such person; and “liability” shall include amounts of expenses, liability, loss, judgments, excise taxes, fines and penalties and amounts paid in settlement. No indemnification pursuant to this Paragraph 14.A shall be made, however, in any case where the act or failure to act giving rise to the claim for indemnification is determined by the final judgment of a court of competent jurisdiction to have constituted willful misconduct or recklessness.

B. RIGHT OF CLAIMANT TO BRING SUIT

If a claim under Paragraph 14.A is not paid in full by PREIT within 60 days after a written claim has been received by PREIT, the claimant may at any time thereafter bring suit against PREIT to recover the unpaid amount of the claim, and, if successful in whole or in part, the claimant shall also be entitled to be paid the expense of prosecuting such claim. It shall be a defense to any such action that the conduct of the claimant was such that under law PREIT would be prohibited from indemnifying the claimant for the amount claimed, but the burden of proving such defense shall be on PREIT. Neither the failure of PREIT (including its Board of Trustees, independent legal counsel and its Shareholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because the conduct of the claimant was not such that indemnification would be prohibited by law, nor an actual determination by PREIT (including, its Board of Trustees, independent legal

counsel or its Shareholders) that the conduct of the claimant was such that indemnification would be prohibited by law, shall be a defense to the action or create a presumption that the conduct of the claimant was such that indemnification would be prohibited by law.

C. INSURANCE AND FUNDING FOR PAYMENT OF EXPENSES

PREIT may purchase and maintain insurance, at its expense, to protect itself and any person eligible to be indemnified hereunder against any liability or expense asserted or incurred by such person in connection with any action, whether or not PREIT would have the power to indemnify such person against such liability or expense by law or under the provisions of this Paragraph 14. PREIT may create a trust fund, grant a security interest, cause a letter of credit to be issued or use other means (whether or not similar to the foregoing), to insure the payment of such sums as may become necessary to effect indemnification as provided in this Paragraph 14.

D. NON-EXCLUSIVITY OF RIGHTS

The provisions of Paragraph 5 relating to the limitation of Trustees’ liability and the right to indemnification and to the advancement of expenses provided in this Paragraph 14 shall not be exclusive of any other rights that any person may have or hereafter acquire under any statute, provision of this Trust Agreement, By-Laws, other agreement, vote of Shareholders or Trustees or otherwise.

E. EXTENT OF RIGHTS

The provisions of Paragraph 5 relating to the limitations of Trustees’ liability, and the provisions of this Paragraph 14 relating to or providing for indemnification and to the advancement of expenses (1) shall be deemed to create contractual rights in favor of each of the Trustees, Officers and other persons entitled to indemnification hereunder and may be modified as to any Trustee, officer or other person only with said Trustee’s, Officer’s or other such person’s signed consent in record form; (2) shall continue as to persons who have ceased to have the status pursuant to which they were entitled or were denominated as entitled to indemnification hereunder and shall enure to the benefit of the heirs and legal representatives of persons entitled to indemnification hereunder; and (3) shall be applicable to actions, suits or proceedings commenced after the adoption hereof, whether arising from acts or omissions occurring before or after the adoption hereof. The right of indemnification provided for herein may not be amended, modified or repealed so as to limit in any way the indemnification provided for herein with respect to any acts or omissions occurring prior to the adoption of such amendment or repeal. If applicable Pennsylvania law is amended to permit a Pennsylvania business trust to provide greater rights to indemnification and advancement of expenses for its trustees and officers than the express terms of this Paragraph 14, this Paragraph 14 shall be construed to provide for such greater rights.

15. CONTROLLING LAW

This Trust Agreement has been signed in the Commonwealth of Pennsylvania and shall be construed in accordance with the laws of that Commonwealth.

16. TERM

The term of PREIT’s existence shall be perpetual unless sooner terminated as provided below:

PREIT may be dissolved, its affairs wound-up and its existence terminated by the affirmative vote of holders of a majority of votes cast by all Shareholders entitled to vote thereon (excluding holders of Preferred Shares that are entitled to vote thereon exclusively as a class) at a meeting called for that purpose pursuant to a resolution adopted by a majority of the Trustees then in office. If any class or series of Preferred Shares is entitled to vote thereon as a class, the affirmative vote of a majority of the votes cast in each class vote shall also be required. Upon PREIT’s dissolution, the Trustees may wind up PREIT’s business, liquidate its assets, make adequate provision for payment of liabilities and funding of contingencies and distribute the net proceeds among the Shareholders in the same proportions that the Shareholders own Shares in PREIT at the time for distribution, subject, if applicable, to Paragraph 9.N(iii) and to distinctions, preferences and rights among different types, classes or series of outstanding Shares; or convey the property of PREIT to, or in any way merge, consolidate or combine with, one or more persons, entities, trusts or corporations, for consideration consisting in whole or part of cash, shares of stock or beneficial interest, or other property of any kind, and distribute the net proceeds among the Shareholders ratably, subject, if applicable, to Paragraph 9.N(iii) and to distinctions, preferences and rights among different types, classes or series of outstanding Shares. The Trustees in office at the time of such dissolution shall continue in office until the process of dissolving, winding-up, terminating the business and the distribution to the Shareholders is completed. PREIT shall not dissolve and the term of PREIT’s existence shall not terminate for the reason that it fails to qualify, or after qualification as such to continue to qualify, as a real estate investment trust under the applicable tax laws.

17. AMENDMENT

This Agreement may be amended by the Trustees in any particular, including, without limitation, such designating amendments as may be necessary or desirable from time to time to implement the authority granted in the second paragraph of Paragraph 8, except:

(A) no amendment shall be effected to increase the liability of the Shareholders;

(B) no amendment may be adopted requiring additional contributions from or assessments against the Shareholders;

(C) without the affirmative vote of the holders of a majority of votes cast by (i) all Shareholders entitled to vote thereon (excluding holders of Preferred Shares that are entitled to vote thereon exclusively as a class) and (ii) the holders of any class or series of

Preferred Shares entitled to vote thereon as a class, no amendment (other than a designating amendment to implement the authority granted under the second paragraph of Paragraph 8) may be effected if the purpose or reasonably foreseeable effect of such amendment is to prevent or impede a “control transaction.” A “control transaction” shall mean the acquisition by a person or a group of persons acting in concert of voting control over voting shares of PREIT that would entitle the holders thereof to cast at least 20% of the votes that all Shareholders would be entitled to cast in an election of Trustees of PREIT;

(D) no amendment to Paragraph 8 which increases the number of Shares which may be outstanding under the first or second paragraph thereof shall be effected without the affirmative vote of the holders of a majority of the votes cast by (i) all Shareholders entitled to vote thereon (excluding Preferred Shares that are entitled to vote thereon exclusively as a class) and (ii) the holders of any class or series of Preferred Shares entitled to vote thereon as a class; and

(E) no amendment to this Paragraph 17 or to Paragraphs 3.Q or 16 shall be effected without the affirmative vote of Shareholders whose votes are at the time of such amendment necessary to effect the pertinent action hereunder or thereunder.

No amendment which may be effected without a vote of Shareholders may be considered at any meeting of the Trustees unless notice of the proposed amendment is included in the call for the meeting. No such amendment may be considered unless the total number of Trustees is five (5) or more, in which event, the consent of two-thirds of the Trustees, but not fewer than four (4), shall be necessary to adopt any such amendment. No amendment may be effected by a vote of Shareholders unless, prior to such vote, the Board of Trustees shall have authorized the submission of the amendment to a vote of the Shareholders. Each amendment under this Paragraph 17 shall be certified by the secretary. As soon as may be possible, after adoption and certification, a copy of the amendment shall be recorded in every public office where this Agreement has been recorded, but no failure to certify or record such amendment shall affect its validity.

CERTIFICATION

The undersigned hereby certifies the adoption of this Amended and Restated Trust Agreement by the Board of Trustees of Pennsylvania Real Estate Investment Trust on December 18, 2008.

/s/ Bruce Goldman

Bruce Goldman, Secretary

Dated: December 22, 2008

Exhibit 3.2

DESIGNATING AMENDMENT TO TRUST AGREEMENT

DESIGNATING THE RIGHTS, PREFERENCES, PRIVILEGES, QUALIFICATIONS,

LIMITATIONS AND RESTRICTIONS OF

8.25% SERIES A CUMULATIVE REDEEMABLE PERPETUAL PREFERRED SHARES

PENNSYLVANIA REAL ESTATE INVESTMENT TRUST

Pennsylvania Real Estate Investment Trust, a business trust organized and existing under the laws of the Commonwealth of Pennsylvania (the “ Trust ”), hereby certifies that, pursuant to the authority conferred upon the Board of Trustees of the Trust (the “ Board of Trustees ”) by the Trust Agreement As Amended and Restated December 18, 2008 (the “ Trust Agreement ”), in accordance with 15 Pa. C.S. Chapter 95, and pursuant to authority vested by the Board of Trustees in a pricing committee of the Board of Trustees (the “ Pricing Committee ”) pursuant to resolutions duly adopted by the Board of Trustees at a meeting on April 12, 2012, the Pricing Committee duly adopted the following resolution by unanimous written consent, dated April 13, 2012, which resolution remains in full force and effect as of the date hereof:

RESOLVED , that, pursuant to the authority vested in the Board of Trustees, and by the Board of Trustees in the Pricing Committee, and in accordance with the provisions of the Trust Agreement, there is hereby created and authorized a series of preferred shares of the Trust, and the rights, preferences, privileges, qualifications, limitations and restrictions of such series are as follows:

8.25% SERIES A CUMULATIVE REDEEMABLE PERPETUAL PREFERRED SHARES

Section 1 Number of Shares and Designation . This series of preferred shares shall be designated as 8.25% Series A Cumulative Redeemable Perpetual Preferred Shares (the “ Series A Preferred Shares ”) and the number of shares which shall constitute such series shall be 4,600,000 shares, par value $0.01 per share, which number may be decreased (but not below the number thereof then outstanding) from time to time by the Board of Trustees.

Section 2 Ranking . The Series A Preferred Shares will, with respect to rights to receive dividends and to participate in distributions or payments upon liquidation, dissolution or winding up of the Trust, rank (a) senior to the Common Shares (as defined in the Trust Agreement) and any other class of equity securities of the Trust, now or hereafter issued and outstanding, the terms of which provide that such equity securities rank, as to the payment of dividends or amounts upon liquidation, dissolution or winding up of the Trust, junior to such Series A Preferred Shares (“ Junior Shares ”), (b) ranking equally with any equity securities the Trust may authorize or issue in the future that, pursuant to the terms thereof, rank on parity with the Series A Preferred Shares with respect to the payment of dividends and the distribution of assets in the event of the liquidation, dissolution or winding up of the Trust (“ Parity Shares ”); and (c) junior to any equity securities the Trust may authorize or issue in the future that, pursuant to the terms thereof, rank senior to the Series A Preferred Shares with respect to the payment of dividends and the distribution of assets in the event of the liquidation, dissolution or winding up of the Trust (“ Senior Shares ”). Any authorization or issuance of Senior Shares would require the affirmative vote of the holders of at least two-thirds of the outstanding Series A Preferred Shares voting together as a single class with all other classes or series of Parity Shares upon which like voting rights have been conferred and are exercisable. Any convertible or exchangeable debt securities that the Trust may issue are not considered to be equity securities for these purposes.

Section 3 Dividends .

(a) Holders of the then outstanding shares of Series A Preferred Shares shall be entitled to receive, when, as and if authorized by the Board of Trustees and declared by the Trust, out of funds legally available for payment of dividends, cumulative cash dividends at the rate of 8.25% per annum of the $25.00 liquidation preference of each Series A Preferred Share (equivalent to $2.0625 per annum per share).

(b) Dividends on each outstanding Series A Preferred Share shall be cumulative from and including April 20, 2012 and shall be payable (i) for the period from and including April 20, 2012 (the “ Original Issue Date ”) to June 14, 2012, on June 15, 2012, and (ii) for each quarterly distribution period thereafter, quarterly in equal amounts in arrears on the 15th day of each March, June, September and December, commencing on September 15, 2012 (each such day being hereinafter called a “ Dividend Payment Date ”) at the then applicable annual rate; provided, however, that if any Dividend Payment Date falls on any day other than a Business Day (as hereinafter defined), the dividend that would otherwise have been payable on such Dividend Payment Date may be paid on the next succeeding Business Day with the same force and effect as if paid on such Dividend Payment Date, and no interest, additional dividends or other sums shall accrue on the amount so payable from such Dividend Payment Date to such next succeeding Business Day. The period from and including the Original Issue Date to but excluding the first Dividend Payment Date, and each subsequent period from and including a Dividend Payment Date to but excluding the next succeeding Dividend Payment Date, is hereafter called a “Dividend Period.” Each dividend is payable to holders of record as they appear on the share records of the Trust at the close of business on the record date, not exceeding 30 days preceding the applicable Dividend Payment Date, as shall be fixed by the Board of Trustees (the “ Dividend Record Date ”). Dividends shall accumulate from April 20, 2012 or the most recent Dividend Payment Date to which full cumulative dividends have been paid, whether or not in any such Dividend Period or Periods there shall be funds legally available for the payment of such dividends, whether the Trust has earnings or whether such dividends are authorized. No interest, or sum of money in lieu of interest, shall be payable in respect of any dividend payment or payments on the Series A Preferred Shares that may be in arrears. Holders of the Series A Preferred Shares shall not be entitled to any dividends, whether payable in cash, property or shares, in excess of full cumulative dividends, as herein provided, on the Series A Preferred Shares. Dividends payable on the Series A Preferred Shares for any period greater or less than a full Dividend Period will be computed on the basis of a 360-day year consisting of twelve 30-day months. Dividends payable on the Series A Preferred Shares for each full Dividend Period will be computed by dividing the applicable annual dividend rate by four. After full cumulative distributions on the Series A Preferred Shares have been paid, the holders of Series A Preferred Shares will not be entitled to any further distributions with respect to that Dividend Period.

(c) So long as any Series A Preferred Shares are outstanding, no dividends, except as described in the immediately following sentence, shall be authorized and declared or paid or set apart for payment on any series or class or classes of Parity Shares for any period unless full cumulative dividends have been declared and paid or are contemporaneously declared and paid or declared and a sum sufficient for the payment thereof set apart for such payment on the Series A Preferred Shares for all prior Dividend Periods. When dividends are not paid in full or a sum sufficient for such payment is not set apart, as aforesaid, all dividends authorized and declared upon the Series A Preferred Shares and all dividends authorized and declared upon any other series or class or classes of Parity Shares shall be authorized and declared ratably in proportion to the respective amounts of dividends accumulated and unpaid on the Series A Preferred Shares and such Parity Shares.

(d) So long as any Series A Preferred Shares are outstanding, no dividends (other than dividends or distributions paid solely in Junior Shares of, or in options, warrants or rights to subscribe for or purchase, Junior Shares) shall be authorized and declared or paid or set apart for payment or other distribution authorized and declared or made upon Junior Shares, nor shall any Junior Shares be redeemed, purchased or otherwise acquired (other than a redemption, purchase or other acquisition of Common Shares made for purposes of and in compliance with the terms of an employee incentive or benefit plan of the Trust or any subsidiary, or a conversion into or exchange for Junior Shares or redemptions for the purpose of preserving the Trust’s qualification as a REIT (as defined in the Trust Agreement)), for any consideration (or any monies to be paid to or made available for a sinking fund for the redemption of any such shares) by the Trust, directly or indirectly (except by conversion into or exchange for Junior Shares), unless in each case full cumulative dividends on all outstanding Series A Preferred Shares and any Parity Shares at the time such dividends are payable shall have been paid or set apart for payment for all past dividend periods with respect to the Series A Preferred Shares and all past dividend periods with respect to such Parity Shares.

(e) Any dividend payment made on the Series A Preferred Shares, including any capital gains dividends, shall first be credited against the earliest accrued but unpaid dividend due with respect to such Series A Preferred Shares which remains payable.

(f) Except as provided herein, the Series A Preferred Shares shall not be entitled to participate in the earnings or assets of the Trust.

(g) As used herein, the term “Business Day” shall mean any day, other than a Saturday or Sunday, that is neither a legal holiday nor a day on which banking institutions in New York, New York are authorized or required by law, regulation or executive order to close.

