Pennsylvania Real Estate Investment Trust (PEI) 2010 Q4 法說會逐字稿

Good afternoon, ladies and gentlemen. Thank you for standing by and welcome to the Pennsylvania Real Estate Investment Trust Fourth Quarter 2010 Earnings Conference Call. During today's presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be opened for questions. (Operator Instructions) This conference is being recorded today, Wednesday, February 23 of 2011. I would now like to turn the conference over to Garth Russell with KCSA Strategic Communications. Please go ahead, sir.

Thank you, Britney. Before turning the call over to Management for their prepared remarks, I would like to state that 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 in 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 be affected by uncertainties affecting real estate businesses generally, as well as specific factors discussed in PREIT's press releases, documents PREIT has filed with the Securities and Exchange Commission, and in particular, PREIT's annual report on Form 10-K. 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 CEO of PREIT. Ron, The floor is yours.

Thanks very much, Garth. Ladies and gentlemen, welcome to the Pennsylvania Real Estate Investment Trust year-end 2010 conference call. Joining me on the call today are Ed Glickman, the President, Bob McCadden, CFO, and 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 fourth quarter performance and our results for 2010. We'll also discuss our expectations for 2011. After we conclude our remarks, the call will be opened as usual for your questions.

The Company's performance improved in 2010 as consumers and retailers gained confidence in the economy as the year progressed. This confidence has continued into 2011, though there still remains significant concerns with respect to employment growth, interest rates, and geopolitical issues. The Company made significant progress on a number of fronts. We improved our balance sheet and reduced our leverage, in part by refinancing our credit facility, by raising equity and selling some non-core assets, using the proceeds to pay down debt. The Company's cash position is much stronger, providing us with flexibility should there be more opportunities to improve the balance sheet and grow our business. On the operating front, we also achieved meaningful increases in occupancy and sales. We are working to continue these trends in 2011.

I'm also pleased with our annual same store NOI performance, which is above our announced guidance. We haven't lost our opportunistic culture, however. We are being very selective and with a quiet, uncertain acquisition environment, our management team has focused on strengthening our financial position and on improving our operational performance and investing in our own properties. In doing so, we are working to place and keep tenants in our malls, to improve our occupancy, and maximize NOI as part of our strategy to create long-term value for our shareholders. With that, I'll turn the call over to Ed Glickman.

Thanks, Ron. Good afternoon and thank you for joining us on the call. 2010 has been a year of great challenges and great accomplishments for the Company. We begin 2011 in a far better place than we were 12 months ago. While we still face the changing landscape of the retail industry, both the economy in general and our Company in particular, have made significant progress in the last 12 months. At the end of 2009 we had just completed our redevelopment program and we were faced with both the operational challenges of bringing these projects online and the financial challenges of carrying the increased leverage from our investment.

Our newly renovated assets have been well-received in the market with 27 of 38 malls showing improved same store sales. Overall, we are now at $350 per square foot. This is only 4% below our peak performance of $364 per square foot in June of 2007. We are optimistic that our assets will continue to gain momentum as the overall economy continues its recovery. At the same time, we have taken a number of decisive steps to improve our financial leverage. With the help of our bank group, we successfully restructured our credit facilities and then began the process of de-levering by issuing equity and selling assets. While we are not yet where we would like to be on either the operational side or financial side of the business, we have demonstrated the ability to manage through a highly adverse environment and make demonstrable progress in achieving our stated goals.

On the operational side of the business, in spite of the bright line economic indicators turning positive, we continue to face a fragile consumer and cautious retailers. In 2010, we were able to keep our assets vital, negotiating pricing to improve occupancy. We ended the year at 91% occupancy, with 24 of 38 properties improving. In 2010 and in 2011, we also face the expiration of over 3.6 million square feet of anchor tenants, and there was concern that this would adversely impact us. To date, we have successfully negotiated the extension of all of the space that has come to term with less than 300,000 square feet to negotiate before year-end. At the same time as we extended our anchor tenancy, we shortened small shop lease terms to protect our upside against a strong recovery.

