10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended December 31, 2019

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission File No. 1-6300

PENNSYLVANIA REAL ESTATE INVESTMENT TRUST

(Exact name of Registrant as specified in its charter)

Pennsylvania	23-6216339
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)
One Commerce Square 2005 Market Street, Suite 1000 Philadelphia, Pennsylvania	19103
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (215) 875-0700

Securities Registered Pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Shares of Beneficial Interest, par value $1.00 per share	PEI	New York Stock Exchange
Series B Preferred Shares, par value $0.01 per share	PEIPrB	New York Stock Exchange
Series C Preferred Shares, par value $0.01 per share	PEIPrC	New York Stock Exchange
Series D Preferred Shares, par value $0.01 per share	PEIPrD	New York Stock Exchange

Securities Registered Pursuant to Section 12(g) of the Act: None

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    

Yes   ☐     No   ☒

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.    Yes   ☐     No   ☒

Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes   ☒     No   ☐

Indicate by check mark whether the registrant has submitted electronically if any, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes   ☒     No   ☐

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected to not use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐   

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes   ☐     No   ☒

The aggregate market value, as of June 30, 2019, of the shares of beneficial interest, par value $1.00 per share, of the Registrant held by non-affiliates of the Registrant was approximately $489.5 million. (Aggregate market value is estimated solely for the purposes of this report and shall not be construed as an admission for the purposes of determining affiliate status.)

On March 6, 2020, 78,528,350 shares of beneficial interest, par value $1.00 per share, of the Registrant were outstanding.

Documents Incorporated by Reference

Portions of the Registrant’s definitive proxy statement to be filed with the Securities and Exchange Commission pursuant to regulation 14A relating to its 2020 Annual Meeting of Shareholders are incorporated by reference in Part III of this Form 10-K.

PENNSYLVANIA REAL ESTATE INVESTMENT TRUST

ANNUAL REPORT ON FORM 10-K

FOR THE YEAR ENDED DECEMBER 31, 2019

TABLE OF CONTENTS

		Page
Forward Looking Statements		1
PART I
Item 1.	Business	2
Item 1A.	Risk Factors	11
Item 1B.	Unresolved Staff Comments	27
Item 2.	Properties	27
Item 3.	Legal Proceedings	33
Item 4.	Mine Safety Disclosures	33
PART II
Item 5.	Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities	34
Item 6.	Selected Financial Data	34
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	36
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	57
Item 8.	Financial Statements and Supplementary Data	58
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	58
Item 9A.	Controls and Procedures	58
Item 9B.	Other Information	58
PART III
Item 10.	Trustees, Executive Officers and Corporate Governance	59
Item 11.	Executive Compensation	59
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters	59
Item 13.	Certain Relationships and Related Transactions, and Trustee Independence	59
Item 14.	Principal Accountant Fees and Services	59
PART IV
Item 15.	Exhibits and Financial Statement Schedules	60
Item 16.	Form 10-K Summary	65
	Signatures	66
	Financial Statements	F-1

FORWARD LOOKING STATEMENTS

This Annual Report on Form 10-K for the year ended December 31, 2019, together with other statements and information publicly disseminated by us, contain certain forward-looking statements that can be identified by the use of words such as “anticipate,” “believe,” “estimate,” ”expect,” “intend,” “may,” “project,” and similar expressions. Forward-looking statements relate to expectations, beliefs, projections, future plans, strategies, anticipated events, trends and other matters that are not historical facts. These forward-looking statements reflect our current views about future events, achievements or results and are subject to risks, uncertainties and changes in circumstances that might cause future events, achievements or results to differ materially from those expressed or implied by the forward-looking statements. In particular, our business might be materially and adversely affected by the following:

• changes in the retail and real estate industries, including consolidation and store closings, particularly among anchor tenants;

• current economic conditions and the corresponding effects on tenant business performance, prospects, solvency and leasing decisions;

• our inability to collect rent due to the bankruptcy or insolvency of tenants or otherwise;

• our ability to maintain and increase property occupancy, sales and rental rates;

• increases in operating costs that cannot be passed on to tenants;

• the effects of online shopping and other uses of technology on our retail tenants;

• risks related to our development and redevelopment activities, including delays, cost overruns and our inability to reach projected occupancy or rental rates;

• acts of violence at malls, including our properties, or at other similar spaces, and the potential effect on traffic and sales;

• our ability to sell properties that we seek to dispose of or our ability to obtain prices we seek;

• potential losses on impairment of certain long-lived assets, such as real estate, including losses that we might be required to record in connection with any dispositions of assets;

• our substantial debt and the liquidation preference of our preferred shares and our high leverage ratio and our ability to remain in compliance with our financial covenants under our debt facilities;

• our ability to refinance our existing indebtedness when it matures, on favorable terms or at all;

• our ability to raise capital, including through sales of properties or interests in properties and through the issuance of equity or equity-related securities if market conditions are favorable; and

• potential dilution from any capital raising transactions or other equity issuances.

Additional factors that might cause future events, achievements or results to differ materially from those expressed or implied by our forward-looking statements include those discussed in the section entitled “Item 1A. Risk Factors.” We do not intend to update or revise any forward-looking statements to reflect new information, future events or otherwise.

Except as the context otherwise requires, references in this Annual Report on Form 10-K to “we,” “our,” “us,” the “Company” and “PREIT” refer to Pennsylvania Real Estate Investment Trust and its subsidiaries, including our operating partnership, PREIT Associates, L.P. References in this Annual Report on Form 10-K to “PREIT Associates” or to the “Operating Partnership” refer to PREIT Associates, L.P.

1

PART I

ITEM 1.     BUSINESS.

OVERVIEW

PREIT, a Pennsylvania business trust founded in 1960 and one of the first equity real estate investment trusts (“REITs”) in the United States, has a primary investment focus on retail shopping malls located in the eastern half of the United States, primarily in the Mid-Atlantic region.

We currently own interests in 26 retail properties, of which 25 are operating properties and one is a development property. The 25 operating properties include 21 shopping malls and four other retail properties, have a total of 20.1 million square feet and are located in nine states. We and partnerships in which we hold an interest own 15.7 million square feet at these properties (excluding space owned by anchors or third parties).

There are 18 operating retail properties in our portfolio that we consolidate for financial reporting purposes. These consolidated properties have a total of 15.2 million square feet, of which we own 12.1 million square feet. The seven operating retail properties that are owned by unconsolidated partnerships with third parties have a total of 4.9 million square feet, of which 3.6 million square feet are owned by such partnerships. When we refer to “Same Store” properties, we are referring to properties that have been owned for the full periods presented and excluding properties acquired, disposed of, under redevelopment or designated as a non-core property during the periods presented. Core properties include all operating retail properties except for Exton Square Mall, Valley View Mall and Fashion District Philadelphia. “Core Malls” excludes these properties as well as power centers and Gloucester Premium Outlets. Wyoming Valley Mall was conveyed to the lender of the mortgage loan secured by that property in September 2019.

We have one property in our portfolio that is classified as under development; however, we do not currently have any activity occurring at this property.

Fashion District Philadelphia, our recently redeveloped property owned with our 50/50 joint venture partner, the Macerich Company (“Macerich”), opened on September 19, 2019. The partnership continues to progress through the lease-up phase of the project with stabilization of the project expected after the anticipated opening of several key tenants in 2020. We are currently forecasting stabilization in the first half of 2021.

We are a fully integrated, self-managed and self-administered REIT that has elected to be treated as a REIT for federal income tax purposes. In general, we are required each year to distribute to our shareholders at least 90% of our net taxable income and to meet certain other requirements in order to maintain the favorable tax treatment associated with qualifying as a REIT.

PREIT’S BUSINESS

We are primarily engaged in the ownership, management, leasing, acquisition, redevelopment, and disposition of shopping malls. In general, our malls include tenants that are national or regional department stores, large format retailers or other anchors and a diverse mix of national, regional and local in-line stores offering apparel (women’s, family, teen, children’s, men’s), shoes, eyewear, cards and gifts, jewelry, sporting goods, home furnishings and personal care items, among other things. In recent years, we have increased the portion of our mall properties that is leased to non-traditional mall tenants. Approximately 24% of our mall space is committed to non-traditional tenants offering services such as dining and entertainment, health and wellness, off-price retail and fast fashion.

To enhance the experience for shoppers, most of our malls have restaurants and/or food courts, and some of the malls have multi-screen movie theaters and other entertainment options, either as part of the mall or on outparcels around the perimeter of the mall property. In addition, many of our malls have outparcels containing restaurants, banks or other stores. Our malls frequently serve as a central place for community, promotional and charitable events in their geographic trade areas.

The largest core mall in our retail portfolio is 1.4 million square feet and contains 172 stores, and the smallest core mall is 0.5 million square feet and contains 80 stores. The other properties in our retail portfolio range from 370,000 to 780,000 square feet.

We derive the substantial majority of our revenue from rent received under leases with tenants for space at retail properties in our real estate portfolio. In general, our leases require tenants to pay minimum rent, which is a fixed amount specified in the lease, and which is often subject to scheduled increases during the term of the lease for longer term leases. In 2019, 75% of the new leases that we signed contained scheduled rent increases, and these increases, which are typically scheduled to occur between two and four times during the term, ranged from 1.2% to 33.3%, with approximately 90% ranging from 2.0% to 4.0%. In addition or in the alternative, certain tenants are required to pay percentage rent, which can be either a percentage of their sales revenue that exceeds certain levels specified in their lease agreements, or a percentage of their total sales revenue.

The majority of our leases also provide that the tenant will reimburse us for certain expenses relating to the property for common area maintenance (“CAM”), real estate taxes, utilities, insurance and other operating expenses incurred in the operation of the property subject, in some cases, to certain limitations. The proportion of the expenses for which tenants are responsible was historically related to the tenant’s pro rata share of space at the property. We have continued to shift the CAM provision in our leases to be a fixed amount, which gives greater predictability to tenants, and a majority of such revenue is derived from leases specifying fixed CAM reimbursements.

2

Retail real estate industry participants sometimes classify malls based on the average sales per square foot of non-anchor mall tenants occupying spaces under 10,000 square feet in size, the population and average household income of the trade area and the geographic market, the growth rates of the population and average household income in the trade area and geographic market, and numerous other factors. Based on these factors, in general, malls that have high average sales per square foot and are in trade areas with large populations and high household incomes and/or growth rates are considered Class A malls, malls with average sales per square foot that are in the middle range of population or household income and/or growth rates are considered Class B malls, and malls with lower average sales and smaller populations and lower household incomes and/or growth rates are considered Class C malls. Although these classifications are defined differently by different market participants, in general, most of our malls would be classified as Class A or Class B properties. The classification of a mall can change, and one of the goals of our current property strategic plans and remerchandising programs is to increase the average sales per square foot of certain of our properties and correspondingly increase their rental income and cash flows, and thus potentially their class, in order to maximize the value of the property. The malls that we have sold pursuant to the strategic property disposition program we commenced in 2012 generally have been Class C properties.

BUSINESS STRATEGY

Our primary objective is to maximize the long-term value of the Company for our shareholders. To that end, our business goals are to obtain the highest possible rental income, tenant sales and occupancy at our properties in order to maximize our cash flows, net operating income, funds from operations, funds available for distribution to shareholders and other operating measures and results, and ultimately to maximize the values of our properties.

To achieve this primary goal, we have developed a business strategy focused on increasing the values of our properties, and ultimately of the Company, which includes:

• Raising capital by monetizing embedded value in the portfolio to enhance our liquidity position and reducing debt and leverage to improve the balance sheet;

• Raising the overall level of quality of our portfolio and of individual properties in our portfolio;

• Improving the operating results of our properties; and

• Taking steps to position the Company for future growth opportunities.

Improving Our Balance Sheet by Reducing Debt and Leverage; Maintaining Liquidity

Leverage. We continue to seek ways to reduce our leverage by improving our operating performance and through a variety of other means available to us. These means might include selling properties or interests in properties with values in excess of their mortgage loans and applying any excess proceeds to debt reduction; entering into joint ventures or other partnerships or arrangements involving our contribution of assets; issuing common or preferred equity or equity-related securities if market conditions are favorable; or through other actions.

Mortgage Loan Refinancings and Repayments. We might pursue opportunities to make favorable changes to individual mortgage loans on our properties. When we refinance such loans, we might seek a new term, better rates and excess proceeds. An aspect of our approach to debt financing is that we strive to lengthen and stagger the maturities of our debt obligations in order to better manage our future capital requirements. We might seek to repay certain mortgage loans in full in order to unencumber the associated properties, which enables us to increase our pool of unencumbered assets, have greater financial flexibility and obtain additional financing.

Liquidity. As of December 31, 2019, our consolidated balance sheet reflected $12.2 million in cash and cash equivalents. We believe that this amount and our net cash provided by operations, together with the available credit under the 2018 Revolving Facility (assuming continued compliance with the financial covenants thereunder) and other sources of capital, provide sufficient liquidity to meet our liquidity requirements in the short term.

Capital Recycling. We regularly conduct portfolio property reviews and, if appropriate, we seek to dispose of malls, other retail properties or outparcels that we do not believe meet the financial and strategic criteria we apply, given economic, market and other circumstances. Disposing of these properties can enable us to redeploy or recycle our capital to other uses, such as to repay debt, to reinvest in other real estate assets and development and redevelopment projects, and for other corporate purposes. Along these lines, during 2019 we sold a mortgage note secured by Wiregrass Commons in Dothan, Alabama, two non-income producing undeveloped properties, and five outparcels, including the Whole Foods at Exton, generating aggregate proceeds of $50.4 million. Since we began our disposition program in 2012, we have sold 17 malls, four power centers, two street retail properties, three office properties and several land parcels and other real estate assets for a total of $886.6 million. The proceeds generated from these sales were reinvested in our existing redevelopment program or used to repay debt. In September 2019, we conveyed Wyoming Valley Mall to the lender of the mortgage loan secured by the property. In January 2020, we sold the REI outparcel at Woodland Mall to Four Corners Property Trust (“FCPT”). We are currently under contract to sell ten additional outparcels to FCPT and expect to close the transactions in the first half of 2020. We have executed agreements of sale for two hotel sites at our malls that we expect to close in 2020. Additionally, in 2020, we entered into an agreement of sale for the sale and leaseback of five properties and executed agreements of sale for land parcels for anticipated multifamily development at seven sites on, or adjacent to, our mall properties.

We expect to continue to look for opportunities to sell non-core assets, including land parcels, to residential, hotel and office developers at some of our mall properties.

3

Raising the Overall Level of Quality of Our Portfolio and of Individual Properties in Our Portfolio

Portfolio Actions. We continue to refine our collection of properties to enhance the overall quality of the portfolio. We seek to have a portfolio that derives most of its Net Operating Income, or “NOI” (a non-GAAP measure; as defined below) from higher productivity properties and from properties located in major metropolitan markets. We hold ownership interests in 10 properties in the Philadelphia metro area, four properties in the Washington, D.C. metro area and one property in the Boston-Providence metro area. One method we have used and continue to use for raising the level of quality of our portfolio is disposing of assets that had certain economic features, such as sales productivity or occupancy levels below the average for our portfolio and significantly lower expected income due to anchor closures. In 2018, we designated the following two properties as non core malls (“Non Core Malls”) (1) Exton Square Mall, because we have completed the first phase of a redevelopment with the opening of Whole Foods and the sale of a land parcel to a multifamily developer as part of our densification effort (as discussed below) and as we consider the possible inclusion of other non-retail uses on the site; and (2) Valley View Mall, which currently has three vacant anchors and where we are evaluating strategic options for the property. A third Non Core Mall, Wyoming Valley Mall, was conveyed to the lender of the mortgage loan secured by that property in 2019.

Redevelopment. We might also seek to improve particular properties, to increase the potential value of properties in our portfolio, and to maintain or enhance their competitive positions by redeveloping them. We do so in order to make the properties more attractive to customers and retailers, which we expect to lead to increases in shopper traffic, sales, occupancy and rental rates. Redevelopments are generally more involved than strategic property plans or remerchandising programs and require the investment of capital. We give redevelopment priority to properties in our portfolio that are of a higher quality and where we anticipate the redevelopment can be economically transformative. Our property redevelopments focus primarily on anchor replacement and remerchandising. We believe these activities will position us to optimize our financial returns.

The table below sets forth our property redevelopment summary as of December 31, 2019.

Name of Project and Location	Total Project Cost (1) (in millions)	PREIT's Investment to Date (in millions)	Targeted Return on Incremental Investment	Construction Start Date	Expected Construction Completion	Stabilization Year	Percentage Leased or Negotiating
Woodland Mall
Grand Rapids, MI	$94-95	$90.9	5.0-6.0%	2017	2019	2021	89%
Upgrade of existing tenant mix including: 90,000 square foot Von Maur, new-to-market tenants: Urban Outfitters, The Cheesecake Factory and Black Rock Bar & Grill along with additional high quality retail, replacing a former Sears store. Black Rock Bar & Grill opened Q3 2019.
Anchor replacements:
Dartmouth Mall
Dartmouth, MA	$12-13	$4.8(2)	4.0-8.0%(3)	2019	2020	2021	49%
Includes Burlington as lead replacement for Sears as well as several outparcel opportunities.
Valley Mall
Hagerstown, MD	$23-24	$17.1	6.0-7.0%	2019	2020	2020	68%
Includes DICK'S Sporting Goods as replacement for Sears as well as other tenant opportunities.
Willow Grove Park Mall
Willow Grove, PA	$27-28	$31.4	7.5-8.0%	2018	2020	2021	82%
Addition of Studio Movie Grill, offering movies and in-theater dining, with other dining and entertainment tenants planned in former JC Penney box.

(1) PREIT's projected shares of costs are net of any expected tenant reimbursements, parcel sales, tax credits or other incentives.

(2) Excludes $5.0 million of initial direct costs included in deferred costs and other assets in the consolidated balance sheet. Total project costs include a pro rata share of such initial direct costs.

(3) High end of targeted return on incremental investment includes revenues from additional inline stores and outparcel opportunities. Additional capital expenditures will be required to achieve these returns.

Densification. We seek to maximize the value of our retail properties by adding other uses where appropriate. We believe that by incorporating residential, hotel or office uses into some of our retail properties, we will increase the value of those properties. The addition of other property types to our sites may provide synergies to both the retail and non-retail uses. The presence of residents, hotel guests or office workers in close proximity to the retail center may result in additional visits to the retail property. In November 2018, we sold a four acre parcel at Exton Square Mall where construction of the first phase of multifamily residences consisting of 348 units, is nearing completion. The lease-up phase is expected to commence in the first half of 2020. We have executed agreements of sale for two hotel sites at our malls that we expect to close in 2020. In 2020, we entered into agreements of sale for the sale and leaseback of five properties and executed agreements of sale for land parcels for anticipated multifamily development at seven sites on, or adjacent to, our mall properties.

4

Since 2014, we, along with our 50/50 joint venture partner, Macerich, have been engaged in a redevelopment of Fashion District Philadelphia (formerly The Gallery). In connection therewith, we contributed and sold real estate assets to the venture and Macerich acquired its interest in the venture and real estate from us for $106.8 million in cash. We and Macerich are jointly and severally responsible for a minimum investment in the project of $300.0 million. Fashion District Philadelphia is in a key location in central Philadelphia, strategically positioned above regional mass transit, adjacent to the convention center and tourism sites, and amidst numerous offices and residential sites.

In January 2018, we along with Macerich, entered into a $250.0 million term loan (the “FDP Term Loan”). The initial term of the FDP Term Loan is five years and bears interest at a variable rate of 2.00% over LIBOR. PREIT and Macerich secured the FDP Term Loan by pledging their respective equity interests of 50% each in the entities that own Fashion District Philadelphia. The entire $250.0 million available under the FDP Term Loan was drawn during the first quarter of 2018, and we received an aggregate $123.0 million as a distribution of our share of the draws in 2018. In July 2019, the FDP Term Loan was modified to increase the maximum total potential borrowings from $250.0 million to $350.0 million. A total of $51.0 million was drawn during the third quarter of 2019 and we received aggregate distributions of $25.0 million as our share of the draws.  

An important aspect of any redevelopment project, including the redevelopment of Fashion District Philadelphia, is its effect on the property and on the tenants and customers during the time that a redevelopment is taking place. While we might undertake a redevelopment to maximize the long term performance of the property, in the short term, the operations and performance of the property, as measured by sales, occupancy and NOI, will often be negatively affected. Tenants might be relocated or closed as space for the redevelopment is aggregated, which affects overall tenant sales and rental rates. As Fashion District Philadelphia was being redeveloped, occupancy, sales and NOI decreased from their levels prior to the commencement of the redevelopment. We expect those trends to reverse as the newly constructed space is completed, leased and occupied. On September 19, 2019, Fashion District Philadelphia, an aggregation of properties spanning three blocks in downtown Philadelphia that were formerly known as Gallery I, Gallery II and 907 Market Street, opened. Joining Century 21 and Burlington in 2019 were multiple dining and entertainment venues including Market Eats, a multi-offering food court, City Winery, AMC Theatres, and Round 1 Bowling & Amusement. In addition, Nike Factory Store, Ulta, and H & M opened Philadelphia flagship stores at the property. Fashion District is expected to have additional tenant openings throughout 2020 and 2021. Through December 31, 2019 we had incurred costs of $175.4 million relating to our share of the development costs of the project.

Mall-Specific Plans. We seek to unlock value in our portfolio through a variety of targeted efforts at our properties. We believe that certain of our properties, including those in trade areas around major cities or those which are leading properties in secondary markets, can benefit from strategic remerchandising strategies, including, for example, selective re-tenanting of certain spaces in certain properties with higher quality, better-matched tenants. Based on the demographics of the trade area or the relevant competition, we believe that this subset of properties provides opportunities for meaningful value creation at the property level. We believe that we can successfully implement particular strategies at these assets by incorporating in-demand uses such as dining, entertainment and fitness, by adding discount, specialty, fast fashion and native internet retailer tenants, and by closing, relocating and right-sizing certain existing mall tenants. Some examples of in-demand tenants include Apple, Urban Outfitters and The Cheesecake Factory. We also continuously work to optimize the match between the demographics of the trade area, such as the household income level, and the nature and mix of tenants at such properties. We strive to work closely with tenants to enhance their merchandising opportunities at our properties. We believe that these approaches can attract more national and other tenants to the property and can lead to higher occupancy and NOI.

Shopper Experiences. In addition to such property-wide remerchandising efforts, we also seek to offer unique shopper experiences at our properties by having tenants that provide products, services or interactions that are unlike other offerings in the trade area. We seek to add first-to-market tenants, dining and entertainment options, beauty and fashion purveyors, off-price retail, traditionally online retailers and health and fitness destinations such as Legoland Discovery Center, Peloton, Ulta, HomeSense, Dave & Buster's, Balsam Hill and the 1776 retail incubator, among others, as well as to provide amenities like children’s play areas and mall shopping smartphone apps.

Vacant Anchor Replacements. In recent years, through property dispositions, proactive store recaptures, lease terminations and other activities, we have made efforts to reduce our risks associated with certain department store concentrations. Since 2012, we have reduced the number of Sears locations from 27 to 5, the number of Macy’s locations from 25 to 14, and the number of J.C. Penney locations from 29 to 14.

From the beginning of 2017 through December 31, 2019, nine department stores within our core portfolio were recaptured or closed. To date, all or a significant portion of these former department stores have tenants that either opened, are currently under construction, or have leases that are executed or near execution.