(h) As used herein, the term “dividend” does not include dividends payable solely in Junior Shares on Junior Shares, or in options, warrants or rights to holders of Junior Shares to subscribe for or purchase any Junior Shares.

Section 4 Liquidation Preference .

(a) In the event of any liquidation, dissolution or winding up of the Trust, whether voluntary or involuntary, before any payment or distribution of the assets of the Trust shall be made to or set apart for the holders of Junior Shares, the holders of the Series A Preferred Shares shall be entitled to receive $25.00 per share (the “ Liquidation Preference ”) plus an amount per share equal to all accrued and unpaid dividends (whether or not earned or declared) thereon to, but not including, the date of final distribution to such holders; but such holders of the Series A Preferred Shares shall not be entitled to any further payment. If, upon any such liquidation, dissolution or winding up of the Trust, the assets of the Trust, or proceeds thereof, distributable among the holders of the Series A Preferred Shares shall be insufficient to pay in full the preferential amount aforesaid and liquidating payments on any other Parity Shares, then such assets, or the proceeds thereof, shall be distributed among the holders of such Series A Preferred Shares and any such other Parity Shares ratably in accordance with the respective amounts that would be payable on such Series A Preferred Shares and any such other Parity Shares if all amounts payable thereon were paid in full. For the purposes of this Section 4, none of (i) a consolidation or merger of the Trust with one or more entities, (ii) a statutory share exchange by the Trust or (iii) a sale or transfer of all or substantially all of the Trust’s assets shall be deemed to be a liquidation, dissolution or winding up, voluntary or involuntary, of the Trust.

(b) Until payment shall have been made in full to the holders of the Series A Preferred Shares, as provided in this Section 4, and to the holders of Parity Shares, subject to any terms and provisions applying thereto, no payment will be made to any holder of Junior Shares upon the liquidation, dissolution or winding up of the Trust. Subject to the rights of the holders of Parity Shares, upon any liquidation, dissolution or winding up of the Trust, after payment shall have been made in full to the holders of the Series A Preferred Shares, as provided in this Section 4, any series or class or classes of Junior Shares shall, subject to any respective terms and provisions applying thereto, be entitled to receive any and all assets remaining to be paid or distributed, and the holders of the Series A Preferred Shares shall not be entitled to share therein.

Section 5 Optional Redemption .

(a) The Series A Preferred Shares are not redeemable prior to April 20, 2017, except as set forth in Section 5(b) of these terms of the Series A Preferred Shares; provided that the foregoing shall not prevent or limit the right of the Trust to redeem Series A Preferred Shares pursuant to these terms of the Series A Preferred Shares in order to preserve the qualification of the Trust as a REIT for federal and/or state income tax purposes as provided in the Trust Agreement and in Section 8 of these terms of the Series A Preferred Shares. On and after April 20, 2017, the Trust may, at its option, upon not less than 30 nor more than 60 days’ written notice, redeem the Series A Preferred Shares, in whole, at any time, or in part, from time to time, for cash (i) at a redemption price of $25.00 per share, plus (ii) subject to the provisions set forth in the first sentence of Section 5(e) of these terms of the Series A Preferred Shares, accrued and unpaid dividends thereon (whether or not declared) to but excluding the date fixed for redemption (the “ Regular Redemption Right ”). If the Trust elects to redeem any Series A Preferred Shares as described in this paragraph, the Trust may use any available cash to pay the redemption price, and the Trust will not be required to pay the redemption price only out of the proceeds from the issuance of other classes and series of the Trust’s shares or any other specific source.

(b) Upon the occurrence of a Change of Control (as defined below), the Trust may, at its option, upon not less than 30 nor more than 60 days’ written notice, redeem the Series A Preferred Shares, in whole or in part, within 120 days after the first date on which such Change of Control occurred, for cash at (i) a redemption price of $25.00 per share, plus (ii) subject to the provisions set forth in the first sentence of Section 5(e) of these terms of the Series A Preferred Shares, accrued and unpaid dividends thereon (whether or not declared) to but excluding the date fixed for redemption (the “ Special Redemption Right ”). If, prior to the Change of Control Conversion Date (as defined below), the Trust has provided or provides notice of its election to redeem some or all of the Series A Preferred Shares (whether pursuant to the Regular Redemption Right or the Special Redemption Right), the holders of Series A Preferred Shares shall not have the Change of Control Conversion Right (as defined below) set forth in Section 9 of these terms of the Series A Preferred Shares with respect to the shares called for redemption. If the Trust elects to redeem any Series A Preferred Shares as described in this paragraph, the Trust may use any available cash to pay the redemption price, and the Trust will not be required to pay the redemption price only out of the proceeds from the issuance of other classes and series of the Trust’s shares or any other specific source.

(i) the acquisition by any person, including any syndicate or group deemed to be a “person” under Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), of beneficial ownership, directly or indirectly, through a purchase, merger or other acquisition transaction or series of purchases, mergers or other acquisition transactions of shares of the Trust entitling that person to exercise more than 50% of the total voting power of all shares of the Trust entitled to vote generally in the election of the Trust’s trustees (except that such person will be deemed to have beneficial ownership of all securities that such person has the right to acquire, whether such right is currently exercisable or is exercisable only upon the occurrence of a subsequent condition); and

(ii) following the closing of any transaction referred to in (i) above, neither the Trust nor the acquiring or surviving entity has a class of common securities (or American Depositary Receipts representing such securities) listed on the New York Stock Exchange (the “ NYSE ”), the NYSE Amex Equities (the “ NYSE Amex ”), or the NASDAQ Stock Market (“ NASDAQ ”), or listed or quoted on an exchange or quotation system that is a successor to the NYSE, the NYSE Amex or NASDAQ.

(d) Holders of Series A Preferred Shares to be redeemed shall surrender certificates representing such Series A Preferred Shares at the place designated in such notice (or, in the case of Series A Preferred Shares held in book-entry form through a Depositary (as defined below), shall deliver the shares to be redeemed through the facilities of such Depositary) and shall thereafter be entitled to receive the redemption price and any accrued and unpaid dividends payable upon such redemption. If notice of redemption of any Series A Preferred Shares has been given and if the funds necessary for such redemption have been irrevocably set aside by the Trust, separate and apart from its other funds, in trust for the benefit of the holders of the Series A Preferred Shares so called for redemption, then from and after the redemption date (unless default shall be made by the Trust in providing for the payment of the redemption price plus accrued and unpaid dividends, if any, payable upon redemption), dividends will cease to accrue on such Series A Preferred Shares, such Series A Preferred Shares shall no longer be deemed outstanding and all rights of the holders of such shares will terminate, except the right to receive the redemption price plus accrued and unpaid dividends, if any, payable upon redemption. In the event that any redemption date shall not be a Business Day, then payment of the redemption price plus, if applicable, accrued and unpaid dividends, if any, payable upon redemption need not be made on such redemption date but may be made on the next succeeding Business Day with the same force and effect as if made on such redemption date and no interest, additional dividends or other sums shall accrue on the amount so payable for the period from and after such redemption date to such next succeeding Business Day.

(e) Anything herein to the contrary notwithstanding, and except as otherwise required by law, the persons who were the holders of record of Series A Preferred Shares at the close of business on a Dividend Record Date will be entitled to receive the dividend payable on the corresponding Dividend Payment Date notwithstanding the redemption of those shares after such Dividend Record Date and on or prior to such Dividend Payment Date or the default by the Trust in the payment of the dividend due on that Dividend Payment Date, in which case the amount payable upon redemption of such Series A Preferred Shares will not include such dividend, and the full amount of the dividend payable for the applicable Dividend Period shall instead be paid on such Dividend Payment Date to the holders of record at the close of business on such Dividend Record Date as aforesaid. Except as provided in this paragraph and except to the extent that accrued and unpaid dividends are payable upon redemption pursuant to the foregoing provisions of this Section 5, the Trust will make no payment or allowance for unpaid dividends, whether or not in arrears, on Series A Preferred Shares called for redemption.

(f) Unless full cumulative dividends for all past Dividend Periods on all outstanding shares of Series A Preferred Shares shall have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof is set apart for payment, no Series A Preferred Shares shall be redeemed unless all outstanding Series A Preferred Shares are simultaneously redeemed; provided, however, that the foregoing shall not prevent the purchase or acquisition by the Trust of Series A Preferred Shares pursuant to the Trust Agreement and Section 8 of these terms of the Series A Preferred Shares in order to preserve the qualification of the Trust as a REIT for federal and/or state income tax purposes or pursuant to a purchase or exchange offer made on the same terms to the holders of all outstanding Series A Preferred Shares. In addition, unless full cumulative dividends for all past Dividend Periods on all outstanding Series A Preferred Shares have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof set apart for payment, the Trust shall not purchase or otherwise acquire, directly or indirectly, any Series A Preferred Shares (except by conversion into or exchange for shares of the Trust ranking junior to the Series A Preferred Shares with respect to the payment of dividends and the distribution of assets upon liquidation, dissolution and winding up of the Trust); provided, however, that the foregoing shall not prevent the purchase or acquisition by the Trust of Series A Preferred Shares pursuant to Section 8 of these terms of the Series A Preferred Shares in order to preserve the qualification of the Trust as a REIT for federal and/or state income tax purposes or pursuant to a purchase or exchange offer made on the same terms to the holders of all outstanding Series A Preferred Shares. Subject to the limitations set forth in the Trust Agreement (including these terms of the Series A Preferred Shares), the Trust shall be entitled at any time and from time to time to repurchase Series A Preferred Shares in open-market transactions, by tender or by private agreement, in each case as duly authorized by the Board of Trustees and effected in compliance with applicable laws.

(g) Notice of redemption will be furnished by the Trust and will be mailed, postage prepaid, not less than 30 nor more than 60 days prior to the redemption date, addressed to the holders of record of the Series A Preferred Shares to be redeemed at their addresses as they appear on the share transfer records of the Trust (or, in the case of Series A Preferred Shares held in book-entry form through a Depositary, upon notice of redemption delivered in accordance with such notice and the procedures of such Depositary). No failure to give such notice or any defect therein or in the mailing thereof shall affect the validity of the proceedings for the redemption of any Series A Preferred Shares except as to the holder to whom notice was defective or not given. Each notice shall state: (i) the redemption date; (ii) the number of Series A Preferred Shares to be redeemed; (iii) the redemption price and whether or not accrued and unpaid dividends will be payable to holders surrendering Series A Preferred Shares or to the persons who were holders of record at the close of business on the relevant Dividend Record Date; (iv) the place or places where certificates for the Series A Preferred Shares, if any, are to be surrendered for payment of the redemption price; (v) the procedures that the holders of Series A Preferred Shares must follow to surrender the certificates, if any, for redemption, including whether the certificates, if any, shall be properly endorsed or assigned for transfer; (vi) that dividends on the Series A Preferred Shares to be redeemed will cease to accrue on such redemption date; (vii) whether such redemption is being made pursuant to the Regular Redemption Right or the Special Redemption Right; (viii) if applicable, that such redemption is being made in connection with a Change of Control and, in that case, a brief description of the transaction or transactions constituting such Change of Control; and (ix) if such redemption is being made in connection with a Change of Control, that the holders of the Series A Preferred Shares being so called for redemption will not be able to tender such Series A Preferred Shares for conversion in connection with the Change of Control and that each Series A Preferred Share tendered for conversion that is called, prior to the Change of Control Conversion Date, for redemption will be redeemed on the related date of redemption instead of converted on the Change of Control Conversion Date. If fewer than all of the Series A Preferred Shares held by any holder are to be redeemed, the notice mailed to such holder shall also specify

the number of Series A Preferred Shares to be redeemed from such holder and, upon redemption, to the extent the Series A Preferred Shares are represented by certificates, a new certificate shall be issued representing the unredeemed shares without cost to the holder thereof. If fewer than all of the outstanding Series A Preferred Shares are to be redeemed, the shares to be redeemed shall be selected by lot or pro rata or by any other equitable method determined by the Trust. If any redemption date is not a Business Day, then the redemption price may be paid on the next Business Day and no interest, additional dividends or other sums will accrue on the amount payable for the period from and after that redemption date to that next Business Day.

(h) Upon surrender, in accordance with such notice, of the certificates representing any Series A Preferred Shares to be so redeemed (properly endorsed or assigned for transfer, if the Trust shall so require and the notice shall so state) (or, in the case of Series A Preferred Shares held in book-entry form through a Depositary, upon delivery of such shares in accordance with such notice and the procedures of such Depositary), such Series A Preferred Shares shall be redeemed by the Trust at the redemption price plus, except as provided in the first sentence of Section 5(e) of these terms of the Series A Preferred Shares, accrued and unpaid dividends, if any. In case fewer than all the Series A Preferred Shares represented by any such certificate are redeemed, a new certificate or certificates shall be issued representing the unredeemed Series A Preferred Shares without cost to the holder thereof.

(i) Any Series A Preferred Shares that shall at any time have been redeemed shall, after such redemption, have the status of authorized but unissued preferred shares of the Trust, without designation as to series until such preferred shares are once more designated as part of a particular series by the Board of Trustees.

Section 6 Voting Rights . Except as otherwise set forth herein, the Series A Preferred Shares shall not have any relative, participating, optional or other voting rights or powers, and the consent of the holders thereof shall not be required for the taking of any corporate action. Subject to the provisions in the Trust Agreement regarding Excess Shares (as defined in Paragraph 9.A of the Trust Agreement), in any matter in which the holders of Series A Preferred Shares are entitled to vote, each such holder shall have the right to one vote for each Series A Preferred Share held by such holder.

(a) If and whenever six quarterly dividends (whether or not consecutive) payable on the Series A Preferred Shares are in arrears, whether or not earned or declared, the number of members then constituting the Board of Trustees will be increased by two and the holders of Series A Preferred Shares, voting together as a class with the holders of any other series of Parity Shares upon which like voting rights have been conferred and are exercisable (any such other series, the “ Voting Preferred Shares ”), will have the right to elect two additional Trustees of the Trust ( the “ Preferred Share Trustees ”) at an annual meeting of shareholders or a properly called special meeting of the holders of the Series A Preferred Shares and such Voting Preferred Shares and at each subsequent annual meeting of shareholders until all such dividends and dividends for the then current Dividend Period on the Series A Preferred Shares and such other Voting Preferred Shares have been paid or declared and set aside for payment. Whenever all arrears in dividends on the Series A Preferred Shares and the Voting Preferred Shares then outstanding have been paid and full dividends on the Series A Preferred Shares and the Voting Preferred Shares for the then current Dividend Period have been paid in full or declared and set apart for payment in full, then the right of the holders of the Series A Preferred Shares and the Voting Preferred Shares to elect the two Preferred Share Trustees will cease, the terms of office of the Preferred Share Trustees will forthwith terminate and the number of members of the Board of Trustees will be reduced accordingly; provided, however, that the right of the holders of the Series A Preferred Shares and the Voting Preferred Shares to elect the Preferred Share Trustees will again vest if and whenever six quarterly dividends are in arrears, as described above. In no event shall the holders of Series A

Preferred Shares be entitled pursuant to these voting rights to elect a trustee that would cause the Trust to fail to satisfy a requirement relating to director independence of any national securities exchange on which any class or series of the Trust’s shares are listed or under any law or regulation. In class votes with other Voting Preferred Shares, preferred shares of different series shall vote in proportion to the liquidation preference of the preferred shares.

