PHILADELPHIA-Pennsylvania Real Estate Investment is currently60% leveraged and one of the ways management could lessen thatnumber is by selling noncore assets, including some of itsportfolio of 13 open-air and power centers. "In today's market,smaller assets tend to be a little more liquid and a little moreattractive to investors," said CFO Robert McFadden, speaking at theannual REIT Week convention in Chicago.

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Another way to reduce the leverage, he said, is for managment toconsider non-retail tenants in middle markets where spaces whereanchor space was vacated by store closings. For example, one ofPREIT's 38 malls, in Pennsylvania, leased space to a telemarketingfirm. McFaddeen contended that some of these nontraditional tenantsactually pay higher rents than big-format retailers.

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The company would also like to partner with instutionalinvestors that might be looking for "growth opportunities in thefuture," he said.

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PREIT has recently finished major renovations of three of itsmalls, Cherry Hill (NJ), Plymouth Meeting (PA) and Gallery atMarket East in Philadelphia. It is close to completing work onVorhees Town Center (NJ), which is a mixed-use project.

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McFadden sounded encouraged but cautious about the currentperformance of retailers. "We're starting to feel that we'vereached bottom and have turned around," he said, explaining that wecan expect a U-shaped turnaround to the recession.

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