During 2019, we re-opened or introduced additional tenants to former anchor positions at Woodland Mall in Grand Rapids, Michigan, Valley Mall in Hagerstown, Maryland and Plymouth Meeting Mall, in Plymouth Meeting, Pennsylvania. We opened Von Maur and Urban Outfitters, on a site formerly occupied by Sears at Woodland Mall and in-line lease-up continues.  At Valley Mall, we opened Onelife Fitness in February to complete the former Macy’s redevelopment and during the year we signed a lease with Dick’s Sporting Goods to occupy the former Sears store at the property. Dick’s Sporting Goods is expected to open in the first quarter of 2020. At Plymouth Meeting Mall, we opened Burlington, Dick’s Sporting Goods, Edge Fitness and Miller’s Ale House in the former Macy’s location, and the last tenant, Michael’s, opened in the first quarter of 2020. We opened Sierra Trading at Moorestown Mall in Moorestown, New Jersey in 2019 and Michael’s opened in the first quarter of 2020.

Construction is underway to open Burlington in place of a former Sears at Dartmouth Mall in Dartmouth, Massachusetts. We are also moving forward with several outparcels at Dartmouth Mall resulting from the Sears recapture and working with large format prospects for space adjacent to Burlington.

5

We currently have three vacant anchor positions at Valley View Mall in La Crosse, Wisconsin and during 2019 an additional anchor, Sears, closed at Exton Square Mall in Exton, Pennsylvania and at Dartmouth Mall in Dartmouth, Massachusetts. In January 2020, the Lord & Taylor store at Moorestown Mall in Moorestown, New Jersey closed and we are working with several retail and entertainment prospects to fill the space. We have been notified by Sears that it plans to close stores at Moorestown Mall in Moorestown, New Jersey and Jacksonville Mall in Jacksonville, North Carolina. Sears continues to be financially obligated pursuant to the leases at these locations.

The status of our anchor replacements at our other properties is summarized in the table below.

Property	Former Anchors	GLA (in '000's)	Date Closed	Decommission Date	Replacement Tenant(s)	GLA (in '000's)	Actual/Targeted Occupancy Date
Completed:
Magnolia Mall	Sears	91	Q1 17	Q2 17	Burlington	46	Q3 17
					HomeGoods	22	Q2 18
					Five Below	8	Q2 18
Moorestown Mall	Macy's	200	Q1 17	Q2 17	HomeSense	28	Q3 18
					Five Below	9	Q4 18
					Sierra Trading Post	19	Q1 19
					Michael's	25	Q1 20
Valley Mall	Macy's	120	Q1 16	Q4 17	Tilt Studio	48	Q3 18
					One Life Fitness	70	Q3 18
	Bon-Ton	123	Q1 18	Q1 18	Belk	123	Q4 18
Willow Grove Park	JC Penney	125	Q3 17	Q1 18	Yard House	8	Q4 19
Woodland Mall	Sears	313	Q2 17	Q2 17	Black Rock Bar & Grill	9	Q3 19
					Von Maur	87	Q4 19
					Urban Outfitters	8	Q4 19
					Small shops	13	Q4 19
Plymouth Meeting Mall	Macy's(1)	215	Q1 17	Q2 17	Burlington	40	Q3 19
					Dick's Sporting Goods	58	Q3 19
					Miller's Ale House	8	Q3 19
					Edge Fitness	38	Q4 19
					Michael's	26	Q1 20
In progress:
Valley Mall	Sears	123	Q3 17	Q3 18	Dick's Sporting Goods	59	Q1 20
Willow Grove Park	JC Penney	see above			Studio Movie Grill	49	Q2 20
Dartmouth Mall	Sears	108	Q3 19	Q3 19	Burlington	44	Q1 20

(1) Property is subject to a ground lease.

Improving the Operating Results of Our Properties

We aim to improve the overall operational performance of our portfolio of properties with a multi-pronged approach.

Occupancy. We continue to work to increase non-anchor and total occupancy in our properties. From 2018 to 2019, total occupancy for our retail portfolio including consolidated and unconsolidated properties (and including all tenants irrespective of the term of their agreement) decreased 10 basis points to 92.6%, and total occupancy at our malls other than the Non-Core Malls and Fashion District Philadelphia, which reopened in 2019 and is expected to stabilize in 2021 (such other malls being called the “Core Malls”) decreased 50 basis points to 95.5%.

In connection with the remerchandising plans at several of our properties, we are seeking or have obtained tenants for new spaces of different types, such as pads or kiosks. We are also seeking tenants that have not previously been prevalent at our mall properties.

Key Tenants; Mall Leasing. We continue to recruit, and expand our relationships with, certain high profile retailers, and to initiate and expand our relationships with other quality and first-to-market retailers or concepts. We coordinate closely with tenants on new store locations in an effort to position our properties for our tenants’ latest concept or store prototype, in order to drive traffic to our malls and stimulate customer spending. We believe that increasing our occupancy in ways that are tailored to particular properties will be helpful to our leasing efforts and will help increase rental rates and tenant sales. We have also diversified the mix of tenants within our portfolio, with approximately 24% of our mall space committed to non traditional tenants offering services such as dining and entertainment, health and wellness, off price retail and fast fashion.

Rental Rates and Releasing Spreads. For the year ended December 31, 2019, we generated sales per square foot of $539 from our Core Malls, an increase of 5.6% from 2018. At properties with improved or already higher sales per square foot, these sales levels have helped attract new tenants and helped us retain current tenants that seek to take advantage of the property’s increased productivity. We have worked to capitalize on the increase in, or high level of, sales per square foot by seeking positive rent renewal spreads, including from renewal and new leases following expirations of leases entered into during earlier challenging economic times. In 2019, total renewal spreads increased 2.5% on all non-anchor leases.

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As discussed above, since 2012, we have sold 17 low-productivity or underperforming malls. In 2019, we also conveyed Wyoming Valley Mall to the lender of the mortgage secured by the property. We believe that the disposition of these less productive assets will help improve our negotiating position with retailers with multiple stores in our portfolio (including stores at these properties), and potentially enable us to obtain higher rental rates from them at our remaining properties.

Specialty Leasing and Partnership Marketing. Some space at our properties might be available for a shorter period of time, pending a lease with a permanent tenant or in connection with a redevelopment. We strive to manage the use of this space through our specialty leasing function, which manages the short term leasing of stores and the licensing of income-generating carts and kiosks, with the goal of maximizing the rent we receive during the period when a space is not subject to a longer term lease.

We also seek to generate ancillary revenue (such as sponsorship marketing revenue and promotional income) from the properties in our portfolio. We believe that increased efforts in this area can enable us to increase the proportion of net operating income derived from ancillary revenue.

Operating Expenses and CAM Reimbursements. Our strategy for improving operating results also includes efforts to control or reduce the costs of operating our properties. With respect to operating expenses, we have taken steps to manage a significant proportion of them through contracts with third party vendors for housekeeping and maintenance, security services, landscaping and trash removal. These contracts provide reasonable control, certainty and predictability. We also seek to contain certain expenses through our active programs for managing utility expense and real estate taxes. We have taken advantage of opportunities to buy electricity economically in states that have opened their energy markets to competition, and we expect to continue with this approach. We have instituted a solar energy program at five of our properties, which we expect will lower our utility expenses and reduce our carbon footprint. We also review the annual tax assessments of our properties and, when appropriate, pursue appeals.

With respect to CAM reimbursements, we have converted most of our leases to fixed CAM reimbursement, in contrast to the traditional pro-rata CAM reimbursement. Fixed CAM reimbursement, while shifting some risk to us as landlord, offers tenants increased predictability of their costs, a decrease in the number of items to be negotiated in a lease thus speeding lease execution, and reduced need for detailed CAM billings, reconciliations and collections.

Taking Steps to Position the Company for Future Growth Opportunities

We are taking steps designed to position the Company to generate future growth. In connection therewith, we have implemented processes designed to ensure strong internal discipline in the use, harvesting and recycling of our capital, and these processes will be applied in connection with proposals to redevelop properties or to reposition properties with a mix of uses, or possibly, in the future, to acquire additional properties.

External Opportunities. Though not currently a primary focus, we may continue to seek to acquire, in an opportunistic, selective and disciplined manner, properties that are well-located, that are in trade areas with growing or stable demographics, that have operating metrics that are better than or equal to our existing portfolio averages, and that we believe have strong potential for increased cash flows and appreciation in value if we call upon our relationships with retailers and apply our skills in asset management and redevelopment. We also seek to acquire additional parcels or properties that are included within, or adjacent to, the properties already in our portfolio, in order to gain greater control over the merchandising and tenant mix of a property. Taking advantage of any acquisition opportunities will likely involve some use of debt or equity capital.

We pursue development of retail and mixed use projects that we expect can meet the financial and strategic criteria we apply, given economic, market and other circumstances. We seek to leverage our skill sets in site selection, entitlement and planning, design, cost estimation and project management to develop new retail and mixed use properties. We seek properties in trade areas that we believe have sufficient demand, once developed, to generate cash flows that meet the financial thresholds we establish in the given environment. We manage all aspects of these undertakings, including market and trade area research, acquisition, preliminary development work, construction and leasing.

Depending on the nature of the acquisition or development opportunity, we might involve a partner or sell land to a qualified third party, including in connection with projects involving a use other than retail.

In light of the redevelopment and densification opportunities in our existing portfolio and the capital required to complete these investments, together with a limited availability of properties that meet our investment criteria, we are not currently emphasizing external opportunities as part of our growth strategy.

Organic Opportunities. We look for ways to maximize the value of our assets by adding a mix of uses, such as office or multi-family residential housing, initiated either by ourselves or with a partner, that are designed to attract a greater number of people to the property. Multiple constituencies, from local governments to city planners to citizen groups, have indicated a preference for in-place development, development near transportation hubs, the addition of uses to existing properties, and sustainable development, as opposed to locating, acquiring and developing new green field sites. Also, if appropriate, we will seek to attract certain nontraditional tenants to these properties, including tenants using the space for purposes such as entertainment, education, health care, government and childcare, which can bring larger numbers of people to the property, as well as regional, local or nontraditional retailers. Such uses will, we believe, increase traffic and enable us to generate additional revenue and grow the value of the property.

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RECENT DEVELOPMENTS

Operating Performance

Our net loss decreased by $113.5 million to a net loss of $13.0 million for the year ended December 31, 2019 from a net loss of $126.5 million for the year ended December 31, 2018. The change in our 2019 results of operations was primarily due to impairment losses in 2018 that did not recur in 2019, partially offset by a $6.7 million decrease in same store lease termination revenue and a $7.6 million decrease in non same store net operating income due to three anchor store closings during 2018 and 2019 and associated co-tenancy concessions, as well as a decrease in lease revenue at Exton Square Mall due to the sale of an outparcel in 2019.

Funds From Operations (“FFO”), a non-GAAP measure, decreased 6.2% from the prior year, and FFO as adjusted, also a non-GAAP measure, decreased 31.4% from the prior year. Adjustments to FFO included impairment of land parcels in Gainesville, Florida and at Woodland Mall in Grand Rapids, Michigan, provision for employee separation expense, insurance recoveries, and a gain on debt extinguishment. FFO as adjusted per share decreased 31.8% from 2018.

Same Store net operating income (“Same Store NOI”), a non-GAAP measure, decreased 5.5% over the prior year. Same Store NOI, excluding lease termination revenue, decreased 2.5% compared to 2018.

Renewal spreads at our properties decreased 4.8% on non-anchor leases under 10,000 square feet and increased 5.0% for non-anchor leases of at least 10,000 square feet.

Retail portfolio occupancy at December 31, 2019 was 92.6%, a decrease of 10 basis points compared to 2018. Non-anchor occupancy was 91.7%, a decrease of 90 basis points compared to 2018. Core Mall occupancy decreased by 50 basis points to 95.5%. Core Mall non-anchor occupancy was 92.9%, a decrease of 70 basis points.

Sales per square foot at our Core Malls was $539, an increase of 5.6% from 2018, including consolidated and unconsolidated properties.

Descriptions of each non-GAAP measure mentioned above, NOI, Same Store NOI, FFO and FFO, as adjusted, as well as the related reconciliation to the comparable GAAP measures are located in “Management’s Discussion and Analysis of Financial Condition and Results of Operations”—Results of Operations—NON-GAAP SUPPLEMENTAL FINANCIAL MEASURES.

Financing Activity

We have entered into two credit agreements (collectively, the “Credit Agreements”): (1) the 2018 Credit Agreement, which includes (a) the 2018 Revolving Facility and (b) the 2018 Term Loan Facility, and (2) the 2014 7-Year Term Loan. The 2014 7-Year Term Loan and the 2018 Term Loan Facility are collectively referred to as the “Term Loans.”

We, along with Macerich, our partner in the Fashion District Philadelphia redevelopment project, entered into a $250.0 million term loan (the “FDP Term Loan”) in January 2018. We own a 50% partnership interest in Fashion District Philadelphia. The FDP Term Loan matures in January 2023, and bears interest at a variable rate of LIBOR plus 2.00%. We and Macerich secured the FDP Term Loan by pledging each of our respective equity interests in the entities that own Fashion District Philadelphia. The entire $250.0 million available under the FDP Term Loan was drawn during the first quarter of 2018, and we received an aggregate $123.0 million as a distribution of our share of the draws in 2018. In July 2019, the FDP Term Loan was modified to increase the potential borrowings from $250.0 million to $350.0 million. A total of $51.0 million was drawn during the third quarter of 2019 and we received aggregate distributions of $25.0 million as our share of the draws.

Leverage. Our ratio of Total Liabilities to Gross Asset Value under our Credit Agreements increased by 600 basis points from 53.8% at December 31, 2018 to 59.8% as of December 31, 2019.

Mortgage Loan Activity.

We received a notice of transfer of servicing, dated July 9, 2018, from the special servicer for the mortgage loan secured by Wyoming Valley Mall, which had a balance of $72.8 million as of September 26, 2019. Our subsidiary that was the borrower under the loan also received a notice of default on the loan from the lender, dated December 14, 2018. The loan was subject to a cash sweep arrangement as a result of an anchor tenant trigger event. We had entered into an agreement with the lender to jointly market the property for sale for a stipulated period of time. The property did not sell and we conveyed the property to the lender by deed in lieu of foreclosure on September 26, 2019.

In March 2019, we defeased a $58.5 million mortgage loan secured by Capital City Mall in Camp Hill, Pennsylvania using funds from our 2018 Revolving Facility and the balance from available working capital.

In April 2019, we received a notice from the servicer of the Cumberland Mall mortgage of a cash sweep event due to the failure of an anchor tenant to renew for a full term. We satisfied this requirement in August 2019.

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CAPITAL STRATEGY

In support of the business strategies described above, our long-term corporate finance objective is to maximize the availability and minimize the cost of the capital we employ to fund our operations. In pursuit of this objective and for other business reasons, we seek the broadest range of funding sources (including commercial banks, institutional lenders, equity and debt investors and joint venture partners) and funding vehicles (including mortgage loans, commercial loans, sales of properties or interests in properties, and debt and equity securities) available to us on the most favorable terms. We pursue this goal by maintaining relationships with various capital sources and utilizing a variety of financing instruments, all in an effort to enhance our flexibility to execute our business strategy in different economic environments or at different points in the business cycle.

We have one wholly-owned property mortgage loan maturing in July 2020. While mortgage interest rates remain relatively low, we intend to continue to seek to extend the maturity dates of our mortgage loans to the maximum extent possible, or to replace them with longer term mortgage loans.

As part of our capital strategy, in the past, we have taken steps to restructure our debt and credit facilities to align with our needs and goals at such time and we intend to do so going forward.

In general, in determining the amount and type of debt capital to employ in our business, we consider several factors, including: general economic conditions, the capital market environment, prevailing and forecasted interest rates for various debt instruments, the cost of equity capital, property values, capitalization rates for mall properties, our financing needs for acquisition, redevelopment and development opportunities, the debt ratios of other mall REITs and publicly-traded real estate companies, and the federal tax law requirement that REITs distribute at least 90% of net taxable income, among other factors.

In the normal course of business, we are exposed to financial market risks, including interest rate risk on our interest-bearing liabilities. We attempt to limit these risks by following established risk management policies, procedures and strategies, including the use of various types of financial instruments. To manage interest rate risk and limit overall interest cost, we may employ interest rate swaps, options, forwards, caps and floors or a combination thereof depending on our underlying exposure, and subject to our ability to satisfy collateral requirements.

Capital Availability

To maintain our status as a REIT, we are required, under federal tax laws, to distribute to shareholders 90% of our net taxable income, which generally leaves insufficient funds to finance major initiatives internally. Because of these requirements, we ordinarily fund most of our significant capital requirements, such as the capital for acquisitions, redevelopments and developments, through secured and unsecured indebtedness, sales of properties or interests in properties and, when appropriate, the issuance of additional debt, equity or equity-related securities.

Aggregate borrowings under our $400.0 million senior unsecured revolving credit facility, $300.0 million five-year term loan facility and $250.0 million 7-year term loan may be limited by the Unencumbered Debt Yield covenant included in these loan agreements. The aggregate borrowing capacity, including support for letters of credit, under these facilities is determined by dividing the net operating income (“NOI”) from the Company’s unencumbered properties by 11%. The maximum amount that was available to be borrowed by us under our revolving credit facility as of December 31, 2019 was $30.1 million. As of December 31, 2019, $255.0 million was outstanding under the 2018 Revolving Facility and as of the filing date of this Annual Report on Form 10-K, $289.0 million was outstanding under the 2018 Revolving Facility.

In addition, our ability to finance our growth using these sources depends, in part, on our creditworthiness, the availability of credit to us, the market for our securities at the time or times we need capital and prevailing conditions in the capital and credit markets, among other things. While currently not available to us, we believe that we will have adequate access to capital to fund the remaining cost of our anchor replacement and redevelopment program, which we currently estimate to be between $130.0 million and $150.0 million. Our ability to manage our obligations under our senior unsecured credit facility and to remain in compliance with the covenants thereunder is critical to maintaining adequate liquidity and access to capital. We regularly engage in discussions with lenders that participate in our senior unsecured credit facility regarding our capital and liquidity resources and liquidity needs in order to explore alternatives and ensure that we will remain in compliance with our financial covenants and have continued access to funding under the facility. In particular, as of the date of the filing of this Annual Report on Form 10-K, we are in active discussions with the banks participating in our credit facilities to modify the terms of those agreements and obtain debt covenant relief.

OWNERSHIP STRUCTURE

We hold our interests in our portfolio of properties through our operating partnership, PREIT Associates, L.P. We are the sole general partner of PREIT Associates and, as of December 31, 2019, held a 97.5% controlling interest in PREIT Associates. We consolidate PREIT Associates for financial reporting purposes. We own our interests in our properties through various ownership structures, including partnerships and tenancy in common arrangements (collectively, “partnerships”). PREIT Associates’ direct or indirect economic interest in the properties ranges from 25% or 50% (for eight partnership properties) up to 100%. See “Item 2. Properties—Retail Properties.”

We provide management, leasing and real estate development services through two of our subsidiaries: PREIT Services, LLC (“PREIT Services”), which generally develops and manages properties that we consolidate for financial reporting purposes, and PREIT-RUBIN, Inc. (“PRI”), which generally develops and manages properties that we do not consolidate for financial reporting purposes, including properties owned by partnerships in which we own an interest, and properties that are owned by third parties in which we do not have an interest. PREIT Services and PRI are consolidated. PRI is a taxable REIT subsidiary, as defined by federal tax laws, which means that it is able to offer additional services to tenants without jeopardizing our continuing qualification as a REIT under federal tax law.

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COMPETITION

Competition in the retail real estate market is intense. We compete with other public and private retail real estate companies, including companies that own or manage malls, power centers, strip centers, lifestyle centers, factory outlet centers, theme/festival centers and community centers, as well as other commercial real estate developers and real estate owners, particularly those with properties near our properties, on the basis of several factors, including location and rent charged. We compete with these companies to attract customers to our properties, as well as to attract anchor and in-line stores and other tenants. We also compete to acquire land for new site development or to acquire parcels or properties to add to our existing properties. Our malls and our other retail properties face competition from similar retail centers, including more recently developed or renovated centers that are near our retail properties. We also face competition from an increasing variety of different retail formats, including internet retailers, discount or value retailers, home shopping networks, mail order operators, catalogs, and telemarketers. Our tenants face competition from companies at the same and other properties and from other retail channels or formats as well, including internet retailers. This competition could have a material adverse effect on our ability to lease space and on the amount of rent and expense reimbursements that we receive.

The existence or development of competing retail properties and the related increased competition for tenants might, subject to the terms and conditions of our Credit Agreements, lead us to make capital improvements to properties that we would have deferred or would not have otherwise planned to make and might affect occupancy and net operating income of such properties. Any such capital improvements, undertaken individually or collectively, would involve costs and expenses that could adversely affect our results of operations.

We compete with many other entities engaged in real estate investment activities for acquisitions of malls, other retail properties and prime development sites or sites adjacent to our properties, including institutional pension funds, other REITs and other owner-operators of retail properties. When we seek to make acquisitions, competitors might drive up the price we must pay for properties, parcels, other assets or other companies or might themselves succeed in acquiring those properties, parcels, assets or companies. In addition, our potential acquisition targets might find our competitors to be more attractive suitors if they have greater resources, are willing to pay more, or have a more compatible operating philosophy. In particular, larger REITs might enjoy significant competitive advantages that result from, among other things, a lower cost of capital, a better ability to raise capital, a better ability to finance an acquisition, better cash flow and enhanced operating efficiencies. We might not succeed in acquiring retail properties or development sites that we seek, or, if we pay a higher price for a property or site, or generate lower cash flow from an acquired property or site than we expect, our investment returns will be reduced, which will adversely affect the value of our securities.

ENVIRONMENTAL

Under various federal, state and local laws, ordinances, regulations and case law, an owner, former owner or operator of real estate might be liable for the costs of removal or remediation of hazardous or toxic substances present at, on, under, in or released from its property, regardless of whether the owner, operator or other responsible party knew of or was at fault for the release or presence of hazardous or toxic substances. Contamination might adversely affect the owner’s ability to sell or lease real estate or borrow with real estate as collateral. In connection with our ownership, operation, management, development and redevelopment of properties, or any other properties we acquire in the future, we might be liable under these laws and might incur costs in responding to these liabilities.

Each of our retail properties has been subjected to a Phase I or similar environmental audit (which involves a visual property inspection and a review of records, but not soil sampling or ground water analysis) by environmental consultants. These audits have not revealed, and we are not aware of, any environmental liability that we believe would have a material adverse effect on our results of operations. It is possible, however, that there are material environmental liabilities of which we are unaware.

We are aware of certain past environmental matters at some of our properties. We have, in the past, investigated and, where we consider appropriate, performed remediation of such environmental matters, but we might be required in the future to perform testing relating to these matters or to satisfy requirements for further remediation, or we might incur liability as a result of such environmental matters. See “Item 1A. Risk Factors—Risks Related to Our Business and Our Properties—We might incur costs to comply with environmental laws, which could have an adverse effect on our results of operations.”

SUSTAINABILITY

We strive to be socially and environmentally conscious. We now have the capacity to produce more than 8 million kilowatt hours of electricity per year from solar arrays at five of our properties. The annual environmental benefit accrued through the production of renewable energy at these five properties is equivalent to a reduction in greenhouse gas emissions from more than 1,200 passenger vehicles. We also currently offer electric vehicle charging stations at three of our properties, with plans underway for such stations at two more mall locations. Additionally, as part of our redevelopment at Woodland Mall in Grand Rapids, Michigan, we diverted more than 20,000 tons of concrete from two former Sears buildings from landfills, instead recycling it for reuse as building pads, parking lot base and site grading during the expansion phase of the mall.