(b) So long as any Series A Preferred Shares are outstanding, the approval of two-thirds of the votes entitled to be cast by the holders of outstanding Series A Preferred Shares, voting separately as a class, either at a meeting of shareholders or by written consent, is required (i) to amend, alter or repeal any provisions of the Trust Agreement or of this amendment setting forth the terms of the Series A Preferred Shares, whether by merger, consolidation or otherwise, to affect materially and adversely the voting powers, rights or preferences of the holders of the Series A Preferred Shares, (ii) to authorize, create or issue, or increase the number of authorized or issued shares of, any class or series of shares of the Trust ranking senior to the Series A Preferred Shares with respect to the payment of dividends or the distribution of assets upon liquidation, dissolution or winding up of the Trust, or reclassify any authorized shares of the Trust into any such shares, or create, authorize or issue any obligation or security convertible into, exchangeable or exercisable for, or evidencing the right to purchase, any such shares (provided that if such amendment affects materially and adversely the rights, preferences, privileges or voting powers of one or more but not all of the other class or series of Voting Preferred Shares, the consent of the holders of at least two-thirds of the outstanding shares of each such class or series so affected is required), or (iii) to enter into any share exchange that affects Series A Preferred Shares, or consolidate with or merge into any other entity, or permit any other entity to consolidate with or merge into the Trust, unless in each such case described in this clause (iii) each Series A Preferred Share then outstanding remains outstanding without a material adverse change to its terms and rights or is converted into or exchanged for one or more preferred shares of the surviving or resulting entity having preferences, conversion and other rights, dividends, voting powers, restrictions, limitations as to dividends, qualifications and terms and conditions of redemption substantially identical to, and in any event without any material adverse change to, those of the Series A Preferred Shares. However, the Trust may create additional classes of Parity Shares and Junior Shares, amend the Trust Agreement and this Designating Amendment to increase the authorized number of Parity Shares (including the Series A Preferred Shares) and Junior Shares and issue additional series of Parity Shares and Junior Shares without the consent of any holder of Series A Preferred Shares.

(c) The foregoing voting provisions shall not apply if, at or prior to the time when the act with respect to which such vote would otherwise be required shall be effected, all outstanding Series A Preferred Shares shall have been redeemed or called for redemption upon proper notice and sufficient funds shall have been deposited in trust to effect such redemption.

Section 7 Information Rights . During any period in which the Trust is not subject to Section 13 or 15(d) of the Exchange Act, and any Series A Preferred Shares are outstanding, the Trust will (i) transmit by mail (or other permissible means under the Exchange Act) to all holders of Series A Preferred Shares, as their names and addresses appear in the record books of the Trust and without cost to such holders, copies of the annual reports on Form 10-K and quarterly reports on Form 10-Q that the Trust would have been required to file with the Securities and Exchange Commission pursuant to Section 13 or 15(d) of the Exchange Act if the Trust were subject thereto (other than any exhibits that would have been required) and (ii) promptly, upon request, supply copies of such reports to any prospective holder of Series A Preferred Shares. The Trust will mail (or otherwise provide) the information to the holders of Series A Preferred Shares within 15 days after the respective dates by which a periodic report on Form 10-K or Form 10-Q, as the case may be, in respect of such information would have been required to be filed with the Securities and Exchange

Commission if the Trust were subject to Section 13 or 15(d) of the Exchange Act, in each case, based on the dates on which the Trust would be required to file such periodic reports if the Trust were a “non-accelerated filer” within the meaning of the Exchange Act.

Section 8 Restrictions on Transfer . The Series A Preferred Shares shall be included within the term “Preferred Shares” and within the term “Shares,” and are governed by and issued subject to all the ownership and transfer restrictions of the Trust Agreement applicable to Preferred Shares and Shares generally, including but not limited to the terms and conditions (including exceptions and exemptions) of Paragraph 9 of the Trust Agreement applicable to Preferred Shares and Shares. The foregoing sentence shall not be construed to limit the applicability to the Series A Preferred Shares of any other term or provision of the Trust Agreement.

Section 9 Conversion Upon a Change of Control . The Series A Preferred Shares are not convertible into or exchangeable for any other property or securities of the Trust, except as provided in this Section 9.

(a) Upon the occurrence of a Change of Control, each holder of Series A Preferred Shares shall have the right (unless, prior to the Change of Control Conversion Date, the Trust has provided or provides notice of its election to redeem some or all of the Series A Preferred Shares held by such holder pursuant to the Regular Redemption Right or the Special Redemption Right, in which case such holder shall have the right only with respect to Series A Preferred Shares that are not called for redemption) to convert some or all of the Series A Preferred Shares held by such holder (the “ Change of Control Conversion Right ”) on the Change of Control Conversion Date into a number of Common Shares per share of Series A Preferred Shares (the “ Common Share Conversion Consideration ”) equal to the lesser of:

(i) the quotient obtained by dividing (i) the sum of the $25.00 Liquidation Preference per Series A Preferred Share plus the amount of any accrued and unpaid dividends thereon to but excluding the Change of Control Conversion Date (unless the Change of Control Conversion Date is after a Dividend Record Date and prior to the corresponding Dividend Payment Date, in which case no additional amount for such accrued and unpaid dividends will be included in such sum) by (ii) the Common Share Price (as defined below) (such quotient, the “ Conversion Rate ”) and

(ii) 5.5741 (the “ Share Cap ”).

(b) Anything in these terms of the Series A Preferred Shares to the contrary notwithstanding and except as otherwise required by law, the persons who are the holders of record of Series A Preferred Shares at the close of business on a Dividend Record Date will be entitled to receive the dividend payable on the corresponding Dividend Payment Date notwithstanding the conversion of those shares after such Dividend Record Date and on or prior to such Dividend Payment Date and, in such case, the full amount of such dividend shall be paid on such Dividend Payment Date to the persons who were the holders of record at the close of business on such Dividend Record Date.

(c) The Share Cap is subject to pro rata adjustments for any share splits (including those effected pursuant to a distribution of the Common Shares), subdivisions or combinations (in each case, a “ Share Split ”) with respect to the Common Shares as follows: the adjusted Share Cap as the result of a Share Split shall be the number of Common Shares that is equivalent to the product obtained by multiplying (i) the Share Cap in effect immediately prior to such Share Split by (ii) a fraction, the numerator of which is the number of Common Shares outstanding immediately after giving effect to such Share Split and the denominator of which is the number of Common Shares outstanding immediately prior to such Share Split.

(d) For the avoidance of doubt, subject to the immediately succeeding sentence, the aggregate number of Common Shares (or equivalent Alternative Conversion Consideration (as defined below), as applicable) issuable or deliverable, as applicable, in connection with the exercise of the Change of Control Conversion Right shall not exceed 22,296,400 Common Shares (or equivalent Alternative Conversion Consideration, as applicable), subject to proportionate increase to the extent the underwriters’ option to purchase additional Series A Preferred Shares in the initial public offering of Series A Preferred Shares is exercised, not to exceed 25,640,860 Common Shares in total (or equivalent Alternative Conversion Consideration, as applicable) (the “ Exchange Cap ”). The Exchange Cap is subject to pro rata adjustments for any Share Splits on the same basis as the corresponding adjustment to the Share Cap, and shall be increased on a pro rata basis with respect to any additional Series A Preferred Shares designated and authorized for issuance pursuant to any subsequent amendment to the Trust Agreement.

(e) In the case of a Change of Control pursuant to which Common Shares are or will be converted into cash, securities or other property or assets (including any combination thereof) (the “ Alternative Form Consideration ”), a holder of Series A Preferred Shares shall receive upon conversion of such Series A Preferred Shares the kind and amount of Alternative Form Consideration which such holder would have owned or been entitled to receive upon the Change of Control had such holder held a number of Common Shares equal to the Common Share Conversion Consideration immediately prior to the effective time of the Change of Control (the “ Alternative Conversion Consideration ,” and the Common Share Conversion Consideration or the Alternative Conversion Consideration, whichever shall be applicable to a Change of Control, are referred to herein as the “ Conversion Consideration ”).

(f) If the holders of Common Shares have the opportunity to elect the form of consideration to be received in the Change of Control, the Conversion Consideration in respect of such Change of Control will be deemed to be the kind and amount of consideration actually received by holders of a majority of the outstanding Common Shares that made or voted for such an election (if electing between two types of consideration) or holders of a plurality of the outstanding Common Shares that made or voted for such an election (if electing between more than two types of consideration), as the case may be, and will be subject to any limitations to which all holders of Common Shares are subject, including, without limitation, pro rata reductions applicable to any portion of the consideration payable in such Change of Control.

(g) The Trust will not issue fractional Common Shares upon the conversion of Series A Preferred Shares in connection with a Change of Control. Instead, the Trust will make, and the holders of Series A Preferred Shares shall be entitled to receive, a cash payment equal to the value of such fractional shares based upon the Common Share Price used in determining the Common Share Conversion Consideration for such Change of Control.

(h) Within 15 days following the occurrence of a Change of Control, the Trust will provide to holders of Series A Preferred Shares a notice of the occurrence of the Change of Control that describes the resulting Change of Control Conversion Right, which notice shall be delivered to the holders of record of the Series A Preferred Shares at their addresses as they appear on the Trust’s share transfer records and notice shall also be provided to the Trust’s transfer agent. No failure to give such notice or any defect therein or in the mailing thereof shall affect the validity of the proceedings for the conversion of any Series A Preferred Shares except as to the holder to whom notice was defective or not given. Each notice shall state: (i) the events constituting the Change of Control; (ii) the date of the Change of Control; (iii) the last date on which the

holders of Series A Preferred Shares may exercise their Change of Control Conversion Right; (iv) the method and period for calculating the Common Share Price; (v) the Change of Control Conversion Date; (vi) that if, prior to the Change of Control Conversion Date, the Trust has provided or provides notice of its election to redeem all or any of the Series A Preferred Shares, the holders will not be able to convert the Series A Preferred Shares called for redemption and such Series A Preferred Shares shall be redeemed on the related redemption date, even if such shares have already been tendered for conversion pursuant to the Change of Control Conversion Right; (vii) if applicable, the type and amount of Alternative Conversion Consideration entitled to be received per Series A Preferred Share; (viii) the name and address of the paying agent, transfer agent and conversion agent for the Series A Preferred Shares; (ix) the procedures that the holders of Series A Preferred Shares must follow to exercise the Change of Control Conversion Right (including procedures for surrendering shares for conversion through the facilities of a Depositary (as defined below)), including the form of conversion notice to be delivered by such holders as described below; and (x) the last date on which holders of Series A Preferred Shares may withdraw shares surrendered for conversion and the procedures such holders must follow to effect such a withdrawal.

(i) The Trust shall issue a press release containing such notice for publication on Dow Jones & Company, Inc., Business Wire, PR Newswire or Bloomberg Business News (or, if such organizations are not in existence at the time of issuance of such press release, such other news or press organization as is reasonably calculated to broadly disseminate the relevant information to the public), or post notice on the Trust’s website, in any event prior to the opening of business on the first Business Day following any date on which the Trust provides notice pursuant to Section 9(h) of these terms of the Series A Preferred Shares to the holders of Series A Preferred Shares.

(j) To exercise the Change of Control Conversion Right, the holders of Series A Preferred Shares shall be required to deliver, on or before the close of business on the Change of Control Conversion Date, the certificates (if any) representing the Series A Preferred Shares to be converted, duly endorsed for transfer (or, in the case of any Series A Preferred Shares held in book-entry form through a Depositary, to deliver, on or before the close of business on the Change of Control Conversion Date, the Series A Preferred Shares to be converted through the facilities of such Depositary), together with a written conversion notice in the form provided by the Trust, duly completed, to the Trust’s transfer agent. Such notice shall state: (i) the relevant Change of Control Conversion Date; (ii) the number of Series A Preferred Shares to be converted; and (iii) that the Series A Preferred Shares are to be converted pursuant to the applicable terms of the Series A Preferred Shares.

(k) The “Change of Control Conversion Date” is the date the Series A Preferred Shares are to be converted, which will be a Business Day selected by the Trust that is no fewer than 20 days nor more than 35 days after the date on which the Trust provides the notice to holders of Series A Preferred Shares pursuant to Section 9(h) of these terms of the Series A Preferred Shares.

(l) The “Common Share Price” shall be (a) if the consideration to be received in the Change of Control by the holders of Common Shares is solely cash, the amount of cash consideration per Common Share or (b) if the consideration to be received in the Change of Control by holders of Common Shares is other than solely cash (x) the average of the closing sale prices per Common Share (or, if no closing sale price is reported, the average of the closing bid and ask prices per share or, if more than one in either case, the average of the average closing bid and the average closing ask prices per share) for the ten consecutive trading days immediately preceding, but not including, the date on which such Change of Control occurred as reported on the principal U.S. securities exchange on which the Common Shares are then traded, or (y) the average of the last quoted bid prices for the Common Shares in the over-the-counter market as reported by Pink OTC Markets

Inc. or similar organization for the ten consecutive trading days immediately preceding, but not including, the date on which such Change of Control occurred, if the Common Shares are not then listed for trading on a U.S. securities exchange.

(m) Holders of Series A Preferred Shares may withdraw any notice of exercise of a Change of Control Conversion Right (in whole or in part) by a written notice of withdrawal delivered to the Trust’s transfer agent prior to the close of business on the Business Day prior to the Change of Control Conversion Date. The notice of withdrawal delivered by any holder must state: (a) the number of withdrawn Series A Preferred Shares; (b) if certificated Series A Preferred Shares have been surrendered for conversion, the certificate numbers of the withdrawn Series A Preferred Shares; and (c) the number of Series A Preferred Shares, if any, which remain subject to the holder’s conversion notice.

(n) Notwithstanding the foregoing, if any Series A Preferred Share is held in book-entry form through The Depository Trust Company or a similar depositary (each, a “ Depositary ”), the conversion notice and/or the notice of withdrawal as applicable shall comply with applicable procedures, if any, of the applicable Depositary.

(o) Series A Preferred Shares as to which the Change of Control Conversion Right has been properly exercised and for which the conversion notice has not been properly withdrawn shall be converted into the applicable Conversion Consideration in accordance with the Change of Control Conversion Right on the Change of Control Conversion Date, unless, prior to the Change of Control Conversion Date, the Trust has provided or provides notice of its election to redeem some or all of the shares of Series A Preferred Shares pursuant to the Regular Redemption Right or the Special Redemption Right, in which case only the Series A Preferred Shares properly surrendered for conversion and not properly withdrawn that are not called for redemption will be converted as aforesaid. If the Trust elects to redeem Series A Preferred Shares that would otherwise be converted into the applicable Conversion Consideration on a Change of Control Conversion Date, such Series A Preferred Shares shall not be so converted and the holders of such shares shall be entitled to receive on the applicable redemption date the redemption price set forth in Section 5(a) or 5(b) of these terms of the Series A Preferred Shares, as applicable.

(p) The Trust will deliver all securities, cash (including, without limitation, cash in lieu of fractional Common Shares) and any other property owing upon conversion no later than the third Business Day following the Change of Control Conversion Date. Notwithstanding the foregoing, the persons entitled to receive any Common Shares or other securities delivered upon conversion will be deemed to have become the holders of record thereof as of the Change of Control Conversion Date.

(q) In connection with the exercise of any Change of Control Conversion Right, the Trust will comply with all federal and state securities laws and stock exchange rules in connection with any conversion of Series A Preferred Shares into Common Shares or other property. Notwithstanding any other provision contained in these terms of the Series A Preferred Shares, no holder of Series A Preferred Shares will be entitled to convert such Series A Preferred Shares into Common Shares to the extent that receipt of such Common Shares would cause such holder (or any other person) to have Beneficial Ownership or Constructive Ownership (each as defined in Paragraph 9.A of the Trust Agreement) in excess of the Ownership Limit (as defined in Paragraph 9.A of the Trust Agreement).

authorized but unissued shares the maximum number of Common Shares issuable upon conversion of the outstanding Series A Preferred Shares until such time as all of the outstanding Series A Preferred Shares shall have been converted, repurchased and retired or redeemed and retired. The Trust covenants that all Common Shares, if any, issued upon conversion of the Series A Preferred Shares will upon issue be duly authorized, validly issued, fully paid and non-assessable and free from all taxes, liens and charges with respect to the issue thereof.

Section 10 Record Holders . The Trust and the transfer agent for the Series A Preferred Shares may deem and treat the record holder of any Series A Preferred Shares as the true and lawful owner thereof for all purposes, and neither the Trust nor the transfer agent shall be affected by any notice to the contrary.

Section 11 Status of Senior Preferred Shares and Holders Thereof . In accordance with Section 8 of the Trust Agreement, the Series A Preferred Shares shall be included within the term “Preferred Shares” and within the term “Shares,” and the holders of Series A Preferred Shares shall be included within the term “Shareholders” for purposes of all provisions of the Trust Agreement, other than Paragraph 2.C., the third sentence of Paragraph 6, Paragraph 10, Paragraph 11.A., the second paragraph of Paragraph 11.C., and Paragraph 11.F. thereof.

