PHILADELPHIA-For $32 million, or about $97.56 per sf, locally based Pennsylvania Real Estate Investment Trust closes on its purchase of the 383,000-sf Gallery at Market East II. This takes PREIT’s ownership of the 1.1-million-sf Gallery at Market East, which is the largest retail complex in Downtown Philadelphia, to approximately 50%.

PREIT acquired the 193,000-sf Gallery at Market East I from Columbia, MD-based Rouse Co. in April 2003 as part of a six-property retail portfolio. In-line occupancy of the Market East II section of the complex is 78.3%, and in-line sales volume as of Dec. 31, 2003 was $393 per sf.

According to PREIT’s first-quarter report, that makes this property’s occupancy lower than the 86.6% average occupancy among all 40 of its enclosed malls as of March 31, 2004, and its in-line sales volume the fifth highest in the enclosed mall portion of the portfolio. Average sales at the Market East I section are $346 per sf, according to PREIT first-quarter data.

Rental rate per sf at Market East II is undisclosed. According to the PREIT report, the average base rent at the adjacent Market East I is $33.21 per sf and additional charges are $9.73 per sf. In the enclosed mall portion of PREIT’s portfolio, this rental rate is exceeded only by the rate at Exton Square Mall in Exton, PA.

Burlington Coat Factory anchors Market East II, and also among the current 51 in-line tenants are Old Navy, Foot Locker, Bath & Body Works, Limited, Express and Lerner. Strawbridge’s and Big K-Mart anchor the full Gallery at Market East.

PREIT funded the Market East II acquisition from its line of credit, and it underwrote the purchase to generate an unleveraged return of approximately 9.5% on cost based on anticipated operating income for 2004.

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