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PHILADELPHIA-Pennsylvania Real Estate Investment Trust has begun a private offering of $250 million in exchangeable senior notes due 2012. It includes an over-allotment option of up to $37.5 million to initial purchasers within 13 days and coincides with the shopping center REIT’s first-quarter financial report, which showed positive performance on all fronts.

Completion of the redevelopment of eight properties in 2006 buoyed operating income at each location, Ron Rubin, chairman and CEO, said during a conference call. At the end of first quarter, average sales per sf throughout the portfolio reached $361 per sf, up more than 4% from an average of $343 per sf the same time a year ago.

Rent rates for new leases signed during the quarter averaged $32.15 per sf, and renewals averaged $21.02 per sf. Both represented increases over prior rates. As redevelopments begin at Jacksonville Mall in North Carolina and North Hanover Mall in Pennsylvania, Joseph Coradino, EVP, said, “we approach ICSC in Las Vegas this month with compelling reasons for expanding retail tenancy,” referring to International Council of Shopping Centers’ annual convention coming up later this month.

First quarter revenue was $111.9 million, up from $111 million in first quarter 2006. Funds from operations reached $33.2 million, up 4.7% from $31.7 million in the prior-year’s opening quarter. Net operating income dropped 2.5% to $73.5 million, compared with $75.4 million in first quarter 2006, primarily because of higher lease termination revenues in prior quarters.

Proceeds from the note offering will primarily be used to repay a portion of the locally based REIT’s outstanding balance on its credit facility. Shares of PEI on the NYSE closed on May 1, the day of the conference call, at $46.66 a share. This compares with the 52-week high of $50.39 a share this April 5, and a 52-week low of $36.75 on May 31, 2006.

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