PREIT Considers Selling Smaller Retail Centers

PHILADELPHIA-Pennsylvania Real Estate Investment is currently 60% leveraged and one of the ways management could lessen that number is by selling noncore assets, including some of its portfolio of 13 open-air and power centers. "In today's market, smaller assets tend to be a little more liquid and a little more attractive to investors," said CFO Robert McFadden, speaking at the annual REIT Week convention in Chicago.

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

The company would also like to partner with instutional investors that might be looking for "growth opportunities in the future," he said.

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

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