Pennsylvania Real Estate Investment Trust (PEI) 2008 Q2 法說會逐字稿

Good afternoon, ladies and gentlemen, thank you for standing by. Welcome to the Pennsylvania Real Estate Investment Trust second quarter 2008 earnings conference call.

During today's presentation, all parties will be in a listen-only mode. Following the presentation the conference will be open for questions. (OPERATOR INSTRUCTIONS) This conference is being recorded today, Thursday, August 7, 2008.

I would now like to turn the conference over to Garth Russell of KCSA Strategic Communications. Please go ahead, sir.

Thank you, Britney.

Before management begins its prepared remarks I'd like to read the forward-looking statements. This conference call will contain certain forward-looking statements within the meaning of the Federal Securities laws. 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 PREIT's current views about future events and are subject to risks, uncertainties, and changes and circumstances that might cause future events, achievements or results to differ materially from those expressed or implied by the forward-looking statements.

PREIT's business might the be affected by uncertainties affecting real estate businesses generally, as well as specific factors discussed in documents PREIT has filed with the Securities and Exchange Commission and in particular, PREIT's annual report on Form 10K for the year ended December 31 , 2007. PREIT does not intend to update or revise any forward-looking statements to reflect new information, future events, or otherwise.

It is now my pleasure to turn the call over to Ron Rubin, Chairman and Chief Executive Officer of PREIT. Ron, the floor is yours.

Thank you very much.

Welcome to the Pennsylvania Real Estate Investment Trust second quarter 2008 conference call. Joining me on the call today are Ed Glickman, President; Bob McCadden, CFO; Joe Coradino, President of our management company, and head of our retail operations. Also in the room today are Vice Chairman, George Rubin and General Counsel, Bruce Goldman.

Today we will discuss our second quarter 2008 results, the status of our current projects, and some of our plans for the future. After we conclude our remarks, the call will be open for your questions. As Ed Glickman will discuss in more detail, the Company has given notice of our intention to repay the REMIC on September 10, 2008, having received secured and unsecured loan commitments in the amount of approximately $380 million. Upon closure, the loan proceeds when combined with a significant capacity on our line will provide funds sufficient to pay off the REMIC.

We all know that Boscovs has filed for bankruptcy protection. We have eight Boscovs in our portfolio and two more under construction. It is very early in the process and we do not have enough information to predict future events. We do know, however, that no PREIT malls were among the 10 stores being closed. We also have been in touch with the Company and expect to work with them in their effort to emerge from bankruptcy as a stronger company.

As I noted in our first quarter call, while the economic environment has changed substantially in the past year, the fundamentals of our business have not. Despite the challenging economy, we are working to advance our redevelopment and development projects, to place stores in service, to increase NOI and occupancy, and to generate positive leasing spreads. As always, we remain focused on maximizing long term returns for our shareholders.

And with that, I will turn the call over to Ed Glickman.

Thanks, Ron.

As Ron mentioned, in a moment I will discuss our capital plan, but first I'd like to review our performance for the second quarter. Funds from operations for the quarter was $0.87, up 6.1% quarter-over-quarter. For the six months it was $1.72, up 6.2% for the year-to-date comparison. This result includes $0.05 of swap gains related to the implementation of our capital plan. NOI for the quarter was $74.4 million, up 2.1% quarter-over-quarter. For the six months it was $150.3 million, up 2.7% for the year-to-date comparison. Same-store NOI which includes 98% of our total NOI was up 0.5% quarter to quarter and up 1.4% for the year-to-date comparison.

PREIT NOI as well as occupancy was tendered by 10 anchors in transition. All of these vacant spaces have leases in place to new tenants. These transactions are outlined in detail on page 21 of this quarter's supplemental disclosure. In line occupancy was up 0.4% but down 1.1% including anchors, again reflecting the large number of anchor spaces concurrently in transition. We had a busy quarter in leasing with 51 new leases for approximately 197,000 square feet and 97 renewals for approximately 246,000 square feet.