So far, this strategy of pushing occupancy and negotiating pricing and cutting term has been successful. We have experienced a 4.8% increase in same store sales, and our same store NOI is up 2.5% for the quarter. We also believe that the increased level of activity in our assets sets the stage for improved lease economics, a key area of focus for the Company in 2011. On the financial side of the business, through property sales equity issuance and applying cash on hand, we reduced debt by 13% and completed the amortization required for the extension under our credit facility. We have significantly improved our liquidity and have the requisite capital to operate our business. Along with this restructuring, however, came higher interest costs from increased spreads and fees. We have also chosen to operate at a low level of floating rate debt, which further limits risk but also comes at a cost.

Our 2011 guidance speaks to the full year impact of these and other 2010 events. First, the proceeds from the Company's equity raise and power center sale were applied to debt reduction. We believe that this was the right strategy in facing the uncertain economic environment. By reducing leverage and limiting our exposure to floating rate debt, we have improved the quality of the Company's earnings, but this has come at a cost. It is our goal to further reduce leverage and to pursue capital transactions that lower the risk on the balance sheet. We will do this on an opportunistic basis and when market conditions are advantageous. In the interim, again, we have the liquidity and capital access for what we need.

Second, our NOI forecast of minus 1% to plus 1%, reconciles the improvements that we have seen in the Company's operating performance with the full year impact of the reduced pricing. We believe that increasing activity level at our properties, in some cases by bringing in alternate uses and replacement tenants at lower rent levels, will ultimately drive sales performance, attracting new merchants and leading to increased rental income. Third and last, as a result of the timing of our announcement, our guidance is also impacted by what we know about the Borders situation. Bob will now give you additional color on our financial performance.

Thank you, Ed. PREIT's net loss for the fourth quarter was $8 million, or $0.15 per diluted share. FFO, as adjusted was $32.2 million or $0.56 per diluted share, compared to $37.3 million or $0.81 per share in the prior period. The prior year amounts have been adjusted to exclude the impairment charges totaling $74.2 million, and a $13.1 million gain on the extinguishment of debt. FFO on a per share basis also reflects the dilutive effect of the 10.35 million share offering completed in May of this year, May of 2010. Key factors impacting our operating results include the following. As Ed mentioned previously, same store NOI increased by 2.5%, or $1.9 million.

Last year's fourth quarter benefited from a 27 -- I'm sorry, a $2.7 million gain from a partial sale in October of last year, and $2.6 million of NOI generated by the power centers that we subsequently sold in September of 2010. Interest expense increased by $700,000, compared to the prior year's quarter, despite lower average outstanding debt balances. Outstanding debt for the fourth quarter of 2010 averaged $2.41 billion, as compared to $2.79 billion in last year's fourth quarter, a decrease of $380 million. The increase in interest expense is due to higher interest rates on our bank borrowings and two joint venture mortgage loans, increased amortization of deferred financing expenses associated with new debt, and lower capitalized interest. We placed $103 million of completed development and redevelopment assets into service since the end of 2009. Our effective interest rate for the quarter was 6.21%, 92 basis points higher than last year's fourth quarter. G&A expenses net of management company revenue increased by $1.4 million in the quarter, due primarily to higher incentive compensation accruals.

While reducing debt by almost $350 million since the end of 2009, we've been able to improve our liquidity position by $107 million. As of December 31, 2010, we had $47 million of cash on hand, and $148 million of unused capacity under the revolving credit facility. Our liquidity is sufficient to meet all of our near term capital needs. At the end of the quarter, 97.2% of our debt was either fixed or swapped to fixed. Our leverage ratio was 67.15%, compared to 70.8% a year ago. Turning to 2011 guidance, we expect GAAP earnings per diluted share to be a net loss between $0.88 and $0.78. We expect FFO per diluted share to be in the range of $1.56 to $1.66 per share.