RESOLVED , that, this Certificate of Designation shall become effective at 8:30 a.m. (Eastern Time) on April 20, 2012.

IN WITNESS WHEREOF, Pennsylvania Real Estate Investment Trust has caused this Certificate of Designation to be executed and delivered on its behalf by its Chairman and Chief Executive Officer and attested to by its Secretary on this 19th day of April, 2012.


PENNSYLVANIA REAL ESTATE INVESTMENT TRUST

By:		/s/ Ronald Rubin
Name:		Ronald Rubin
Title:		Chairman and Chief Executive Officer


Attest:

By:		/s/ Bruce Goldman
Name:		Bruce Goldman
Title:		Executive Vice President,
		General Counsel and Secretary

Exhibit 3.3

AMENDMENT

AMENDED AND RESTATED TRUST AGREEMENT DATED DECEMBER 18, 2008, AS AMENDED

PENNSYLVANIA REAL ESTATE INVESTMENT TRUST

Pennsylvania Real Estate Investment Trust, a business trust organized and existing under the laws of the Commonwealth of Pennsylvania (“PREIT”), hereby certifies that, pursuant to the authority conferred upon the Board of Trustees of PREIT (the “Board of Trustees”) by the Trust Agreement As Amended and Restated dated as of December 18, 2008 (the “Trust Agreement”) and in accordance with 15 Pa. C.S. Chapter 95, the Board of Trustees has duly adopted, and the holders of shares of beneficial interest of PREIT approved on June 7, 2012, the following resolution, which resolution remains in full force and effect as of the date hereof:

RESOLVED, that the first sentence of Paragraph 8 of the Trust Agreement be, and it hereby is, amended and restated to read as follows:

IN WITNESS WHEREOF, Pennsylvania Real Estate Investment Trust has caused this Amendment to be executed and delivered on its behalf by its Executive Vice President and General Counsel and attested to by its Assistant Secretary on this 7th day of June, 2012.


PENNSYLVANIA REAL ESTATE INVESTMENT TRUST

By:		/s/ Bruce Goldman
		Bruce Goldman
		Executive Vice President and General Counsel

Attest:



By:		/s/ Daniel A. Pliskin
		Daniel A. Pliskin
		Assistant Secretary

Exhibit 3.4

SECOND DESIGNATING AMENDMENT TO TRUST AGREEMENT

DESIGNATING THE RIGHTS, PREFERENCES, PRIVILEGES, QUALIFICATIONS, LIMITATIONS AND RESTRICTIONS OF

7.375% SERIES B CUMULATIVE REDEEMABLE PERPETUAL PREFERRED SHARES

PENNSYLVANIA REAL ESTATE INVESTMENT TRUST

Pennsylvania Real Estate Investment Trust, a business trust organized and existing under the laws of the Commonwealth of Pennsylvania (the “ Trust ”), hereby certifies that, pursuant to the authority conferred upon the Board of Trustees of the Trust (the “ Board of Trustees ”) by the Trust Agreement As Amended and Restated December 18, 2008, as amended (the “ Trust Agreement ”), in accordance with 15 Pa. C.S. Chapter 95, and pursuant to authority vested by the Board of Trustees in a pricing committee of the Board of Trustees (the “ Pricing Committee ”) pursuant to resolutions duly adopted by the Board of Trustees at a meeting on September 25, 2012, the Pricing Committee duly adopted the following resolution by written consent, dated October 1, 2012, which resolution remains in full force and effect as of the date hereof:

RESOLVED, that, pursuant to the authority vested in the Board of Trustees, and by the Board of Trustees in the Pricing Committee, and in accordance with the provisions of the Trust Agreement, there is hereby created and authorized a series of preferred shares of the Trust, and the rights, preferences, privileges, qualifications, limitations and restrictions of such series are as follows:

7.375% SERIES B CUMULATIVE REDEEMABLE PERPETUAL PREFERRED SHARES

Section 1 Number of Shares and Designation . This series of preferred shares shall be designated as 7.375% Series B Cumulative Redeemable Perpetual Preferred Shares (the “ Series B Preferred Shares ”) and the number of shares which shall constitute such series shall be 3,450,000 shares, par value $0.01 per share, which number may be decreased (but not below the number thereof then outstanding) from time to time by the Board of Trustees.

Section 2 Ranking . The Series B Preferred Shares will, with respect to rights to receive dividends and to participate in distributions or payments upon liquidation, dissolution or winding up of the Trust, rank (a) senior to the Common Shares (as defined in the Trust Agreement) and any other class of equity securities of the Trust, now or hereafter issued and outstanding, the terms of which provide that such equity securities rank, as to the payment of dividends or amounts upon liquidation, dissolution or winding up of the Trust, junior to such Series B Preferred Shares (“ Junior Shares ”), (b) equally with the Series A Preferred Shares (as defined in the Trust Agreement) and any other equity securities the Trust may authorize or issue in the future that, pursuant to the terms thereof, rank on parity with the Series B Preferred Shares with respect to the payment of dividends and the distribution of assets in the event of the liquidation, dissolution or winding up of the Trust (“ Parity Shares ”); and (c) junior to any equity securities the Trust may authorize or issue in the future that, pursuant to the terms thereof, rank senior to the Series B Preferred Shares with respect to the payment of dividends and the distribution of assets in the event of the liquidation, dissolution or winding up of the Trust (“ Senior Shares ”). Any authorization or issuance of Senior Shares would require the affirmative vote of the holders of at least two-thirds of the outstanding Series B Preferred Shares voting

together as a single class with all other classes or series of Parity Shares upon which like voting rights have been conferred and are exercisable. Any convertible or exchangeable debt securities that the Trust may issue are not considered to be equity securities for these purposes.

Section 3 Dividends .

(a) Holders of the then outstanding shares of Series B Preferred Shares shall be entitled to receive, when, as and if authorized by the Board of Trustees and declared by the Trust, out of funds legally available for payment of dividends, cumulative cash dividends at the rate of 7.375% per annum of the $25.00 liquidation preference of each Series B Preferred Share (equivalent to $1.84375 per annum per share).

(b) Dividends on each outstanding Series B Preferred Share shall be cumulative from and including October 11, 2012 and shall be payable (i) for the period from and including October 11, 2012, (the “ Original Issue Date ”) to December 14, 2012, on December 17, 2012 (because December 15, 2012 is not a Business Day), and (ii) for each quarterly distribution period thereafter, quarterly in equal amounts in arrears on the 15th day of each March, June, September and December, commencing on March 15, 2012 (each such day being hereinafter called a “ Dividend Payment Date ”) at the then applicable annual rate; provided, however, that if any Dividend Payment Date falls on any day other than a Business Day (as hereinafter defined), the dividend that would otherwise have been payable on such Dividend Payment Date may be paid on the next succeeding Business Day with the same force and effect as if paid on such Dividend Payment Date, and no interest, additional dividends or other sums shall accrue on the amount so payable from such Dividend Payment Date to such next succeeding Business Day. The period from and including the Original Issue Date to but excluding December 15, 2012, and each subsequent period from and including December 15, 2012 or a Dividend Payment Date to but excluding the next succeeding Dividend Payment Date, is hereafter called a “Dividend Period.” Each dividend is payable to holders of record as they appear on the share records of the Trust at the close of business on the record date, not exceeding 30 days preceding the applicable Dividend Payment Date, as shall be fixed by the Board of Trustees (the “ Dividend Record Date ”). Dividends shall accumulate from October 11, 2012 or the most recent Dividend Payment Date to which full cumulative dividends have been paid, whether or not in any such Dividend Period or Periods there shall be funds legally available for the payment of such dividends, whether the Trust has earnings or whether such dividends are authorized. No interest, or sum of money in lieu of interest, shall be payable in respect of any dividend payment or payments on the Series B Preferred Shares that may be in arrears. Holders of the Series B Preferred Shares shall not be entitled to any dividends, whether payable in cash, property or shares, in excess of full cumulative dividends, as herein provided, on the Series B Preferred Shares. Dividends payable on the Series B Preferred Shares for any period greater or less than a full Dividend Period will be computed on the basis of a 360-day year consisting of twelve 30-day months. Dividends payable on the Series B Preferred Shares for each full Dividend Period will be computed by dividing the applicable annual dividend rate by four. After full cumulative distributions on the Series B Preferred Shares have been paid, the holders of Series B Preferred Shares will not be entitled to any further distributions with respect to that Dividend Period.

(c) So long as any Series B Preferred Shares are outstanding, no dividends, except as described in the immediately following sentence, shall be authorized and declared or paid or set apart for payment on any series or class or classes of Parity Shares for any period unless full cumulative dividends have been declared and paid or are contemporaneously declared and paid or declared and a sum sufficient for the payment thereof set apart for such payment on the Series B Preferred Shares for all prior Dividend Periods. When dividends are not paid in full or a sum sufficient for such payment is not set apart, as aforesaid, all dividends authorized and declared upon the Series B Preferred Shares and all dividends authorized and declared upon any other series or class or classes of Parity Shares shall be authorized and declared ratably in proportion to the respective amounts of dividends accumulated and unpaid on the Series B Preferred Shares and such Parity Shares.

(d) So long as any Series B Preferred Shares are outstanding, no dividends (other than dividends or distributions paid solely in Junior Shares of, or in options, warrants or rights to subscribe for or purchase, Junior Shares) shall be authorized and declared or paid or set apart for payment or other distribution authorized and declared or made upon Junior Shares, nor shall any Junior Shares be redeemed, purchased or otherwise acquired (other than a redemption, purchase or other acquisition of Common Shares made for purposes of and in compliance with the terms of an employee incentive or benefit plan of the Trust or any subsidiary, or a conversion into or exchange for Junior Shares or redemptions for the purpose of preserving the Trust’s qualification as a REIT (as defined in the Trust Agreement)), for any consideration (or any monies to be paid to or made available for a sinking fund for the redemption of any such shares) by the Trust, directly or indirectly (except by conversion into or exchange for Junior Shares), unless in each case full cumulative dividends on all outstanding Series B Preferred Shares and any Parity Shares at the time such dividends are payable shall have been paid or set apart for payment for all past dividend periods with respect to the Series B Preferred Shares and all past dividend periods with respect to such Parity Shares.

(e) Any dividend payment made on the Series B Preferred Shares, including any capital gains dividends, shall first be credited against the earliest accrued but unpaid dividend due with respect to such Series B Preferred Shares which remains payable.

(f) Except as provided herein, the Series B Preferred Shares shall not be entitled to participate in the earnings or assets of the Trust.

Section 4 Liquidation Preference .

(a) In the event of any liquidation, dissolution or winding up of the Trust, whether voluntary or involuntary, before any payment or distribution of the assets of the Trust shall be made to or set apart for the holders of Junior Shares, the holders of the Series B Preferred Shares shall be entitled to receive $25.00 per share (the “ Liquidation Preference ”) plus an amount per share equal to all accrued and unpaid dividends (whether or not earned or declared) thereon to, but not including, the date of final distribution to such holders; but such holders of the Series B Preferred Shares shall not be entitled to any further payment. If, upon any such liquidation, dissolution or winding up of the Trust, the assets of the Trust, or proceeds thereof, distributable among the holders of the Series B Preferred Shares shall be insufficient to pay in full the preferential amount aforesaid and liquidating payments on any other Parity Shares, then such assets, or the proceeds thereof, shall be distributed among the holders of such Series B Preferred Shares and any such other Parity Shares ratably in accordance with the respective amounts that would be payable on such Series B Preferred Shares and any such other Parity Shares if all amounts payable thereon were paid in full. For the purposes of this Section 4, none of (i) a consolidation or merger of the Trust with one or more entities, (ii) a statutory share exchange by the Trust or (iii) a sale or transfer of all or substantially all of the Trust’s assets, individually or as part of a series of transactions, shall be deemed to be a liquidation, dissolution or winding up, voluntary or involuntary, of the Trust.

(b) Until payment shall have been made in full to the holders of the Series B Preferred Shares, as provided in this Section 4, and to the holders of Parity Shares, subject to any terms and provisions applying thereto, no payment will be made to any holder of Junior Shares upon the liquidation, dissolution or winding up of the Trust. Subject to the rights of the holders of Parity Shares, upon any liquidation, dissolution or winding up of the Trust, after payment shall have been made in full to the holders of the Series B Preferred Shares, as provided in this Section 4, any series or class or classes of Junior Shares shall, subject to any respective terms and provisions applying thereto, be entitled to receive any and all assets remaining to be paid or distributed, and the holders of the Series B Preferred Shares shall not be entitled to share therein.

Section 5 Optional Redemption .

(a) The Series B Preferred Shares are not redeemable prior to October 11, 2017, except as set forth in Section 5(b) of these terms of the Series B Preferred Shares; provided that the foregoing shall not prevent or limit the right of the Trust to redeem Series B Preferred Shares pursuant to these terms of the Series B Preferred Shares in order to preserve the qualification of the Trust as a REIT for federal and/or state income tax purposes as provided in the Trust Agreement and in Section 8 of these terms of the Series B Preferred Shares. On and after October 11, 2017, the Trust may, at its option, upon not less than 30 nor more than 60 days’ written notice, redeem the Series B Preferred Shares, in whole, at any time, or in part, from time to time, for cash at a redemption price (the “ Redemption Price ”) of (i) $25.00 per share, plus (ii) subject to the provisions set forth in the first sentence of Section 5(e) of these terms of the Series B Preferred Shares, accrued and unpaid dividends thereon (whether or not declared) to but excluding the date fixed for redemption (the “ Regular Redemption Right ”). If the Trust elects to redeem any Series B Preferred Shares as described in this paragraph, the Trust may use any available cash to pay the Redemption Price, and the Trust will not be required to pay the Redemption Price only out of the proceeds from the issuance of other classes and series of the Trust’s shares or any other specific source.

(b) Upon the occurrence of a Change of Control (as defined below), the Trust may, at its option, upon not less than 30 nor more than 60 days’ written notice, redeem the Series B Preferred Shares, in whole or in part, within 120 days after the first date on which such Change of Control occurred, for cash at the Redemption Price (the “ Special Redemption Right ”). If, prior to the Change of Control Conversion Date (as defined below), the Trust has provided or provides notice of its election to redeem some or all of the Series B Preferred Shares (whether pursuant to the Regular Redemption Right or the Special Redemption Right), the holders of Series B Preferred Shares shall not have the Change of Control Conversion Right (as defined below) set forth in Section 9 of these terms of the Series B Preferred Shares with respect to the shares called for redemption. If the Trust elects to redeem any Series B Preferred Shares as described in this paragraph, the Trust may use any available cash to pay the Redemption Price, and the Trust will not be required to pay the Redemption Price only out of the proceeds from the issuance of other classes and series of the Trust’s shares or any other specific source.

transaction or series of purchases, mergers or other acquisition transactions of shares of the Trust entitling that person to exercise more than 50% of the total voting power of all shares of the Trust entitled to vote generally in the election of the Trust’s trustees (except that such person will be deemed to have beneficial ownership of all securities that such person has the right to acquire, whether such right is currently exercisable or is exercisable only upon the occurrence of a subsequent condition); and

(d) Holders of Series B Preferred Shares to be redeemed shall surrender certificates representing such Series B Preferred Shares at the place designated in such notice (or, in the case of Series B Preferred Shares held in book-entry form through a Depositary (as defined below), shall deliver the shares to be redeemed through the facilities of such Depositary) and shall thereafter be entitled to receive the Redemption Price payable upon such redemption. If notice of redemption of any Series B Preferred Shares has been given and if the funds necessary for such redemption have been irrevocably set aside by the Trust, separate and apart from its other funds, in trust for the benefit of the holders of the Series B Preferred Shares so called for redemption, then from and after the redemption date (unless default shall be made by the Trust in providing for the payment of the Redemption Price payable upon redemption), dividends will cease to accrue on such Series B Preferred Shares, such Series B Preferred Shares shall no longer be deemed outstanding and all rights of the holders of such shares will terminate, except the right to receive the Redemption Price payable upon redemption. In the event that any redemption date shall not be a Business Day, then payment of the Redemption Price payable upon redemption need not be made on such redemption date but may be made on the next succeeding Business Day with the same force and effect as if made on such redemption date and no interest, additional dividends or other sums shall accrue on the amount so payable for the period from and after such redemption date to such next succeeding Business Day.