Turnover spreads were quite strong with releasing spreads on previously leased space up 22.2% and renewal spreads up 9.4%. Sales for the period were, however, down 2.2% to $355 per square foot. This decline impacted the majority of the portfolio crossing geographic and property quality lines. Overall, we had a solid quarter given the environment in which we are operating.

We believe that our recently completed redevelopment work has strengthened a number of our assets and has given them positive momentum to mitigate the negative impacts of declining consumer sentiment. We have, however, given up some of our expected growth to conditions in the retail market. PREIT, however, has been quite fortunate in that we have a very diverse tenant base. Our top 20 tenants average less than 1.6% each of our minimum rent pool. Our largest tenant, The Gap, accounts for only 4% of rent. As a group, our top 20 tenants accounted for less than 32% of total minimum rent. This diversification gives the Company a modicum of protection against the failure of any one tenant. PREIT is also quite fortunate in our portfolio geography.

The Mid-Atlantic region home to 80% of our assets is a diverse economic base that has shown resiliency in the recent economic downturn. In May, the region outperformed the nation and showed 0..% year-over-year non-farm payroll growth, our 52nd consecutive increase. A recent study placed our region in the top 10 job markets in the country. Part of this resiliency comes from our regional focus on education and healthcare, two industries that make up a large portion of our economic base and which our resistant to economic downturns.

The region has also escaped some of the underlying causes of the recent economic downturn. Our home price went up was moderate compared to the rest of the country. According to Freddie Mac, we have about 16% less subprime exposure than the country as a whole. As of the end of 2007, our home prices were still rising. Pennsylvania State foreclosure rate of one filing for every 3,222 households ranked 37th among the 50 states.

While our region has remained reasonably steady, the overall economic situation in the U.S. is quite challenging and it is in this difficult economic environment that we come to you with our capital plan. As we have previously stated, it remains our intention to repay the $400 million outstanding balance on the REMIC in full on its payment date of September 10th. To this end, we have recently completed three Power Center financings, on our PREIT View, Christiana and Paxton Centers for total proceeds of $119 million.

Our immediate use of proceeds was to repay our line of credit to create liquidity in advance of this upcoming REMIC pay off. We currently have commitments from financial institutions for a $297 million of new mortgages. These are individual, long term, non-recourse loans on four of the properties currently in the REMIC. We expect to close these financings simultaneously with our repayment. Between availability on the line of credit and the proceeds from these four financings, we expect to repay the REMIC in full and on schedule.

In addition to the repayment of the REMIC, the Company must also continue to fund its development and redevelopment construction in progress. We expect the balance of these capital needs to be funded from a term loan and through selected secured financing. We have discussed financing terms with prospective lenders and we intend to move forward with these financings during the balance of the year.

After paying the REMIC and closing on the four mortgage financings, we will have increased financial flexibility as approximately 25% of our NOI will be unencumbered up from 15 % today. While the economic outlook in the short-term is challenging, we have been able to find receptivity in the financing marketplace for our assets and we believe that we will be able to sort the remaining liquidity required to complete our development and redevelopment plans.

Thank you for your continued interest in PREIT and now, I'll turn the call over to Bob McCadden, our CFO.

Thanks, Ed.

I will provide additional comments on our financial performance for the second quarter, update our capital spending plans and provide details on our outlook for the second half of the year. We reported a net loss for the second quarter of $2.9 million or $0.08 per diluted share compared to net income available to common shareholder of $0.5 million or $0.01 per share in 2007. FFO for the second quarter was $35.7 million, a 5.2% increase from the $33.9 million reported last year.

Let me review some of the items impacting comparability between the years. All the amounts I describe will be on a supplemental basis which includes our majority-owned properties as well as our percentage ownership interest in partnership properties. On the revenue side, as Ed mentioned, since June 30, 2007, department stores at six of our malls have been closed to facilitate the addition of new anchors. Anchor locations formerly occupied by Value City at the Chamberlin--of the Chambersburg, Cumberland, Wyoming and Uniontown malls are being replaced by Burlington Coat Factory stores scheduled to open later this month, with the exception of Cumberland which will open in the first quarter of next year.