Let me bridge the gap from 2010's operating results. In 2010, same store NOI, net of lease terminations, was $277.6 million. We expect same store NOI growth to be between minus 1% and 1%, excluding lease termination fees. In line occupancy is expected to increase by 100 to 200 basis points from 2010 levels. We anticipate a seasonal downturn in occupancy during the first half of the year, with increasing occupancy in the latter part of the year as new tenants open stores for holiday 2011. In 2010, we recorded lease termination fees of $3.3 million. Our guidance range assumes a lower level of termination fees from $1.5 million to $2.5 million.

Interest expense will be impacted by a full year of higher interest rates on our bank borrowings and the two joint venture property mortgages mentioned previously, the cessation of interest capitalization on assets placed in service over the past year and higher interest rates on swapped debt. Interest expense during the fourth quarter of 2010 was $36.8 million. This should be a reasonable run rate for 2011 if you're taking into account the following two adjustments. First, we refinanced the mortgage loan in Springfield Mall at the end of November. The interest rate increased from 1.36% at the end of the third quarter, to a fixed rate of 4.77%. You should adjust the fourth quarter run rate for two months of interest on this loan at the higher rate.

Second, as disclosed on page 28 of our supplemental, last year we entered into an interest rate swap on $200 million of our term loan, that steps up on March 11 of this year. The swap effectively increases the base rate from LIBOR plus 61 basis points to LIBOR plus 177 basis points. The impact of the step-up swap in 2011 is approximately $2 million. All of the other items on our income statement -- management company revenues, G&A and other expenses are expected to be flat on a net basis when compared to 2010. Additionally, weighted average shares in 2011 are estimated to be approximately 57.8 million, as compared to 53.5 million shares in 2010, an increase in weighted average shares of 4.3 million. Recurring capital expenditures and tenant allowances are expect to be in the range of $30 million to $35 million. Finally, our guidance does not assume any additional acquisitions or dispositions. With that, I'll turn the call over to Joe Coradino.

Thanks, Bob. The retail economy has continued its gradual improvement, with key indicators including employment and housing gaining positive momentum. While we are witnessing rising fuel and raw material costs for retailers, the consumer has continued to shop and drive sales at our shopping centers. We realized a year-over-year enclosed mall comp sales increase of 4.8%, from $334 per square foot to $350 per square foot, which compares favorably to the 3.3% national increase in sales. Notably, we experienced positive sales gains at 27 of our 38 mall properties, with 23 now reporting sales over $300 per square foot.

From a retailer perspective, 8 of our top 10 rent paying tenants realized increases in sales. The sales increases were led by our premier properties, Cherry Hill, Jacksonville, Woodland and Lehigh Valley Malls, where average sales were $521 per square foot, up 13.3% over 2009. We believe our portfolio is showing signs of turning the corner on the economic downturn of 2008. We opened over 1 million square feet in new tenants and ended 2010 with positive net absorption of 453,000 square feet. We increased total occupancy by 160 basis points to 91%, a move that was primarily the result of in line leasing activity. We ended the year with non-anchor occupancy of 87.2%, an increase of 260 basis points over '09.

When temporary tenants are included, enclosed mall non-anchor occupancy increases 430 basis points to 90.4%, and total mall occupancy is at 92.6%, a significant increase over last year. These occupancy gains were also driven by our general manager leasing program which generated over 160,000 square feet in transactions during 2010. The introduction of alternative uses and a successful incubation of tenants and our attempt to firm conversion program also contributed. We are beginning to see improvement on the fundamentals of our business with long-term renewal spreads beginning to stabilize. Specifically, renewals in properties with sales over $350 per square foot are achieving positive renewal spreads of 2.8%. Conversely, in properties with sales below $350 per square foot, we are experiencing negative renewal spreads of 9.2%. However, for all lease renewals with terms over three years, we are seeing positive renewal spreads in excess of 1%.

In our view, the fourth quarter leasing spreads on new deals do not reflect a trend. Rather, the fourth quarter reflects the significant effect of a few transactions that we do not expect to be replicated. We expect 2011 spreads on new deals to return to earlier 2010 levels. We experienced no bankruptcies during the quarter, compared to three bankruptcies during the fourth quarter of '09. Our exposure to Borders, who filed for bankruptcy protection last week, is limited. We currently have seven small format Borders comprising 31,000 square feet in the portfolio, and five large format stores totaling 160,000 square feet.