(e) Anything herein to the contrary notwithstanding, and except as otherwise required by law, the persons who were the holders of record of Series B Preferred Shares at the close of business on a Dividend Record Date will be entitled to receive the dividend payable on the corresponding Dividend Payment Date notwithstanding the redemption of those shares after such Dividend Record Date and on or prior to such Dividend Payment Date or the default by the Trust in the payment of the dividend due on that Dividend Payment Date, in which case the amount payable upon redemption of such Series B Preferred Shares will not include such dividend, and the full amount of the dividend payable for the applicable Dividend Period shall instead be paid on such Dividend Payment Date to the holders of record at the close of business on such Dividend Record Date as aforesaid. Except as provided in this paragraph and except to the extent that accrued and unpaid dividends are payable upon redemption pursuant to the foregoing provisions of this Section 5, the Trust will make no payment or allowance for unpaid dividends, whether or not in arrears, on Series B Preferred Shares called for redemption.

(f) Unless full cumulative dividends for all past Dividend Periods on all outstanding shares of Series B Preferred Shares shall have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof is set apart for payment, no Series B Preferred Shares shall be redeemed unless all outstanding Series B Preferred Shares are simultaneously redeemed; provided, however, that the

foregoing shall not prevent the purchase or acquisition by the Trust of Series B Preferred Shares pursuant to the Trust Agreement and Section 8 of these terms of the Series B Preferred Shares in order to preserve the qualification of the Trust as a REIT for federal and/or state income tax purposes or pursuant to a purchase or exchange offer made on the same terms to the holders of all outstanding Series B Preferred Shares. In addition, unless full cumulative dividends for all past Dividend Periods on all outstanding Series B Preferred Shares have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof set apart for payment, the Trust shall not purchase or otherwise acquire, directly or indirectly, any Series B Preferred Shares (except by conversion into or exchange for shares of the Trust ranking junior to the Series B Preferred Shares with respect to the payment of dividends and the distribution of assets upon liquidation, dissolution and winding up of the Trust); provided, however, that the foregoing shall not prevent the purchase or acquisition by the Trust of Series B Preferred Shares pursuant to Section 8 of these terms of the Series B Preferred Shares in order to preserve the qualification of the Trust as a REIT for federal and/or state income tax purposes or pursuant to a purchase or exchange offer made on the same terms to the holders of all outstanding Series B Preferred Shares. Subject to the limitations set forth in the Trust Agreement (including these terms of the Series B Preferred Shares), the Trust shall be entitled at any time and from time to time to repurchase Series B Preferred Shares in open-market transactions, by tender or by private agreement, in each case as duly authorized by the Board of Trustees and effected in compliance with applicable laws.

(g) Notice of redemption will be furnished by the Trust and will be mailed, postage prepaid, not less than 30 nor more than 60 days prior to the redemption date, addressed to the holders of record of the Series B Preferred Shares to be redeemed at their addresses as they appear on the share transfer records of the Trust (or, in the case of Series B Preferred Shares held in book-entry form through a Depositary, upon notice of redemption delivered in accordance with such notice and the procedures of such Depositary). No failure to give such notice or any defect therein or in the mailing thereof shall affect the validity of the proceedings for the redemption of any Series B Preferred Shares except as to the holder to whom notice was defective or not given. Each notice shall state: (i) the redemption date; (ii) the number of Series B Preferred Shares to be redeemed; (iii) the Redemption Price and whether or not accrued and unpaid dividends will be payable to holders surrendering Series B Preferred Shares or to the persons who were holders of record at the close of business on the relevant Dividend Record Date; (iv) the place or places where certificates for the Series B Preferred Shares, if any, are to be surrendered for payment of the Redemption Price; (v) the procedures that the holders of Series B Preferred Shares must follow to surrender the certificates, if any, for redemption, including whether the certificates, if any, shall be properly endorsed or assigned for transfer; (vi) that dividends on the Series B Preferred Shares to be redeemed will cease to accrue on such redemption date; (vii) whether such redemption is being made pursuant to the Regular Redemption Right or the Special Redemption Right; (viii) if applicable, that such redemption is being made in connection with a Change of Control and, in that case, a brief description of the transaction or transactions constituting such Change of Control; and (ix) if such redemption is being made in connection with a Change of Control, that the holders of the Series B Preferred Shares being so called for redemption will not be able to tender such Series B Preferred Shares for conversion in connection with the Change of Control and that each Series B Preferred Share tendered for conversion that is called, prior to the Change of Control Conversion Date, for redemption will be redeemed on the related date of redemption instead of converted on the Change of Control Conversion Date. If fewer than all of the Series B Preferred Shares held by any holder are to be redeemed, the notice mailed to such holder shall also specify the number of Series B Preferred Shares to be redeemed from such holder and, upon redemption, to the extent the Series B Preferred Shares are represented by certificates, a new certificate shall be issued representing the unredeemed shares without cost to the holder thereof. If fewer than all of the outstanding Series B Preferred Shares are to be redeemed, the shares to be redeemed shall be selected by lot or pro rata or by any other equitable method determined by the Trust. If any redemption date is not a Business Day, then the Redemption Price may be paid on the next Business Day and no interest, additional dividends or other sums will accrue on the amount payable for the period from and after that redemption date to that next Business Day.

(h) Upon surrender, in accordance with such notice, of the certificates representing any Series B Preferred Shares to be so redeemed (properly endorsed or assigned for transfer, if the Trust shall so require and the notice shall so state) (or, in the case of Series B Preferred Shares held in book-entry form through a Depositary, upon delivery of such shares in accordance with such notice and the procedures of such Depositary), such Series B Preferred Shares shall be redeemed by the Trust at the Redemption Price. In case fewer than all the Series B Preferred Shares represented by any such certificate are redeemed, a new certificate or certificates shall be issued representing the unredeemed Series B Preferred Shares without cost to the holder thereof.

(i) Any Series B Preferred Shares that shall at any time have been redeemed shall, after such redemption, have the status of authorized but unissued preferred shares of the Trust, without designation as to series until such preferred shares are once more designated as part of a particular series by the Board of Trustees.

Section 6 Voting Rights . Except as otherwise set forth herein, the Series B Preferred Shares shall not have any relative, participating, optional or other voting rights or powers, and the consent of the holders thereof shall not be required for the taking of any corporate action. Subject to the provisions in the Trust Agreement regarding Excess Shares (as defined in Paragraph 9.A of the Trust Agreement), in any matter in which the holders of Series B Preferred Shares are entitled to vote, each such holder shall have the right to one vote for each Series B Preferred Share held by such holder.

(a) If and whenever six quarterly dividends (whether or not consecutive) payable on the Series B Preferred Shares are in arrears, whether or not earned or declared, the number of members then constituting the Board of Trustees will be increased by two and the holders of Series B Preferred Shares, voting together as a class with the holders of any other class or series of Parity Shares upon which like voting rights have been conferred and are exercisable (any such other class or series, the “ Voting Preferred Shares ”), will have the right to elect two additional Trustees of the Trust ( the “ Preferred Share Trustees ”) at an annual meeting of shareholders or a properly called special meeting of the holders of the Series B Preferred Shares and such Voting Preferred Shares and at each subsequent annual meeting of shareholders until all such dividends and dividends for the then current Dividend Period on the Series B Preferred Shares and such other Voting Preferred Shares have been paid or declared and set aside for payment. Whenever all arrears in dividends on the Series B Preferred Shares and the Voting Preferred Shares then outstanding have been paid and full dividends on the Series B Preferred Shares and the Voting Preferred Shares for the then current Dividend Period have been paid in full or declared and set apart for payment in full, then the right of the holders of the Series B Preferred Shares and the Voting Preferred Shares to elect the two Preferred Share Trustees will cease, the terms of office of the Preferred Share Trustees will forthwith terminate and the number of members of the Board of Trustees will be reduced accordingly; provided, however, that the right of the holders of the Series B Preferred Shares and the Voting Preferred Shares to elect the Preferred Share Trustees will again vest if and whenever six quarterly dividends are in arrears, as described above. In no event shall the holders of Series B Preferred Shares be entitled pursuant to these voting rights to elect a trustee that would cause the Trust to fail to satisfy a requirement relating to director independence of any national securities exchange on which any class or series of the Trust’s shares are listed or under any law or regulation. In class votes with other Voting Preferred Shares, preferred shares of different classes or series shall vote in proportion to the liquidation preference of the preferred shares.

(b) So long as any Series B Preferred Shares are outstanding, the approval of two-thirds of the votes entitled to be cast by the holders of outstanding Series B Preferred Shares, voting separately as a class, either at a meeting of shareholders or by written consent, is required (i) to amend, alter or repeal any provisions of the Trust Agreement or of this amendment setting forth the terms of the Series B Preferred Shares, whether by merger, consolidation or otherwise, to affect materially and adversely the voting powers, rights or preferences of the holders of the Series B Preferred Shares, (ii) to authorize, create or issue, or increase the number of authorized or issued shares of, any class or series of shares of the Trust ranking senior to the Series B Preferred Shares with respect to the payment of dividends or the distribution of assets upon liquidation, dissolution or winding up of the Trust, or reclassify any authorized shares of the Trust into any such shares, or create, authorize or issue any obligation or security convertible into, exchangeable or exercisable for, or evidencing the right to purchase, any such shares (provided that if such amendment affects materially and adversely the rights, preferences, privileges or voting powers of one or more but not all of the other class or series of Voting Preferred Shares, the consent of the holders of at least two-thirds of the outstanding shares of each such class or series so affected is required), or (iii) to enter into any share exchange that affects Series B Preferred Shares, or consolidate with or merge into any other entity, or permit any other entity to consolidate with or merge into the Trust, unless in each such case described in this clause (iii) each Series B Preferred Share then outstanding remains outstanding without a material adverse change to its terms and rights or is converted into or exchanged for one or more preferred shares of the surviving or resulting entity having preferences, conversion and other rights, dividends, voting powers, restrictions, limitations as to dividends, qualifications and terms and conditions of redemption substantially identical to, and in any event without any material adverse change to, those of the Series B Preferred Shares. However, the Trust may create additional classes of Parity Shares and Junior Shares, amend the Trust Agreement and this Designating Amendment to increase the authorized number of Parity Shares (including the Series B Preferred Shares) and Junior Shares and issue additional classes or series of Parity Shares and Junior Shares without the consent of any holder of Series B Preferred Shares.

(c) The foregoing voting provisions shall not apply if, at or prior to the time when the act with respect to which such vote would otherwise be required shall be effected, all outstanding Series B Preferred Shares shall have been redeemed or called for redemption upon proper notice and sufficient funds shall have been deposited in trust to effect such redemption.

Section 7 Information Rights . During any period in which the Trust is not subject to Section 13 or 15(d) of the Exchange Act, and any Series B Preferred Shares are outstanding, the Trust will (i) transmit by mail (or other permissible means under the Exchange Act) to all holders of Series B Preferred Shares, as their names and addresses appear in the record books of the Trust and without cost to such holders, copies of the annual reports on Form 10-K and quarterly reports on Form 10-Q that the Trust would have been required to file with the Securities and Exchange Commission pursuant to Section 13 or 15(d) of the Exchange Act if the Trust were subject thereto (other than any exhibits that would have been required) and (ii) promptly, upon request, supply copies of such reports to any prospective holder of Series B Preferred Shares. The Trust will mail (or otherwise provide) the information to the holders of Series B Preferred Shares within 15 days after the respective dates by which a periodic report on Form 10-K or Form 10-Q, as the case may be, in respect of such information would have been required to be filed with the Securities and Exchange Commission if the Trust were subject to Section 13 or 15(d) of the Exchange Act, in each case, based on the dates on which the Trust would be required to file such periodic reports if the Trust were a “non-accelerated filer” within the meaning of the Exchange Act.

Section 8 Restrictions on Transfer . The Series B Preferred Shares shall be included within the term “Preferred Shares” and within the term “Shares,” and are governed by and issued subject to all the ownership and transfer restrictions of the Trust Agreement applicable to Preferred Shares and Shares generally, including but not limited to the terms and conditions (including exceptions and exemptions) of Paragraph 9 of the Trust Agreement applicable to Preferred Shares and Shares. The foregoing sentence shall not be construed to limit the applicability to the Series B Preferred Shares of any other term or provision of the Trust Agreement.

Section 9 Conversion Upon a Change of Control . The Series B Preferred Shares are not convertible into or exchangeable for any other property or securities of the Trust, except as provided in this Section 9.

(a) Upon the occurrence of a Change of Control, each holder of Series B Preferred Shares shall have the right (unless, prior to the Change of Control Conversion Date, the Trust has provided or provides notice of its election to redeem some or all of the Series B Preferred Shares held by such holder pursuant to the Regular Redemption Right or the Special Redemption Right, in which case such holder shall have the right only with respect to Series B Preferred Shares that are not called for redemption) to convert some or all of the Series B Preferred Shares held by such holder (the “ Change of Control Conversion Right ”) on the Change of Control Conversion Date into a number of Common Shares per share of Series B Preferred Shares (the “ Common Share Conversion Consideration ”) equal to the lesser of:

(i) the quotient obtained by dividing (i) the sum of the $25.00 Liquidation Preference per Series B Preferred Share plus the amount of any accrued and unpaid dividends thereon to but excluding the Change of Control Conversion Date (unless the Change of Control Conversion Date is after a Dividend Record Date and prior to the corresponding Dividend Payment Date, in which case no additional amount for such accrued and unpaid dividends will be included in such sum) by (ii) the Common Share Price (as defined below) (such quotient, the “ Conversion Rate ”) and

(ii) 3.1348 (the “ Share Cap ”).

(b) Anything in these terms of the Series B Preferred Shares to the contrary notwithstanding and except as otherwise required by law, the persons who are the holders of record of Series B Preferred Shares at the close of business on a Dividend Record Date will be entitled to receive the dividend payable on the corresponding Dividend Payment Date notwithstanding the conversion of those shares after such Dividend Record Date and on or prior to such Dividend Payment Date and, in such case, the full amount of such dividend shall be paid on such Dividend Payment Date to the persons who were the holders of record at the close of business on such Dividend Record Date.

Consideration, as applicable) (the “ Exchange Cap ”). The Exchange Cap is subject to pro rata adjustments for any Share Splits on the same basis as the corresponding adjustment to the Share Cap, and shall be increased on a pro rata basis with respect to any additional Series B Preferred Shares designated and authorized for issuance pursuant to any subsequent amendment to the Trust Agreement.

(e) In the case of a Change of Control pursuant to which Common Shares are or will be converted into cash, securities or other property or assets (including any combination thereof) (the “ Alternative Form Consideration ”), a holder of Series B Preferred Shares shall receive upon conversion of such Series B Preferred Shares the kind and amount of Alternative Form Consideration which such holder would have owned or been entitled to receive upon the Change of Control had such holder held a number of Common Shares equal to the Common Share Conversion Consideration immediately prior to the effective time of the Change of Control (the “ Alternative Conversion Consideration ,” and the Common Share Conversion Consideration or the Alternative Conversion Consideration, whichever shall be applicable to a Change of Control, are referred to herein as the “ Conversion Consideration ”).

(g) The Trust will not issue fractional Common Shares upon the conversion of Series B Preferred Shares in connection with a Change of Control. Instead, the Trust will make, and the holders of Series B Preferred Shares shall be entitled to receive, a cash payment equal to the value of such fractional shares based upon the Common Share Price used in determining the Common Share Conversion Consideration for such Change of Control.