One of two Phelps stores closed at Gadsden to accommodation the addition of an 85,000 square foot JCPenny store scheduled to open in late September. We acquired a McCray's store at Wiregrass Mall to accommodate the relocation of a Phelps store to our larger format and the addition of Burlington Coat as the malls fourth anchor.

As of June 30th, approximately 1.2 million square feet of owned anchor space was vacant and an additional 120,000 square feet was decommissioned since the former stores were demolished pending construction of replacement space for the new anchors. As each of these properties replacement tenants have been signed to leases for all or a significant portion of the space currently vacant. The annualized minimum rent from all of the identified tenants today is approximately $8.7 million. These replacement tenant leases will commence over the next six quarters beginning in the current quarter.

In addition to the indirect impact that these anchor vacancies have had on mall traffic and in line comp store sales performance, these vacancies resulted in a direct reduction in NOI of $0.6 million or about $0.015 per share of FFO during the second quarter of 2008 as compared to the second quarter of last year. Lease termination revenue was $1.2 million in the second quarter compared to $0.4 million in last year's comparable period. Percentage rents received from tenants during the second quarter were lower by approximately $0.5 million as compared to last year's period.

For the full year, we are experiencing or expecting percentage rents including our proportion to share earned partnership properties to be down approximately $1.6 million as compared to last year. On the expense side, our bad debt expense increased by $0.7 million to 1% of total real estate revenues as compared to 0.5% in the second quarter of last year primarily due to three tenant bankruptcies, White Hall Jewelers, Steve and Barry's and Goody's Family Clothing.

Also impacting bad debt expense was an increase to our general reserves covering annual expense settlements which were billed earlier this year compared to last year. In light of the current economic conditions, we are working to reduce our exposure to potential bad debt through timely billing of expense supplements and aggressive pursuit of delinquent accounts receivable. Including our straight line rent receivables, our net receivables balance was reduced by $2.9 million or 7% as compared to June 30, 2007's balance on an even larger revenue base this year.

Our earnings guidance range includes reserves for an estimated pre-petition receivable from Boscovs but does not contemplate any additional store closings by tenants operating in bankruptcy unless specific store closing information has been provided to us. We have higher depreciation and amortization expense as a result of development and redeveloped construction progress that was placed into service. Since the end of the second quarter of 2007, we have commissioned approximately $132 million of redevelopment assets and an additional $46 million related to our development properties.

Our interest expense increased as a result of higher average set balances due to capital spending and the redemption of our preferred shares in July of last year, partially offset by lower average interest rates. The average cash interest rate on our outstanding balances and preferred shares as of June 30, 2008, was 5.5% compared to 6.23% at the end of the second quarter of 2007, a decrease of 73 basis points. On a reported basis, our average rate fell by 65 basis points to 4.98% from 5.63%. A significant portion of the interest on our short-term borrowings is related to our construction in progress balances and is therefore capitalized. As a result, our operating results do not reflect the full year benefit of this years lower LIBOR rates.

As Ed mentioned, our interest expense lines also includes a net favorable benefit of approximately $2 million or $0.05 a share from the application of FASB statement number 133 accounting for derivatives. G & A expense in the second quarter was $10.9 million, a modest 2% increase over the second quarter of last year. As of June 30, 2008, we had outstanding debt of $2.6 billion, an increase of $83 million from the end of the first quarter. Our credit facility leverage covenant is based on the ratio of total liability to gross asset value as defined in the loan agreement. At the end of June of this year, our leverage ratio was approximately 60.4%, which is modestly higher than the ratio at the end of the last quarter.

Our previous credit facility limit was 65%; however our modified credit facility permits leverage up to 70% for two quarters. We expect our leverage to increase moderately through the balance of 2008 and into the first half of 2009 as we continue to execute our redevelopment plans with a high level of spending on the three large Philadelphia area projects. Based on the assumptions outlined in our earnings guidance we anticipate that our leverage covenant will be approximately 62.5% at the end of this year.