Two of our large format stores are on the closing list -- Patrick Henry Mall and Whitehall Mall. At Patrick Henry, we already have a queue of interested prospects. We are continuing to realize the impact of our investments in redevelopment. Our efforts to upgrade the merchandise in our properties have resulted in improved sales metrics. At Woodland Mall in Grand Rapids, where we added a Barnes & Noble, sales ended the year at $499 per square foot, increasing 13.9% over 2009. We expect these sales gains to continue their upward trajectory, bolstered by the first in our portfolio opening of the North Face. At Cherry Hill Mall, the comp sales productivity is $559 per square foot, an impressive increase of 25.3% over 2009. This improvement is a result of securing the right merchants for the market.

We strengthened our tenant lineup during the quarter with the opening of 12 merchants in 32,000 square feet. Key openings during the fourth quarter included White House Black Market and Marciano.Also during 2010, we opened a Buckle, Guess, Francesca's Collections and 77kids. Cherry Hill has been transformed into the retail powerhouse of South Jersey. At this time, we're forecasting 2011 year-end occupancy at approximately 95%. At Plymouth Meeting Mall, the comp sales productivity increased by 31% over '09, driven by the new additions to the property including California Pizza Kitchen, PF Chang's and Redstone Grill. We continued to improve our tenant lineup during the quarter with opening seven merchants and 28,000 square feet. Key openings included Orvis on the south plaza and Express in the main mall.

The leasing activity has driven total occupancy to 87.7%, an increase of 180 basis points over 2009. At Voorhees Town Center, construction continues on the township municipal building. Demolition is complete with tenant improvements under way. We continue consolidating the mall retailers under the first level of the mall. During the fourth quarter, we opened a 20,000 square foot Tilt, a large scale nationally recognized arcade, in place of the previous tenant. Children's Place opened in their new 5,100 square foot first level location, joining Victoria's Secret and Payless Shoes.

The announcement of the town hall relocation has already begun to generate additional prospective tenants and we are in active discussions with medical and educational uses for a majority of the space on the second level of the mall. The residents at Avatar continue to come online and increases in traffic at the site with six buildings now available. The residential occupancy at year end was approximately 95% and in the last 60 days, two new buildings opened for occupancy. We are under way with construction at two signature restaurants, expected to open in the fall of 2011. They'll complement Coffee Works which opened on The Boulevard in December.

We also had a strong year leasing our strip and power center assets. We opened 153,000 square feet, vacated as a result of the bankruptcy filings of Circuit City and Linens 'n Things, resulting in total occupancy at our strip and power centers at 95.8% at the end of 2010, a 700 basis point increase. So, we have made significant improvements on many of our operating initiatives in 2010, including sales, occupancy, revenue, and controlling expenses. We're encouraged by these positive operating metrics we have registered with the improving retail climate. We continue to build on the platform created by our completed redevelopment assets and look forward to sharing continued positive developments on future calls. With that, we're now ready for questions.

Thank you, sir. We will now begin the question and answer session. (Operator Instructions). Our first question comes from the line of Quinton Falelli with Citi. Please go ahead.

Hello, guys, it's actually Manny here with Quinton. My first question is on Borders, what exactly are you including in guidance for the impact of those closings?

You have roughly about $0.5 million of lost revenue associated with the two stores.

And that's -- you're not including any other potential closings?

We are not.

Okay. And then, in terms of renewals, are tenants still looking to do short-term deals on -- especially on a percentage basis? And what's your proportion of those types of deals?

I would say for the most part the challenged operators are continuing and we are also pursuing that, looking for shorter term deals. But for the most part, you're beginning to see the retailers who are performing to work towards longer term transactions in our properties.

Okay and then, Joe, on Cherry Hill, I think you said you expect occupancy at that asset to go to 95%.

That's correct.