EMPLOYEES

We had 233 employees at our properties and in our corporate office as of December 31, 2019. None of our employees are represented by a labor union.

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INSURANCE

We have comprehensive liability, fire, flood, cyber liability, terrorism, extended coverage and rental loss insurance that we believe is adequate and consistent with the level of coverage that is standard in our industry. We cannot be assured, however, that our insurance coverage will be adequate to protect against a loss of our invested capital or anticipated profits, or that we will be able to obtain adequate coverage at a reasonable cost in the future.

STATUS AS A REIT

We conduct our operations in a manner intended to maintain our qualification as a REIT under the Internal Revenue Code of 1986, as amended. Generally, as a REIT, we will not be subject to federal or state income taxes on our net taxable income that we currently distribute to our shareholders. Our qualification and taxation as a REIT depend on our ability to meet various qualification tests (including dividend distribution, asset ownership and income tests) and certain share ownership requirements prescribed in the Internal Revenue Code.

CORPORATE HEADQUARTERS

Our principal executive offices are currently located at One Commerce Square, 2005 Market Street, Philadelphia, Pennsylvania 19103.  In December 2018, we entered into a lease for this office space with Brandywine Realty Trust.  Our lead independent trustee is also a trustee of Brandywine Realty Trust. The lease commenced in late December 2019 and our corporate office reopened on January 2, 2020 at the One Commerce Square location.

Our principal executive offices during 2019 were located at The Bellevue, 200 South Broad Street, Philadelphia, Pennsylvania 19102. We had leased our principal executive offices from Bellevue Associates, an entity that is owned by Ronald Rubin, one of our former trustees, collectively with members of his immediate family and affiliated entities.

SEASONALITY

There is seasonality in the retail real estate industry. Retail property leases often provide for the payment of all or a portion of rent based on a percentage of a tenant’s sales revenue, or sales revenue over certain levels. Income from such rent is recorded only after the minimum sales levels have been met. The sales levels are often met in the fourth quarter, during the November and December holiday season. Also, many new and temporary leases are entered into later in the year in anticipation of the holiday season and a higher number of tenants vacate their space early in the year. As a result, our occupancy and cash flows are generally higher in the fourth quarter and lower in the first and second quarters. Our concentration in the retail sector increases our exposure to seasonality and has resulted, and is expected to continue to result, in a greater percentage of our cash flows being received in the fourth quarter.

AVAILABLE INFORMATION

We maintain a website with the address www.preit.com. We are not including or incorporating by reference the information contained on our website into this report. We make available on our website, free of charge and as soon as practicable after filing with the SEC, copies of our most recently filed Annual Report on Form 10-K, all Quarterly Reports on Form 10-Q and all Current Reports on Form 8-K filed during each year, including all amendments to these reports, if any. Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to these reports are also available on the SEC’s website at http://www.sec.gov. In addition, copies of our corporate governance guidelines, codes of business conduct and ethics (which include the code of ethics applicable to our Chief Executive Officer, Principal Financial Officer and Principal Accounting Officer) and the governing charters for the audit, nominating and governance, and executive compensation and human resources committees of our Board of Trustees are available free of charge on our website, as well as in print to any shareholder upon request. We intend to comply with the requirements of Item 5.05 of Form 8-K regarding amendments to and waivers under the code of business conduct and ethics applicable to our Chief Executive Officer, Principal Financial Officer and Principal Accounting Officer by providing such information on our website within four days after effecting any amendment to, or granting any waiver under, that code, and we will maintain such information on our website for at least twelve months.

ITEM 1A.    RISK FACTORS.

RISKS RELATED TO OUR BUSINESS AND OUR PROPERTIES

Store closings, leasing and construction delays, lease terminations, tenant financial difficulties and tenant bankruptcies have in the past and could in the future adversely affect our financial condition and results of operations.

We receive a substantial portion of our operating income as rent under leases with tenants. At any time, any tenant having space in one or more of our properties could experience a downturn in its business that might weaken its financial condition. There are also a number of tenants that are based outside the U.S., and these tenants are affected by economic conditions in the country where their headquarters are located and internationally. Any of such tenants might enter into or renew leases with relatively shorter terms. Such tenants might also defer or fail to make rental payments when due, delay or defer lease commencement, voluntarily vacate the premises or declare bankruptcy, which could result in the termination of the tenant’s lease, or preclude the collection of rent in connection with the space for a period of time, and could result in material losses to us and harm to our results of operations. Also, it might take time to terminate leases of underperforming or nonperforming tenants, and we might incur costs to remove such tenants. Some of our tenants occupy stores at multiple locations in our portfolio, and so the effect of any bankruptcy or store closing of those tenants might be more significant to us than the bankruptcy or store closings of other tenants. In addition, under some of our leases, our tenants pay rent based, in whole or in part, on a percentage of their sales. Accordingly, declines in these tenants’ sales could directly affect our results of operations, and in some cases allow these tenants to cancel their leases pursuant to a sales termination clause. Also, if tenants are unable to comply with the terms of our leases, or otherwise seek changes to the terms, including changes to the amount of rent, we might modify lease terms in ways that are less favorable to us.

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If a tenant files for bankruptcy, the tenant might have the right to reject and terminate its leases, and we cannot be sure that it will affirm its leases and continue to make rental payments in a timely manner. A bankruptcy filing by, or relating to, one of our tenants would bar all efforts by us to collect pre-bankruptcy debts from that tenant, or from their property, unless we receive an order permitting us to do so from the bankruptcy court. In addition, we cannot evict a tenant solely because of its bankruptcy. If a lease is assumed by the tenant in bankruptcy, all pre-bankruptcy balances due under the lease must be paid to us in full. However, if a lease is rejected by a tenant in bankruptcy, we would have only a general unsecured claim for damages in connection with such balances. If a bankrupt tenant vacates a space, it might not do so in a timely manner, and we might be unable to re-lease the vacated space during that time, at attractive rates, or at all. In addition, such a scenario with one tenant could result in lease terminations or reductions in rent by other tenants of the same property whose leases have co-tenancy provisions. These other tenants might seek changes to the terms of their leases, including changes to the amount of rent to be paid. Any unsecured claim we hold against a bankrupt tenant might be paid only to the extent that funds are available and only in the same percentage as is paid to all other holders of unsecured claims, and there are restrictions under bankruptcy laws that limit the amount of the claim we can make if a lease is rejected. As a result, it is likely that we would recover substantially less than the full value of any unsecured claims we hold, which could adversely affect our financial condition and results of operations. In some instances, retailers that have sought protection from creditors under bankruptcy law have had difficulty in obtaining debtor-in-possession financing, which has decreased the likelihood that such retailers will emerge from bankruptcy protection and has limited their alternatives. Tenant bankruptcies and liquidations have adversely affected, and are likely in the future to adversely affect, our financial condition and results of operations.

Changes in the retail industry, particularly among anchor tenant retailers, could adversely affect our results of operations and financial condition.

The income we generate depends in part on our anchor or other major tenants’ ability to attract customers to our properties and generate traffic, which affects the property’s ability to attract non-anchor tenants, and thus the revenue generated by the property. In recent years, in connection with economic conditions and other changes in the retail industry, including customers’ use of smartphones and websites and the continued expansion of e-commerce generally, some anchor tenant retailers have experienced decreases in operating performance, and in response, they are contemplating strategic, operational and other changes. The strategic and operational changes being considered by anchor tenants include subleasing, combinations and other consolidation designed to increase scale, leverage with suppliers like landlords, and other efficiencies, which might result in the restructuring of these companies and which could involve withdrawal from certain geographic areas, such as secondary or tertiary trade areas, or the closure or sale of stores operated by them. We have been affected by anchor store closings in the past and cannot assure you that there will not be additional store closings by any anchor or other tenant in the future, which could affect our results of operations, cash flows, and ability to make cash distributions. The closure of one or more anchor stores would have a negative effect on the affected properties, on our portfolio and on our results of operations. In addition, a lease termination by an anchor for any reason, a failure by an anchor to occupy the premises, or any other cessation of operations by an anchor could result in lease terminations or reductions in rent by other tenants of the same property whose leases permit cancellation or rent reduction (i.e., co-tenancy provisions) if an anchor’s lease is terminated or the anchor otherwise ceases occupancy or operations. In that event, we might be unable to re-lease the vacated space of the anchor or non-anchor stores in a timely manner, or at all. If a large number of anchor stores close in a particular region, competition to fill these vacancies could cause us to lease space at lower rates than we would otherwise seek, which could negatively affect our results of operations. In addition, the leases of some anchors might permit the anchor to transfer its lease, including any attendant approval rights, to another retailer. The transfer to a new anchor could cause customer traffic in the property to decrease or to be composed of different types of customers, which could reduce the income generated by that property. A transfer of a lease to a new anchor also could allow other tenants to make reduced rental payments or to terminate their leases at the property, which could adversely affect our results of operations.

Approximately 35% of our non-anchor leases expire in 2020 or 2021 or are in holdover status, and if we are unable to renew these leases or re-lease the space covered by these leases on equivalent terms, we might experience reduced occupancy and traffic at our properties and lower rental revenue, net operating income, cash flows and funds available for distributions.

The current conditions in the economy, including rising interest rates and changes in the means and patterns of consumer behavior, may affect employment growth and cause fluctuations and variations in retail sales, consumer confidence and consumer spending on retail goods. The weaker operating performance of certain retailers, combined in some circumstances with overleveraged retailer balance sheets in recent years has resulted in store closings and in delays or deferred decisions regarding the openings of new retail stores at some of our properties and affected renewals of both anchor and non-anchor leases. In recent years, partially because of the economic environment, we frequently renewed leases with terms of one year, two years or three years, rather than the more typical five years or ten years. These shorter term leases enabled both the tenant and us, before entering into a longer term lease, to evaluate the advantages and disadvantages of a longer term lease at a later time in the economic cycle, at least in part with the expectation that there will be greater visibility into future conditions in the economy and future trends. As a result, we have a substantial number of such leases that are in holdover status or will expire in the next few years, including some leases with our top 20 tenants, and including both anchor and non-anchor leases. See “Item 2. Properties—Retail Lease Expiration Schedule” and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations—Leasing Activity.” We might not be successful in renewing the leases for, or re-leasing, the space covered by leases that are in holdover status or that are expiring in 2020 and 2021, or obtaining positive rent renewal spreads, or even renewing the leases on terms comparable to those of the expiring leases. If we are not successful, we will be likely to experience reduced occupancy, traffic, rental revenue and net operating income, which could have a material adverse effect on our financial condition, results of operations and ability to make distributions to shareholders.

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The investments we have made in redeveloping older properties and developing new properties could be subject to delays or other risks and might not yield the returns we anticipate, which would harm our financial condition and operating results.

Currently, we are planning or engaged in redevelopment projects at a number of our properties. Additionally, Fashion District Philadelphia (“FDP”), which is a significant redevelopment project undertaken through our 50/50 joint venture, opened in September 2019, but development is continuing and FDP has not yet stabilized. To the extent we continue current redevelopment projects or enter into new redevelopment or development projects in the longer term, they will be subject to a number of risks that could negatively affect our return on investment, financial condition, results of operations and our ability to make distributions to shareholders, including, among others:

• higher than anticipated construction costs, including labor and material costs;

• delayed ability or inability to reach projected occupancy, rental rates, profitability, and investment return;

• timing delays due to weather, labor disruptions, zoning or other regulatory approvals, tenant decision delays, delays in anchor approvals of redevelopment plans, where required, acts of God (such as fires, significant storms, earthquakes or floods) and other factors outside our control, which might make a project less profitable or unprofitable, or delay profitability;

• expenditure of money and time on projects that might be significantly delayed before stabilization;

• inability to achieve financing on favorable terms, or at all;

• offer inducements (including rent reduction, tenant allowance, and rent abatement) to tenants; and

• the impact of co-tenancy requirements as a result of our inability to meet a projected timeline.

Some of our retail properties were constructed or last renovated more than 10 years ago. Older, unrenovated properties tend to generate lower rent and might require significant expense for maintenance or renovations to maintain competitiveness, which, if incurred, could harm our results of operations. Subject to the terms and conditions of our Credit Agreements, as a key component of our growth strategy, we plan to continue to redevelop existing properties, and we might develop or redevelop other projects as opportunities arise. These plans are subject to then-prevailing economic, capital market and retail industry conditions.

We might elect not to proceed with certain development projects after they have begun. In general, when we elect not to proceed with a project that has commenced, development costs for such a project will be expensed in the then-current period. The accelerated recognition of these expenses could have a material adverse effect on our results of operations for the period in which the expenses are recognized.

We might be unable to effectively manage any redevelopment and development projects involving a mix of uses, or other unique aspects, such as a project located in a city rather than a suburb, which could affect our financial condition and results of operations.

The complex nature of redevelopment and development projects calls for substantial management time, attention and skill. Some of our redevelopment and development projects currently, and in the future, might involve mixed uses of the properties, including residential, office and other uses. We might not have all of the necessary or desirable skill sets to manage such projects. If a development or redevelopment project includes a non-retail use, we might seek to sell the rights to that component to a third-party developer with experience in that use, or we might seek to partner with such a developer. If we are not able to sell the rights to, or partner with, such a developer, or if we choose to develop the other component ourselves, we would be exposed not only to those risks typically associated with the development of commercial real estate generally, and of retail real estate, but also to specific risks associated with the development, ownership and property management of non-retail real estate, such as the demand for residential or office space of the types to be developed and the effects of general economic conditions on such property types, as opposed to the effects on retail real estate, with which we are more familiar. Also, if we pursue a redevelopment or development project with a different or unique aspect, such as a project in a dense city location like the redevelopment of Fashion District Philadelphia, either in a partnership with another developer (like with Macerich for Fashion District Philadelphia) or ourselves, we would be, and are, exposed to the particular risks associated with the unique aspect such as, in the case of dense city projects, differences in the entitlements process, different types of responses by particular stakeholders and different involvement and priorities of local, state and federal government entities. In addition, even if we sell the rights to develop a specific component or elect to participate in the development through a partnership, we might be exposed to the risks associated with the failure of the other party to complete the development as expected. These include the risk that the other party would default on its obligations, necessitating that we complete the component ourselves (including providing any necessary financing). The lack of sufficient management resources, or of the necessary skill sets to execute our plans, or the failure of a partner in connection with a joint, mixed-use or other unique development, could delay or prevent us from realizing our expectations with respect to any such projects and could adversely affect our results of operations and financial condition.

Expense reimbursements are relatively low and might continue to be relatively low. Also, operating expense amounts have increased and, in the future, are likely to continue to increase, reducing our cash flow and funds available for future distributions.

Our leases have historically provided that the tenant is liable for a portion of common area maintenance (“CAM”) costs, real estate taxes and other operating expenses. If these expenses increase, then under such provisions, the tenant’s portion of such expenses also increases. Our new leases are continuing to incorporate terms providing for fixed CAM reimbursement or caps on the rate of annual increases in CAM reimbursement. In these cases, a tenant will pay a set or capped expense reimbursement amount, regardless of the actual amount of operating expenses. The tenant’s payment remains the same even if operating expenses increase, causing us to be responsible for the excess amount. To the extent that existing leases, new leases or renewals of leases do not require a pro rata contribution from tenants, and to the extent that any new fixed CAM reimbursement provision sets an amount below actual expense levels, we are liable for the cost of such expenses in excess of the portion paid by tenants, if any. This has affected and could, in the future, adversely affect our net effective rent, our results of operations and our ability to make distributions to shareholders. Further, if a property is not fully occupied, as it typically is not, we are required to pay the portion of the expenses allocable to the vacant space that is otherwise typically paid by tenants, which would adversely affect our results of operations and our ability to make distributions to shareholders.

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Our properties are also subject to the risk of increases in CAM costs and other operating expenses, which typically include real estate taxes, energy and other utility costs, repairs, maintenance on and capital improvements to common areas, security, housekeeping, property and liability insurance and administrative costs. A significant portion of our operating expenses are managed through contracts with third-party vendors. Vendor consolidation could result in increased expense for such services.  In addition, in recent years, municipalities have sought to raise real estate taxes paid by our property in their jurisdiction because of their strained budgets, our recent redevelopment of such property or for other reasons. In some cases, our mall might be the largest single taxpayer in a jurisdiction, which could make real estate tax increases significant to us. If operating expenses increase, the availability of other comparable retail space in the specific geographic markets where our properties are located might limit our ability to pass these increases through to tenants, or, if we do pass all or a part of these increases on, might lead tenants to seek retail space elsewhere, which, in either case, could adversely affect our results of operations and limit our ability to make distributions to shareholders.

The valuation and accounting treatment of certain long-lived assets, such as real estate, or of intangible assets, such as goodwill, could result in future asset impairments, which would be recorded as operating losses.

Real estate investments and related intangible assets are reviewed for impairment whenever events or changes in circumstances, such as a decrease in net operating income, the loss of an anchor tenant or an agreement of sale at a price below book value, indicate that the carrying amount of the property might not be recoverable. An operating property to be held and used is considered impaired under applicable accounting authority only if management’s estimate of the aggregate future cash flows to be generated by the property, undiscounted and without interest charges, is less than the carrying value of the property. In addition, this estimate may consider a probability weighted cash flow estimation approach when alternative courses of action to recover the carrying amount of a long-lived asset are under consideration or when a range of possible values is estimated. This estimate takes into consideration factors such as expected future net operating income, trends and prospects, and upcoming lease maturities, as well as the effects of demand, competition and other factors. We have set our estimates of future cash flows to be generated by our properties taking into account these factors, which might cause changes in our estimates in the future. If we find that the carrying value of real estate investments and related intangible assets has been impaired, as we did in recent years, we will recognize impairment with respect to such assets. Applicable accounting principles require that goodwill and certain intangible assets be tested for impairment annually or earlier upon the occurrence of certain events or substantive changes in circumstances. If we find that the carrying value of goodwill or certain intangible assets exceeds estimated fair value, we will reduce the carrying value of the real estate investment or goodwill or intangible asset to the estimated fair value, and we will recognize impairment with respect to such investments or goodwill or intangible assets.

Impairment of long-lived assets is required to be recorded as a noncash operating expense. Our 2019, 2018, and 2017 impairment analyses resulted in noncash impairment charges on long-lived assets of $5.0 million, $137.5 million, and $55.8 million, respectively, and, as a result, the carrying values of our impaired assets were reset to their estimated fair values as of the respective dates on which the impairments were recognized. Any further decline in the estimated fair values of these assets could result in additional impairment charges. It is possible that such impairments, if required, could be material. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies—Asset Impairment.”

Conditions in the U.S. economy might adversely affect our cash flows from operations.

The U.S. economy has continued to experience relatively slow income growth, increased health care costs and reduced or fluctuating business and consumer confidence and retail sales. Changes in the patterns of consumer spending, consumer confidence and seasonal spending have led to decreased operating performance of and bankruptcy or similar filings by several retailer tenants, which has led to store closings, delays or deferred decisions regarding lease renewals and the openings of new retail stores at our properties, and has in some cases affected the ability of our current tenants to meet their obligations to us. This could adversely affect our ability to generate cash flows, meet our debt service requirements, comply with the covenants under our Credit Agreements, make capital expenditures and make distributions to shareholders. These conditions could also have a material adverse effect on our financial condition and results of operations.

Our retail properties are concentrated in the Eastern United States, particularly in the Mid-Atlantic region, and adverse market conditions in that region might affect the ability of our tenants to make lease payments and the interest of prospective tenants to enter into leases, which might reduce the amount of revenue generated by our properties.

Our retail properties are concentrated in the Eastern United States, particularly in the Mid-Atlantic region, including a number of properties in the Philadelphia, and to a lesser extent, the Washington, D.C. metropolitan areas. To the extent adverse conditions affecting retail properties, such as economic conditions, population trends, changing demographics and urbanization, availability and costs of financing, construction costs, income, unemployment, declining real estate values, local real estate conditions, sales and property taxes and tax laws, and weather conditions are particularly adverse in these areas, our results of operations will be affected to a greater degree than companies that do not have concentrations in these regions. If the sales of stores operating at our properties were to decline significantly due to adverse regional conditions, the risk that our tenants, including anchors, will be unable to fulfill the terms of their leases to pay rent or will enter into bankruptcy might increase. Furthermore, such adverse regional conditions might affect the likelihood or timing of lease commitments by new tenants or lease renewals by existing tenants as such parties delay their leasing decisions in order to obtain the most current information about trends in their businesses or industries. If, as a result of prolonged adverse regional conditions, occupancy at our properties decreases or our properties do not generate sufficient revenue to meet our operating and other expenses, including debt service, our financial position, results of operations, cash flow and ability to make distributions to shareholders would be adversely affected.

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The benefits of our redevelopment of The Gallery at Market East into Fashion District Philadelphia may not be realized as expected and our financial results could be adversely affected.

We, along with our joint venture partner, The Macerich Company, undertook the significant redevelopment of Fashion District Philadelphia (“FDP”). FDP opened in 2019, but development activities are continuing, occupancy has not yet been fully achieved, and stabilization is currently projected to be realized in 2021. Although FDP is expected to generate a positive contribution and provide for future growth, operating FDP involves a number of risks, including those that are financial and operational in nature. For example, FDP may under-perform relative to our expectations or not perform in accordance with our anticipated timetable or it may place unanticipated demands on our resources.  If we are unable to realize the expected benefits of our investment in this joint venture, our financial results could be adversely affected.

We have invested and expect to invest in the future in partnerships with third parties to acquire, develop or redevelop properties, and we might not control the management, redevelopment or disposition of these properties, or we might be exposed to other risks.

We have invested and expect to invest in the future as a partner with third parties in the acquisition or ownership of existing properties or the development of new properties, in contrast to acquiring or owning properties or developing projects by ourselves. Entering into partnerships with third parties involves risks not present where we act alone, in that we might not have primary control over the acquisition, disposition, development, redevelopment, financing, leasing, management, budgeting and other aspects of the property or project. These limitations might adversely affect our ability to develop, redevelop or sell these properties at the most advantageous time for us, if at all. Also, there might be restrictive provisions and rights that apply to sales or transfers of interests in our partnership properties, which might require us to make decisions about buying or selling interests at a disadvantageous time.

Some of our retail properties are owned by partnerships for which major decisions, such as a sale, lease, refinancing, redevelopment, expansion or rehabilitation of a property, or a change of property manager, require the consent of all partners. Accordingly, because decisions must be unanimous, necessary actions might be delayed significantly and it might be difficult or even impossible to remove a partner that is serving as the property manager. We might not be able to resolve favorably any conflicts which arise with respect to such decisions, or we might be required to provide financial or other inducements to our partners to obtain a resolution. In cases where we are not the controlling partner or where we are only one of the general partners, there are many decisions that do not relate to fundamental matters that do not require our approval and that we do not control. Also, in cases in which we serve as managing general partner of the partnership that owns the property, we might have certain fiduciary responsibilities to the other partners in those partnerships.

Business disagreements with our third-party partners might arise. We might incur substantial expenses in resolving these disputes. Moreover, we cannot assure you that our resolution of a dispute with a third-party partner will be on terms that are favorable to us.