As of June 30, 2008, fixed rate debt comprised 81.7% of the Company's indebtedness including our proportionate share of the debt of our partnerships. As of June 30th, we had borrowed $355 million under our credit facility. After giving the amounts required to support letter of credits we had an available borrowing capacity of approximately $127 million at that date. Subsequent to the end of the quarter, we closed on the $54 million mortgage financing at Paxton Town Center and used the proceeds to replenish our line of credit balance.

Our capital spending estimate for the second half of 2008 is a range of $150 million to $180 million to fund the capital requirements of the redevelopment projects and developments currently underway. A large portion of this capital is committed to projects which are slated for a completion early next year. We are reaffirming our full-year FFO and net income estimates for 2008.

We expect GAAP earnings to be between a net loss of $0.03 and net income of $0.07 per diluted share. FFO is still expected to be between $3.60 and $3.70. Key assumptions underlying this guidance include year-end non-anchor occupancy of approximately 88.6% which is a 60 basis point improvement over the 88% at the end of the current quarter. A number of store openings at our redevelopment properties originally slated to open in the fourth quarter have been pushed into 2009 as next year openings.

Excluding lease termination fees in both periods we expect overall NOI growth to be between 2.5% to 3%. Same-store NOI growth is expected to be between 1% and 1.5%, again excluding lease termination fees. Last year we had lease termination fees of $1.6 million or approximately $0.04 per share. Our previous 2008 guidance assumed termination fees of $0.04 to $0.05 per share for the full year. Through June 30th, we recorded $2.3 million or $0.06 per share in termination fees. Our current guidance assumes an additional $0.01 to $0.03 in termination fees. A significant portion of these termination fees is related to tenants who have advised us of their expression to close locations within our portfolio. The ultimate amount and timing of receipt of the expected termination fees are subject to negotiation with these tenants and therefore, could change from these estimates.

In 2007 we had gains on the sale of non-operating real estate including condemnation proceeds totaling $2.5 million or $0.06 a share. Through June 30th, we have not recorded any gains on land sales. Our guidance for the full-year assumes $0.02 to $0.04 per share and gains on parcel sales likely to close in the fourth quarter. Our 2007 bad debt expense was approximately 50 basis points of real estate revenues. For 2008 we expect the full year bad debt run rate to be between 90 and 100 basis points of our real estate revenues. Our assumption is that G&A expenses excluding dead deal costs which are separately disclosed in our financial statements are expected to average approximately $10 million to $11 million per quarter over the next few quarters.

Now, I'll turn the call over to Joe Coradino.

Thanks, Bob.

As you're probably aware, uncontrollable economic factors are influencing our business. Increases in gas prices, food costs and unemployment are negatively impacting retailer sales productivity. As a result, we've been addressing retailer closings and bankruptcies over the past several months. That said, these issues are manageable and we're fortunate that we have not experienced a material increase in closings related to bankruptcies as compared to last year.

We've been selective and conservative in merchandising our properties and have an immaterial exposure to recently announced bankruptcies. Goody's has one location in our portfolio, Steve and Barry's has only two locations with us and Linens and Things has three stores in our portfolio. As far as the Boscov's filing is concerned, the eight store in our portfolio representing 1.45 million square feet of occupied anchor space paying approximately $2.4 million in base rent, we were obviously pleased that none of our stores were on the closing list published Monday of this week. More importantly, we've seen many retailers using this market as an opportunity to expand strong brands by taking advantage of prime locations made available by retail closings.

American Eagle Outfitters is expanding their area of leisure wear concept across our portfolio. We've signed leases at Wyoming Valley, Viewmont, and Logan Valley with this retailer. Abercrombie is expanding their highly successful Hollister concept, which is particularly beneficial to us considering that the Southeast is a fill-in market for them and we expect to secure several deals in this portion of our portfolio. Charlotte Russ, and Forever 21 are expanding their junior's concept in the South and Mid-Atlantic. Higher end tenants such as Sephora, Apple, and Lucky Jeans are continuing with expansion plans. Barnes & Noble and Ulta Cosmetics are expanding as well. In addition we're in discussions with several notable retailers with headquarters outside the United States. Some of these include Zaraf, Garage, Mango, Lush and Puma.