(h) Within 15 days following the occurrence of a Change of Control, the Trust will provide to holders of Series B Preferred Shares a notice of the occurrence of the Change of Control that describes the resulting Change of Control Conversion Right, which notice shall be delivered to the holders of record of the Series B Preferred Shares at their addresses as they appear on the Trust’s share transfer records and notice shall also be provided to the Trust’s transfer agent. No failure to give such notice or any defect therein or in the mailing thereof shall affect the validity of the proceedings for the conversion of any Series B Preferred Shares except as to the holder to whom notice was defective or not given. Each notice shall state: (i) the events constituting the Change of Control; (ii) the date of the Change of Control; (iii) the last date on which the holders of Series B Preferred Shares may exercise their Change of Control Conversion Right; (iv) the method and period for calculating the Common Share Price; (v) the Change of Control Conversion Date; (vi) that if, prior to the Change of Control Conversion Date, the Trust has provided or provides notice of its election to redeem all or any of the Series B Preferred Shares, the holders will not be able to convert the Series B Preferred Shares called for redemption and such Series B Preferred Shares shall be redeemed on the related redemption date, even if such shares have already been tendered for conversion pursuant to the Change of Control Conversion Right; (vii) if applicable, the type and amount of Alternative Conversion Consideration entitled to be received per Series B Preferred Share; (viii) the name and address of the paying agent, transfer agent and conversion agent for the Series B Preferred Shares; (ix) the procedures that the holders of Series B Preferred Shares must follow to exercise the Change of Control Conversion Right (including procedures for

surrendering shares for conversion through the facilities of a Depositary (as defined below)), including the form of conversion notice to be delivered by such holders as described below; and (x) the last date on which holders of Series B Preferred Shares may withdraw shares surrendered for conversion and the procedures such holders must follow to effect such a withdrawal.

(i) The Trust shall issue a press release containing such notice for publication on Dow Jones & Company, Inc., Business Wire, PR Newswire or Bloomberg Business News (or, if such organizations are not in existence at the time of issuance of such press release, such other news or press organization as is reasonably calculated to broadly disseminate the relevant information to the public), or post notice on the Trust’s website, in any event prior to the opening of business on the first Business Day following any date on which the Trust provides notice pursuant to Section 9(h) of these terms of the Series B Preferred Shares to the holders of Series B Preferred Shares.

(j) To exercise the Change of Control Conversion Right, the holders of Series B Preferred Shares shall be required to deliver, on or before the close of business on the Change of Control Conversion Date, the certificates (if any) representing the Series B Preferred Shares to be converted, duly endorsed for transfer (or, in the case of any Series B Preferred Shares held in book-entry form through a Depositary, to deliver, on or before the close of business on the Change of Control Conversion Date, the Series B Preferred Shares to be converted through the facilities of such Depositary), together with a written conversion notice in the form provided by the Trust, duly completed, to the Trust’s transfer agent. Such notice shall state: (i) the relevant Change of Control Conversion Date; (ii) the number of Series B Preferred Shares to be converted; and (iii) that the Series B Preferred Shares are to be converted pursuant to the applicable terms of the Series B Preferred Shares.

(k) The “Change of Control Conversion Date” is the date the Series B Preferred Shares are to be converted, which will be a Business Day selected by the Trust that is no fewer than 20 days nor more than 35 days after the date on which the Trust provides the notice to holders of Series B Preferred Shares pursuant to Section 9(h) of these terms of the Series B Preferred Shares.

(m) Holders of Series B Preferred Shares may withdraw any notice of exercise of a Change of Control Conversion Right (in whole or in part) by a written notice of withdrawal delivered to the Trust’s transfer agent prior to the close of business on the Business Day prior to the Change of Control Conversion Date. The notice of withdrawal delivered by any holder must state: (a) the number of withdrawn Series B Preferred Shares; (b) if certificated Series B Preferred Shares have been surrendered for conversion, the certificate numbers of the withdrawn Series B Preferred Shares; and (c) the number of Series B Preferred Shares, if any, which remain subject to the holder’s conversion notice.

(n) Notwithstanding the foregoing, if any Series B Preferred Share is held in book-entry form through The Depository Trust Company or a similar depositary (each, a “ Depositary ”), the conversion notice and/or the notice of withdrawal as applicable shall comply with applicable procedures, if any, of the applicable Depositary.

(o) Series B Preferred Shares as to which the Change of Control Conversion Right has been properly exercised and for which the conversion notice has not been properly withdrawn shall be converted into the applicable Conversion Consideration in accordance with the Change of Control Conversion Right on the Change of Control Conversion Date, unless, prior to the Change of Control Conversion Date, the Trust has provided or provides notice of its election to redeem some or all of the shares of Series B Preferred Shares pursuant to the Regular Redemption Right or the Special Redemption Right, in which case only the Series B Preferred Shares properly surrendered for conversion and not properly withdrawn that are not called for redemption will be converted as aforesaid. If the Trust elects to redeem Series B Preferred Shares that would otherwise be converted into the applicable Conversion Consideration on a Change of Control Conversion Date, such Series B Preferred Shares shall not be so converted and the holders of such shares shall be entitled to receive on the applicable redemption date the Redemption Price set forth in Section 5(a) or 5(b) of these terms of the Series B Preferred Shares, as applicable.

(q) In connection with the exercise of any Change of Control Conversion Right, the Trust will comply with all federal and state securities laws and stock exchange rules in connection with any conversion of Series B Preferred Shares into Common Shares or other property. Notwithstanding any other provision contained in these terms of the Series B Preferred Shares, no holder of Series B Preferred Shares will be entitled to convert such Series B Preferred Shares into Common Shares to the extent that receipt of such Common Shares would cause such holder (or any other person) to have Beneficial Ownership or Constructive Ownership (each as defined in Paragraph 9.A of the Trust Agreement) in excess of the Ownership Limit (as defined in Paragraph 9.A of the Trust Agreement).

(r) The Trust has reserved and will reserve and keep available at all times, free of any preemptive rights arising by operation of law, under the Trust Agreement or the By-Laws of the Trust, under any agreement or instrument to which the Trust or any of its subsidiaries is a party or otherwise, out of its authorized but unissued shares the maximum number of Common Shares issuable upon conversion of the outstanding Series B Preferred Shares until such time as all of the outstanding Series B Preferred Shares shall have been converted, repurchased and retired or redeemed and retired. The Trust covenants that all Common Shares, if any, issued upon conversion of the Series B Preferred Shares will upon issue be duly authorized, validly issued, fully paid and non-assessable and free from all taxes, liens and charges with respect to the issue thereof.

Section 10 Record Holders . The Trust and the transfer agent for the Series B Preferred Shares may deem and treat the record holder of any Series B Preferred Shares as the true and lawful owner thereof for all purposes, and neither the Trust nor the transfer agent shall be affected by any notice to the contrary.

Section 11 Status of Senior Preferred Shares and Holders Thereof . In accordance with Section 8 of the Trust Agreement, the Series B Preferred Shares shall be included within the term “Preferred Shares” and within the term “Shares,” and the holders of Series B Preferred Shares shall be included within the term “Shareholders” for purposes of all provisions of the Trust Agreement, other than Paragraph 2.C., the third sentence of Paragraph 6, Paragraph 10, Paragraph 11.A., the second paragraph of Paragraph 11.C., and Paragraph 11.F. thereof.

RESOLVED , that, this Certificate of Designation shall become effective at 8:30 a.m. (Eastern Time) on October 11, 2012.

IN WITNESS WHEREOF, Pennsylvania Real Estate Investment Trust has caused this Certificate of Designation to be executed and delivered on its behalf by its Executive Vice President and Chief Financial Officer and attested to by its Secretary on this 10th day of October, 2012.


PENNSYLVANIA REAL ESTATE INVESTMENT TRUST

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


Attest:

By:		/s/ Bruce Goldman
Name: Bruce Goldman
Title: Executive Vice President, General Counsel and Secretary

Exhibit 10.1

Pennsylvania Real Estate Investment Trust (“PREIT”)

2012 Incentive Compensation Opportunity Award

for

2012 Incentive Opportunity ²

2012 Incentive Range ³ - % of Base Salary

2012 Base Salary ¹ $

Threshold ⁴ Target ⁴ Outperformance ⁴

Corporate Measure ^{5, 8}

Threshold ⁷

Target ⁷

Outperformance ⁷

FFO Per Share

(Primary) ⁶

2012 INCENTIVE

OPPORTUNITY:*

The amount payable under this award will be paid in cash during the period January 1, 2013 through March 15, 2013. 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 2012 incentive compensation to you is conditioned on your continued employment by PREIT or one of its affiliates through the date that 2012 incentive compensation is paid to 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 may be subsequently amended, even if such amendment is adopted after payment is made under this award.

IN WITNESS WHEREOF, PREIT has caused this 2012 Incentive Compensation Opportunity Award to be duly executed by its duly authorized officer and the Grantee has signed this award on , 2012.


PENNSYLVANIA REAL ESTATE INVESTMENT TRUST

By:


Grantee

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 may be subsequently amended, even if such amendment is adopted after payment is made under this award.

IN WITNESS WHEREOF, PREIT has caused this 2012 Incentive Compensation Opportunity Award to be duly executed by its duly authorized officer and the Grantee has signed this award on , 2012.


PENNSYLVANIA REAL ESTATE INVESTMENT TRUST

By:


Grantee

ENDNOTES

“2012 Base Salary” means your regular, basic compensation from PREIT and/or a PREIT affiliate for 2012, not including bonuses, contributions made by PREIT and/or a PREIT affiliate (other than from an elective reduction in your salary under a 401(k), cafeteria or transportation plan) to benefit or welfare plans or other additional compensation.

“2012 Incentive Opportunity” means the opportunity to earn incentive compensation for 2012, up to % of your Base Salary, in the event certain business performance measures and individual performance goals are achieved. PREIT’s FFO Per Share for 2012 will be the primary business performance measure considered by the Committee, with the Committee retaining the discretion to consider other business performance factors. See note 9. Individual performance relates to your performance within the scope of your responsibilities as an employee of PREIT and/or a PREIT affiliate.

“2012 Incentive Range” means, depending on the level of business and individual performance achieved ( i.e., Threshold, Target or Outperformance), the percentage of your Base Salary that you may earn under this 2012 Incentive Compensation Opportunity Award. If business performance is at or between the Threshold level and the Target level or between the Target level and the Outperformance level, the percentage based on business performance will be interpolated accordingly. Similarly, if individual performance is at or between the Threshold level and the Target level, or at or between the Target level and the Outperformance level, the percentage will be interpolated accordingly.

⁴

With respect to business 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 2012 incentive compensation is earned. The Committee (after considering the recommendations of the senior management of PREIT) 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 both individual performance and with respect to FFO Per Share and the other business performance factors, if any, considered relevant hereunder by the Committee (FFO and such other business factors being, collectively, the “Relevant Factors”), you will earn at least % of your 2012 Base Salary as your 2012 incentive compensation allocated to such performances (see note 5). If the Threshold performance level is not met for the Relevant Factors or your individual performance, you will not receive any 2012 incentive compensation allocated to business performance or individual performance, as applicable. For purposes of determining the level of business performance achieved for purposes of this award, the Relevant Factors shall be taken as a whole with such relative weighting as shall be determined by the Committee.

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 FFO Per Share, Target shall be FFO Per Share at or between $ and $ for 2012. The Committee (after considering the recommendation of the senior management of PREIT) 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 for both the Relevant Factors and individual performance, you will earn at least % of your 2012 Base Salary as your 2012 incentive compensation allocated to such performances (see note 5).

With respect to business performance, “Outperformance” signifies an outstanding achievement, an extraordinary performance by business performance 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 Committee determines to be the “Outperformance” level for purposes of your individual performance. If the Outperformance level is achieved for both the Relevant Factors and individual performance, you will earn % of your 2012 Base Salary as your 2012 incentive compensation allocated to such performances (see note 5). In no event will PREIT pay you 2012 incentive compensation under this award in excess of % of your 2012 Base Salary.

⁵

“Performance Measurement Allocation” means the percent by which your 2012 incentive compensation is allocated between business performance and your individual performance. For example, if your base salary is $100,000, and 50% of your 2012 incentive compensation is allocated to business performance and 50% is allocated to your individual performance, you will earn $ (50% of % of $100,000) of your 2012 incentive compensation if the Outperformance level of business performance is achieved and $ (50% of % of $100,000) of your 2012 Incentive Compensation if the Outperformance level of your individual performance is achieved.

⁶

The “Corporate Measure” consists of the Relevant Factor or Factors upon which PREIT’s business performance is determined for purposes of this award, and the “Corporate Salary Portion” is the amount of your 2012 Base Salary to which the Corporate Measure is applied. In your case, that amount is $ , or % of your 2012 Base Salary.

⁷	“FFO Per Share” means, with respect to each diluted share of beneficial interest in PREIT, “funds from operations” of PREIT for its fiscal year ending December 31, 2012, as reported to the public by PREIT after the end of the fiscal year.

⁸

The Committee shall have the authority, in its sole discretion, to adjust the Threshold, Target and Outperformance levels for FFO Per Share 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 2011 in a manner consistent with the purposes of this award. 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 in making the adjustment as it deems appropriate under the circumstances in its sole discretion.

⁹

Although FFO Per Share is the primary business performance factor for determining incentive compensation for 2012 relating to your Corporate Salary Portion, it is not expected to be the sole Relevant Factor and its importance may be impacted materially by the combined effect of other Relevant Factors. For purposes of determining incentive compensation for 2012, in addition to FFO Per Share, the Committee has selected (i) growth in same store net operating income, (ii) the leverage ratio at the end of 2012 as computed under PREIT’s principal credit facility, (iii) the ratio of general and administrative expenses to gross revenues, and (iv) PREIT’s success in the disposition of non-core assets as potential Relevant Factors in view of PREIT’s business objectives for 2012. Other factors that the Committee may consider to be Relevant Factors include, but are not limited to, (i) occupancy rates, (ii) new and renewal leasing activity, (iii) balance sheet metrics deemed important by the Committee for purposes of this award, and (iv) a comparison of PREIT’s business performance metrics with the business performance metrics of companies in its peer group for compensation purposes. The Committee has the authority to base its final determination on the Relevant Factors in addition to FFO that it shall choose and to give such weight to each of such Relevant Factors as the Committee shall deem appropriate after considering PREIT’s over-all business performance for 2012. Your incentive compensation based upon the Corporate Measure shall be as so determined by the Committee. Determinations made by the Committee under this note 9 and note 8 shall be applied consistently to the Corporate Salary Portion of each officer of PREIT and its affiliates who received a 2012 Incentive Compensation Opportunity Award. Determinations made by the Committee under this note 9 and under note 8 shall not affect to any extent determinations that the Committee may make for years after 2012. After the Committee has made its determinations under this award, you will receive a notice which shall (i) state whether Threshold has been achieved for purposes of the Corporate Measure and, if so, the level from Threshold to Outperformance at which incentive compensation based on the Corporate Measure will be paid, and (ii) contain such other information as the Committee shall elect in its sole discretion to include in the notice. Neither a failure to provide such notice nor a deficiency in such notice shall affect any determination made under this award.

¹⁰

The Committee has the sole discretion to determine the level of individual performance you have achieved in 2012. However, regardless of your individual performance, no 2012 incentive compensation based on your individual performance will be paid if FFO Per Share is less than $ (subject to adjustment by the Committee in connection with an adjustment made under note 8) unless incentive compensation shall be paid based upon the Corporate Measure.

¹¹

In the event of a “Change in Control” of PREIT as defined in PREIT’s Second Amended and Restated 2003 Equity Incentive Plan, as the same may be subsequently amended, the Committee shall have the authority, in its sole discretion, to accelerate the determination and payment to you of your 2012 incentive compensation.

¹²	The Committee has the sole authority to interpret the terms and provisions of this award and to decide any questions that may arise under this award. Its determinations shall be conclusive and binding on all parties.

Exhibit 10.2

Pennsylvania Real Estate Investment Trust (“PREIT”)

2012 Incentive Compensation Opportunity Award

for

2012 Base Salary $

2012 Incentive Opportunity

2012 Incentive Range - % of Base Salary

Threshold Target ⁴ Outperformance ⁴

Performance Measurement Allocation

Corporate Individual

CORPORATE -

Corporate Measure

Threshold ⁸

Target ⁸

Outperformance ⁸

FFO Per Share, ⁹

(Primary)

TOTAL 2012

CORPORATE

OPPORTUNITY

INDIVIDUAL -

Individual Measure

Threshold

Target

Outperformance

KPIs ¹⁰

KPIs

TOTAL 2012

INDIVIDUAL

OPPORTUNITY

TOTAL 2012

INCENTIVE

OPPORTUNITY:*

ENDNOTES

“2012 Incentive Opportunity” means the opportunity to earn incentive compensation for 2012, up to % of your Base Salary, in the event certain business performance measures are achieved. PREIT’s FFO Per Share for 2012 will be the primary business performance measure considered by the Committee, with the Committee retaining the discretion to consider other business performance factors. See note 8.