The profitability of each partnership we enter into with a third party that has short-term financing or debt requiring a balloon payment is dependent on the subsequent availability of long-term financing on satisfactory terms. If satisfactory long-term financing is not available, we might have to rely on other sources of short-term financing or equity contributions. Although these partnerships are not wholly-owned by us, if any obligations were recourse, we might be required to pay the full amount of any obligation of the partnership, or we might elect to pay all of the obligations of such a partnership to protect our equity interest in its properties and assets. This could cause us to utilize a substantial portion of our liquidity sources or operating funds and could have a material adverse effect on our operating results and reduce amounts available for distribution to shareholders.

Other risks of investments in partnerships with third parties include:

• partners might become bankrupt or fail to fund their share of required capital contributions, which might inhibit our ability to make important decisions in a timely fashion or necessitate our funding their share to preserve our investment, which might be at a disadvantageous time or in a significant amount;

• partners might undergo a change of control or a substantial change in management, which could similarly inhibit our ability to make important decisions in a timely fashion or otherwise affect our intentions with respect to a project;

• partners might have or develop business interests or goals that are inconsistent with our business interests or goals;

• partners might be in a position to take action contrary to our policies or objectives;

• we might incur liability for the actions of our partners;

• third-party managers might not be sensitive to publicly-traded company or REIT tax compliance matters; and

• partners might suffer deterioration in their creditworthiness, making it difficult for the joint venture to obtain financing at favorable rates, or at all.

We face competition for the acquisition of properties, development sites and other assets, which might impede our ability to make future acquisitions or might increase the cost of these acquisitions.

We compete with many other entities engaged in real estate investment activities for acquisitions of malls, other retail properties and other prime development sites or sites adjacent to our properties, including institutional investors, other REITs and other owner-operators of retail properties. Our efforts to compete for acquisitions are also subject to the terms and conditions and limitations of our Credit Agreements. When we seek to make acquisitions, competitors might drive up the price we must pay for properties, parcels, other assets or other companies, or might themselves succeed in acquiring those properties, parcels, assets or companies. In addition, our potential acquisition targets might find our competitors to be more attractive suitors if they have greater resources, are willing to pay more, or have a more compatible operating philosophy. In particular, larger REITs might enjoy significant competitive advantages that result from, among other things, a lower cost of capital, a better ability to raise capital, a better ability to finance an acquisition, and enhanced operating efficiencies. We might not succeed in acquiring retail properties or development sites that we seek, or, if we pay a higher price for a property or site, or generate lower cash flow from an acquired property or site than we expect, our investment returns will be reduced, which will adversely affect the value of our securities.

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We might not be successful in identifying suitable acquisitions that meet the criteria we apply, given economic, market or other circumstances, which might adversely affect our results of operations.

Acquisitions of retail properties have historically been an important component of our growth strategy, though we have initiated few acquisitions in recent years. Expanding by acquisitions requires us to identify suitable acquisition candidates or investment opportunities that meet the criteria we apply, given economic, market or other circumstances, and that are compatible with our growth strategy. We must also typically obtain financing on terms that are acceptable to us. We analyze potential acquisitions on a property-by-property and market-by-market basis. We might not be successful in identifying suitable properties or other assets in our existing geographic markets or in markets new to us that meet the acquisition criteria we apply, given economic, market or other circumstances, in financing such properties or other assets or in consummating acquisitions or investments on satisfactory terms. In connection with prospective acquisitions, we generally conduct a due diligence review of the target property, portfolio or investment.  While the process of due diligence is intended to provide us with an independent basis to evaluate a prospective acquisition, in some cases we might be given limited time or be given limited materials to review, or pertinent facts might not be adequately uncovered. In such cases, the decision of whether to pursue acquiring the property or portfolio might be based on insufficient, incomplete or inaccurate information, which might lead us to make acquisitions that might have additional or larger issues than we anticipated. If so, these issues might reduce the returns on our investment and affect our financial condition and results of operations. An inability to successfully identify, consummate or finance acquisitions could reduce the number of acquisitions we complete and impede our growth, which could adversely affect our results of operations.

We might be unable to integrate effectively any additional properties we might acquire, which might result in disruptions to our business and additional expense.

To the extent that we pursue acquisitions of additional properties or portfolios of properties that meet the investment criteria we apply, given economic, market and other circumstances, we might not be able to adapt our management and operational systems to effectively manage any such acquired properties or portfolios. Specific risks for our ongoing operations posed by acquisitions we have completed or that we might complete in the future include:

• we might not achieve the expected value-creation potential, operating efficiencies, economies of scale or other benefits of such transactions, including effective execution on acquired development rights;

• we might not have adequate personnel, personnel with necessary skill sets or financial and other resources to successfully handle our increased operations;

• we might not be successful in leasing space in acquired properties or renewing leases of existing tenants after our acquisition of the property;

• the combined portfolio might not perform at the level we anticipate;

• the additional property or portfolio might require excessive time and financial resources to make necessary improvements or renovations and might divert the attention of management away from our other operations;

• we might experience difficulties and incur unforeseen expenses in connection with assimilating and retaining employees working at acquired properties, and in assimilating any acquired properties;

• we might experience problems and incur unforeseen expenses in connection with upgrading and expanding our systems and processes to incorporate any such acquisitions; and

• we might incur unexpected liabilities in connection with the properties and businesses that we acquire without any recourse, or limited recourse, against the prior owners or other relevant third parties.

If we fail to successfully integrate any properties, portfolios, assets or companies we acquire, or fail to effectively handle our increased operations or to realize the intended benefits of any such transactions, our financial condition and results of operations, and our ability to make distributions to shareholders, might be adversely affected.

Our business could be harmed if members of our corporate management team terminate their employment with us or otherwise are unable to continue in their current capacity or we are unable to attract and retain talented employees.

Our future success depends, to a meaningful extent, upon the continued services of Joseph F. Coradino, our Chairman and Chief Executive Officer, and Mario C. Ventresca, Jr., our Chief Financial Officer, and the services of our corporate management team and, more broadly, our employees generally. Our executives have substantial experience in managing, developing and acquiring retail real estate. In March 2020, the Company entered into an employment agreement with Mario C. Ventresca, Jr. to serve as its Chief Financial Officer. We have also entered into an employment agreement with Joseph F. Coradino, our Chief Executive Officer. Each of these individuals could elect to terminate their respective agreements at any time. The loss of services of one or more members of our corporate management team, or our failure to attract and retain talented employees generally could harm our business and our prospects. Further, if we undertake certain cost-savings and restructuring initiatives in the future, they may be disruptive to our workforce and operations and adversely affect our financial results, because they may impact employee morale and may impair our ability to attract and retain talent.

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If we suffer losses that are not covered by insurance or that are in excess of our insurance coverage limits, we could lose invested capital and anticipated profits.

There are some types of losses, including those of a catastrophic nature, such as losses due to wars, earthquakes, floods, hurricanes, pollution, environmental matters, information technology system failures (including phishing, ransomware and cyber attacks) and lease and contract claims, that are generally uninsurable or not economically insurable, or might be subject to insurance coverage limitations, including large deductibles or co-payments or caps on coverage amounts. Under federal terrorism risk insurance legislation, the United States government provides reinsurance coverage to insurance companies following a declared terrorism event. There is a generally similar program relating to flood insurance.  If either or both of these programs were no longer in effect, it might become prohibitively expensive, or impossible, to obtain insurance that covers damages or losses from those types of events.  Tenants might also encounter difficulty obtaining coverage. 

If one of these events occurred to, or caused the destruction of, one or more of our properties, we could lose both our invested capital and anticipated profits from that property. We also might remain obligated for any mortgage loan or other financial obligation related to the property. In addition, if we are unable to obtain insurance in the future at acceptable levels and at a reasonable cost, the possibility of losses in excess of our insurance coverage might increase and we might not be able to comply with covenants under our debt agreements, which could adversely affect our financial condition. If any of our properties were to experience a significant, uninsured loss, it could seriously disrupt our operations, delay our receipt of revenue and result in large expense to repair or rebuild the property. These types of events could adversely affect our cash flow, results of operations and ability to make distributions to shareholders.

We might incur costs to comply with environmental laws, which could have an adverse effect on our results of operations.

Under various federal, state and local laws, ordinances, regulations and case law, an owner, former owner or operator of real estate might be liable for the costs of removal or remediation of hazardous or toxic substances present at, on, under, in or released from its property, regardless of whether the owner, operator or other responsible party knew of or was at fault for the release or presence of hazardous or toxic substances. The responsible party also might be liable to the government or to third parties for substantial property damage and investigation and cleanup costs. Even if more than one person might have been responsible for the contamination, each person covered by the environmental laws might be held responsible for all of the clean-up costs incurred. In addition, some environmental laws create a lien on the contaminated site in favor of the government for damages and costs the government incurs in connection with the contamination. Contamination might adversely affect the owner’s ability to sell or lease real estate or borrow with that real estate as collateral. In connection with our ownership, operation, management, development and redevelopment of properties, or any other properties we acquire in the future, we might be liable under these laws and might incur costs in responding to these liabilities.

We are aware of certain environmental matters at some of our properties. We have, in the past, investigated and, where appropriate, performed remediation of such environmental matters, but we might be required in the future to perform testing relating to these matters and further remediation might be required, or we might incur liability as a result of such environmental matters. Environmental matters at our properties include the following:

Asbestos. Asbestos-containing materials are present at a number of our properties, primarily in the form of floor tiles, mastics, roofing materials and adhesives. Fire-proofing material containing asbestos is present at some of our properties in limited concentrations or in limited areas. Under applicable laws and practices, asbestos-containing material in good, non-friable condition are allowed to be present, although removal might be required in certain circumstances. In particular, in the course of any redevelopment, renovation, construction or build out of tenant space, asbestos-containing materials are generally removed.

Underground and Above Ground Storage Tanks. Underground and above ground storage tanks are or were present at some of our properties. These tanks were used to store waste oils or other petroleum products primarily related to the operation of automobile service center establishments at those properties. In some cases, the underground storage tanks have been abandoned in place, filled in with inert materials or removed and replaced with above ground tanks. Some of these tanks might have leaked into the soil, leading to ground water and soil contamination. Where leakage has occurred, we might incur investigation, remediation and monitoring costs if responsible current or former tenants, or other responsible parties, are unavailable to pay such costs.

Ground Water and Soil Contamination. Ground water contamination has been found at some properties in which we currently or formerly had an interest. At some properties, dry cleaning operations, which might have used solvents, contributed to ground water and soil contamination.

Each of our retail properties has been subjected to a Phase I or similar environmental audit (which involves a visual property inspection and a review of records, but not soil sampling or ground water analysis) by environmental consultants. These audits have not revealed, and we are not aware of, any environmental liability that we believe would have a material adverse effect on our results of operations. It is possible, however, that there are material environmental liabilities of which we are unaware. Also, we cannot assure you that future laws will not impose any material environmental liability, or that the current environmental condition of our properties will not be affected by the operations of our tenants, by the existing condition of the land, by operations in the vicinity of the properties (such as the presence of underground storage tanks) or by the activities of unrelated third parties.

We have environmental liability insurance coverage for the types of environmental liabilities described above, which currently covers liability for pollution and on-site remediation of up to $25.0 million per occurrence and $25.0 million in the aggregate over our three year policy term. We cannot assure you that this coverage will be adequate to cover future environmental liabilities. If this environmental coverage were inadequate, we would be obligated to fund those liabilities. We might be unable to continue to obtain insurance for environmental matters, at a reasonable cost or at all, in the future.

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In addition to the costs of remediation, we might incur additional costs to comply with federal, state and local laws relating to environmental protection and human health and safety. There are also various federal, state and local fire, health, life-safety and similar regulations that might be applicable to our operations and that might subject us to liability in the form of fines or damages for noncompliance. The cost described above, individually or in the aggregate, could adversely affect our results of operations.

Inflation may adversely affect our financial condition and results of operations.

Inflationary price increases could have an adverse effect on consumer spending, which could impact our tenants’ sales and, in turn, our tenants’ business operations. This could affect the amount of rent these tenants pay, including if their leases provide for percentage rent or percentage of sales rent, and their ability to pay rent. Also, inflation could cause increases in operating expenses, which could increase occupancy costs for tenants and, to the extent that we are unable to recover operating expenses from tenants, could increase operating expenses for us. In addition, if the rate of inflation exceeds the scheduled rent increases included in our leases, then our net operating income and our profitability would decrease. Inflation could also result in increases in market interest rates, which could not only negatively impact consumer spending and tenant investment decisions, but would also increase the borrowing costs associated with our existing or any future variable rate debt, to the extent such rates are not effectively hedged or fixed, or any future debt that we incur.

We face risks associated with, and have experienced, security breaches through cyber attacks. A significant privacy breach or IT system disruption could adversely affect our business and we might be required to increase our spending on data and system security, which could adversely affect our financial condition.

We rely on information technology networks and systems, including the Internet, to process, transmit and store electronic information, and to manage or support a variety of business processes and activities. In addition, our business relationships with our tenants and vendors involve the storage and transmission of proprietary information and sensitive or confidential data. Like many businesses today, we have experienced an increase in cyber-threats and attempted intrusions. Our systems are subject to a variety of forms of cyber attacks (including phishing and ransomware attacks) with the objective of gaining unauthorized access to our systems or data or disrupting our operations.  Security breaches have, from time to time, occurred and may occur in the future.  Due to the nature of these attacks, there is a risk that an attack or intrusion remains undetected for a period of time.  Though the cyber attacks we have experienced have not had a material impact on our financial results to date, and we maintain cyber liability insurance coverage, there remains a risk that breaches in security could expose us, our tenants or our employees to a risk of loss, misappropriation of assets that cannot be recovered, or misuse of proprietary information and of sensitive or confidential data. In addition, our information technology systems, some of which are managed or hosted by third-parties, may be susceptible to damage, disruptions or shutdowns due to computer viruses, attacks by computer hackers, telecommunication failures, user errors or catastrophic events, failures during the process of upgrading or replacing software, databases or components thereof, power outages or hardware failures. Any of these occurrences could result in disruptions in our operations, the loss of existing or potential tenants or shoppers, damage to our brand and reputation, regulatory compliance efforts and costs, remediation costs, and litigation and potential liability. Even the most well-protected information remains potentially vulnerable, because the techniques and sophistication used to conduct cyber attacks and breaches of IT systems, as well as the sources of these attacks, change frequently and are often not recognized until they are launched and have been put in place for a period of time.  Although we make substantial efforts to maintain the security of our networks and related systems, there can be no assurance that our security efforts will be effective or that attempted security breaches would not be successful or damaging. Our efforts include conducting periodic assessments of internal and external threats to and vulnerabilities of our information and technology systems, security controls and processes in place and the effectiveness of our management of cybersecurity risk. The results of these assessments are used to create and implement strategies designed to prevent, detect and respond to cybersecurity threats, and we expect to continue to employ cybersecurity risk mitigation measures, as well as seek to improve and expand such measures.  We expect to continue to dedicate resources to technology and mitigating related risks. We may incur increasing costs to deploy additional personnel and protection technologies, to train employees and engage third-party experts and consultants, or to notify employees, suppliers or the general public as part of our notification obligations. The cost and operational consequences of implementing further data or system protection measures or remediation efforts could be significant. Our processes, procedures and controls to reduce these risks, our increased awareness of the risk of a cyber incident, and our insurance coverage, however, do not guarantee that our financial results would not be materially impacted by a cyber incident.

Our retailer tenants’ businesses also require the collection, transmission and retention of large volumes of shopper and employee data, including credit and debit card numbers and other personally identifiable information, in various information technology systems. The consequences of cyber attacks perpetrated against our retailer tenants, which may include the misappropriation of assets or sensitive information or an operational disruption, could diminish consumer confidence and spending, result in fines, legal claims or proceedings or other liability, as well as significant remediation costs, any of which could have a material and adverse effect on their financial condition and results of operations and business. This could, in turn, have an adverse effect on our financial condition or results of operations.

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RISKS RELATED TO THE REAL ESTATE INDUSTRY

Online shopping and other uses of technology could affect the business models and viability of retailers, which could, in turn, affect their demand for retail real estate.

Online retailing and shopping and the use of technology to aid purchase decisions have increased in recent years, and are expected to continue to increase in the future. In certain categories, such as books, music, apparel and electronics, online retailing has become a significant proportion of total sales, and has affected retailers and consumers significantly. The information available online empowers consumers with knowledge about products and information about prices and other offers differently than information available in a single physical store with sales associates. Consumers are able to purchase products anytime and anywhere, and are able to compare more products than are typically found in a single retail location, and they are able to read product reviews and to compare product features and pricing. In addition, customers of certain of our retailers use technology including smartphones to check competitors’ product offerings and prices while in stores evaluating merchandise. Some tenants utilize our shopping centers as showrooms or as part of an omni-channel strategy (allowing for customers to shop online or in stores and for order fulfillment and returns to take place in stores or via shipping). In this model, customers may make purchases during or immediately after visiting our malls, with such sales not currently being captured in our tenant sales figures or monetized in our minimum or percentage rents.

Online shopping and technology, such as smartphone applications, might affect the business models, sales and profitability of retailers, which might, in turn, affect the demand for retail real estate, occupancy at our properties and the amount of rent that we receive. Any resulting decreases in rental revenue could have a material adverse effect on our financial condition, results of operations and ability to make distributions to shareholders.

We are subject to risks that affect the retail real estate environment generally.

Our business focuses on retail real estate, predominantly malls. As such, we are subject to certain risks that can affect the ability of our retail properties to generate sufficient revenue to meet our operating and other expenses, including debt service, to make capital expenditures and to make distributions to our shareholders. We face continuing challenges because of changing consumer preferences and because the conditions in the economy affect employment growth and cause fluctuations and variations in retail sales and in business and consumer confidence and consumer spending on retail goods. In general, a number of factors can negatively affect the income generated by a retail property or the value of a property, including: a downturn in the national, regional or local economy; a decrease in employment or consumer confidence or spending; increases in operating costs, such as common area maintenance, real estate taxes, utility rates and insurance premiums; higher energy or fuel costs resulting from adverse weather conditions, natural disasters, geopolitical concerns, terrorist activities and other factors; changes in interest rate levels and the cost and availability of financing; a weakening of local real estate conditions, such as an oversupply of, or a reduction in demand for, retail space or retail goods, and the availability and creditworthiness of current and prospective tenants; trends in the retail industry; seasonality; changes in perceptions by retailers or shoppers of the safety, convenience and attractiveness of a retail property; perceived changes in the convenience and quality of competing retail properties and other retailing options such as internet shopping or other strategies, such as using smartphones or other technologies to determine where to make and to assist in making purchases; the ability of our tenants to meet shoppers’ demands for quality, variety, and product availability, which may be impacted by supply chain disruptions; and changes in laws and regulations applicable to real property, including tax and zoning laws. For example, in early 2020, a global outbreak of a novel coronavirus occurred, leading to travel restrictions and plant shutdowns, all of which have impacted, and could continue to impact, our tenants’ supply chains and, ultimately, retail product availability. Fears related to this coronavirus outbreak has impacted, and may continue to impact, shoppers’ willingness to visit our retail properties and the continued spread of the virus has resulted in property shutdowns, and may result in additional shutdowns of our retail properties, particularly in certain geographies reporting increasing diagnoses of the virus or related illnesses. The extent of the outbreak and its impact on our tenants and our operations is uncertain, but a prolonged outbreak could continue to have a material impact.  

Changes in one or more of the aforementioned factors can lead to a decrease in the revenue or income generated by our properties and can have a material adverse effect on our financial condition and results of operations. Many of these factors could also specifically or disproportionately affect one or more of our tenants, which could lead to decreased operating performance, reduce property revenue and affect our results of operations. If the estimated future cash flows related to a particular property are significantly reduced, we may be required to reduce the carrying value of the property.

The retail real estate industry is highly competitive, and this competition could harm our ability to operate profitably.

Competition in the retail real estate industry is intense. We compete with other public and private retail real estate companies, including companies that own or manage malls, power centers, strip centers, lifestyle centers, factory outlet centers, theme/festival centers and community centers, as well as other commercial real estate developers and real estate owners, particularly those with properties near our properties, on the basis of several factors, including location and rent charged. We compete with these companies to attract customers to our properties, as well as to attract anchor, non-anchor and other tenants. We also compete to acquire land for new site development or to add to our existing properties. Our properties face competition from similar retail centers, including more recently developed or renovated centers that are near our retail properties. We also face competition from a variety of different retail formats, including internet retailers, discount or value retailers, home shopping networks, mail order operators, catalogs, and telemarketers. Our tenants face competition from companies at the same and other properties and from other retail formats as well, including retailers with a significant online presence. This competition could have a material adverse effect on our ability to lease space and on the amount of rent and expense reimbursements that we receive.

The existence or development of competing retail properties and the related increased competition for tenants might, subject to the terms and conditions of our Credit Agreements, require us to make capital improvements to properties that we would have deferred or would not have otherwise planned to make, and might affect the occupancy and net operating income of such properties. Any such capital improvements, undertaken individually or collectively, would involve costs and expenses that could adversely affect our results of operations.

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Acts of violence or war or other terrorist activity, including at our properties, could adversely affect our financial condition and results of operations.

Violent activities, terrorist or other attacks, threats of attacks or the increased frequency of such attacks or threats of attacks could directly affect the value of our properties as a result of casualties or through property damage, destruction or loss, or by making shoppers afraid to patronize such properties. The availability of insurance for such acts, or of insurance generally, might decrease, or cost more, which could increase our operating expenses and adversely affect our financial condition and results of operations. Future acts of violence or terrorist attacks in the United States might result in declining economic activity, which could harm the demand for goods and services offered by our tenants and the value of our properties, and might adversely affect the value of an investment in our securities. Such a decrease in retail demand could make it difficult for us to renew leases or enter into new leases at our properties at lease rates equal to or above historical rates. To the extent that our tenants are directly or indirectly affected by future attacks, their businesses similarly could be adversely affected, including their ability to continue to meet obligations under their existing leases. Customers of the tenants at an affected property, and at other properties, might be less inclined to shop at an affected location or at a retail property generally. Such acts might erode business and consumer confidence and spending, and might result in increased volatility in national and international financial markets and economies. Any such acts could decrease demand for retail goods or real estate, decrease or delay the occupancy of our properties, and limit our access to capital or increase our cost of raising capital.

The illiquidity of real estate investments might delay or prevent us from selling properties that we determine no longer meet the strategic and financial criteria we apply and could significantly affect our ability to respond in a timely manner to adverse changes in the performance of our properties and harm our financial condition.

Substantially all of our assets consist of investments in real properties. We review all of the assets in our portfolio regularly and we make determinations about which assets have growth potential and which properties do not meet the strategic or financial criteria we apply and should thus be divested. Because real estate investments are relatively illiquid, our ability to quickly sell one or more properties in our portfolio in response to our evaluation or to changing economic and financial conditions is limited. The real estate market is affected by many factors that are beyond our control, such as general economic conditions, the availability of financing, interest rates, and the supply and demand for space. We cannot predict whether we will be able to sell any property for the price or on the terms we set, or whether any price or other terms offered by a prospective purchaser would be acceptable to us. The number of prospective buyers interested in purchasing malls is limited. We also cannot predict the length of time needed to find a willing purchaser and to close the sale of a property. In addition, prospective buyers might experience increased costs of debt financing or other difficulties in obtaining debt financing (as the volatility in the credit markets may be reflected in lending on unfavorable terms to the retail industry), which might make it more difficult for us to sell properties or might adversely affect the price we receive for properties that we do sell. There are also limitations under federal income tax laws applicable to REITs that could limit our ability to sell assets. Therefore, if we want to sell one or more of our properties, we might not be able to make such dispositions in the desired time period, or at all, and might receive less consideration than we seek or than we originally invested in the property.