I was just surprised, given the productivity at the mall, that the occupancy was down so much in 2010. Could you --

Well, remember that part of that is driven by the fact that we incorporated the second level now into the calculation of occupancy for the property.

And the other driver, Manny, was at the end of last year, Forever 21 had opened its larger format store and was also operating a second store in the first level. So, at the end of 2010, that second store was occupied by a temporary tenant which isn't included in our occupancy statistics.

Got it. And then finally, Bob, for G&A, I think you said that you expect the 2011 number to be sort of flat with 2010. But 4Q I think was higher than what you had initially guided to.

Right.

So, should we expect the 4Q run rate, which would get us higher than 2010, or a 2010 all-in number?

Right. Yes. Look at the 2010 all-in number.

Okay. Thanks, guys.

Thank you. Our next question comes from the line of Craig Schmidt with Bank of America-Merrill Lynch. Please go ahead.

Thank you. I also had a couple questions on the redevelopment projects. I assume the occupancy number at Voorhees doesn't include the city municipal offices. Do you know what the number will roughly be once they settle in there?

You're correct, it does not include it and they're going to be occupying about 20,000 square feet, sort of gorilla math.

We're actually selling them a condominium interest in a property.

So you'd be reducing the numerator and the denominator, I guess at that point.

Right.

Got you. And then, of the 41% of vacant, how much would be on the second floor versus the first floor? Of the non-anchor space?

Well, a lot of the occupancy or the vacancy also includes the property along The Boulevard. So, it's the street level retail.

Okay. Got you.

So just as a matter of practice, as the buildings are complete, you wait some period of time and then if the space is not leased, you typically put it into service following the occupancy of the first tenant.

Okay.

The goal of the project at this point is to relocate all of the second floor tenants to the first floor, the retail tenants, which is in the process of being executed, if not already completed. And then to populate the second level, to take advantage of city hall moving on to that second level and to continue to proliferate the second level with office tenants. And that's the comment I made in my script regarding, we are in discussions for the majority of that space, if not all of it, with several tenants.

Great. And then on Plymouth Meeting, I see that the non-anchor space is 81.2. I know you're trying to pick that number up. Where do you think that number will be year-end 2011?

Bear with us a second.

Okay.

Our CEO gave the right answer. He said it will be an improvement. But we'll get more specific in a moment. 86% occupancy is projected at year-end.

Great. Okay. Thanks a lot.

Thank you. Our next question comes from the line of Nathan Isbee with Stifel Nicolaus. Please go ahead.

Hi. Good afternoon. Can you talk a little bit about the space demand from traditional retailers at your lower productivity malls?

I think as you can see, our focus in our lower productivity malls has been alternative uses and local retailers. And as I pointed out, our general managers program resulted in over 160,000 square foot of leases in 2010. I think that retailer demand is stagnant at best right now for those properties. It's a selective mall by mall decision. In some cases, retailers -- the retailers are performing in the lower productivity malls. In some cases they're not. So, we make a case by case decision, but I would say generally the answer to that question is that you're not seeing significant expansion in the secondary market malls by national retailers.

Okay. And then I think you had spoken on the last call, that thing in discussion is about 300,000 square feet of nontraditional retailers, some medical uses, educational uses. Can you just talk about where you stand with those?

Well, the 300,000 square, some of that number has been concluded during the fourth quarter. I don't have that specific number, but the bulk of that is really health care uses at this point and they're transactions in progress.

Okay.

Probably upwards of 150,000 square feet of that 300,000 are transactions in progress that we are optimistic for in 2011.

Okay. Some of that fell out and some of that got done?

Yes, deals always die, unfortunately.

Sure. Okay. Can you just -- on Cherry Hill, how much, in terms of leases signed today that have yet to come online in terms of NOI for 2011, how much do you have in the bag there?