Consequently we have seen continued leasing momentum during the second quarter. As an example we've secured leases with the majority of retailers in the lifestyle segment at Plymouth Meeting for a Spring '09 opening. We remain confident that our strategy of redevelopment, remerchandising, and renovating our portfolio will allow us to successfully weather the economic storm. In fact, if Plymouth Meeting Mall or Eastown Center in Cherry Hill Mall, we continue to experience positive initial results at these properties.

At Cherry Hill Mall, construction is well underway for the new Nordstrom, which is now fully identifiable from the street and is on schedule for a grand opening on March 27, 2009. The food court relocation is complete, and expected to be fully occupied for the holiday shopping season. The parking deck is nearing completion and paving and striping will be complete by November. The Mall addition is progressing with sky lights installed and roofing underway. We expect that the interior renovation will be finished for the holiday shopping season as well. The shell for the new Maggiano's is nearly complete with turnover to the tenant scheduled for later this month.

During the quarter we signed two exciting bistro row leases with Darden Restaurants for their higher end concepts that will elevate the Cherry Hill Mall shopping experience. We've also executed leases with J Crew and Gap for an expanded flagship store and recently opened BCBG in Spring. Approximately 82% of the expansion portion of this project is either leased or in active negotiation.

At Voorhees Town Center the redevelopment is gaining momentum. Residential construction continues with the sales center and clubhouse nearing completion. The mixed use buildings are underway with resident occupancy expected to commence in the fourth quarter. On the interior of the Mall, the 19,000 square foot Crazy City indoor theme park opened Friday, August 1st. The 10,000 square foot learning experience daycare facility is expected to open next week.

The 50,000 square foot headquarters for Star Group, the Philadelphia regions largest advertising agency is complete and their 200 employees will move in on August 15, 2008. We've either executed leases or are in various stages of negotiations for 61% of the expansion areas of the project.

At Plymouth Meeting Mall, PF Chang's, California Pizza Kitchen, Red Stone Grill and Dave and Busters have opened to great fan fair. The regions customers have rediscovered the property and have taken advantage of our newly introduced valet parking program. Each of the new restaurants are either meeting or beating their sales forecast. Construction continues on Benihana which will be situated on an out parcel across from the movie theatre that is expected to be open for this year's holiday season.

Inside the Mall, construction is underway for Crazy City for a fourth quarter opening. The grand opening of the Lifestyle Edition will take place in the Spring of '09 coinciding with Whole Foods planned opening insuring a successful grand opening to Phase II of the project.

At the Gallery, our downtown Philadelphia property, we executed a lease with the Commonwealth of Pennsylvania for 224,000 square feet in the former Strawbridge's Building. They will occupy space on the fourth through sixth floors that will house approximately 750 employees. We expect them to take occupancy in the third quarter of '09. We're in active discussions with several large format retailers for the lower floors of the building which is contiguous to the Gallery.

At Moorestown Mall our efforts to revitalize the street scape of the property culminated with the July openings of Pai Wei and Pot Belly Outparcels. These restaurants compliment the recent additions of Chipotle, Eastern Mountain Sports and Lane Furniture. All of these additions in conjunction with the facade renovation of the property will continue to enhance the customer shopping experience and differentiate the property from our nearby Cherry Hill Mall.

At Jacksonville Mall in Jacksonville, North Carolina, Barnes and Nobel opened on April 28th, Red Robin is under construction for a third quarter opening and we're pleased to announce that during the quarter we signed a lease with Ulta Cosmetics for a 10,000 square foot store and construction is underway for a fourth quarter opening. The exterior renovation work continues and we will place into service a new pedestrian plaza and main mall entrance in time for the holiday shopping season. These additions will serve as the catalyst to drive traffic and sales which were already an impressive $474 per square foot.