Before a property can be sold, we might be required to make expenditures to correct defects or to make improvements. We cannot assure you that we will have funds available to correct those defects or to make those improvements, and if we cannot do so, we might not be able to sell the property, or might be required to sell the property on unfavorable terms. In acquiring a property, we might agree with the sellers or others to provisions that materially restrict us from selling that property for a period of time or impose other restrictions, such as limitations on the amount of debt that can be placed or repaid on that property. These factors and any others that would impede our ability to respond to adverse changes in the performance of our properties could significantly harm our financial condition and results of operations. In addition, failure to sell the properties that we intend to sell could delay or negatively affect our strategy to obtain higher rental rates from retailers with multiple stores in our portfolios, including at these properties. 

RISKS RELATED TO OUR INDEBTEDNESS AND OUR FINANCING

We have substantial debt and stated value of preferred shares outstanding, which could adversely affect our overall financial health and our operating flexibility. We require significant cash flows to satisfy our debt service and dividends on our preferred shares outstanding. These obligations may prevent us from using our cash flows for other purposes. If we are unable to satisfy these obligations, we might default on our debt or reduce, defer or suspend our dividend payments on preferred shares or reduce our dividend payments on common shares below historical rates.

We use a substantial amount of debt and preferred shares outstanding to finance our business. As of December 31, 2019, we had an aggregate consolidated indebtedness of $1,702.8 million, the majority of which consisted of mortgage loans secured by our properties. These aggregate debt amounts do not include our proportionate share of indebtedness of our partnership properties, which was $376.3 million as of December 31, 2019. We also had outstanding as of December 31, 2019, in the aggregate, $86.3 million of 7.375% Series B Preferred Shares, $172.5 million of 7.20% Series C Preferred Shares and $125.0 million of 6.875% Series D Preferred Shares.

Our substantial indebtedness and preferred shares outstanding involve significant obligations for the payment of interest, principal and dividends. If we do not have sufficient cash flow from operations to meet these obligations, we might be forced to sell assets to generate cash, which might be on unfavorable terms, if at all, or we might not be able to make all required payments of principal and interest on our debt, which could result in a default or have a material adverse effect on our financial condition and results of operations, and which might adversely affect our ability to make distributions to shareholders and might lead us to determine to reduce our dividend payments below historical rates, any of which might adversely affect the value of our preferred shares or our common shares.

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Our substantial obligations arising from our indebtedness and preferred shares could also have other negative consequences to our shareholders, including the acceleration of a significant amount of our debt if we are not in compliance with the terms of such debt or, if such debt contains cross-default or cross-acceleration provisions (as our Credit Agreements do), other debt. If we fail to meet our obligations under our debt and our preferred shares, we could lose assets due to foreclosure or sale on unfavorable terms, which could create taxable income without accompanying cash proceeds, or such failure could harm our ability to obtain additional financing in the future for working capital, capital expenditures, debt service requirements, acquisitions, redevelopment and development activities, execution of our business strategy or other general corporate purposes. Also, our indebtedness and mandated debt service might limit our ability to refinance existing debt or to do so at a reasonable cost, might make us more vulnerable to adverse economic and market conditions, might limit our ability to respond to competition or to take advantage of opportunities, and might discourage business partners from working with us or counterparties from entering into hedging transactions with us.

In addition to our current debt, we might incur additional debt in the future in the form of mortgage loans, unsecured borrowings, additional borrowing under our existing Credit Agreements, other term loan borrowings or other financing vehicles or arrangements, or by issuing additional preferred shares. We might do so in order to finance acquisitions, to develop or redevelop properties or for other general corporate purposes, subject to the terms and conditions of our Credit Agreements, which could exacerbate the risks set forth above.

If we are unable to comply with the covenants in our Credit Agreements, we might be adversely affected.

The Credit Agreements require us to satisfy certain customary affirmative and negative covenants and to meet numerous financial tests, including tests relating to our leverage, unencumbered debt yield, interest coverage, fixed charge coverage, tangible net worth, corporate debt yield and facility debt yield. These covenants could restrict our ability to pursue acquisitions, redevelopment and development projects or limit our ability to respond to changes and competition, and reduce our flexibility in conducting our operations by limiting our ability to borrow money, sell or place liens on assets, manage our cash flows, repurchase securities, make capital expenditures or make distributions to shareholders. We expect the current conditions in the economy and the retail industry to continue to affect our operating results. The leverage covenant in the Credit Agreements generally takes our net operating income and applies capitalization rates to calculate Gross Asset Value, and consequently, deterioration or improvement to our operating performance also affects the calculation of our leverage. In addition, a material decline in future operating results could affect our ability to comply with other financial ratio covenants contained in our Credit Agreements, which are calculated on a trailing four quarter basis. Also, we might be restricted in the amount we can borrow based on the Unencumbered Debt Yield covenant under the Credit Agreements. Following recent property sales, the NOI from our remaining unencumbered properties is at a level such that the maximum amount that was available to be borrowed by us under the 2018 Revolving Facility was $26.3 million as of December 31, 2019.

As of December 31, 2019, we were in compliance with all the financial covenants in our Credit Agreements. Particularly in light of recent property sales and reduction in our asset base, however, we are at increased risk of being unable to comply with these covenants or having reduced borrowing capacity. We regularly engage in discussions with lenders that participate in our senior unsecured credit facility regarding our capital and liquidity resources and needs, including to explore alternatives and ensure that we will remain in compliance with our financial covenants and have continued access to funding under the facility, which alternatives may include waivers or amendments. For example, as of the date of the filing of this Annual Report on Form 10-K, we are in active discussions with the banks participating in our credit facilities to modify the terms of those agreements and obtain debt covenant relief. There is no assurance that we could obtain such waivers or amendments, and even if obtained, we would likely incur additional costs. Our inability to obtain any such waiver or amendment could result in a breach and a possible event of default under our Credit Agreements, which could allow the lenders to discontinue lending or issuing letters of credit, terminate any commitments they have made to provide us with additional funds, and/or declare amounts outstanding to be immediately due and payable. If a default were to occur, we might have to refinance the debt through secured or unsecured debt financing or private or public offerings of debt or equity securities. If we are unable to do so, we might have to liquidate assets, potentially on unfavorable terms. Any of such consequences could negatively affect our financial position, results of operations, cash flow and ability to make capital expenditures and distributions to shareholders.

We have determined that there is substantial doubt about our ability to continue as a going concern.

In evaluating whether there are conditions or events, considered in the aggregate, that raise substantial doubt about our ability to continue as a going concern within one year after the date that the financial statements are issued, our management considered our current financial condition and liquidity sources, including current funds available, forecasted future cash flows and our conditional and unconditional obligations due over the next twelve months. Management considered the following: (i) our senior unsecured facility, which includes a revolving facility maturing in 2022 with a balance of $255.0 million as of December 31, 2019 and term loans maturing in 2021 with a balance of $550.0 million as of December 31, 2019; (ii) our mortgage loans with varying maturities through 2025 with a principal balance of $901.6 million as of December 31, 2019; (iii) the financial covenant compliance requirements of our credit agreements; and (iv) recurring costs of operating our business. As a result of the considerations articulated below, management concluded there is substantial doubt about our ability to continue as a going concern.

Although we plan to control costs, sell certain real estate assets and continue to work with the banks participating in our credit facilities to obtain debt covenant relief, there are inherent risks, unknown results and significant uncertainties associated with each of these matters and the direct correlation between these matters and our ability to satisfy financial obligations that may arise over the applicable twelve month period. Our ability to satisfy obligations under our senior unsecured credit facility and mortgage loans, maintain compliance with our debt covenants and fund recurring costs of operations depends on management’s ability to complete the sale of certain real estate assets, which sales will provide cash, to continue to control costs, and to obtain relief from banks participating in our credit facilities in regards to debt covenants. While controlling costs is within management’s control to some extent, executing the sale-leaseback transactions, selling real estate assets and obtaining relief from the lender group through modified debt covenant requirements involve performance by third parties and therefore cannot be considered probable of occurring.

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The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. The financial statements do not include any adjustments that might be necessary should we be unable to continue as a going concern. Management is taking steps to mitigate the associated risks, but we can provide no assurance that cash generated from our operations together with cash received in the future from our various sources of funding will be sufficient to enable us to continue as a going concern.

We might not be able to refinance our existing obligations or obtain the capital required to finance our activities.

The REIT provisions of the Internal Revenue Code of 1986, as amended, generally require the distribution to shareholders of 90% of a REIT’s net taxable income, excluding net capital gains, which generally leaves insufficient funds to finance major initiatives internally. Due to these requirements, and subject to the terms of the Credit Agreements, we generally fund certain capital requirements, such as the capital for renovations, expansions, redevelopments, other non-recurring capital improvements, scheduled debt maturities, and acquisitions of properties or other assets, through secured and unsecured indebtedness and, when available and market conditions are favorable, the issuance of additional equity securities.

As of December 31, 2019, we had one consolidated mortgage loan with an outstanding balance of $27.4 million with an initial maturity in July 2020 at our consolidated properties. Also, subject to the terms and conditions of our Credit Agreements, we estimate that we will need between $130.0 million and $150.0 million of additional capital to complete our current active anchor replacement and redevelopment projects, including the completion of redevelopment at Fashion District Philadelphia, which opened on September 19, 2019. Our ability to finance growth from financing sources depends, in part, on our creditworthiness, the availability of credit to us from financing sources, or the market for our debt, equity or equity-related securities when we need capital, and on conditions in the capital markets generally. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources” for information about our available sources of funds. There can be no assurances that we will continue to be able to obtain the financing we need for future growth or to meet our debt service as obligations mature, or that the financing will be available to us on acceptable terms, or at all. A lack of acceptable financing could delay or hinder our growth initiatives, or prevent us from implementing our initiatives on satisfactory terms.

Much of our indebtedness does not require significant principal payments prior to maturity, and we might enter into agreements on similar terms in future transactions. If our mortgage loans and other debts cannot be repaid in full, refinanced or extended at maturity on acceptable terms, or at all, a lender could foreclose upon the mortgaged property and receive an assignment of rent and leases or pursue other remedies, or we might be forced to dispose of one or more of our properties on unfavorable terms, which could have a material adverse effect on our financial condition and results of operations and which might adversely affect our cash flow and our ability to make distributions to shareholders.

Payments by our direct and indirect subsidiaries of dividends and distributions to us might be adversely affected by their obligations to make prior payments to the creditors of these subsidiaries.

We own substantially all of our assets through our interest in PREIT Associates. PREIT Associates holds substantially all of its properties and assets through subsidiaries, including subsidiary partnerships and limited liability companies, and derives substantially all of its cash flow from cash distributions to it by its subsidiaries. We, in turn, derive substantially all of our cash flow from cash distributions to us by PREIT Associates. Our direct and indirect subsidiaries must make payments on their obligations to their creditors when due and payable before they may make distributions to us. Thus, PREIT Associates’ ability to make distributions to its partners, including us, depends on its subsidiaries’ ability first to satisfy their obligations to their creditors. Similarly, our ability to pay dividends to holders of our shares depends on PREIT Associates’ ability first to satisfy its obligations to its creditors before making distributions to us. If the subsidiaries were unable to make payments to their creditors when due and payable, or if the subsidiaries had insufficient funds both to make payments to creditors and distribute funds to PREIT Associates, we might not have sufficient cash to satisfy our obligations and/or make distributions to our shareholders.

In addition, we will only have the right to participate in any distribution of the assets of any of our direct or indirect subsidiaries upon the liquidation, reorganization or insolvency of such subsidiary after the claims of the creditors, including mortgage lenders and trade creditors, of that subsidiary are satisfied. Our shareholders, in turn, will have the right to participate in any distribution of our assets upon our liquidation, reorganization or insolvency only after the claims of our creditors, including trade creditors, are satisfied.

Some of our properties are owned or ground-leased by subsidiaries that we created solely to own or ground-lease those properties. The mortgaged properties and related assets are restricted solely for the payment of the related loans and are not available to pay our other debts, which could impair our ability to borrow, which in turn could have a material adverse effect on our operating results and reduce amounts available for distribution to shareholders.

Our hedging arrangements might not be successful in limiting our risk exposure, and we might incur expenses in connection with these arrangements or their termination that could harm our results of operations or financial condition.

In the normal course of business, we are exposed to financial market risks, including interest rate risk on our interest-bearing liabilities. We use interest rate hedging arrangements to manage our exposure to interest rate volatility, but these arrangements might expose us to additional risks, such as requiring that we fund our contractual payment obligations under such arrangements in relatively large amounts or on short notice. We are also subject to credit risk with respect to the counterparties to derivative contracts. If a counterparty becomes bankrupt or otherwise fails to perform its obligations under a derivative contract due to financial difficulties, we may experience delays in obtaining any recovery under the derivative contract in a dissolution, assignment for the benefit of creditors, liquidation, winding-up, bankruptcy or other analogous proceeding. As of December 31, 2019, the aggregate fair value of our derivative instruments was an unrealized loss of $11.9 million, which is expected to be subsequently reclassified into earnings in the periods that the hedged forecasted transactions affect earnings. Developing an effective interest rate

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risk strategy is complex, and no strategy can completely insulate us from risks associated with interest rate fluctuations. We might enter into interest rate swaps as hedges in connection with forecasted debt transactions or payments, and if we repay such debt earlier than expected and are no longer obligated to make such payments, then we might determine that the swaps no longer meet the criteria for effective hedges, and we might incur gain or loss on such ineffectiveness. We cannot assure you that our hedging activities will have a positive impact, and it is possible that our strategies could adversely affect our financial condition or results of operations. We might be subject to additional costs, such as transaction fees or breakage costs, if we terminate these arrangements.

We are subject to risks associated with increases in interest rates, including in connection with our variable interest rate debt.

As of December 31, 2019, we had $1.1 billion of indebtedness with variable interest rates, although we have fixed the interest rates on an aggregate of $795.6 million of this variable rate debt by using derivative instruments. In addition, our unconsolidated partnerships have $175.1 million, at our proportionate share, of indebtedness with variable rates. We might incur additional variable rate debt in the future, and, if we do so, the proportion of our debt with variable interest rates might increase. See “Part I. Item 7A. Quantitative and Qualitative Disclosures About Market Risk.”

An increase in market interest rates applicable to the variable portion of the debt portfolio would increase the interest incurred and cash flows necessary to service such debt, subject to our hedging arrangements on such debt. This has and could, in the future, adversely affect our results of operations and our ability to make distributions to shareholders. Also, in coming years, as our current mortgage loans mature, if these mortgage loans are refinanced at higher interest rates than the rates in effect at the time of the prior loans, our interest expense in connection with debt secured by our properties will increase, and could adversely affect our results of operations and ability to make distributions to shareholders.

Furthermore, the expected discontinuation of LIBOR after 2021 and the transition away from LIBOR presents various risks and challenges, including with respect to our borrowings and hedging arrangements that rely on the LIBOR benchmark. Various parties are working on industry wide and company specific transition plans as they relate to derivatives and cash markets exposed to LIBOR.  We have material contracts that are indexed to LIBOR and are monitoring and evaluating the related risks, which include interest on loans or amounts received and paid on derivative instruments. To the extent that our contracts that rely on the LIBOR benchmark do not provide for replacement rates, we may seek to amend such contracts. While we are focused on effective planning for the phase-out of LIBOR, the transition may divert management attention and could have other adverse consequences for us, including on our interest rates for current and future indebtedness.

RISKS RELATING TO OUR ORGANIZATION AND STRUCTURE

Our organizational documents contain provisions that might discourage a takeover of us and depress our share price.

Our organizational documents contain, or might contain in the future, provisions that might have an anti-takeover effect and might inhibit a change in our management and the opportunity to realize a premium over the then-prevailing market price of our securities. These provisions currently include:

(1) There are ownership limits and restrictions on transferability in our trust agreement. In order to protect our status as a REIT, no more than 50% of the value of our outstanding shares (after taking into account options to acquire shares) may be owned, directly or constructively, by five or fewer individuals (as defined in the Internal Revenue Code of 1986, as amended), and the shares must be beneficially owned by 100 or more persons during at least 335 days of a taxable year of 12 months or during a proportionate part of a shorter taxable year. To assist us in satisfying these tests, subject to some exceptions, our trust agreement prohibits any shareholder from owning more than 9.9% of our outstanding shares of beneficial interest (exclusive of preferred shares) or more than 9.9% of any class or series of preferred shares. The trust agreement also prohibits transfers of shares that would cause a shareholder to exceed the 9.9% limit or cause our shares to be beneficially owned by fewer than 100 persons. Our Board of Trustees may exempt a person from the 9.9% ownership limit if it receives a ruling from the Internal Revenue Service or an opinion of counsel or tax accountants that exceeding the 9.9% ownership limit as to that person would not jeopardize our tax status as a REIT. Our Board has granted such exemptions to Cohen & Steers Capital Management, Inc., Blackrock, Inc., CBRE Clarion Securities, Heitman Real Estate Securities, Security Capital Research and Management and Nuveen Assets Management LLC. Absent an exemption, this restriction might:

• discourage, delay or prevent a tender offer or other transaction or a change in control of management that might involve a premium price for our shares or otherwise be in the best interests of our shareholders; or

• compel a shareholder who had acquired more than 9.9% of our shares to transfer the additional shares to a trust and, as a result, to forfeit the benefits of owning the additional shares.

(2) Our trust agreement permits our Board of Trustees to issue preferred shares with terms that might discourage a third party from acquiring the Company. Our trust agreement permits our Board of Trustees to create and issue multiple classes and series of preferred shares, and classes and series of preferred shares having preferences to the existing shares on any matter, without a vote of shareholders, including preferences in rights in liquidation or to dividends and option rights, and other securities having conversion or option rights. Also, the Board might authorize the creation and issuance by our subsidiaries and affiliates of securities having conversion and option rights in respect of our shares. Our trust agreement further provides that the terms of such rights or other securities might provide for disparate treatment of certain holders or groups of holders of such rights or other securities. The issuance of such rights or other securities could have the effect of discouraging, delaying or preventing a change in control of us, even if a change in control were in our shareholders’ interest or would give the shareholders the opportunity to realize a premium over the then-prevailing market price of our securities.

(3) Advance Notice Requirements for Shareholder Nominations of Trustees. The Company’s advance notice procedures with regard to shareholder proposals relating to the nomination of candidates for election as trustees, as provided in our amended and restated Trust Agreement, require, among other things, that advance written notice of any such proposals, containing prescribed information, be given

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to our Secretary at our principal executive offices not less than 90 days nor more than 120 days prior to the anniversary date of the prior year’s meeting (or within 10 business days of the day notice is given of the annual meeting date, if the annual meeting date is not within 30 days of the anniversary date of the immediately preceding annual meeting).

Limited partners of PREIT Associates may vote on certain fundamental changes we propose, which could inhibit a change in control that might otherwise result in a premium to our shareholders.

Our assets generally are held through our interests in PREIT Associates. We currently hold a majority of the outstanding limited partnership interests (“OP Units”) in PREIT Associates. However, PREIT Associates might, from time to time, issue additional OP Units to third parties in exchange for contributions of property to PREIT Associates in amounts that could, individually or in the aggregate, be substantial. These issuances will dilute our percentage ownership of PREIT Associates. OP Units generally do not carry a right to vote on any matter voted on by our shareholders, although OP Units might, under certain circumstances, be redeemed for our shares. However, before the date on which at least half of the units issued on September 30, 1997 in connection with our acquisition of The Rubin Organization have been redeemed, the holders of units issued on September 30, 1997 are entitled to vote such units together with our shareholders, as a single class, on any proposal to merge, consolidate or sell substantially all of our assets. Joseph F. Coradino, our Chairman and Chief Executive Officer, is among the holders of these units. 

These existing rights could inhibit a change in control that might otherwise result in a premium to our shareholders. In addition, we cannot assure you that we will not agree to extend comparable rights to other limited partners in PREIT Associates.

We have, in the past, and might again, in the future, enter into tax protection agreements for the benefit of certain former property owners, including some limited partners of PREIT Associates, that might affect our ability to sell or refinance some of our properties that we might otherwise want to sell or refinance, which could harm our financial condition.

As the general partner of PREIT Associates, we have agreed to indemnify certain former property owners against tax liabilities that they might incur if we sell a property in a taxable transaction or significantly reduce the debt secured by a property acquired from them within a certain number of years after we acquired it, and we might do so again in the future. In some cases, these agreements might make it uneconomical for us to sell or refinance these properties, even in circumstances in which it otherwise would be advantageous to do so, which could interfere with our ability to execute strategic dispositions, harm our ability to address liquidity needs in the future or otherwise harm our financial condition.

RISKS RELATING TO OUR SECURITIES

Individual taxpayers might perceive REIT securities as less desirable relative to the securities of other corporations because of the lower tax rate on certain dividends from such corporations, which might have an adverse effect on the market value of our securities.

Currently, the maximum federal income tax rate on dividends, excluding tax on net investment income, from most publicly traded corporations is 20%. Dividends from REITs, however, do not qualify for this favorable tax treatment, and the maximum federal income tax rate on dividends from REITs is 29.6% (which excludes tax on new investment income). It is possible also that tax legislation enacted in subsequent years might increase this rate differential. The differing treatment of dividends received from REITs and other corporations might cause individual investors to view an investment in REITs as less attractive relative to other corporations, which might negatively affect the value of our shares.

We could face adverse consequences as a result of the actions of activist shareholders.

In recent years, proxy contests and other forms of shareholder activism have been directed against numerous public companies, including us.  Shareholders may engage in proxy solicitations, advance shareholder proposals, or otherwise attempt to effect changes in or acquire control over us. Campaigns by shareholders to effect changes at publicly traded companies are sometimes led by investors seeking to increase short-term shareholder value through actions such as financial restructuring, increased debt, special dividends, share repurchases, or sales of assets or the entire company.  Shareholder activists may also seek to involve themselves in the governance, strategic direction and operations of the company.

If a shareholder, by itself or in conjunction with other shareholders or as part of a group, engages in activist activities with respect to us, our business could be adversely affected because responding to proxy contests and other actions by activist shareholders can be costly and time-consuming, potentially disrupting operations and diverting the attention of our Board of Trustees, senior management and employees from the execution of business strategies. In addition, perceived uncertainties as to our future direction might result in the loss of potential business opportunities and harm our ability to attract new tenants, customers and  investors. If individuals are elected to our Board of Trustees with a specific agenda, it might adversely affect our ability to effectively and timely implement our strategies and initiatives and to retain and attract experienced executives and employees. Finally, we might experience a significant increase in legal fees and administrative and associated costs incurred in connection with responding to a proxy contest or related action. These actions could also negatively affect our share price.

A few significant shareholders may influence or control the direction of our business, and, if the ownership of our common shares continues to be concentrated, or becomes more concentrated in the future, it could prevent our other shareholders from influencing significant corporate decisions.

As of December 31, 2019, a small number of institutional shareholders together own or control more than 25% of our outstanding common shares. Although these investors do not act as a group, they may be able to exercise influence over matters requiring shareholder approval, including approval of significant corporate transactions that might affect the price of our shares.  The concentration of ownership of our shares held by these investors may make some transactions more difficult or impossible without their support. 

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The interests of these investors may conflict with our interests or the interests of our other shareholders.  For example, the concentration of ownership with these investors could allow them to influence our policies and strategies and could delay, defer or prevent a transaction or business combination from occurring that might otherwise be favorable to us and our other shareholders.