Again, bear with us. We have, I would say, about 21,000 square feet committed at this point and probably a number that's double that, that we are -- that we're working on transactions with right now. I think with Cherry Hill, again, and I think I mentioned this on a previous call, we're being very selective about transactions. The center's doing $559 a square foot in sales with 25% sales growth year-over-year, which I would -- in terms of 25% sales growth, I don't know another asset in America that could compete with that. If you do, I'd be happy to learn about it. But having said that, we're being very selective and very careful about who we put into the property and while we are -- we're in a business where quarter-over-quarter metrics are important, we're more focused on creating value for the long-term at Cherry Hill and we have the queue of tenants, but we want to do the right deals at our terms. And so -- I mean, I can give you a long list of prospective tenants which our General Counsel won't allow me to do, but 21,000 feet right now, but good things in the future for Cherry Hill.

Sure. And I know it's early yet, you'd brought the Express into the interior of Plymouth Meeting. Are there any signs that that's helping the interior? Are you seeing any other -- ?

They're about 20% over plan in that store, which is good news. And we are -- we're working on a number of transactions to build off of that in similar categories, similar price points.

National retailers?

That's correct.

Okay. And then just to finish up, any progress on the Willow Grove or Hanover anchor space?

There is progress. We are -- we're moving forward. But again, nothing to report on.

Got you. All right. Thanks so much.

Thank you. Our next question comes from the line of Michael Mueller with JPMorgan. Please go ahead.

Yes, hi. Maybe a little bit aways, but can you talk about how you're thinking about the term loan?I think it converts to come due in 2012 and the term loan in 2013 and just how you're thinking about refinancing those?And maybe while you're at it, just touch on asset sales as well, what you're thinking about, is anything definitively in the market at this point in time, et cetera?

So, we have the convert that comes due next May and our thought is that we'll either look for some kind of an extension of that convert or we'll refinance it. If we don't like the terms, if we don't like where the stock price is or where the interest rate environment is, we'll use the line of credit to pay it off. So, that's our feeling about the convert. In terms of the loan that comes due on Cherry Hill Mall, as Joe just mentioned, the mall's doing extremely well and we feel very comfortable with the ability to refinance that at the time.

I'm sorry. I said the term loan. I think I said the term loan. If not, I meant to say the term loan.

Oh, okay. Well, the term loan and the line of credit are essentially tied together.

But we have the ability on the paydown to extend that another year from 2013 to 2014. We've already met the requirements for an extension, Mike.

Got it. Okay. And then anything on the asset sale front we should be thinking about?

Not at the moment. We still have the two remaining of the seven assets which are part of the original Cedar transaction that has not yet been concluded.

Okay. For guidance purposes, are they included -- are they treated as being sold?

They are not.

Okay. Okay. Thank you.

Thank you. (Operator Instructions) Our next question comes from the line of Ben Yang with KBW. Please go ahead.

Yes, hi. Good afternoon. Ron or Ed, at the end of the last quarter you were just starting the whole non-traditional medical office initiative. And now that you've had a few months under your belt, and I assume you've had several conversations at this point, can you just give us an idea of what the reception has been from some of the existing retailers? Are they concerned at all about what you're doing and is it possible that you might have to lower their rents if they're maybe located in that medical office wing? Is that something that we should be thinking about or be concerned about?

Well, first off, we're being quite selective about where we introduce -- this is Joe Coradino. We're being quite selective about where we introduce those alternative uses and they're typically in properties that -- where occupancy would be welcome by other retailers, number one. And the other -- I think the other thing is that we obviously see this as a positive and we see great synergy between retail and medical, and I think our discussions with the -- both the retailers and health care is that it's a significant opportunity. There's a couple of examples around the country where it's already been accomplished with Vanderbilt University going into a mall environment. So, I guess you never know when someone's going to hold you up, but at this point, we are optimistic that there's a value-added opportunity with health care.

So, there hasn't really been any pushback it sounds like from some of the retailers at those particular properties that you've identified?

No, not at this point.

Okay. Great. And then I think, Joe, you also mentioned that in terms of re-tenanting the two large format Border spaces, that there was a queue of retailers lined up. Could you give us an idea of who may be taking that type of space?Is it a competing book store? Is it retailers? Do you have to carve it up into smaller space? Who do you think is going to take that space in your portfolio?

