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PHILADELPHIA-Second-quarter earnings for Pennsylvania Real Estate Investment Trust met expectations and remain at a subdued level as the locally based REIT continues aggressive redevelopment activity. Approximately 36% of the portfolio is in some stage of redevelopment, noted CFO Bob McCadden during a conference call.

Net operating income for the quarter was $72.9 million, up 4% compared with $70.1 million in the same quarter of 2005. Funds from operations fell to $32.9 million in the most recent quarter, versus $34.1 million in second quarter a year ago.

“We’re making solid progress with our current redevelopment projects, and we are beginning to see the early signs of positive contributions from some of the properties involved,” said Ron Rubin, chairman and CEO. The portfolio’s sales per sf averaged $348 on June 30 this year, up from $339 per sf at the same time last year.

Rubin said the company executed 204 leasing transactions during second quarter. Rent rates were up 15% for renewals and 8% for new leases. Overall occupancy slipped from 91.3% at mid-year 2005 to 90% this June.

The company unveiled new redevelopment projects for three Pennsylvania properties: Willow Grove Park in Willow Grove, Lehigh Valley Mall in Allentown, and Beaver Valley Mall in Monaca. Magnolia Mall is Florence, SC, will also undergo redevelopment. Joseph Coradino, president of PREIT Services, said Barnes & Noble has committed to Magnolia Mall, Dick’s Sporting Goods will lease at Beaver Valley Mall and Boscov’s has leased much of the former Strawbridge’s at Willow Grove, where PREIT plans to add an entertainment and restaurant component.

Much of the company’s planned ground-up development is at or adjacent to properties already in its portfolio, including the addition of Plaza at Magnolia. However, Rubin also said that during the quarter PREIT acquired the first parcel of a 925-acre tract in Sellersburg, where it plans ground-up development of a 700,000-sf power center.

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