Holders of our common shares might have their interest in us diluted by actions we take in the future.

We continue to contemplate ways to reduce our leverage through a variety of means available to us, subject to the terms of the Credit Agreements. These means might include obtaining equity capital, including through the issuance of common or preferred equity or equity-related securities if market conditions are favorable. In addition, we might contemplate acquisitions of properties or portfolios, and we might issue equity, in the form of common shares, OP Units or other equity securities in consideration for such acquisitions, potentially in substantial amounts. Any issuance of equity securities might result in substantial dilution in the percentage of our common shares held by our then existing shareholders, and the interest of our shareholders might be materially adversely affected. The market price of our common shares could decline as a result of sales of a large number of shares in the market or the perception that such sales could occur. Additionally, future sales or issuances of substantial amounts of our common shares might be at prices below the then-current market price of our common shares and might adversely affect the market price of our common shares.

Many factors, including changes in interest rates and the negative perceptions of the retail sector generally, can have an adverse effect on the market value of our securities.

As is the case with other publicly traded companies, a number of factors might adversely affect the price of our securities, many of which are beyond our control. These factors include:

• Increases in market interest rates, relative to the dividend yield on our shares. If market interest rates increase, prospective purchasers of our securities might require a higher yield. Higher market interest rates would not, however, result in more funds being available for us to distribute to shareholders and, to the contrary, would likely increase our borrowing costs and potentially decrease funds available for distribution to our shareholders. Thus, higher market interest rates could cause the market price of our shares to decrease;

• Possible future issuances of equity, equity-related or convertible securities, including securities senior as to distributions or liquidation rights;

• A decline in the anticipated benefits of an investment in our securities as compared to an investment in securities of companies in other industries (including benefits associated with the tax treatment of dividends and distributions);

• Perception, by market professionals and participants, of REITs generally and REITs in the retail sector, and malls in particular. Our portfolio of properties consists almost entirely of retail properties and we expect to continue to focus primarily on retail properties in the future;

• Perception by market participants of our potential for payment of cash distributions and for growth;

• Levels and concentrations of institutional investor and research analyst interest in our securities;

• Relatively low trading volumes in securities of REITs;

• Our results of operations and financial condition; and

• Investor confidence in the stock market or the real estate sector generally.

Any additional issuances of preferred shares in the future might adversely affect the earnings per share available to common shareholders and amounts available to common shareholders for payments of dividends.

The market value of our common shares is based primarily upon the market’s perception of our growth potential and our current and potential future earnings, net operating income, funds from operations, our liquidity and capital resources, and cash distributions. Consequently, our common shares might trade at prices that are higher or lower than our net asset value per common share. If our future earnings, net operating income, funds from operations or cash distributions are less than expected, it is likely that the market price of our common shares will decrease. These metrics might be adversely affected by the existence of preferred shares, including our existing preferred shares and additional preferred shares that we might issue. We are not restricted by our organizational documents, contractual arrangements or otherwise from issuing additional preferred shares, including any securities that are convertible into or exchangeable or exercisable for, or that represent the right to receive, preferred shares or any substantially similar securities in the future.

We might change the dividend policy for our common shares in the future.

In February 2020, our Board of Trustees declared a cash dividend of $0.21 per share, payable in March 2020. Our future payment of distributions will be at the discretion of our Board of Trustees and will depend on numerous factors, including our cash flow, financial condition, capital requirements, annual distribution requirements under the REIT provisions of the Internal Revenue Code, the terms and conditions of our Credit Agreements and other factors that our Board of Trustees deems relevant. Any change in our dividend policy could have a material adverse effect on the market price of our common shares.

In addition, the Credit Agreements provide generally that dividends may not exceed the greater of 110% of REIT Taxable Income (as defined in the Credit Agreements) for a fiscal year, or 95% of funds from operations (unless necessary for us to maintain our status as a REIT). We must maintain our status as a REIT at all times.

Some of the distributions we make might be classified as a return of capital. In general, if the distributions are in excess of our current and accumulated earnings and profits (determined under the Internal Revenue Code of 1986, as amended), then such distributions would be considered a return of capital for federal income tax purposes to the extent of a holder’s adjusted basis in its shares. A return of capital is not

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taxable, but has the effect of reducing the holder’s adjusted tax basis in the investment. To the extent that distributions exceed the adjusted tax basis of a holder’s shares, the distributions will be treated as gain from the sale or exchange of such shares.

TAX RISKS

If we were to fail to qualify as a REIT, our shareholders would be adversely affected.

We believe that we have qualified as a REIT since our inception and intend to continue to qualify as a REIT. To qualify as a REIT, however, we must comply with certain highly technical and complex requirements under the Internal Revenue Code, which is complicated in the case of a REIT such as ours that holds its assets primarily in partnership form. We cannot be certain we have complied with these requirements because there are very limited judicial and administrative interpretations of these provisions, and even a technical or inadvertent mistake could jeopardize our REIT status. In addition, facts and circumstances that might be beyond our control might affect our ability to qualify as a REIT. We cannot assure you that new legislation, regulations, administrative interpretations or court decisions will not change the tax laws significantly with respect to our qualification as a REIT or with respect to the federal income tax consequences of qualification.

If we were to fail to qualify as a REIT, we would be subject to federal income tax, on our taxable income at regular corporate rates. Also, unless the Internal Revenue Service granted us relief under statutory provisions, we would remain disqualified from treatment as a REIT for the four taxable years following the year during which we first failed to qualify. The additional tax incurred at regular corporate rates would significantly reduce the cash flow available for distribution to shareholders and for debt service. In addition, we would no longer be required to make any distributions to shareholders and our securities could be delisted from the exchange on which they are listed. If there were a determination that we do not qualify as a REIT, there would be a material adverse effect on our results of operations and there could be a material reduction in the value of our common shares.

Furthermore, as a REIT, we might be subject to a 100% “prohibited transactions” tax on the gain from dispositions of property if we are deemed to hold the property primarily for sale to customers in the ordinary course of business, unless the disposition qualifies under a safe harbor exception for properties that have been held for at least two years and with respect to which certain other requirements are met. The potential application of the prohibited transactions tax could cause us to forego or delay potential dispositions of property or other opportunities that might otherwise be attractive to us, or to undertake such dispositions or other opportunities through a taxable REIT subsidiary, which would generally result in income taxes being incurred.

We might be unable to comply with the strict income distribution requirements applicable to REITs, or compliance with such requirements could adversely affect our financial condition or cause us to forego otherwise attractive opportunities.

To obtain the favorable tax treatment associated with qualifying as a REIT, in general, we are required each year to distribute to our shareholders at least 90% of our net taxable income. In addition, we are subject to a tax on any undistributed portion of our income at regular corporate rates and might also be subject to a 4% excise tax on this undistributed income. We could be required to borrow funds on a short-term basis to meet the distribution requirements that are necessary to achieve the tax benefits associated with qualifying as a REIT, even if conditions are not favorable for borrowing, which could adversely affect our financial condition and results of operations. In addition, compliance with these REIT requirements might cause us to forgo opportunities we would otherwise pursue.

There is a risk of changes in the tax law applicable to REITs or our tenants.

Congress, the United States Treasury Department and the IRS frequently revise federal tax laws, regulations and other guidance. We cannot predict whether, when or to what extent new federal tax laws, regulations, interpretations or rulings will be adopted.

The federal tax legislation that was signed into law on December 22, 2017 (the ‘‘Act’’) made a large quantity of changes to the Internal Revenue Code of 1986 (the “Code”). Among those changes were a significant reduction in the generally applicable corporate income tax rate (from a top corporate rate of 35% to a flat 21% rate), and a reduction in the rates of taxation on most ordinary REIT dividends and certain business income derived by non-corporate taxpayers (in each case, from a top individual rate of 39.6% to a top individual rate of 29.6%) so as to be lower than the rate applicable to other ordinary income recognized by such taxpayers. The Act also imposes certain additional limitations on the deduction of net operating losses, which may in the future require us to make distributions that will be taxable to our stockholders to the extent of our current or accumulated earnings and profits in order to comply with the annual REIT distribution requirements. Some uncertainties remain as to the effects of these, and other changes made in the Act, both in terms of their direct effects on the taxation of an investment in our common stock and their indirect effects on the value of our assets or market conditions generally.

We also cannot predict the impact that any future federal tax legislation may have on REITs or our tenants. Any such legislative action may prospectively or retroactively modify our tax treatment and, therefore, may adversely affect taxation of us and/or our shareholders. Any legislative action might also negatively affect our tenants and, in turn, affect their ability to pay rent, which could adversely affect our financial condition and results of operations.

We could face possible adverse federal, state and local tax audits and changes in state and local tax laws, which might result in an increase in our tax liability.

In the normal course of business, certain subsidiaries through which we own real estate have undergone, are currently undergoing or may undergo tax audits. There can be no assurance that the ultimate outcomes of any such audits will not have a material adverse effect on our results of operations.

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From time to time, changes in state and local tax laws or regulations are enacted, which might result in an increase in our tax liability including potentially increases in the real estate taxes due on the properties we own. The shortfall in tax revenue for many states and municipalities in recent years might lead to an increase in the frequency and size of such changes. If such changes occur, we might be required to pay additional taxes on our assets, including our properties, or income. We might be unable to effectively pass these increased costs onto our existing tenants and such increased costs may make our properties less appealing to renewing tenants and potential new tenants, which could negatively affect our occupancy rates. These increased tax costs could adversely affect our financial condition and results of operations and our ability to make distributions to shareholders.

ITEM 1B.    UNRESOLVED STAFF COMMENTS.

None.

ITEM 2.    PROPERTIES.

RETAIL PROPERTIES

We currently own interests in 26 retail properties, of which 25 are operating properties and one is a development property. The 25 operating properties include 21 shopping malls and four other retail properties, have a total of 20.1 million square feet and are located in nine states. We and partnerships in which we hold an interest own 15.7 million square feet at these properties (excluding space owned by anchors or third parties).

There are 18 operating retail properties in our portfolio that we consolidate for financial reporting purposes. These consolidated properties have a total of 15.2 million square feet, of which we own 12.1 million square feet. The seven operating retail properties that are owned by unconsolidated partnerships with third parties have a total of 4.9 million square feet, of which 3.6 million square feet are owned by such partnerships. When we refer to “Same Store” properties, we are referring to properties that have been owned for the full periods presented and exclude properties acquired, disposed of, under redevelopment or designated as a non-core property during the periods presented. Core properties include all operating retail properties except for Exton Square Mall, Valley View Mall and Fashion District Philadelphia. “Core Malls” also excludes these properties as well as power centers and Gloucester Premium Outlets. Wyoming Valley Mall was conveyed to the lender of the mortgage loan secured by that property in September 2019.

In general, we own the land underlying our properties in fee or, in the case of our properties held by partnerships with others, ownership by the partnership entity is in fee. At certain properties, however, the underlying land is owned by third parties and leased to us or the partnership in which we hold an interest pursuant to long-term ground leases. In a ground lease, the building owner pays rent for the use of the land and is responsible for all costs and expenses related to the building and improvements.

See financial statement Schedule III for financial statement information regarding the consolidated properties.

The following tables present information regarding our retail properties. We refer to the total retail space of these properties, including anchors and non-anchor stores, as “total square feet,” and the portion that we own as “owned square feet.”

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Consolidated Retail Properties

Property/Location (1)	Ownership Interest			Total Square Feet (2)		Owned Square Feet (3)		Year Built / Last Renovated	Occupancy % (4)	Anchors/Major Tenants (5)
MALLS
Capital City Mall, Camp Hill, PA		100	%		616,750		496,750	1974/2005	99.5%	JC Penney, Field & Stream, Macy’s, Dicks Sporting Goods, and Dave & Buster’s
Cherry Hill Mall, Cherry Hill, NJ		100	%		1,300,318		821,433	1961/2009	98.3%	Apple, The Container Store, Crate and Barrel, JC Penney, Macy’s and Nordstrom
Cumberland Mall, Vineland, NJ		100	%		950,987		677,757	1973/2003	88.9%	Best Buy, BJ’s Wholesale Club, Boscov’s, Burlington, Dick’s Sporting Goods, Home Depot, and Marshalls
Dartmouth Mall, Dartmouth, MA		100	%		564,271		424,271	1971/2000	99.6%	JC Penney, Macy’s and AMC
Exton Square Mall, Exton, PA (6)		100	%		991,342		810,142	1973/2000	59.2%	Boscov’s, Macy’s, Whole Foods and Round 1
Francis Scott Key Mall, Frederick, MD		100	%		754,267		614,934	1978/1991	92.5%	Barnes & Noble, JC Penney, Macy’s, Sears and Value City Furniture
Jacksonville Mall, Jacksonville, NC		100	%		494,945		494,945	1981/2008	99.0%	Barnes & Noble, Belk, JC Penney and Sears
Magnolia Mall, Florence, SC		100	%		601,589		601,589	1979/2007	99.7%	Barnes & Noble, Belk, Best Buy, Dick’s Sporting Goods, JC Penney, Burlington, HomeGoods, and Five Below
Moorestown Mall, Moorestown, NJ		100	%		931,971		931,971	1963/2008	93.8%	Boscov’s, Lord & Taylor, Regal Cinema RPX, Sears, HomeSense, Five Below, and Sierra Trading Post
Patrick Henry Mall, Newport News, VA		100	%		717,664		433,507	1988/2005	96.8%	Dick’s Sporting Goods, Dillard’s, JC Penney and Macy’s
Plymouth Meeting Mall, Plymouth Meeting, PA (7)		100	%		877,798		877,798	1966/2009	87.5%	AMC Theater, Boscov’s, Legoland Discovery Center, Whole Foods, and Burlington
The Mall at Prince Georges, Hyattsville, MD		100	%		923,706		923,706	1959/2004	99.0%	JC Penney, Macy’s, Marshalls, Ross Dress for Less, TJ Maxx and Target
Springfield Town Center, Springfield, VA (7)		100	%		1,374,177		984,192	1974/2015	94.2%	Dick’s Sporting Goods, JC Penney, Macy’s, Nordstrom Rack, Regal Cinemas and Target
Valley Mall, Hagerstown, MD		100	%		794,794		794,794	1974/1999	99.4%	JC Penney, Tilt, and Belk
Valley View Mall, La Crosse, WI (6)		100	%		518,582		405,330	1980/2001	70.7%	Barnes & Noble and JC Penney
Viewmont Mall, Scranton, PA		100	%		689,226		549,425	1968/2006	99.7%	JC Penney, Dick’s Sporting Goods/ Field and Stream, HomeGoods and Macy’s
Willow Grove Park, Willow Grove, PA		100	%		1,035,200		622,079	1982/2001	97.1%	Apple, Bloomingdale’s, Macy’s, Nordstrom Rack and Sears
Woodland Mall, Grand Rapids, MI		100	%		976,292		564,070	1968/2019	98.7%	Apple, Barnes & Noble, JC Penney, Kohl’s, Macy’s, and Von Maur
Total consolidated mall properties					15,113,879		12,028,693
RETAIL LOCATED AT CONSOLIDATED MALLS
Valley View Center, La Crosse, WI (6)		100	%		60,272		60,272	1980/2001	100.0%	Chuck E. Cheese, Dick’s Sporting Goods and Play It Again Sports
Total consolidated other retail properties					60,272		60,272

⁽¹⁾ The location stated is the major city or town nearest to the property and is not necessarily the local jurisdiction in which the property is located.

⁽²⁾ Total square feet includes space owned by us and space owned by tenants or other lessors.

⁽³⁾ Owned square feet includes only space owned by us and excludes space owned by tenants or other lessors.

⁽⁴⁾ Occupancy is calculated based on space owned by us, excludes space owned by tenants or other lessors and includes space occupied by both anchor and non-anchor tenants, irrespective of the term of their agreements.

⁽⁵⁾ Includes anchors/major tenants that own their space or lease from lessors other than us and do not pay rent to us.

⁽⁶⁾ Property designated as non-core.

⁽⁷⁾ A portion of the underlying land at this property is subject to a ground lease.

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Unconsolidated Operating Properties

Property/Location (1)	Ownership Interest	Total Square Feet (2)		Owned Square Feet (3)		Year Built / Last Renovated	Occupancy % (4)	Anchors/Major Tenants (5)
MALLS
Fashion District Philadelphia, Philadelphia, PA(6)	50%		823,648		823,648	1977/2019	65.7%	Century 21, Burlington, AMC, and Round 1
Lehigh Valley Mall, Allentown, PA	50%		1,159,808		952,516	1960/2008	90.4%	Apple, Barnes & Noble, Boscov’s, JC Penney and Macy’s
Springfield Mall, Springfield, PA	50%		610,719		222,820	1974/1997	91.5%	Macy’s and Target
OTHER RETAIL
Gloucester Premium Outlets, Blackwood, NJ	25%		368,148		368,148	2015	83.7%	Nike Factory Store, Old Navy
Metroplex Shopping Center, Plymouth Meeting, PA	50%		778,190		477,461	2001	97.3%	Barnes & Noble, Giant Food Store, Lowe’s, Ross Dress for Less, Saks off Fifth and Target
The Court at Oxford Valley, Langhorne, PA	50%		704,526		456,903	1996	90.3%	Best Buy, BJ’s Wholesale Club, Dick’s Sporting Goods and Home Depot
Red Rose Commons, Lancaster, PA	50%		462,883		263,293	1998	100.0%	Barnes & Noble, Burlington, Home Depot, HomeGoods and Weis Markets
Total unconsolidated retail properties			4,907,922		3,564,789

⁽¹⁾ The location stated is the major city or town nearest to the property and is not necessarily the local jurisdiction in which the property is located.

⁽²⁾ Total square feet includes space owned by the unconsolidated partnership and space owned by tenants or other lessors.

⁽³⁾ Owned square feet includes only space owned by the unconsolidated partnership and excludes space owned by tenants or other lessors.

⁽⁴⁾ Occupancy is calculated based on space owned by the unconsolidated partnership, includes space occupied by both anchor and non-anchor tenants and includes all tenants irrespective of the term of their agreements.

⁽⁵⁾ Includes anchors that own their space or lease from lessors other than us and do not pay rent to us.

⁽⁶⁾ Property designated as non-core.

The following table sets forth our average annual gross rent per square foot, under the terms of the leases (for consolidated and unconsolidated properties, excluding Fashion District Philadelphia, which opened in September 2019 and is not yet fully stabilized as development work is continuing) for the five years ended December 31, 2019:

Average Gross Rent	2019		2018		2017		2016		2015
Under 10,000 square feet	$	57.09	$	57.07	$	58.09	$	56.56	$	50.94
Over 10,000 square feet	$	20.79	$	21.13	$	21.17	$	21.15	$	19.24
All Non-Anchor stores	$	39.30	$	39.97	$	40.88	$	40.98	$	37.11
Anchor stores	$	5.41	$	5.05	$	5.10	$	4.43	$	4.49

LARGE FORMAT RETAILERS AND ANCHORS

Historically, large format retailers and anchors have been an important element of attracting customers to a mall, and they have generally been department stores whose merchandise appeals to a broad range of customers, although in recent years we have attracted some non-traditional large format retailers. These large format retailers and anchors either own their stores, the land under them and adjacent parking areas, or enter into long-term leases at rent that is generally lower than the rent charged to in-line tenants. Well-known, large format retailers and anchors continue to play an important role in generating customer traffic and making malls desirable locations for in-line store tenants, even though the market share of traditional department store anchors has been declining and such companies have experienced significant changes. See “Item 1A. Risk Factors—Risks Related to Our Business and Our Properties.” The following table indicates the parent company of each of our large format retailers and anchors and sets forth the number of stores and square feet owned or leased by each at our retail properties, including consolidated and unconsolidated, as of December 31, 2019:

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Tenant Name (1)	Number of Stores (2)		GLA (2)		Percent of Total GLA (3)
AMC Entertainment Holdings, Inc.
AMC		3		129,523
Carmike 16		1		60,124
Total AMC Entertainment Holdings, Inc.		4		189,647		1.1	%
Ashley Homestore		1		39,793		0.2	%
Barnes & Noble, Inc.		9		267,831		1.5	%
Belk, Inc.		3		311,397		1.7	%
Best Buy Co., Inc.		6		190,153		1.1	%
BJ’s Wholesale Club, Inc.		2		234,761		1.3	%
Boscov’s Department Store		5		889,229		5.0	%
Burlington Stores, Inc.		4		211,647		1.2	%
Dave & Buster’s, Inc.		3		107,738		0.6	%
Dick’s Sporting Goods, Inc.
Dick’s Sporting Goods, Inc		11		594,530
Field & Stream		1		50,302
Total Dick’s Sporting Goods, Inc.		12		644,832		3.6	%
Dillard’s, Inc.		1		144,157		0.8	%
DSW Shoe Warehouse		3		50,829		0.3	%
Forever 21 Retail, Inc.		13		209,995		1.2	%
Giant Food Stores, LLC		1		67,185		0.4	%
H&M Hennes & Mauritz L.P.		14		299,764		1.7	%
The Home Depot, Inc.		3		397,322		2.2	%
Hudson's Bay Company
Lord & Taylor		1		121,200
Saks Fifth Avenue Off 5th		2		54,118
Total Hudson's Bay Company		3		175,318		1.0	%
J.C. Penney Company, Inc.		14		1,986,597		11.1	%
Lowes, Inc.		1		163,215		0.9	%
Macy’s, Inc.
Macy’s		13		2,408,619
Bloomingdales		1		237,537
Total Macy’s, Inc.		14		2,646,156		14.8	%
Nordstrom, Inc.
Nordstrom		1		138,000
Nordstrom Rack		2		73,439
Total Nordstrom, Inc.		3		211,439		1.2	%
Office Depot, Inc. (OfficeMax)		2		51,509		0.3	%
Onelife Fitness		1		70,000		0.4	%
PetsMart, Inc		3		78,678		0.4	%
Cineworld Group (Regal Cinemas)		4		205,135		1.1	%
Round One Entertainment, Inc.		2		116,451		0.6	%
Ross Stores		2		60,320		0.3	%
Transform Operating Stores LLC (Sears)		5		748,103		4.2	%
The TJX Companies, Inc.
HomeGoods		3		84,076
HomeSense		1		28,486
Marshalls		2		65,004
Sierra Trading Post		1		19,089
TJ Maxx		1		27,597
Total The TJX Companies, Inc.		8		224,252		1.3	%
Target Corporation		4		656,052		3.7	%
Tilt Studio		2		66,993		0.4	%
Ulta Beauty, Inc.		9		100,321		0.6	%
Von Maur, Inc.		1		86,165		0.5	%
Weis Markets, Inc.		1		65,032		0.4	%
Whole Foods, Inc.		1		65,156		0.4	%
		164		12,033,172		67.1	%

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⁽¹⁾ To qualify as a large format retailer or an anchor for inclusion in this table, a tenant must occupy at least 15,000 square feet or be part of a chain that has stores in our portfolio occupying an aggregate of at least 15,000 square feet. 

⁽²⁾ Number of stores and gross leasable area (“GLA”) include anchors that own their own space or lease from lessors other than us and do not pay rent to us. Includes stores that have closed that are still obligated to make rental or expense contribution payments.

⁽³⁾ Percent of Total GLA is calculated based on the total GLA of all properties.