Well, certainly one possibility is a competing book store. And I think the other possibilities include large format soft goods retailers, number one. Number two, there is the possibility, particularly in Patrick Henry, of carving that up into additional restaurants. Restaurants at that center do exceedingly well, in excess of $4 million each, the two new restaurants we -- well, the two restaurants that we have in the space, so we are considering that as well.

So again, it's something that, I think for Patrick Henry, with the investment that we initially put into it as part of the redevelopment, number one, and also the fact that we think it's important with the competitive property Peninsula Center that was developed that we merchandise that consistent in a way with the positive demographics in the area. So again, being somewhat careful in who we put in and want to make sure that as a result of making decisions, it's one, economically a good decision and two, from the a merchandising perspective, drives traffic and sales.

And that $0.5 million of lost revenue that you talked about related to Borders, does that assume that you re-tenant that space this year?

No, that does not.

Okay. Thank you.

Thank you. Our next question is a follow-up question from the line of Quinton Falelli with Citi. Please go ahead.

Hi. Good afternoon. Ed, in your prepared remarks you spoke a little bit about opportunity to see capital raising and if we look at the balance sheet and the leverage levels and it's around the nine times net debt to EBITDA ratio, and you suggested that there's not a lot of asset sales that are under way at the moment, so how are you thinking about potentially raising common equity to further de-lever?And also maybe if you're thinking about preferred equity as well?

So we've looked at a panoply of possibilities ranging from the convert and extending and expanding that. We've looked at preferred stock and we've also looked at different flavors of raises of common equity from going out and issuing more shares to going out and doing an ATM program. But as I said, we intend to be opportunistic, look at how the market responds to the stock and to what we think is the improvements in the core performance of the portfolio and we're also keeping tabs on the interest rate environment. But we would like to, over time, reduce leverage as we've said, but we intend to do it in the most advantageous way possible for the Company.

Okay. Thank you.

Thank you. Our next question comes from the line of Cedric Lachance with Green Street Advisors. Please go ahead.

Thank you. Just to stay on the same line of question, but maybe turning to property sales instead, could you give me a sense of what you consider non-core assets at this point? And what's your appetite to market them?

Well, we have a number of malls that we don't think are core. Those would be the ones that have the lowest sales productivity and places where we don't think the investment of marginal capital will necessarily be helpful, at least for what we would like to do with the properties. So, those are possible. But at the moment, those are usually sold to financial buyers and those buyers aren't really in this market at the moment. We have some additional power centers that we could contemplate at some point in time doing something with. They're not core in some sense. They're fully realized. But again, we sold most of the power centers that we felt were the ones that were the least strategic to the portfolio. So, again, I don't think that in the near term the leverage issue will be solved by further portfolio sales.

Okay. When I look at where your stock trades, it seems to persistently trade at a fairly large discount to net asset value. And given that there actually are very few properties that are being marketed, why not take advantage of perhaps a window in the market and try to sell a few, if not a large chunk of assets which would help you realize an AV and at the same time de-lever the Company by quite a fair bit?

Well, I guess the question is what you consider to be a window of opportunity here for the properties and which ones that we feel we have that would meet that window and yet are not strategic to leasing the balance of the portfolio. So, in our thought, the properties that would meet today's window, as we perceive it, are the ones that are key to keeping the balance of the portfolio leased.

So, it's basically strategically essentially impossible for you to sell the top half of your portfolio?

Yes.

Okay.

I would say so.

All right. Thank you.

Thank you. And I'm showing no further questions in the queue. I would like to turn the call back to Mr. Rubin for any closing remarks at this time.

Thank you for joining us this afternoon and for your continued support. We'll continue to provide us with updates that take place within the Company and we will obviously provide our update for first quarter 2011 results in April. Thank you again and have a good evening.

Thank you. Ladies and gentlemen, this concludes the Pennsylvania Real Estate Investment Trust fourth quarter 2010 earnings conference call. We thank you for your participation. You may now disconnect.