“2012 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 2012 Incentive Compensation Opportunity Award. If 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 2012 incentive compensation is earned. If the Threshold performance level is achieved with respect to FFO Per Share and the other business performance factors, if any, considered relevant hereunder by the Committee (FFO and such other business performance factors being, collectively, the “Relevant Factors”), you will earn at least % of your 2012 Base Salary as your 2012 incentive compensation. If the Threshold performance level is not met for the Relevant Factors, you will not receive any 2012 incentive compensation. For purposes of determining the level of performance achieved for purposes of this award, the Relevant Factors shall be taken as a whole with such relative weighting as shall be determined by the Committee.

“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 FFO Per Share, Target shall be FFO Per Share at or between $ and $ for 2012. If the Target performance level is achieved for the Relevant Factors, you will earn at least % of your 2012 Base Salary as your 2012 incentive compensation.

“Outperformance” signifies an outstanding achievement, an extraordinary performance by business performance standards, and which is expected to have a modest probability of achievement. If the Outperformance level is achieved for the Relevant Factors, you will earn % of your 2012 Base Salary as your 2012 incentive compensation. In no event will PREIT pay you 2012 incentive compensation under this award in excess of % of your 2012 Base Salary.

⁵

The “Corporate Measure” consists of the Relevant Factor or Factors upon which PREIT’s business performance is determined by the Committee for purposes of this award, and the “Corporate Salary Portion” is the amount of your 2012 Base Salary to which the Corporate Measure is applied. In your case, that amount is $ , or 100% of your 2012 Base Salary. Accordingly, in your case, the Corporate Salary Portion and your 2012 Base Salary are identical.

⁶	“FFO Per Share” means, with respect to each diluted share of beneficial interest in PREIT, “funds from operations” of PREIT for its fiscal year ending December 31, 2012, as reported to the public by PREIT after the end of the fiscal year.

⁷

The Committee shall have the authority, in its sole discretion, to adjust the Threshold, Target and Outperformance levels for FFO Per Share 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 2012 in a manner consistent with the purposes of this award. 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 in making the adjustment as it deems appropriate under the circumstances in its sole discretion.

⁸

authority to base its final determination on the Relevant Factors in addition to FFO that it shall choose and to give such weight to each of such Relevant Factors as the Committee shall deem appropriate after considering PREIT’s over-all business performance for 2012. Your incentive compensation based upon the Corporate Measure shall be as so determined by the Committee. Determinations made by the Committee under this note 8 and note 7 shall be applied consistently to the Corporate Salary Portion of each officer of PREIT and its affiliates who received a 2012 Incentive Compensation Opportunity Award. Determinations made by the Committee under this note 8 and under note 7 shall not affect to any extent determinations that the Committee may make for years after 2012. After the Committee has made its determinations under this award, you will receive a notice which shall (i) state whether Threshold has been achieved for purposes of the Corporate Measure and, if so, the level from Threshold to Outperformance at which incentive compensation based on the Corporate Measure will be paid, and (ii) contain such other information as the Committee shall elect in its sole discretion to include in the notice. Neither a failure to provide such notice nor a deficiency in such notice shall affect any determination made under this award.

⁹

¹⁰	The Committee has the sole authority to interpret the terms and provisions of this award and to decide any questions that may arise under this award. Its determinations shall be conclusive and binding on all parties.

Exhibit 10.3

PROMISSORY NOTE A-1

$150,000,000.00

Cherry Hill, New Jersey

August 15, 2012

FOR VALUE RECEIVED, PR CHERRY HILL STW LLC , a Delaware limited liability company (“ PR Cherry Hill ”), and CHERRY HILL CENTER, LLC , a Maryland limited liability company (“ Cherry Hill Center ”; PR Cherry Hill and Cherry Hill Center are referred to herein individually and collectively, as the context may require, as “ Maker ”), each having an office at c/o Pennsylvania Real Estate Investment Trust, The Bellevue, 200 South Broad Street, 3 ^rd Floor, Philadelphia, Pennsylvania 19102, jointly promises to pay to NEW YORK LIFE INSURANCE COMPANY (“ Holder ”), a New York mutual insurance company, having its principal office at 51 Madison Avenue, New York, New York 10010-1603, or order, without offset, at its principal office in New York, New York, or at such other place as may be designated in writing by Holder, the principal sum of ONE HUNDRED FIFTY MILLION DOLLARS ($150,000,000.00), lawful money of the United States of America, together with interest thereon at the rate (“ Interest Rate ”) of three and ninety-hundredths percent (3.90%) per annum, payable in monthly payments (“ Payments ”) as follows: (a) interest only payments of Four Hundred Eighty-Seven Thousand Five Hundred and 00/100 Dollars ($487,500.00), commencing on the first (1 ^st ) day of October, 2012 and payable on the first (1 ^st ) day of each and every month thereafter until and including September 1, 2014, and (b) principal and interest payments of Seven Hundred Seven Thousand Five Hundred Three and 00/100 Dollars ($707,503.00), commencing on October 1, 2014 and payable on the first (1 ^st ) day of each and every month thereafter until and including September 1, 2022 (“ Maturity Date ”). In addition, on the Maturity Date, Maker shall pay to Holder the entire unpaid principal balance of this Note, together with all interest then accrued thereon pursuant to this Note and all other Obligations (as hereinafter defined) then unpaid pursuant to the Loan Instruments (as hereinafter defined). Holder shall apply each Payment, when received, first to the Obligations, other than principal and interest, which are then due and payable, but only if so elected by Holder in its sole and absolute discretion, and then to the payment of accrued interest on the outstanding principal balance hereof and the remainder to the reduction of such principal balance. Interest from the date hereof through and including August 31, 2012, is due and payable on the date of this Note and shall be computed on the basis of the actual number of days in such period over a 360 day year.

This Note is secured by, among other things, (a) a Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing (“ Mortgage ”), effective as of the date hereof, granted by Maker to Holder and Teachers Insurance and Annuity Association of America, a New York corporation (together with its successors and assigns “ Co-Lender ”) and encumbering premises and other property (“ Secured Property ”) more particularly described in the Mortgage and (b) an Assignment of Leases, Rents, Income and Cash Collateral, effective as of the date hereof, from Maker to Holder and Co-Lender. Obligations, Loan Instruments and all other

capitalized terms used in this Note and not expressly defined herein shall have the meanings assigned to such terms in the Mortgage. The terms and provisions of the Loan Instruments, other than this Note and Note A-2 (as defined below), are hereby fully incorporated into this Note by reference.

All regularly scheduled monthly payments shall be made either by wire transfer initiated by Maker or, at Maker’s option, electronic fund transfer debiting. In the event that electronic fund transfer debiting is established for regularly scheduled payments under the Loan Instruments, Maker will cooperate with Holder and provide such documentation as is required to effectuate such payments by electronic fund transfer debit transactions through the Automated Clearing House network. Once the payment authorization is established, the failure of the electronic funds transfer debit entry transaction to be timely completed, for whatever reason, other than Holder’s failure to initiate the debit, shall not relieve Maker of its obligations to make all payments required hereunder or under the other Loan Instruments when due, and to comply with Maker’s other obligations under the Loan Instruments.

During the existence of an Event of Default or from and after the Maturity Date, the aggregate amount of the Obligations shall automatically bear interest at an annual rate (“ Increased Rate ”) equal to the Interest Rate plus five percentage points, unless compliance with applicable law requires a lesser interest rate, in which event the aggregate amount of the Obligations shall bear interest at the maximum rate permitted by law.

Any default in the making of any Payment or in the making of any payment due pursuant to Section 1.04 of the Mortgage or in the making of any other deposit or reserve due pursuant to any Loan Instrument on the date the same is due will result in loss and additional expense to Holder in servicing the Obligations, handling such delinquent payments and meeting its other financial obligations. Accordingly, upon the occurrence of any such default, Maker shall pay, without regard to any grace periods, a late charge (“ Late Charge ”) of four percent (4%) of each such overdue payment (other than a Payment at the maturity of this Note, whether by acceleration upon an Event of Default or otherwise), Maker agrees that (a) the exact amount of such loss and additional expense is extremely difficult, if not impossible to determine, (b) the Late Charge is a reasonable estimate of such loss and expense and therefore does not constitute a penalty and (c) in addition to, and not in lieu of, the exercise of any other remedies to which Holder may be entitled, Holder may collect from Maker all Late Charges for the purpose of defraying such loss and expense, unless applicable law requires a lesser such charge, in which event Holder may collect from Maker a Late Charge at the maximum rate permitted by applicable law.

Maker may not prepay the Obligations prior to October 1, 2015 (“ Closed Period ”). On or at any time after October 1, 2015, Maker may prepay the outstanding principal balance of this Note and that certain Promissory Note A-2 dated the date hereof from Maker to Co-Lender in the original principal amount of $150,000,000.00 (“ Note A-2 ”) (each in whole but not in part), together with accrued interest thereon to the date of prepayment and any other outstanding Obligations, provided that (a) Maker gives Holder not less than sixty (60) and not more than one hundred twenty (120) days prior written notice of Maker’s intention to make such prepayment, (b) at least ten (10) business days prior to the prepayment date, Maker gives Holder written

notice confirming the actual prepayment date and (c) on such prepayment date, in addition to paying the entire outstanding principal balance of this Note and Note A-2, all accrued interest thereon and any other outstanding Obligations, Maker pays to Holder the Make-Whole Amount. Any prepayment notice given by Maker shall be deemed null and void if the prepayment covered by such notice is not made within thirty (30) days of the date specified in Maker’s prepayment notice as the designated date for prepayment. Notwithstanding anything contained herein to the contrary, (w) provided that no Event of Default, or event which, with the giving of notice or the passage of time could become an Event of Default, then exists under the Loan Instruments, no Make-Whole Amount shall be due with respect to, and to the extent of, any prepayment of all or any portion of the Obligations by the application thereto of casualty proceeds or condemnation awards in accordance with the terms of the Mortgage, (x) Maker may partially prepay the Obligations in connection with a Permitted Transfer of the Property as more particularly set forth in the Loan Instruments, (y) on thirty (30) days prior written notice to Holder, Maker may prepay the Obligations during the last three (3) months of the Loan term and no Make-Whole Amount shall be due with respect to, and to the extent of, any such prepayment, and (z) Maker has no right to prepay this Note without the simultaneous prepayment of Note A-2 in accordance with its terms.

“ Make-Whole Amount ” means an amount equal to the greater of (a) one percent (1%) of the then entire outstanding principal balance of this Note or (b ) the present value as of the date of prepayment of the remaining scheduled payments of principal and interest (including any balloon payment), determined by discounting such payments at the Monthly Equivalent Treasury Security Rate (as hereinafter defined), less the amount of principal being prepaid, provided such difference shall not be less than zero. “ Monthly Equivalent Treasury Security Rate ” means the rate which, when compounded monthly, results in a yield that is equivalent to the yield on the Most Recently Auctioned U.S. Treasury Security (as hereinafter defined), which is compounded semi-annually having the same maturity date as the Loan (or if there is not a Most Recently Auctioned U.S. Treasury Security with the same maturity date as the maturity date of the Loan, then the linearly interpolated yield-to-maturity of the two Most Recently Auctioned U.S. Treasury Securities have the next longer and the next shorter remaining terms to maturity), as reported in the Bloomberg News Service (or, if Bloomberg New Service is no longer available, The Wall Street Journal or another daily financial service or publication of national circulation selected by Holder) as of the close of business on the second (2nd) business day preceding the date of prepayment. “ Most Recently Auctioned U.S. Treasury Security ” means the U.S. Treasury bonds, notes and bills with maturities of thirty (30) years, ten (10) years, five (5) years, three (3) years, two (2) years, one (1) year, six (6) months and three (3) months that were most recently auctioned by the United States Treasury Department as of the date the Make-Whole Amount is calculated. Maker waives any right of prepayment except as expressly provided herein and as may be provided in the other Loan Instruments.

If the outstanding principal balance of this Note or any portion thereof shall become due and payable or shall be paid as a result of (a) an Event of Default (which Event of Default shall be presumed to be, and conclusively shall be deemed to be a willful default and a deliberate attempt on Maker’s part to avoid payment of the Make-Whole Amount), (b) the exercise by Maker or any other person of any right of redemption or the taking by Maker or any other person of any other action to prevent a foreclosure of the Secured Property, (c) any prepayment of the

Loan in connection with a foreclosure or similar proceeding or a foreclosure judgment, (d) a casualty or condemnation with respect to the Secured Property (except as otherwise expressly provided in the Loan Instruments), or (e) any other prepayment not permitted by the Loan Instruments, then the Make-Whole Amount shall be due and payable and shall be computed, to the extent not prohibited by applicable law, as if Maker had elected to prepay this Note, as provided in the preceding paragraph, on the date of such Event of Default, exercise, action, casualty or condemnation, as applicable. If such Event of Default, exercise, action, casualty or condemnation occurs during the Closed Period, then, to the extent not prohibited by applicable law, the Make-Whole Amount shall be equal to the greater of (a) ten percent (10%) of the principal balance of this Note then unpaid or (b) the Make-Whole Amount, as calculated in the manner set forth in the immediately preceding paragraph.

From and after the existence of an Event of Default, Holder, at its option, may declare all Obligations to be immediately due and payable, then or thereafter, as Holder may elect, regardless of the stated Maturity Date of this Note.

If Holder collects all or any part of the Obligations by an action, at law or in equity, or in any bankruptcy, receivership or other court proceeding (whether at the trial or appellate level), or if this Note is placed in the hands of attorney(s) for collection, Maker shall pay, in addition to the principal and interest due or deemed to be due, whether by acceleration or otherwise, and in addition to the Make-Whole Amount (a) all costs, including, without limitation, attorneys’ fees and expenses, of collecting or attempting to collect all amounts due pursuant to this Note and all other Obligations, of enforcing or attempting to enforce Holder’s rights and remedies pursuant to the Loan Instruments and of protecting the collateral securing this Note, (b) all Late Charges due pursuant to this Note and (c) interest, at the Increased Rate, computed on the amount of the Obligations.

The failure by Holder to exercise any right, power, privilege, remedy or option as to maturity, foreclosure or otherwise, provided in any Loan Instrument or otherwise available at law or in equity (each a “ Remedy ” and collectively, “ Remedies ”) before or after any Event of Default, in any one or more instances, or the acceptance by Holder of any partial payment or partial performance, shall not constitute a waiver of any default or any Remedy, each of which shall remain continuously in force, until waived in writing by Holder. Holder, at its option, may rescind, in writing, any acceleration of this Note, but the tender and acceptance of partial payment or partial performance alone shall not rescind or in any other way affect any acceleration of this Note or the exercise by Holder of any of its Remedies.

Maker and Holder intend to comply strictly with all usury laws now or hereafter in force in the jurisdiction (“ State ”) in which the Secured Property is located, and all interest payable pursuant to this Note or any other Loan Instrument shall be reduced to the maximum amount which is not in excess of the maximum non-usurious rate of interest applicable to this Note or any other Loan Instrument (“ Legal Rate ”) allowed under the usury laws of the State, as now or hereafter construed by the courts having jurisdiction over such matters. If the aggregate of all interest (whether designated as interest, Late Charges, Make-Whole Amount or otherwise) contracted for, chargeable or receivable pursuant to this Note or any other Loan Instrument, whether upon regular payment or acceleration or otherwise, exceeds the Legal Rate, it shall

conclusively be deemed a mutual mistake. Such excess shall be canceled automatically, and, if theretofore paid, shall, at the option of Holder, either be rebated to Maker or credited in reduction of the outstanding principal balance of this Note, or, if this Note has been repaid, such excess shall be rebated to Maker. In the event of a conflict between the provision of this paragraph and the provisions of any other portion of this Note or any other Loan Instrument, the provisions of this paragraph shall control.