At Gadsden Mall in Gadsden, Alabama construction is complete with fixturing and stocking underway for an 85,000 square foot JCPenny new prototype, with a late September opening planned. We've also signed a lease for a 15,000 square foot Books a Million during the quarter. This space was previously vacant and we will turn it over to the tenant in September for a fourth quarter opening.

We're pleased with the results from our recently completed projects. We delivered an increase in net operating income, excluding termination fees of 10% over the second quarter of last year on our projects that were completed in '07. In line occupancy at our redevelopment properties completed in '06 and '07 increased by 130 basis points from 90.4% to 91.8%. These metrics, coupled with the customer and tenant reception to our redevelopment, remerchandising and renovation program, continue to validate our strategy and build the momentum that will invigorate our portfolio.

With that, we're now ready for questions.

Thank you, sir.

(OPERATOR INSTRUCTIONS)

Our first question is from the line of Nathan Isbee with Stifel Nicolaus. Please go ahead.

Hi, good afternoon.

If you could just comment a little more on the REMIC refinancings, these four properties which ones are they and you talked about long term financing, how long exactly and what type of LTVs you were looking at here?

The four properties, Nate are Jacksonville Mall, Logan Valley Mall, Patrick Henry Mall and Wyoming Valley Mall.

Okay, and you talked about long term financing. How long are these terms?

The terms differ, but they're all in excess of five years.

Okay and what are the interest rates?

The interest rates vary also, and our intention to publish those when we complete the loans.

Okay.

Provided previously in our guidance range, we thought we would advise the investors that we would be financing these properties somewhere between 5.75 and 6.75.

Okay. And you had mentioned in the press release this morning 380 of commitments, these four properties of 297. Is the $83 million difference, is that the term loan?

That's part of the term loan. That's our bank committment to the term loan.

Okay.

So that leads to my next question. If you have about 175 in your line now, you're paying back about 20 to add to the 380. In terms of liquidity at year-end how much more financing is above the 380 do you expect to do between now and year-end?

Well we're considering putting secure debt on three additional properties. The exact amount of that, that is under negotiation.

Okay is it safe to say above 100 million?

It's safe to say that it's above a 100 million.

Okay.

All right, thank you, and one more question. On the same-store NOI guidance reduction, could you break out how much of that was from tenant closures versus perhaps leases on the redevelopment being pushed out?

Nate, we could probably put it into a couple of different buckets. About a quarter of it relates to the way tenant sets, we have leased bridging so it would open in '08 and that will be pushed to '09. We probably have another quarter of it relates to underperforming tenants either bankruptcy closures or the like. You have probably about half of the change if we could characterize that as economic factors, as I've mentioned we're seeing a significant drop off on our percentage rent and in the case of some jewelers for example, we're not assuming any percentage rent is paid this year. So I think you could say half was just due to the general economic conditions that are affecting tenants who are either paying percentage rents or percentage sales.

Okay, thank you very much.

Thank you.

Our next question is from the line of Michael Bilerman with Citigroup. Please go ahead.

Thank you, good afternoon.

Just following up on the financing. The 297, what's your all-in rate for those, including all fees and fully loaded?

I think, Mike, when we actually as I mentioned when we complete the financings, we'll provide all of the details of that.

Is it 6.5%? Just give me some range.

I said it's in the range we talked about earlier in the year, somewhere between individual financings will be between 5.75 and 6.75.

And that's just for the 297 or are you talking about all of the financing?

That's what our expectation was for all of the financing that we complete this year.

Is the term loan a floater or is it a fixed rate?

The term loan is up for negotiation when we complete the term loan, we'll publish the terms.

But your 5.75 to 6.75 is probably a blend of floating rate and fixed rate?

Yes.

And I just want to be clear, the financing that you did post-quarter end, the $54 million, that's separate from this 380?

Correct. Those three Power Center financings are in addition to the ones that we're talking about now.

Okay and then what sort of recourse are you going to have on the term loan?

As I said when we complete the term loan financing, we'll publish its terms.

And none of this you have commitments but it's still not--nothing is done at this point? I mean how firm are these commitments? Do they go through the due diligence process into--?