MAJOR TENANTS

The following table presents information regarding the top 20 tenants at our retail properties, including consolidated and unconsolidated properties, by gross rent as of December 31, 2019:

Primary Tenant (1)(2)	Brands	Total number of locations		Percent of PREIT’s Annualized Gross Rent (3)
Foot Locker, Inc.	Champs, Foot Locker, Footaction, Footaction Flight 23, House of Hoops by Foot Locker, Kids Foot Locker, Lady Foot Locker, Nike Yardline		49		4.4	%
L Brands, Inc.	Bath & Body Works, Pink, Victoria's Secret		42		3.9	%
Signet Jewelers Limited	Kay Jewelers, Piercing Pagoda, Piercing Pagoda Plus, Totally Pagoda, Zale's Jewelers		63		3.1	%
Dick's Sporting Goods, Inc.	Dick's Sporting Goods, Field & Stream		12		2.9	%
American Eagle Outfitters, Inc.	Aerie, American Eagle Outfitters		20		2.5	%
Express, Inc.	Express, Express Factory Outlet, Express Men		16		2.0	%
Gap, Inc.	Banana Republic, Gap/Gap Kids/Gap Outlet/Old Navy		21		1.8	%
J.C. Penney Company, Inc.	JC Penney		14		1.7	%
Macy's Inc.	Bloomingdale's, Macy's		14		1.6	%
Cineworld Group	Regal Cinemas		4		1.6	%
Genesco, Inc.	Hat Shack, Hat World, Johnston & Murphy, Journey's, Journey's Kidz, Lids, Lids Locker Room, Shi by Journey's, Underground by Journey's		30		1.5	%
Dave & Buster's, Inc.	Dave & Buster's		3		1.4	%
Luxottica Group S.p.A.	Lenscrafters, Pearle Vision, Sunglass Hut		31		1.4	%
Ascena Realty Group, Inc.	Ann Taylor, Dress Barn, Justice, Lane Bryant, Loft, Maurices		27		1.4	%
H&M Hennes & Mauritz L.P.	H & M		13		1.2	%
Forever 21, Inc.	Forever 21		12		1.2	%
Darden Concepts, Inc.	Bahama Breeze, Capital Grille, Olive Garden, Seasons 52, Yard House		9		1.2	%
The Children's Place Retail Stores, Inc.	The Children's Place		17		1.1	%
Shoe Show, Inc.	Shoe Dept, Shoe Dept. Encore		22		1.1	%
Abercrombie & Fitch Stores, Inc.	Hollister Co, Abercrombie & Fitch, Abercrombie Kids		14		0.9	%
Total			433		37.9	%

⁽¹⁾ Tenant includes all brands and concepts of the tenant.

⁽²⁾ Excludes tenants from Fashion District Philadelphia, which opened in September 2019.

⁽³⁾ Includes our proportionate share of tenant rent from partnership properties that are not consolidated by us, based on our ownership percentage in the respective equity method investments. Annualized gross rent is calculated based on gross monthly rent as of December 31, 2019.

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RETAIL LEASE EXPIRATION SCHEDULE—NON-ANCHORS

The following table presents scheduled lease expirations of non-anchor tenants as of December 31, 2019:

	All Tenants (1)											Tenants in Bankruptcy (2)
(in thousands of dollars, except per square foot amounts)	Number of Leases		GLA of Expiring		PREIT’s Share of Gross Rent in Expiring		Average Expiring Gross		Percent of PREIT’s Total Gross			GLA of Expiring		PREIT’s Share of Gross Rent in Expiring		Average Expiring Gross		Percent of PREIT’s Share of Gross Rent in Expiring
For the Year Ended December 31,	Expiring		Leases		Year (3)		Rent psf		Rent			Leases		Year		Rent psf		Year
2019 and Prior (4)		109		226,347	$	18,138	$	83.73		5.8	%		20,368	$	5,185	$	254.59		1.7	%
2020		238		997,816		32,727		37.92		10.5	%		—		—		—		—	%
2021		245		1,032,220		32,640		37.37		10.5	%		—		—		—		—	%
2022		204		618,992		26,657		50.01		8.6	%		—		—		—		—	%
2023		179		1,110,090		35,751		36.41		11.5	%		142,641		1,806		12.66		0.6	%
2024		165		704,924		33,955		52.95		10.9	%		—		—		—		—	%
2025		161		752,745		32,204		52.94		10.4	%		15,133		489		32.33		0.2	%
2026		116		580,749		24,623		54.09		8.0	%		8,561		293		68.46		0.1	%
2027		93		637,293		23,489		39.45		7.6	%		2,201		97		87.92		0.0	%
2028		74		612,485		21,048		36.50		6.8	%		—		—		—		—	%
2029		58		502,978		16,672		34.80		5.4	%		11,472		—		—		—	%
Thereafter		40		401,653		12,480		32.08		4.0	%		—		—		—		—	%
Total/Average		1,682		8,178,292		310,384	$	43.19		100.0	%		200,376		7,870	$	41.23		2.6	%

⁽¹⁾ Does not include tenants occupying space under license agreements with initial terms of less than one year. The GLA of these tenants is 606,677 square feet.

⁽²⁾ As described above under “Item 1A. Risk Factors,” if a tenant files for bankruptcy, the tenant might have the right to reject and terminate its leases, and we cannot be sure that it will affirm its leases and continue to make rental payments in a timely manner. If a lease is rejected by a tenant in bankruptcy, we would have only a general unsecured claim for damages in connection with such balances.

⁽³⁾ Excludes Fashion District Philadelphia and includes our proportionate share of tenant rent from partnership properties that are not consolidated by us, based on our ownership percentage in the respective partnerships. Annualized gross rent is calculated based only on gross monthly rent as of December 31, 2019.

⁽⁴⁾ Includes all tenant leases that had expired and were on a month to month basis as of December 31, 2019.

See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations—Leasing Activity” for information regarding rent for leases signed in 2019.

RETAIL LEASE EXPIRATION SCHEDULE—ANCHORS

The following table presents scheduled lease expirations of anchor tenants as of December 31, 2019 (includes leases with tenants that have filed for bankruptcy protection, depending on the current status of the lease):

	All Tenants (1)											Tenants in Bankruptcy (2)
(in thousands of dollars, except per square foot amounts)	Number of Leases		GLA of Expiring		PREIT’s Share of Gross Rent in Expiring		Average Expiring Gross		Percent of PREIT’s Total			GLA of Expiring		PREIT’s Share of Gross Rent in Expiring		Average Expiring Gross		Percent of PREIT’s Share of Gross Rent in Expiring
For the Year Ending December 31,	Expiring		Leases		Year (1)(2)		Rent psf		Gross Rent			Leases		Year		Rent psf		Year
2020		2		206,412	$	689	$	3.34		2.5	%		—	$	—	$	—		—	%
2021		7		648,162		2,760		6.14		10.2	%		—		—		—		—	%
2022		7		1,001,974		3,442		3.79		12.7	%		—		—		—		—	%
2023		3		348,592		1,894		5.43		7.0	%		—		—		—		—	%
2024		5		702,674		3,226		4.59		11.9	%		—		—		—		—	%
2025		5		731,526		2,659		3.63		9.8	%		—		—		—		—	%
2026		1		58,371		861		14.75		3.2	%		—		—		—		—	%
2027		—		—		—		—		—			—		—		—		—	%
2028		9		982,424		6,696		6.82		24.7	%		—		—		—		—	%
2029		1		65,155		2,210		33.92		8.1	%		—		—		—		—	%
Thereafter		3		198,048		2,697		13.62		9.9	%		—		—		—		—	%
Total/Average		43		4,943,338	$	27,134	$	5.81		100.0	%		—	$	—	$	—		—	%

⁽¹⁾ Excludes Fashion District Philadelphia and includes our proportionate share of tenant rent from partnership properties that are not consolidated by us, based on our ownership percentage in the respective partnerships. Annualized gross rent is calculated based only on gross monthly rent as of December 31, 2019.

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⁽²⁾ As described above under “Item 1A. Risk Factors,” if a tenant files for bankruptcy, the tenant might have the right to reject and terminate its leases, and we cannot be sure that it will affirm its leases and continue to make rental payments in a timely manner. If a lease is rejected by a tenant in bankruptcy, we would have only a general unsecured claim for damages in connection with such balances.

See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations—Leasing Activity” for information regarding rent in leases signed in 2019.

DEVELOPMENT AND REDEVELOPMENT PROPERTIES

We have one property in our portfolio that is classified as under development, however we do not currently have any activity occurring at this property.

In September 2019, one property that we previously classified as a redevelopment property, Fashion District Philadelphia (formerly The Gallery at Market East), opened. Development work at that property is continuing and is expected to stabilize in 2021.

OFFICE SPACE

During 2019, we leased our principal executive offices from Bellevue Associates, an entity that is owned by Ronald Rubin, one of our former trustees, collectively with members of his immediate family and affiliated entities. Total rent expense under this lease was $1.7 million, $1.3 million and $1.3 million for the years ended December 31, 2019, 2018 and 2017, respectively. This lease terminated in December 2019.

In December 2018, we entered into a lease for our new office space at One Commerce Square, which is located at 2005 Market Street, Philadelphia, Pennsylvania, with Brandywine Realty Trust. Our lead independent trustee is also a Trustee of Brandywine Realty Trust. The lease commenced in December 2019 and we moved into our new offices at One Commerce Square in January 2020.

ITEM 3.    LEGAL PROCEEDINGS.

In the normal course of business, we have become, and might in the future become, involved in legal actions relating to the ownership and operation of our properties and the properties we manage for third parties. In management’s opinion, the resolutions of any such pending legal actions are not expected to have a material adverse effect on our consolidated financial condition or results of operations.

ITEM 4.    MINE SAFETY DISCLOSURES.

Not applicable.

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PART II

ITEM 5.    MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

Common Shares

Our common shares of beneficial interest are listed on the New York Stock Exchange under the symbol “PEI.”

As of December 31, 2019, there were approximately 1,800 holders of record of our common shares and approximately 19,000 beneficial holders of our common shares.

During 2019 and 2018, we declared quarterly cash distributions on our common shares of beneficial interest equal to $0.21 per share. We currently anticipate that cash distributions will continue to be paid in March, June, September and December. In February 2020, our Board of Trustees declared a cash dividend of $0.21 per share payable in March 2020. Our future payment of distributions will be at the discretion of our Board of Trustees and will depend upon numerous factors, including our cash flow, financial condition, capital requirements, annual distribution requirements under the REIT provisions of the Internal Revenue Code, the terms and conditions of our Credit Agreements, and other factors that our Board of Trustees deems relevant.

The Credit Agreements provide generally that dividends may not exceed 110% of REIT Taxable Income for a fiscal year, or 95% of FFO (unless necessary for us to maintain our status as a REIT). All capitalized terms used in this section and not otherwise defined have the meanings ascribed to such terms in the Credit Agreements. We must maintain our status as a REIT at all times.

Units

Class A and Class B Units of PREIT Associates (“OP Units”) are redeemable by PREIT Associates at the election of the limited partner holding the OP Units at the time and for the consideration set forth in PREIT Associates’ partnership agreement. In general, and subject to exceptions and limitations, beginning one year following the respective issue dates, “qualifying parties” may give one or more notices of redemption with respect to all or any part of the Class A Units then held by that party. Class B Units are redeemable at the option of the holder at any time after issuance.

If a notice of redemption is given, we have the right to elect to acquire the OP Units tendered for redemption for our own account, either in exchange for the issuance of a like number of our common shares, subject to adjustments for stock splits, recapitalizations and like events, or a cash payment equal to the average of the closing prices of our shares on the ten consecutive trading days immediately before our receipt, in our capacity as general partner of PREIT Associates, of the notice of redemption. If we decline to exercise this right, then PREIT Associates will pay a cash amount equal to the number of OP Units tendered multiplied by such average closing price.

Issuer Purchases of Equity Securities

We did not acquire any shares in the three months ended December 31, 2019.

ITEM 6.    SELECTED FINANCIAL DATA.

The following table sets forth Selected Financial Data for the Company as of and for the years ended December 31, 2019, 2018, 2017, 2016 and 2015. The information set forth below should be read in conjunction with “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and notes thereto appearing elsewhere in this Annual Report on Form 10-K.

Selected Financial Data (1)
	For the Year Ended December 31,
(in thousands, except per share amounts)	2019			2018			2017			2016			2015
Operating results:
Total revenue	$	336,792		$	362,400		$	367,490		$	399,946		$	425,411
Impairment of assets	$	(1,455	)	$	(137,487	)	$	(55,793	)	$	(62,603	)	$	(140,318	)
Impairment of development land parcel	$	(3,562	)	$	—		$	—		$	—		$	—
Gain (loss) on sales of real estate, net	$	2,744		$	1,722		$	(27	)	$	23,022		$	12,362
Net loss	$	(13,000	)	$	(126,503	)	$	(32,848	)	$	(12,713	)	$	(129,567	)
Dividends on preferred shares	$	(27,375	)	$	(27,375	)	$	(27,845	)	$	(15,848	)	$	(15,848	)
Net loss attributable to PREIT common shareholders	$	(38,247	)	$	(137,704	)	$	(57,901	)	$	(25,511	)	$	(131,129	)
Basic and diluted loss per share (1)	$	(0.52	)	$	(1.98	)	$	(0.84	)	$	(0.37	)	$	(1.91	)
Weighted average shares outstanding – basic and diluted		75,221			69,749			69,364			69,086			68,740

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	As of December 31,
(in thousands)	2019		2018		2017		2016		2015
Consolidated balance sheet data:
Total investments in real estate	$	3,210,926	$	3,184,594	$	3,299,702	$	3,300,014	$	3,367,889
Intangible assets, net	$	13,404	$	17,868	$	17,693	$	19,746	$	22,248
Total assets	$	2,351,267	$	2,405,114	$	2,588,771	$	2,616,832	$	2,800,392
Total debt, including debt premium and discount	$	1,702,778	$	1,660,195	$	1,656,842	$	1,766,902	$	1,784,371
Noncontrolling interest (1)	$	3,746	$	105,770	$	129,131	$	142,722	$	152,624
Total equity - PREIT	$	423,679	$	440,781	$	631,860	$	555,524	$	784,552

	For the Year Ended December 31,
(in thousands, except per share amounts)	2019			2018			2017			2016			2015
Cash flow data: (1)
Cash provided by operating activities	$	111,392		$	140,516		$	142,091		$	154,931		$	141,108
Cash used in investing activities	$	(131,350	)	$	(47,219	)	$	(105,418	)	$	(4,878	)	$	(382,291	)
Cash provided by (used in) financing activities	$	7,141		$	(94,805	)	$	(32,585	)	$	(162,632	)	$	225,860
Cash distributions per common share	$	0.84		$	0.84		$	0.84		$	0.84		$	0.84

(1) Certain prior period amounts for net income (loss) attributable to PREIT common shareholders, basic and diluted earnings per share, noncontrolling interest, total equity - PREIT and cash flow amounts were adjusted to reflect immaterial financial statement error corrections and new accounting rules as discussed in Note 1 to our consolidated financial statements.

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ITEM 7.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following analysis of our consolidated financial condition and results of operations should be read in conjunction with our consolidated financial statements and the notes thereto included elsewhere in this report.

OVERVIEW

PREIT, a Pennsylvania business trust founded in 1960 and one of the first equity real estate investment trusts (“REITs”) in the United States, has a primary investment focus on retail shopping malls located in the eastern half of the United States, primarily in the Mid-Atlantic region.

We currently own interests in 26 retail properties, of which 25 are operating properties and one is a development property. The 25 operating properties include 21 shopping malls and four other retail properties, have a total of 20.1 million square feet and are located in nine states. We and partnerships in which we hold an interest own 15.7 million square feet at these properties (excluding space owned by anchors or third parties).

There are 18 operating retail properties in our portfolio that we consolidate for financial reporting purposes. These consolidated properties have a total of 15.2 million square feet, of which we own 12.1 million square feet. The seven operating retail properties that are owned by unconsolidated partnerships with third parties have a total of 4.9 million square feet of which 3.6 million square feet are owned by such partnerships. When we refer to “Same Store” properties, we are referring to properties that have been owned for the full periods presented and exclude properties acquired, disposed of, under redevelopment or designated as a non-core property during the periods presented. Core properties include all operating retail properties except for Exton Square Mall, Valley View Mall and Fashion District Philadelphia. “Core Malls” also excludes these properties as well as power centers and Gloucester Premium Outlets. Wyoming Valley Mall was conveyed to the lender of the mortgage loan secured by that property in September 2019.

We have one property in our portfolio that is classified as under development; however, we do not currently have any activity occurring at this property.

Fashion District Philadelphia opened on September 19, 2019. Fashion District Philadelphia is an aggregation of properties spanning three blocks in downtown Philadelphia that were formerly known as Gallery I, Gallery II and 907 Market Street. Joining Century 21 and Burlington in 2019 were multiple dining and entertainment venues including Market Eats, a multi offering food court, City Winery, AMC Theatres, and Round 1 Bowling & Amusement. In addition, Nike Factory Store, Ulta, and H & M, opened Philadelphia flagship stores at the property. Through December 31, 2019 we had incurred costs of $175.4 million relating to our share of the development costs of the project.

We are a fully integrated, self-managed and self-administered REIT that has elected to be treated as a REIT for federal income tax purposes. In general, we are required each year to distribute to our shareholders at least 90% of our net taxable income and to meet certain other requirements in order to maintain the favorable tax treatment associated with qualifying as a REIT.

Our primary business is owning and operating retail shopping malls, which we do primarily through our operating partnership, PREIT Associates, L.P. (“PREIT Associates” or the “Operating Partnership”). We provide management, leasing and real estate development services through PREIT Services, LLC (“PREIT Services”), which generally develops and manages properties that we consolidate for financial reporting purposes, and PREIT-RUBIN, Inc. (“PRI”), which generally develops and manages properties that we do not consolidate for financial reporting purposes, including properties owned by partnerships in which we own an interest, and properties that are owned by third parties in which we do not have an interest. PRI is a taxable REIT subsidiary, as defined by federal tax laws, which means that it is able to offer additional services to tenants without jeopardizing our continuing qualification as a REIT under federal tax law.

Our revenue consists primarily of fixed rental income, additional rent in the form of expense reimbursements, and percentage rent (rent that is based on a percentage of our tenants’ sales or a percentage of sales in excess of thresholds that are specified in the leases) derived from our income producing properties. We also receive income from our real estate partnership investments and from the management and leasing services PRI provides.

Our net loss decreased by $113.5 million to a net loss of $13 million for the year ended December 31, 2019 from a net loss of $126.5 million for the year ended December 31, 2018. The change in our 2019 results of operations was primarily due to lower impairment losses in 2019, a gain on debt extinguishment in 2019, partially offset by a $6.7 million decrease in same store lease termination revenue and a $7.6 million decrease in non same store net operating income due to four anchor store closings during 2018 and 2019 and associated co-tenancy concessions, as well as a decrease in lease revenue at Exton Square Mall due to the sale of an outparcel in 2019.

We evaluate operating results and allocate resources on a property-by-property basis, and do not distinguish or evaluate our consolidated operations on a geographic basis. Due to the nature of our operating properties, which involve retail shopping, we have concluded that our individual properties have similar economic characteristics and meet all other aggregation criteria. Accordingly, we have aggregated our individual properties into one reportable segment. In addition, no single tenant accounts for 10% or more of our consolidated revenue, and none of our properties are located outside the United States.

We hold our interest in our portfolio of properties through the Operating Partnership. We are the sole general partner of the Operating Partnership and, as of December 31, 2019, held a 97.5% controlling interest in the Operating Partnership, and consolidated it for reporting purposes. We hold our investments in seven of the 25 operating retail properties and the one development property in our portfolio through unconsolidated partnerships with third parties in which we own a 25% to 50% interest.

Acquisitions and Dispositions

See note 2 to our consolidated financial statements for a description of our dispositions and acquisitions in 2019, 2018 and 2017.

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Current Economic Conditions and Our Near Term Capital Needs

Conditions in the economy have caused fluctuations and variations in business and consumer confidence, retail sales, and consumer spending on retail goods. Further, traditional mall tenants, including department store anchors and smaller format retail tenants face significant challenges resulting from changing consumer expectations, the convenience of e-commerce shopping, competition from fast fashion retailers, the expansion of outlet centers, and declining mall traffic, among other factors. In recent years, there has been an increased level of tenant bankruptcies and store closings by tenants who have been significantly impacted by these factors.

The table below sets forth information related to our tenants in bankruptcy for our consolidated and unconsolidated properties (excluding tenants in bankruptcy at sold properties):

	Pre-bankruptcy								Units Closed
Year	Number of Tenants (1)		Number of locations impacted		GLA (2)		PREIT’s Share of Annualized Gross Rent (3) (in thousands)		Number of locations closed		GLA (2)		PREIT’s Share of Annualized Gross Rent (3) (in thousands)
2019
Consolidated properties		9		71		400,516	$	14,656		63		242,742	$	9,480
Unconsolidated properties		8		14		56,030		1,481		8		32,024		915
Total		11		85		456,546	$	16,137		71		274,766	$	10,395
2018
Consolidated properties		10		43		1,221,433	$	7,072		4		265,399	$	1,549
Unconsolidated properties		3		5		14,977		402		—		—		—
Total		10		48		1,236,410	$	7,474		4		265,399	$	1,549

(1) Total represents unique tenants and includes both tenant-owned and landlord-owned stores.

(2) Gross Leasable Area (“GLA”) in square feet.

(3) Includes our share of tenant gross rent from partnership properties based on PREIT’s ownership percentage in the respective equity method investments as of December 31, 2019.

Anchor Replacements

In recent years, through property dispositions, proactive store recaptures, lease terminations and other activities, we have made efforts to reduce our risks associated with certain department store concentrations. In December 2016, we acquired the Sears property at Woodland Mall and recaptured the Sears premises at Capital City Mall and Magnolia Mall in 2017. We purchased the Macy’s locations at Moorestown Mall, Valley View Mall and Valley Mall locations. We entered into a ground lease for the land associated with the Macy’s store located at the Plymouth Meeting Mall in 2017, and executed leases with replacement tenants for that location in 2018.

During 2019, we re-opened or introduced additional tenants to former anchor positions at Woodland Mall in Grand Rapids, Michigan, Valley Mall in Hagerstown, Maryland and Plymouth Meeting Mall, in Plymouth Meeting, Pennsylvania. We opened Von Maur and Urban Outfitters, on a site formerly occupied by Sears at Woodland Mall and in-line lease-up continues. At Valley Mall, we opened Onelife Fitness in February to complete the former Macy’s redevelopment and during the year we signed a lease with Dick’s Sporting Goods to occupy the former Sears store at the property. Dick’s Sporting Goods is expected to open in the first quarter of 2020. At Plymouth Meeting Mall, we opened Burlington, Dick’s Sporting Goods, Edge Fitness and Miller’s Ale House in the former Macy’s location, and the last tenant, Michael’s, opened in the first quarter of 2020. We opened Sierra Trading at Moorestown Mall in Moorestown, New Jersey in 2019 and Michael’s opened in the first quarter of 2020.

Construction is underway to open Burlington in place of a former Sears at Dartmouth Mall in Dartmouth, Massachusetts. We are also moving forward with several outparcels at Dartmouth Mall resulting from the Sears recapture and working with large format prospects for space adjacent to Burlington.

We currently have three vacant anchor positions at Valley View Mall in La Crosse, Wisconsin and during 2019 an additional anchor, Sears, closed at Exton Square Mall in Exton, Pennsylvania. In January 2020, the Lord & Taylor store at Moorestown Mall in Moorestown, New Jersey closed and we are working with several retail and entertainment prospects to fill the space. We have been notified by Sears that it plans to close stores at Moorestown Mall in Moorestown, New Jersey and Jacksonville Mall in Jacksonville, North Carolina. Sears continues to be financially obligated pursuant to the leases at these locations.

