Ronald Rubin and Edward Glickman VITAL STATISTICS: Pennsylvania Real Estate Investment Trust ADDRESS: 200 S. Broad St., Philadelphia, PA 19102-3803 PHONE: 866-875-0700 WEB: www.preit.com KEY EXECUTIVES: Ronald Rubin, chairman and CEO; George F. Rubin, vice chairman; Edward A. Glickman, president and COO; Joseph F. Coradino, president, PREIT Services LLC and PREIT-Rubin Inc.

By Allen Kenney

With nearly 50 years in the REIT industry, Pennsylvania Real Estate Investment Trust (NYSE: PEI)—commonly known as "PREIT"—has made a name for itself by understanding the value in "repositioning."

Even though the company currently has some development projects, PREIT specializes in transforming underperforming malls and strip centers into thriving retail meccas. It's fitting that one of the country's longest-tenured REITs would embrace the value of revitalizing older properties.

"We attempt to buy properties at depressed prices, fix them up and bring them to the potential of their market," says PREIT President and Chief Operating Officer Edward Glickman. "If we find a property that we think has upside, we bring our creative skills to bear to push the assets up market."

David Fick, managing director of Stifel Nicholas, says PREIT has proven itself to be highly proficient in this respect.

"The PREIT asset base has more inherent opportunity for improvement than any other that we cover," Fick says. Moreover, he says, "PREIT has a deep pool of real estate development relationships and skills."

Headquartered in Philadelphia, PREIT may be the oldest REIT in existence. The company was founded by Sylvan M. Cohen in 1960 at the beginning of the REIT era. It held its first public offering two years later, raising $5 million.

"Most of the REITs that were around in the beginning have either merged or gone out of business," Glickman says.

In 1997, PREIT moved its stock listing to the New York Stock Exchange. Four years later, following former NAREIT Chair Cohen's passing at the age of 87, current Chairman and CEO Ronald Rubin assumed leadership of the company.

Today, PREIT owns approximately 34 million square feet of retail space spread across 13 states. Primarily clustered in the Mid-Atlantic region, PREIT's portfolio includes 38 shopping malls, 13 strip centers and four projects currently under development. The company has a market capitalization of $103 billion.

A New Life for an Old Mall

Glickman attributes much of PREIT's redevelopment expertise to a period in the 1990s when major financial institutions hired the company to evaluate the viability of their real estate assets. During that period, Glickman says, the company as a whole sharpened its skills for evaluating a market's potential and "reinforcing" an existing asset.

"Our key strength is our knowledge of the ground-up development business," Glickman says. "Our strategy is to use our analytical skills to determine which available properties have potential for redevelopment and which properties don't."

Fick points out that the main drawback of PREIT's approach is that it frequently requires taking an asset "offline" or experiencing some disruption from extensive renovation and construction. While that may hinder quarterly earnings on occasion, he says, the short-term pain is worth the long-term gain. Fick also credits the company's management with being able to effectively communicate the upside of PREIT's projects to shareholders and to the public while maintaining a realistic view of the obstacles that they face.

A rendering of Voorhees Town Center, a PREIT redevelopment project.

"PREIT finds itself in the enviable position of being able to generate substantial value through asset-improvement programs that will both increase operating income and justify reduced cap rates and higher property valuations. The price to get there is interim dilution while space is taken offline to accommodate demolition, construction, and re-opening programs at those malls," Fick says.

Glickman points to a high-profile project in the Philadelphia suburbs as an example of PREIT's expertise in action. Plymouth Meeting Mall sits approximately 20 miles northwest of Philadelphia where two major interstate commuter routes intersect. Despite what Glickman says could be the highest amount of passing traffic in the state, the property floundered for years. According to PREIT analysts, the mall was smack dab in the middle of the problem: the mammoth King of Prussia Mall 10 miles to the southwest and the Willow Grove Park retail center 11 miles northeast.

"The asset has had a difficult time finding a niche because it's located between two high performing malls," Glickman says. "Plymouth Meeting Mall has probably a better physical location than either of the other assets, but the others are much larger, and size creates a certain amount of gravity."

The solution, Glickman says: create a new identity for Plymouth Meeting. Currently, PREIT is in the midst of transforming the property into what Glickman describes as a "lifestyle and entertainment center." The centerpiece of this makeover is a 200,000-square-foot addition anchored by a new Whole Foods Market. The new development also will include a series of themed restaurants, including a California Pizza Kitchen and P.F. Chang's China Bistro.

With other features like a multiplex movie theater and more than 120 retailers, Glickman says he envisions Plymouth Meeting as a "multiple-trip" destination where customers can come to shop, eat and relax all in one spot.

Company History
Date	Events
1960	Founded as one of the first publicly held equity REIT’s in the U.S.
1962	First dividend paid, $.06 per share. Public Offering raised $5 million.
1970	Starts trading on American Stock Exchange in June under ticker symbol PEI.
1997	Merger with The Rubin Organization, a commercial property development and management firm, completed September 30, 1997. • Ronald Rubin named Chief Executive Officer. • Trading moved to New York Stock Exchange in November. • Public Offering of 4.6 million shares raised $100 million in December, 1997.
2001	Sylvan M. Cohen, Founder and Chairman, dies on September 8, 2001, at age 87. • Ronald Rubin, CEO, named Chairman.
2002	100th Consecutive Dividend paid after 40 consecutive years of uninterrupted dividends
2003	Strategic focus changes from a diversified property base to one focused on retail. • Acquires 6 shopping malls from The Rouse Company. • Sells all 15 wholly-owned and 4 joint venture multifamily properties.

"We're attempting to create a unique position for the property in the market, given that it has two major competitors," he says. "Our goal is not to make it directly competitive to those assets in its offerings, but to move it to a different niche."

Other PREIT projects aren't quite so dramatic, but effective nonetheless. The Cherry Hill Mall in the affluent southern New Jersey suburbs of Philadelphia, for example, simply needed a few touchups to turn a good property into a great one, according to Glickman.

In the last five years, PREIT has instituted an initiative to capitalize on Cherry Hill's surrounding demographics and move the mall "up market," Glickman says. This has included full-scale renovations to the property's interior that are expected to be completed this year.

A few miles to the south of Cherry Hill, PREIT is refashioning a pre-existing mall that never quite emerged as the kind of property that it was intended to be. In the 1970s, developers originally conceived of Voorhees Town Center as the cornerstone of a residential and office community in New Jersey's Voorhees Township. However, Echelon Mall and the surrounding properties failed to build the identity envisioned by the property's creators: a hub of community activity.

"We're bringing the property much closer to the vision of being a town center for the community," Glickman says.

That process involved downsizing and renovating the former 1,124,000-square-foot mall. Besides the mall, the Town Center will feature 200,000 square feet of street retail shops and office space. PREIT also has partnered with a private residential developer to build 425 luxury apartment and condominium units on the property.

"It's a process of taking properties and re-envisioning them to better serve their markets," Glickman says.

An Old Hand

Despite PREIT's success with reclamation projects, Glickman recognizes that some distressed assets are just beyond saving, especially in areas overwhelmed by competitors.

"We can't fix every property," he says. "In some cases the market no longer exists, having been removed by competition."

Fick notes that the company is aided in the fact that it is run by "mall industry veterans who know how to get things done on the ground."

"Our tenure in the business comes with the experience of having seen our way through many different economic cycles," Glickman says. "It helps us to understand what makes a property work."

Whether that involves capitalizing on demographic trends or simply altering the identity of a property, PREIT has seen and done it all.