I'll tell you what we know, and as of the moment we have commitments on the four mortgage financings and from our lead bank on the term loans.

Okay.

And there're subject to the normal customary closing conditions.

And the lead banks on the term loan that's just for a portion of the 100 million or that is for all of it?

I'm sorry.

You said you're working with the lead banks on the $100 million term loan.

No, I don't think we associated a dollar amount with the term loan.

I just made the assumption that it was 380. You have three properties secured that's embedded in that excess hundred?

No, no, no, we have four properties that we're financing as mortgages. The names of which I just previously went through.

Yes.

And then we have the lead bank's initial committment to the term loans, and those five items for those that were included in the $380 million. We're in the process of negotiating and marketing the term loan at the moment. When we're done with that process, we'll come back to the market and disclose it.

Okay.

The terms, amounts, rates, etc.

And just in terms of just going into the guidance, you talked about lease term fees being what will it be now $0.07 to $0.09 that's up from $0.04 to $0.05, I assume the $0.05 gain was not included in guidance previously and it sounds like land sales are going to be up to $0.02 to $0.04 up from $0.01, so a $0.09 to $0.12 benefit?

Right.

Is everything else on the same-store being reduced or is there other changes in guidance?

No, I think if you look at all of the other assumptions that we've described, a large part of the--I think our original guidance that same sort of growth slightly ahead of where we're currently guiding to, and again as I mentioned that you look at the reasons for that, it's store closings, a portion of the committed tenants related to redevelopment pushing openings from '08 to '09 and the rest being kind of a (inaudible) in the retail segment which is impacting items such as percentage rents the tenants were paying a percent of sales in lieu of minimum rents.

Okay and so just that I'm completely clear on the sources and uses, you talk about the $400 million being repaid with 380, which is 297 from the four mortgages and the balance in the term loans, you have 175 million available on the line of credit and you have 150 to 180 of spend on the redevelopments, so--which sort of gets you to zero by the end of the year so where is the excess going to come after that?

The other factor that we mentioned was secured financing on three additional properties that are also in the works, so it's a combination. If you look at it this way, our intention is to repay the REMIC with a combination of the secured financings and the availability under the line of credit. To use the proceeds from the term loan and three additional secured financings to create the liquidity you're required to complete the redevelopment assets and the development assets as they progress.

But then you're not left with too much liquidity after that. I can understand how you get everything done, I'm just trying to figure out then what?

Well then we've created a number of assets that will be complete and stabilized and available for marginal financing. So the use of proceeds is primarily to build and rebuild these properties. Not all of which are subject to existing debt. So for instance, Plymouth Meetings is being redeveloped without the benefit of any secured financing, Voorhees Town Center is the same case. So we're utilizing the proceeds from this marginal liquidity to rebuild these assets at which point when they're completed we might seek additional secured financing.

You have no plans for asset sales or raising common equity today, it's all going to be debt?

No. We're talking about a period of time, which is today, where we're talking about the next two steps in our capital plans and those next two steps are to repay the REMIC and to provide significant liquidity for the next 6 to 9 months. We're out in the market constantly looking at the availability of different types of capital along a wide spectrum, but what we can talk about today because what we're fairly certain of are the next two steps in the capital plan.

Okay, thank you.

Thank you. (OPERATOR INSTRUCTIONS)

Our next question is from the line of Ben Yang with Green Street Advisors. Please go ahead.

Hi.

I apologize if I missed this earlier but did you address why the yield at Plymouth Meeting fell relative to what you showed last quarter?

The yield decreased as a result of several things.

This is Joe Coradino--for several reasons. One is there was cost overruns associated with a 26,000 square foot Crazy City, essentially the addition of a tenant, 26,000 square foot Crazy City, and there were also some delays in the permitting process. We've now received our full permitting, and we are just about to turn the space over to Crazy City for construction. And that's really the reasons for the adjustment to Plymouth Meeting.

And how was the leasing of that Lifestyle expansion there progressing?