Maker waives all requirements for presentment, protest, notice of protest, notice of dishonor, demand for payment and diligence in collection of this Note or the Loan Instruments, and any and all other notices and matters of a like nature, except for those expressly required by this Note, the Mortgage or any of the other Loan Instruments. Without notice to Maker and without discharging Maker’s liability hereunder, Maker consents to any extension of time (whether one or more) of payment of this Note, release of all or any part of the security for the payment of this Note or release of any Person liable for payment of this Note.

This Note may be changed only by an agreement, in writing, signed by Maker and Holder. Maker waives and renounces all homestead exemption rights as to the Obligations or any renewal or extension thereof. No failure or delay on the part of Holder in exercising any Remedy pursuant to this Note or any Loan Instrument, and no course of dealing between Maker and Holder, shall operate as a waiver of any Remedy, nor shall any single or partial exercise of any Remedy preclude any other or further exercise thereof or the exercise of any other Remedy. All Remedies expressly provided for in the Loan Instruments are cumulative, and are not exclusive of any rights, powers, privileges or remedies which Holder would otherwise have at law or equity. No notice to or demand on Maker in any case shall entitle Maker to any other or further notice or demand in similar or other circumstances, nor shall any such notice or demand constitute a waiver of the right of Holder to take any other or further action in any circumstances without notice or demand.

The obligations of each Person and entity comprising Maker shall be joint and several. The unenforceability or invalidity of any provision of this Note as to any Person or circumstance shall not render that provision unenforceable or invalid as to any other Person or circumstance, and all provisions hereof, in all other respects, shall remain valid and enforceable. Notwithstanding anything to the contrary contained herein, Lender shall not be obligated to accept the cure of any default or Event of Default unless this Note or the other Loan Instruments expressly provide for a cure period.

If an Event of Default has occurred, Holder may exercise any and all Remedies, and shall have full recourse to the Secured Property and to any other collateral given by Maker to secure any or all of the Obligations, provided that any judgment obtained by Holder in any proceeding to enforce the Remedies shall be enforced only against the Secured Property and/or such other collateral. Notwithstanding the foregoing, Holder may name Maker or any of its successors or assigns or any Person holding under or through them as parties to any actions, suits or other proceedings initiated by Holder to enforce any Remedies against the Secured Property and/or such other collateral, including without, limitation, any action, suit or proceeding to foreclose the lien of the Mortgage against the Secured Property or to otherwise realize upon any other lien or security interest created in any other collateral given to secure the payment of any or all of the Obligations. The restriction on enforcement contained in the first sentence of this paragraph shall not apply to, and Maker shall be personally liable for, and Holder may seek and enforce judgment against Maker for:

(i)

any and all losses, claims, damages, costs, expenses and/or liabilities, including, without limitation, attorneys’ fees and expenses, incurred by Holder:

(a)

relating to or as a result of any material misstatement of fact (1) by Maker or any Person constituting Maker, made to induce Holder to advance the principal amount evidenced hereby or (2) contained in any Loan Instrument,

(b)

relating to or as a result of fraud committed by Maker or any Person constituting Maker,

(c)

relating to or as a result of the (1) collection or application of any insurance proceeds, condemnation awards, trust funds or Rents in a manner which is not in accordance with the provisions of the Loan Instruments or (2) misappropriation or misapplication of any Lessee security deposit,

(d)

relating to or as a result of the breach of any representation or warranty contained in the Sections of the Mortgage pertaining to environmental matters, including without limitation, Sections 1.05E(4), 2.03(C) and 2.03(D), or any default with respect to any covenant contained in the Sections of the Mortgage pertaining to environmental matters, including without limitation, Section 1.05(E),

(e)

as a result of any default with respect to Maker’s covenant to pay Impositions or insurance premiums pursuant to the Mortgage or with respect to Maker’s covenant to obtain the insurance required by the Mortgage, including without limitation, the Terrorism Insurance,

(f)

arising from, in respect of, as a consequence of, or in connection with: (1) the existence of any circumstance or the occurrence of any action described in Section 1.05E(1) of the Mortgage, (2) claims asserted by any Person (including, without limitation, any Governmental Agency) in connection with, or in any way arising out of, the presence, storage, use, disposal, generation, transportation or treatment of any Hazardous Material on, in, under or about the Secured Property, (3) the violation or claimed violation of any law relating to any Hazardous Material or any other Environmental Requirement in regard to the Secured Property, regardless of whether or not such violation or claimed violation occurred prior to or after the date of this Note or whether or not such violation or claimed violation occurred prior to or after the time that Maker became the owner of the Secured Property, or (4) the preparation of any environmental audit as to the Secured Property, whether conducted or authorized by Maker, Holder or any other Person or the implementation of any environmental audit’s recommendations,

(g)

relating to or as a result of a violation of Section 5.20 of the Mortgage, and/or

(h)

as a result of any intentional, bad faith waste of the Secured Property committed by Maker or its agents (such damages to include, without limitation, all repair costs incurred by Holder);

(ii)

all outstanding principal, interest and other Obligations, including the Make-Whole Amount:

(a)

if there shall be a violation of Section 1.11 of the Mortgage; and/or

(b)

in the event that Maker or any Guarantor shall be the subject of any petition or proceeding for bankruptcy, reorganization or arrangement pursuant to federal bankruptcy law, or any similar federal or state law that remains undismissed for a period of sixty (60) days or more, and/or Maker or any Guarantor shall become the subject of any liquidation, dissolution, receivership or other similar proceeding; and/or

(c)

if the Mortgage or any of the other Loan Instruments are deemed fraudulent conveyances or preferences or are otherwise deemed void pursuant to any principles limiting the rights of creditors, whether such claims, demands or assertions are made under the United States Bankruptcy Code (as amended or replaced from time to time), including, without limitation, under Sections 544, 547 or 548 thereof, or under any applicable state fraudulent conveyance statutes or similar laws; and

(iii)

in the event of a loss which is or would be covered by the required Terrorism Insurance, an amount equal to the deductible on such Terrorism Insurance, which amount shall either be applied by Holder to the debt secured by the Mortgage or disbursed by Holder for the repair and restoration of the Secured Property, all in accordance with the terms of the Loan Instruments.

The restriction on enforcement contained in the first sentence of the preceding paragraph shall not apply to the Environmental Indemnity Agreement of even date herewith executed by Maker and the other indemnitors, if any, in favor of Holder and Co-Lender and/or to the obligations of any Guarantor. It is expressly understood and agreed, however, that nothing contained in the preceding paragraph shall (a) in any manner or way constitute or be deemed to be a release of the Obligations or otherwise affect or impair the enforceability of the liens, assignments, rights and security interests created by the Mortgage or any of the other Loan Instruments or any future advance or any related agreements or (b) preclude Holder or Co-Lender from foreclosing the Mortgage or from exercising its other remedies set forth in the Mortgage or the Assignment, or from enforcing any of its rights and remedies in law or in equity (including, without limitation, injunctive and declaratory relief, restraining orders and receivership proceedings), except as provided in the preceding paragraph.

If any payment required hereunder or under any other Loan Instrument becomes due on a Saturday, Sunday, or legal holiday in the state in which the Premises are located (those being non-business days), then such payment shall be due and payable (a) on the immediately preceding business day if such payments are made by the Automated Clearing House network, or (b) on the immediately succeeding business day if such payments are made by wire transfer.

“ Maker ” and “ Holder ” shall be deemed to include the respective heirs, administrators, legal representatives, successors and assigns of Maker and Holder.

Time is of the essence with respect to each and every provision hereof.

This Note shall be governed by, and construed and enforced in accordance with the laws of the State, other than such laws with respect to conflicts of laws.

In the event of any inconsistencies between (a) the terms of both this Note and Note A-2 and (b) the terms of any other Loan Instruments, the terms of both this Note and Note A-2 shall prevail.

[Signature Page Follows]

IN WITNESS WHEREOF , Maker has executed this Promissory Note A-1 as of the date first above written.


PR CHERRY HILL STW LLC, a Delaware limited liability company

By:	PREIT Associates, L.P., a Delaware limited partnership, its sole member

	By:	Pennsylvania Real Estate Investment Trust, its sole general partner

		By:	/s/ Andrew M. Ioannou
		Name:	Andrew M. Ioannou
		Title:	Senior Vice President & Treasurer


CHERRY HILL CENTER, LLC, a Maryland limited liability company

By:	Cherry Hill Center Manager, LLC, a Delaware limited liability company, its managing member

	By:	PREIT Associates, L.P., a Delaware limited partnership, its sole member

		By:	Pennsylvania Real Estate Investment Trust, its sole general partner

			By:	/s/ Andrew M. Ioannou
			Name:	Andrew M. Ioannou
			Title:	Senior Vice President & Treasurer

Exhibit 10.4

PROMISSORY NOTE A-2

$150,000,000.00

Cherry Hill, New Jersey

August 15, 2012

FOR VALUE RECEIVED, PR CHERRY HILL STW LLC , a Delaware limited liability company (“ PR Cherry Hill ”), and CHERRY HILL CENTER, LLC , a Maryland limited liability company (“ Cherry Hill Center ”; PR Cherry Hill and Cherry Hill Center are referred to herein individually and collectively, as the context may require, as “ Maker ”), each having an office at c/o Pennsylvania Real Estate Investment Trust, The Bellevue, 200 South Broad Street, 3 ^rd Floor, Philadelphia, Pennsylvania 19102, jointly promises to pay to TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA (“ Holder ”), a New York corporation, having its principal office at 730 Third Avenue, New York, New York 10017, or order, without offset, at its principal office in New York, New York, or at such other place as may be designated in writing by Holder, the principal sum of ONE HUNDRED FIFTY MILLION DOLLARS ($150,000,000.00), lawful money of the United States of America, together with interest thereon at the rate (“ Interest Rate ”) of three and ninety-hundredths percent (3.90%) per annum, payable in monthly payments (“ Payments ”) as follows: (a) interest only payments of Four Hundred Eighty-Seven Thousand Five Hundred and 00/100 Dollars ($487,500.00), commencing on the first (1 ^st ) day of October, 2012 and payable on the first (1 ^st ) day of each and every month thereafter until and including September 1, 2014, and (b) principal and interest payments of Seven Hundred Seven Thousand Five Hundred Three and 00/100 Dollars ($707,503.00), commencing on October 1, 2014 and payable on the first (1 ^st ) day of each and every month thereafter until and including September 1, 2022 (“ Maturity Date ”). In addition, on the Maturity Date, Maker shall pay to Holder the entire unpaid principal balance of this Note, together with all interest then accrued thereon pursuant to this Note and all other Obligations (as hereinafter defined) then unpaid pursuant to the Loan Instruments (as hereinafter defined). Holder shall apply each Payment, when received, first to the Obligations, other than principal and interest, which are then due and payable, but only if so elected by Holder in its sole and absolute discretion, and then to the payment of accrued interest on the outstanding principal balance hereof and the remainder to the reduction of such principal balance. Interest from the date hereof through and including August 31, 2012, is due and payable on the date of this Note and shall be computed on the basis of the actual number of days in such period over a 360 day year.

This Note is secured by, among other things, (a) a Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing (“ Mortgage ”), effective as of the date hereof, granted by Maker to Holder and New York Life Insurance Company a New York mutual insurance company (together with its successors and assigns “ Co-Lender ”) and encumbering premises and other property (“ Secured Property ”) more particularly described in the Mortgage and (b) an Assignment of Leases, Rents, Income and Cash Collateral, effective as of the date hereof, from Maker to Holder and Co-Lender. Obligations, Loan Instruments and all other

capitalized terms used in this Note and not expressly defined herein shall have the meanings assigned to such terms in the Mortgage. The terms and provisions of the Loan Instruments, other than this Note and Note A-1 (as defined below), are hereby fully incorporated into this Note by reference.

Maker may not prepay the Obligations prior to October 1, 2015 (“ Closed Period ”). On or at any time after October 1, 2015, Maker may prepay the outstanding principal balance of this Note and that certain Promissory Note A-1 dated the date hereof from Maker to Co-Lender in the original principal amount of $150,000,000.00 (“ Note A-1 ”) (each in whole but not in part), together with accrued interest thereon to the date of prepayment and any other outstanding Obligations, provided that (a) Maker gives Holder not less than sixty (60) and not more than one hundred twenty (120) days prior written notice of Maker’s intention to make such prepayment, (b) at least ten (10) business days prior to the prepayment date, Maker gives Holder written

notice confirming the actual prepayment date and (c) on such prepayment date, in addition to paying the entire outstanding principal balance of this Note and Note A-1, all accrued interest thereon and any other outstanding Obligations, Maker pays to Holder the Make-Whole Amount. Any prepayment notice given by Maker shall be deemed null and void if the prepayment covered by such notice is not made within thirty (30) days of the date specified in Maker’s prepayment notice as the designated date for prepayment. Notwithstanding anything contained herein to the contrary, (w) provided that no Event of Default, or event which, with the giving of notice or the passage of time could become an Event of Default, then exists under the Loan Instruments, no Make-Whole Amount shall be due with respect to, and to the extent of, any prepayment of all or any portion of the Obligations by the application thereto of casualty proceeds or condemnation awards in accordance with the terms of the Mortgage, (x) Maker may partially prepay the Obligations in connection with a Permitted Transfer of the Property as more particularly set forth in the Loan Instruments, (y) on thirty (30) days prior written notice to Holder, Maker may prepay the Obligations during the last three (3) months of the Loan term and no Make-Whole Amount shall be due with respect to, and to the extent of, any such prepayment, and (z) Maker has no right to prepay this Note without the simultaneous prepayment of Note A-1 in accordance with its terms.

(i)

any and all losses, claims, damages, costs, expenses and/or liabilities, including, without limitation, attorneys’ fees and expenses, incurred by Holder:

(a)

(b)

relating to or as a result of fraud committed by Maker or any Person constituting Maker,

(c)

(d)

(e)

(f)

(g)

relating to or as a result of a violation of Section 5.20 of the Mortgage, and/or

(h)

as a result of any intentional, bad faith waste of the Secured Property committed by Maker or its agents (such damages to include, without limitation, all repair costs incurred by Holder);

(ii)

all outstanding principal, interest and other Obligations, including the Make-Whole Amount:

(a)

if there shall be a violation of Section 1.11 of the Mortgage; and/or

(b)

(c)

(iii)

“ Maker ” and “ Holder ” shall be deemed to include the respective heirs, administrators, legal representatives, successors and assigns of Maker and Holder.

Time is of the essence with respect to each and every provision hereof.

This Note shall be governed by, and construed and enforced in accordance with the laws of the State, other than such laws with respect to conflicts of laws.

In the event of any inconsistencies between (a) the terms of both this Note and Note A-1 and (b) the terms of any other Loan Instruments, the terms of both this Note and Note A-1 shall prevail.

[Signature Page Follows]

IN WITNESS WHEREOF , Maker has executed this Promissory Note A-2 as of the date first above written.


PR CHERRY HILL STW LLC, a Delaware limited liability company

By:		PREIT Associates, L.P.,
		a Delaware limited partnership, its sole member

By:

Pennsylvania Real Estate Investment Trust,

its sole general partner


		By:		/s/ Andrew M. Ioannou
		Name:		Andrew M. Ioannou
		Title:		Senior Vice President & Treasurer


CHERRY HILL CENTER, LLC, a Maryland limited liability company

By:		Cherry Hill Center Manager, LLC, a Delaware limited liability company, its managing member

By:

PREIT Associates, L.P.,

a Delaware limited partnership,

its sole member

By:

Pennsylvania Real Estate Investment

Trust,

its sole general partner

Exhibit 31.1

CERTIFICATION

I, Joseph F. Coradino, certify that:

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

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;

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;

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

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.

Exhibit 31.2

CERTIFICATION

I, Robert F. McCadden, certify that:

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

(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.

Exhibit 32.1

Certification of Chief Executive Officer

Pursuant to Section 906 of Sarbanes-Oxley Act of 2002

I, Joseph F. Coradino, 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, 2012 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.

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:

(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.