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PHILADELPHIA-In a strategy designed to strengthen its portfolio of shopping malls and power centers, officials with the Pennsylvania Real Estate Investment Trust said they will continue to replace underperforming tenants with stronger merchants to solidify the trust’s position in the industry.

“In the first quarter we closed approximately 95,000 inline sf,” Edward Glickman, the trust’s president and chief operating officer, said. “We expect to close 200,000 additional inline sf for the remainder of this year.” The plan, he said, was to install solid businesses in a move to strengthen its assets.

PREIT holds a portfolio of more than 33 million sf in shopping-mall and power-center investments in the eastern US, including 38 shopping malls, 13 strip and power centers and four industrial properties. During the past year, the trust wrapped up its acquisitionof the Cherry Hill (NJ) Mall; the Gallery at Market East II here, the Orlando Fashion Square Mall; and the Cumberland Mall in Vineland, NJ. It also disposed of five malls acquired in a November 2003 merger with Crown American Realty Trust and sold its 60% interest in Rio Grande Mall in Rio Grande, NJ.

Company officials, who made the re-tenanting announcement at the REIT’s Q1 earnings call on Monday, said the trust has tripled its business in the past year. They also reported strong occupancy and leasing throughout its holdings.

While down slightly, overall occupancy for the trust’s total retail portfolio was 91.2% in the first quarter, compared to 91.9% during the same period the prior year. The decline in occupancy was a result of continuing remerchandising and redevelopment and the reacquisition of space from underperforming or bankrupt tenants, company officials said. In terms of leasing, 109 new deals were signed for a total of 325,000 sf with 720,000 sf of contracts awaiting execution.

Overall, the trust saw its net income improve by 43.8% during the first quarter, rising to $8 million from $5.6 million in the first quarter a year earlier. “The company’s solid numbers demonstrate our ability to expand and enhance our portfolio through selective acquisitions, redevelopment and remerchandising initiatives,” said Ronald Rubin, chairman and CEO.

The locally based REIT also showed strong improvement in its funds from operations, which increased 8.2% to $36.2 million from $33.4 million in the first quarter of 2004. Net operating income derived from wholly owned properties and partnerships also was on the upswing, rising by 4.2% to $69.4 million in the first quarter from $66.6% during the same period in 2004.

For shareholders, that reflected a 31.3% increase in the per-share diluted basis from 16 cents in the first quarter of 2004 to 21 cents in the first quarter of 2005. News of the strong financials sent the trust’s stock up 36 cents to close at $42.51 on Monday.

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