Leasing in the Lifestyle Edition is progressing well. We've signed leases with Chicos, Joe Banks, Coldwater Creek , obviously Whole Foods is the anchor to it. We have several additional leases out for signature.

Do you have a number that you can share with us?

A number?

In terms of percent leased for that new retail space?

Yes, the expansion area, we are either in negotiations or have executed leases for 89% of the expansion area.

And then I think you said you had about 60% of the space at Voorhees spoken for. What about Cherry Hill, how is your leasing there progressing?

On Voorhees, I didn't hear what you said. Did you say 50?

Did you say 60 earlier in the call?

Right it was 62 was the number I put out. At Cherry Hill, 82% of the expansion is either leased or in active negotiations. But we have a very high degree of confidence that we'll deliver Cherry Hill in excellent shape for the grand opening of the Nordstrom store in March of '09.

Okay, and then I know you said you don't have much visibility on Boscov, but with two that are slated to open up in your centers over the next year or so, is that impacting the progress that you're trying to make on those redevelopments in any way?

Certainly, their openings have been delayed at those redevelopments, both Hanover, and Willow Grove and while it's early in the bankruptcy, so there's not a lot of detail to give. We're expecting that we'll bring those to resolution as part of an overall solution with Boscovs.

Great, thank you.

Thank you.

Our next question is a follow-up question from Nathan Isbee with Stifel Nicolaus. Please go ahead.

Yes, hi. The three Power Center financings that you did over the last few months did you provide any recourse on those?

Yes.

How much?

It's different with each property, but we're talking 20% to 25% range.

Okay, thank you very much.

Thank you.

We do have another follow-up question from the line of Michael Bilerman with Citigroup. Please go ahead.

Just one more financing question.

Exton Square Mall what's the plans for that refinancing?

Exton Square Mall pops up later in the year. We've started to have discussions about the property. We have a number of lenders interested it. It's a large mall, it's doing sales in the mid-300s. It's a strong demographic and we have a combination from existing lenders and continuing as well as from some additional lenders to come in. So we're pretty optimistic about that property, but in order, we're doing the REMIC first, the other financings and then Exton.

And Bob, you talked a little bit about the bad debt that you had in the quarter. How much more was that in this quarter relative to the first?

In the first quarter compared to the second quarter?

Yes, just what was the sequential increase that you had?

Bear with me as I get that number for you but one of the other points that we should make relative to the financings is Exton is the only material financing that we have between now and the end of 2009.

And do you have redevelopment costs, you have 150 to 180 this year for the balance. How much more do you have to spend for 2009?

If you look at the total that we've disclosed in the supplemental we have for the development properties you have $193 million and maybe another 30 or 40 in the ground up that's really slated in kind of the early phases so a big chunk of the development spending takes place between now and March of 2009 when a large portion of the redevelopment is completed. So bad debt expense, it was about $1.3 million this quarter against call it about $1 million in the first quarter of this year. So it went from $1 million to $1.3 million.

And that's in your other property expenses?

That's in our other property expenses.

And you said in the back half. Is there any other sort of write-offs or anything that we need to be aware of for Q3 and Q4?

Obviously as I mentioned we have some pre-petitioned Boscovs receivables that will be written off in the third quarter, but we're not aware of any other things that would likely be significant that we know today.

And how much was that on the write-off?

It was probably somewhere around $500,000.

Okay, great. Thank you very much.

Thank you. There are no further questions at this time.

I would like to turn the call back over to Ron Rubin for any closing remarks.

Okay, thank you very much.

In our nearly 50 years in business, the Company has implemented plans in many different market cycles. Throughout, the Company has completed its projects, repaid its loans, and has never reduced or missed its dividend. We will continue to draw on our experience and on our approach to business. This approach which has allowed us to grow and operate as a consistent, stable, and profitable company.

This is and will continue to be who we are, and thank you very much, ladies and gentlemen.

Thank you.

Ladies and gentlemen, this concludes the Pennsylvania Real Estate Investment Trust second quarter 2008 earnings conference call. Thank you for your participation. You may now disconnect.