But, because the REIT acquired so many properties at once,primarily through its November 2003 acquisition of Crown American,Glickman said it was necessary to step up the pace in order tobring gains. "We realize redevelopment will have a short-termnegative impact on occupancy . . . and an interim fall-off inincome."

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Net income fell 31.2% to $5.5 million during the quarter, downfrom $8 million in the same quarter a year ago. Net operatingincome reached $69.5 million, up 2% from $68.1 million, while samestore net operating income decreased by 2.4% compared with the samequarter of 2004. Occupancy in the portfolio at June 30 this yearwas 91.2%, compared with 92.3% at the same time a year ago.

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PREIT detailed a more than $200-million redevelopment investmentthat is underway and expected to reach completion by year-end 2007."Our redevelopment and remerchandising activities gathered momentumduring the second quarter and are continuing," said Ronald Rubin,chairman and CEO, during the call. He announced that Whole Foodswill open at Plymouth Meeting Mall, calling it representative of"the creative strategies we are employing to enhance the value ofour retail assets."

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Barnes & Nobel, Borders, Dick's Sporting Goods and Best Buyalong with new restaurants are taking space throughout theportfolio, Rubin said, "creating a platform for other types oflifestyle tenants. By adding new types of tenants and generatingsynergies at our properties, we intend to give shoppers morereasons to come to our malls, to stay at them longer and buy morefrom our merchants."

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In addition to "stepping up the pace of redevelopment," Rubinsaid, PREIT is also acquiring land adjacent to some existingproperties in order to add new tenants.

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Among the most costly and significant of the investments is theestimated $53-million phase I redevelopment at Plymouth MeetingMall. It includes a lifestyle addition anchored by Whole Foods andup to six "upscale themed" restaurants on outparcels. This isscheduled for completion in fourth quarter 2007.

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At an investment cost and timetable yet to be determined,Echelon Mall in Voorhees, NJ, big box retailers will replace closeddepartment stores. A phase I, $40-million investment at Cherry HillMall in New Jersey calls for creation of a "Bistro Row" along withremerchandising of existing retail. This is expected to reachcompletion in first quarter 2007.

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At a cost of $34.7 million, Regal Cinema at New River ValleyMall in Christiansburg, VA will relocate to an outparcel with RedRobin restaurant and an in-line sporting goods store. A ground-uppower center is being added, and its completion is scheduled forfirst quarter 2006.

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By the end of this year, the $25.7-million redevelopment ofPatrick Henry Mall in Newport News, VA is expected to be complete.It includes the consolidation of two Dillard's units into a singlelarger one and conversion of the former Dillard's space into alifestyle addition. Tenants in the addition are Borders, Dick'sSporting Goods, Red Robin, Victoria's Secret and Bath & BodyWorks.

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The other five malls undergoing redevelopment, each at aninvestment of $11.5 million or less, are: Lycoming Mall inPennsdale, PA; Valley View Mall in LaCrosse, WI; Francis Scott KeyMall in Frederick, MD; South Mall in Allentown, PA and the Plaza atMagnolia in Florence, SC, where the ground-up development of anadjacent parcel for a power center is taking place.

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