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The table below sets forth information related to our anchor replacement program:

Property	Former Anchors	GLA (in '000's)	Date Closed	Decommission Date	Replacement Tenant(s)	GLA (in '000's)	Actual/Targeted Occupancy Date
Completed:
Magnolia Mall	Sears	91	Q1 17	Q2 17	Burlington	46	Q3 17
					HomeGoods	22	Q2 18
					Five Below	8	Q2 18
Moorestown Mall	Macy's	200	Q1 17	Q2 17	HomeSense	28	Q3 18
					Five Below	9	Q4 18
					Sierra Trading Post	19	Q1 19
					Michael's	25	Q1 20
Valley Mall	Macy's	120	Q1 16	Q4 17	Tilt Studio	48	Q3 18
					One Life Fitness	70	Q3 18
	Bon-Ton	123	Q1 18	Q1 18	Belk	123	Q4 18
Willow Grove Park	JC Penney	125	Q3 17	Q1 18	Yard House	8	Q4 19
Woodland Mall	Sears	313	Q2 17	Q2 17	Black Rock Bar & Grill	9	Q3 19
					Von Maur	87	Q4 19
					Urban Outfitters	8	Q4 19
					Small shops	13	Q4 19
Plymouth Meeting Mall	Macy's(1)	215	Q1 17	Q2 17	Burlington	40	Q3 19
					Dick's Sporting Goods	58	Q3 19
					Miller's Ale House	8	Q3 19
					Edge Fitness	38	Q4 19
					Michael's	26	Q1 20
In progress:
Valley Mall	Sears	123	Q3 17	Q3 18	Dick's Sporting Goods	59	Q1 20
Willow Grove Park	JC Penney	see above			Studio Movie Grill	49	Q2 20
Dartmouth Mall	Sears	108	Q3 19	Q3 19	Burlington	44	Q1 20

(1) Property is subject to a ground lease.

In response to anchor store closings and other trends in the retail space, we have been changing the mix of tenants at our properties. We have been reducing the percentage of traditional mall tenants and increasing the share of space dedicated to dining, entertainment, fast fashion, off price, and large format box tenants. Some of these changes may result in the redevelopment of all or a portion of our properties. See “—Capital Improvements, Redevelopment and Development Projects.”

To fund the capital necessary to replace anchors and to maintain a reasonable level of leverage, we expect to use a variety of means available to us, subject to and in accordance with the terms of our Credit Agreements. These steps might include (i) making additional borrowings under our Credit Agreements (assuming continued compliance with the financial covenants thereunder), (ii) obtaining construction loans on specific projects, (iii) selling properties or interests in properties with values in excess of their mortgage loans (if applicable) and applying the excess proceeds to fund capital expenditures or for debt reduction, (iv) obtaining capital from joint ventures or other partnerships or arrangements involving our contribution of assets with institutional investors, private equity investors or other REITs, or (v) obtaining equity capital, including through the issuance of common or preferred equity securities if market conditions are favorable, or through other actions.

Capital Improvements, Redevelopment and Development Projects

We might engage in various types of capital improvement projects at our operating properties. Such projects vary in cost and complexity, and can include building out new or existing space for individual tenants, upgrading common areas or exterior areas such as parking lots, or redeveloping the entire property, among other projects. Project costs are accumulated in “Construction in progress” on our consolidated balance sheet until the asset is placed into service, and amounted to $106.0 million as of December 31, 2019.

As of December 31, 2019, we had unaccrued contractual and other commitments related to our capital improvement projects and development projects at our consolidated and unconsolidated properties of $75.2 million, including $33.1 million of commitments related to the redevelopment of Fashion District Philadelphia, in the form of tenant allowances and contracts with general service providers and other professional service providers. We expect to incur approximately $25.0 million in incremental leasing costs during 2020.

In 2014, we entered into a 50/50 joint venture with The Macerich Company (“Macerich”) to redevelop Fashion District Philadelphia. As we redevelop Fashion District Philadelphia, operating results in the short term, as measured by sales, occupancy, real estate revenue, property operating expenses, NOI and depreciation, will continue to be affected until the newly constructed space is completed, leased and occupied.

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In January 2018, we along with Macerich, our partner in the Fashion District Philadelphia redevelopment project, entered into a $250.0 million term loan (the “FDP Term Loan”). The initial term of the FDP Term Loan is five years, and bears interest at a variable rate of 2.00% over LIBOR. PREIT and Macerich secured the FDP Term Loan by pledging their respective equity interests of 50% each in the entities that own Fashion District Philadelphia. The entire $250.0 million available under the FDP Term Loan was drawn during the first quarter of 2018, and we received an aggregate $123.0 million as a distribution of our share of the draw in 2018. In July 2019, the FDP Term Loan was modified to increase the total maximum potential borrowings from $250.0 million to $350.0 million. A total of $51.0 million was drawn during the third quarter of 2019 and we received aggregate distributions of $25.0 million as our share of the draws.

We also own one development property, but we do not expect to make any significant investment at this property in the short term.

CRITICAL ACCOUNTING POLICIES

Critical Accounting Policies are those that require the application of management’s most difficult, subjective, or complex judgments, often because of the need to make estimates about the effect of matters that are inherently uncertain and that might change in subsequent periods. In preparing the consolidated financial statements, management has made estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenue and expenses during the reporting periods. In preparing the consolidated financial statements, management has utilized available information, including our past history, industry standards and the current economic environment, among other factors, in forming its estimates and judgments, giving due consideration to materiality. Management has also considered events and changes in property, market and economic conditions, estimated future cash flows from property operations and the risk of loss on specific accounts or amounts in determining its estimates and judgments. Actual results may differ from these estimates. In addition, other companies may utilize different estimates, which may affect comparability of our results of operations to those of companies in a similar business. The estimates and assumptions made by management in applying critical accounting policies have not changed materially during 2019, 2018 and 2017, except as otherwise noted, and none of these estimates or assumptions have proven to be materially incorrect or resulted in our recording any significant adjustments relating to prior periods. We will continue to monitor the key factors underlying our estimates and judgments, but no change is currently expected.

Set forth below is a summary of the accounting policy that management believes is critical to the preparation of the consolidated financial statements. This summary should be read in conjunction with the more complete discussion of our accounting policies included in note 1 to our consolidated financial statements.

Asset Impairment

Real estate investments and related intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the property might not be recoverable. A property to be held and used is considered impaired only if management’s estimate of the aggregate future cash flows, less estimated capital expenditures, to be generated by the property, undiscounted and without interest charges, are less than the carrying value of the property. This estimate takes into consideration factors such as expected future operating income, trends and prospects, as well as the effects of demand, competition and other factors.

The determination of undiscounted cash flows requires significant estimates by management, including the expected course of action at the balance sheet date that would lead to such cash flows. Subsequent changes in estimated undiscounted cash flows arising from changes in the anticipated action to be taken with respect to the property could impact the determination of whether an impairment exists and whether the effects could materially affect our net income. To the extent estimated undiscounted cash flows are less than the carrying value of the property, the loss will be measured as the excess of the carrying amount of the property over the estimated fair value of the property.

Assessment of our ability to recover certain lease related costs must be made when we have a reason to believe that the tenant might not be able to perform under the terms of the lease as originally expected. This requires us to make estimates as to the recoverability of such costs.

An other-than-temporary impairment of an investment in an unconsolidated joint venture is recognized when the carrying value of the investment is not considered recoverable based on evaluation of the severity and duration of the decline in value. To the extent impairment has occurred, the excess carrying value of the asset over its estimated fair value is charged to income.

If there is a triggering event in relation to a property to be held and used, we will estimate the aggregate future cash flows, less estimated capital expenditures, to be generated by the property, undiscounted and without interest charges. In addition, this estimate may consider a probability weighted cash flow estimation approach when alternative courses of action to recover the carrying amount of a long-lived asset are under consideration or when a range of possible values is estimated.

New Accounting Developments

See note 1 to our consolidated financial statements for descriptions of new accounting developments.

OFF BALANCE SHEET ARRANGEMENTS

We have no material off-balance sheet items other than (i) the partnerships described in note 3 to our consolidated financial statements and in the “Overview” section above, (ii) unaccrued contractual commitments related to our capital improvement and development projects at our consolidated and unconsolidated properties, and (iii) specifically with respect to our joint venture formed with Macerich to develop Fashion District Philadelphia, our operating partnership, PREIT Associates, has jointly and severally guaranteed the obligations of the joint venture to complete a comprehensive redevelopment of that property costing not less than $300.0 million within 48 months after commencement of construction, which was March 14, 2016, and has severally guaranteed its 50% share of the FDP Term Loan (see note 3 to our consolidated financial statements), which currently has $301.0 million outstanding (our share of which is $150.5 million). If our Fashion District Philadelphia

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joint venture were unable to satisfy its obligations under the FDP Term Loan and we were required to satisfy its payment obligations under the guarantee, this could have a material impact on our liquidity and available capital resources. The FDP Term Loan balance will become due in 2023.

RESULTS OF OPERATIONS

Overview

Net loss for the year ended December 31, 2019 was $13.0 million, compared to a net loss for the year ended December 31, 2018 of $126.5 million. The change in our 2019 results of operations was primarily due to impairment losses in 2018 that did not recur in 2019.

Net loss for the year ended December 31, 2018 was $126.5 million, compared to a net loss for the year ended December 31, 2017 of $32.8 million. The change in our 2018 results of operations was primarily due to increased impairment losses in 2018 as compared to 2017 and dilution from asset sales.

Occupancy

The tables below set forth certain occupancy statistics for our retail properties in total and our Core Malls as of December 31, 2019, 2018 and 2017:

	Occupancy (1) as of December 31,
	Consolidated Properties									Unconsolidated Properties									Combined (2)
	2019			2018			2017			2019			2018			2017			2019			2018			2017
Retail portfolio weighted average: (3)
Total excluding anchors		92.2	%		93.5	%		94.1	%		89.8	%		90.5	%		92.2	%		91.7	%		92.6	%		93.3	%
Total including anchors		92.8	%		94.7	%		96.0	%		91.7	%		92.2	%		93.6	%		92.6	%		92.7	%		95.4	%
Core Malls weighted average: (4)
Total excluding anchors		93.7	%		94.3	%		94.7	%		86.2	%		88.4	%		90.2	%		92.9	%		93.6	%		94.2	%
Total including anchors		96.1	%		96.5	%		96.7	%		90.6	%		92.0	%		93.3	%		95.5	%		96.0	%		96.3	%

⁽¹⁾ Occupancy for all periods presented includes all tenants irrespective of the term of their agreement.

⁽²⁾ Combined occupancy is calculated by using occupied gross leasable area (“GLA”) for consolidated and unconsolidated properties and dividing by total GLA for consolidated and unconsolidated properties.

⁽³⁾ Retail portfolio includes all retail properties excluding Fashion District Philadelphia because that property was under redevelopment until it opened in September 2019 and has not yet stabilized.  

⁽⁴⁾ Core Malls excludes Fashion District Philadelphia, Exton Square Mall, Valley View Mall, Wyoming Valley Mall, power centers and Gloucester Premium Outlets.

From 2018 to 2019, total occupancy for our retail portfolio, including consolidated and unconsolidated properties (and including all tenants irrespective of the term of their agreement), decreased 10 basis points to 92.6%.

From 2018 to 2019, total occupancy for our Core Malls, including consolidated and unconsolidated properties, decreased 50 basis points to 95.5%.

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Leasing Activity

The table below sets forth summary leasing activity information with respect to our properties for the year ended December 31, 2019, including anchor and non-anchor space at consolidated and unconsolidated properties:  

	Number		GLA		Term (in years)		Initial Rent psf		Previous Rent psf		Initial Gross Rent Spread (1)						Avg Rent Spread (2)			Annualized Tenant Improvements psf (3)
Non-Anchor											$			%			%
New Leases
Under 10,000 sf		109		292,866		6.7	$	43.09	$	—	$	—			—	%		—	%	$	12.79
Over 10,000 sf		6		103,549		10.0		19.49		—		—			—	%		—	%		16.77
Total New Leases		115		396,415		7.6	$	36.92		—		—			—	%		—	%	$	14.17
Renewal Leases
Under 10,000 sf		104		235,399		3.4	$	61.74	$	61.91	$	(0.17	)		(0.3	%)		1.7	%	$	1.73
Over 10,000 sf		14		250,555		3.7		15.95		15.22		0.73			4.8	%		5.3	%		0.46
Total Fixed Rent		118		485,954		3.6	$	38.13	$	37.84	$	0.29			0.8	%		2.5	%	$	1.06
Percentage in Lieu		73		301,245		2.4		28.12		41.02		(12.90	)		(31.5	)%		—			—
Total Renewal Leases (4)		191		787,199		3.1	$	34.30	$	39.05	$	(4.75	)		(12.2	)%		—	%	$	0.74
Total Non Anchor (5)		306		1,183,614		4.6	$	35.18
Anchor
New Leases		1		43,840		10.0	$	16.50		—		—			—	%		—	%	$	12.11
Renewal Leases		8		807,083		3.7		3.78	$	4.35	$	(0.57	)		(13.1	)%		—	%		—
Total		9		850,923		4.0	$	4.44

⁽¹⁾ Initial gross rent renewal spread is computed by comparing the initial rent per square foot in the new lease to the final rent per square foot amount in the expiring lease. For purposes of this computation, the rent amount includes minimum rent, common area maintenance (“CAM”) reimbursements, estimated real estate tax reimbursements and marketing charges, but excludes percentage rent. In certain cases, a lower rent amount may be payable for a period of time until specified conditions in the lease are satisfied.

⁽²⁾ Average renewal spread is computed by comparing the average rent per square foot over the new lease term to the final rent per square foot amount in the expiring lease. For purposes of this computation, the rent amount includes minimum rent and fixed CAM reimbursements, but excludes pro rata CAM reimbursements, estimated real estate tax reimbursements, marketing charges and percentage rent.

⁽³⁾ These leasing costs are presented as annualized costs per square foot and are spread uniformly over the initial lease term.

⁽⁴⁾ Includes 3 leases and 64,131 square feet of GLA with respect to tenants whose leases were restructured and extended following a bankruptcy filing.  Excluding these leases, the initial gross rent spreads were -8.7% for all non anchor leases.

⁽⁵⁾ Includes 30 leases and 144,384 square feet of GLA with respect to our unconsolidated partnerships. We own a 25% to 50% interest in each of our unconsolidated properties and do not control such properties. Our percentage ownership is not necessarily indicative of the legal and economic implications of our ownership interest. See "—NON-GAAP SUPPLEMENTAL FINANCIAL MEASURES" for further details on our ownership interests in our unconsolidated properties.

See “Item 2. Properties—Retail Lease Expiration Schedule - Anchors” and “Item 2. Properties—Retail Lease Expiration Schedule – Non-Anchors” for information regarding average minimum rent on expiring leases.

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The following table sets forth our results of operations for the years ended December 31, 2019, 2018 and 2017:

(in thousands of dollars)	For the Year Ended December 31, 2019			% Change 2018 to 2019			For the Year Ended December 31, 2018			% Change 2017 to 2018			For the Year Ended December 31, 2017
Results of operations:
Real estate revenue	$	334,958			(6	)%	$	358,229			(1	)%	$	361,524
Property operating expenses		(136,558	)		(3	)%		(141,232	)		1	%		(140,305	)
Other income		1,834			(56	)%		4,171			(30	)%		5,966
Depreciation and amortization		(137,784	)		4	%		(133,116	)		3	%		(128,822	)
General and administrative expenses		(46,010	)		20	%		(38,342	)		4	%		(36,736	)
Provision for employee separation expenses		(3,689	)		224	%		(1,139	)		(12	)%		(1,299	)
Insurance recoveries, net		4,362			533	%		689		N/A				—
Project costs and other expenses		(284	)		(59	)%		(693	)		(10	)%		(768	)
Interest expense, net		(63,987	)		4	%		(61,355	)		5	%		(58,430	)
Gain on debt extinguishment, net		24,859		N/A				—		N/A				—
Impairment of assets		(1,455	)		(99	)%		(137,487	)		146	%		(55,793	)
Impairment of development land parcel		(3,562	)	N/A				—		N/A				—
Equity in income of partnerships		8,289			(27	)%		11,375			(21	)%		14,367
Gain on sales of real estate by equity method investee		553			(80	)%		2,772			(58	)%		6,567
Gains (losses) on sales of interests in real estate, net		2,744			59	%		1,722			(6478	)%		(27	)
Gains on sales of non-operating real estate		2,718			(67	)%		8,126			540	%		1,270
Adjustment to gain on sales of interests in non operating real estate		12			(105	)%		(223	)		(38	)%		(362	)
Net loss	$	(13,000	)		(90	)%	$	(126,503	)		285	%	$	(32,848	)

The amounts in the preceding table reflect our consolidated properties and our unconsolidated properties. Our unconsolidated properties are presented under the equity method of accounting in the consolidated statements of operations in the line item “Equity in income of partnerships.”

Real Estate Revenue

Effective January 1, 2019, we adopted Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842) (“ASC 842”) and related guidance using the optional transition method and elected to apply the provisions of the standard as of the adoption date rather than the earliest date presented. Prior period amounts were not restated. Since we adopted the practical expedient in ASC 842, which allows us to avoid separating lease (minimum rent) and non-lease rental income (common area maintenance and real estate tax reimbursements), all rental income earned pursuant to tenant leases is reflected as one line, “Lease revenue,” in the consolidated statement of operations. Utility reimbursements are presented separately in “Expense reimbursements.” We review the collectability of both billed and unbilled lease revenues each reporting period, taking into consideration the tenant’s payment history, credit profile and other factors, including its operating performance. For any tenant receivable balances deemed to be uncollectible, under ASC 842 we record an offset for credit losses directly to Lease revenue in the consolidated statement of operations. Previously, under ASC 840, uncollectible tenants’ receivables were reported in Other property operating expenses in the consolidated statement of operations.

The following table reports the breakdown of real estate revenues based on the terms of the lease contracts for the years ended December 31, 2019, 2018 and 2017:

	Twelve Months Ended December 31,
(in thousands of dollars)	2019			2018		2017
Contractual lease payments:
Base rent	$	218,819		$	226,609	$	230,898
CAM reimbursement income		43,874			45,106		48,751
Real estate tax income		36,243			40,095		38,235
Percentage rent		4,704			4,291		4,366
Lease termination revenue		1,444			8,729		2,760
		305,084			324,830		325,010
Less: credit losses		(2,773	)		-		-
Lease revenue		302,311			324,830		325,010
Expense reimbursements		19,979			21,322		22,468
Other real estate revenue		12,668			12,077		14,046
Total real estate revenue	$	334,958		$	358,229	$	361,524

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Real estate revenue decreased by $23.3 million, or 6%, in 2019 as compared to 2018, primarily due to:

• a decrease of $6.7 million in same store lease termination revenue, including $8.1 million from the termination of leases with three tenants during 2018, partially offset by $1.2 million received from three tenants during 2019;

• a decrease of $6.1 million at non-same store properties Valley View Mall and Exton Square Mall due to three anchor store closings during 2018 and 2019 and associated co-tenancy concessions, as well as a decrease in lease revenue at Exton Square Mall due to the sale of an outparcel during the three months ended June 30, 2019;

• a decrease of $4.5 million at Wyoming Valley Mall, which was conveyed to the lender of the mortgage loan secured by Wyoming Valley Mall on September 26, 2019;

• an increase of $2.5 million in same store credit losses as a result of the adoption of ASC 842. Under ASC 840, such amounts were included in other property operating expenses and were $2.1 million during 2018;

• a decrease of $2.4 million in same store real estate tax reimbursements due to lower occupancy at some properties and rental concessions made to some tenants under which the terms of their leases were modified such that they no longer pay expense reimbursements, partially offset by an increase in real estate tax expense (see “—Property Operating Expenses”);

• a decrease of $0.7 million in same store tenant utility reimbursements due to a combination of lower tenant usage and lower occupancy at some properties;

• a decrease of $0.4 million in same store common area expense reimbursements, including an increase of $2.5 million associated with the straight line recognition of fixed common area expense reimbursements effective January 1, 2019 in accordance with ASC 842. Excluding the impact of the straight line adjustment, same store common area reimbursements decreased by $2.9 million due to lower occupancy at some properties and rental concessions made to some tenants under which the terms of their leases were modified such that they no longer pay expense reimbursements;

• a decrease of $0.2 million in same store base rent due to a $3.3 million decrease related to tenant bankruptcies during 2018 and 2019, partially offset by a $3.1 million increase from net new store openings over the previous twelve months; and

• a decrease in same store partnership marketing revenue of $0.2 million; partially offset by

• an increase of $0.5 million in same store percentage rent, including a $0.3 million increase from one tenant.

Real estate revenue decreased by $3.3 million, or 1%, in 2018 as compared to 2017, primarily due to:

• a decrease of $8.5 million in real estate revenue related to sold properties;

• a decrease of $2.4 million in same store common area expense reimbursements, due to a decrease in common area expense (see “—Property Operating Expenses”), as well as lower occupancy at some properties and rental concessions made to some tenants under which the terms of their leases were modified such that they no longer pay expense reimbursements;

• a decrease of $0.9 million in same store partnership marketing revenue;

• a decrease of $0.6 million in same store utility reimbursements due to a decrease in tenant electric consumption, partially offset by an increase in tenant electric billing rates established by each state’s public utility commission;

• a decrease of $0.5 million at Wyoming Valley Mall due to two anchor store closings and associated co-tenancy concessions during 2018; and

• a decrease of $0.2 million in same store marketing revenue; partially offset by

• an increase of $6.0 million in same store lease termination revenue, including $8.6 million from the termination of leases with three tenants during 2018, partially offset by $2.4 million received from four tenants during 2017;

• an increase of $2.3 million in same store real estate tax reimbursements, due to an increase in real estate tax expense (see “—Property Operating Expenses”), partially offset by lower occupancy at some properties and rental concessions made to some tenants under which the terms of their leases were modified such that they no longer pay expense reimbursements; and

• an increase of $1.6 million in same store base rent due to $3.4 million from net new store openings over the previous twelve months, partially offset by a $1.0 million decrease related to tenant bankruptcies in 2017 and 2018, as well as a $0.8 million decrease related to co-tenancy concessions due to anchor closings.

Property Operating Expenses

Property operating expenses decreased by $4.7 million, or 3%, in 2019 as compared to 2018, primarily due to:

• A decrease of $2.1 million in same store credit losses as a result of the adoption of ASC 842. Under ASC 840, such amounts were included in other property operating expenses and were $2.1 million during 2018;

• a decrease of $1.7 million at Wyoming Valley Mall, which was conveyed to the lender of the mortgage loan secured by Wyoming Valley Mall on September 26, 2019;

• a decrease of $1.4 million at non-same store properties Valley View Mall and Exton Square Mall primarily due to a decrease in real estate tax expense due to a lower tax assessment, a decrease in tenant electric expense and a decrease in credit losses as a result of the adoption of ASC 842. Under ASC 840 such amounts were included in other property operating expenses during 2018;

• a decrease of $0.7 million in same store marketing expense; and

• a decrease of $0.6 million in same store tenant utility expense due to a combination of lower tenant electric usage and electric rates; partially offset by

• an increase of $1.3 million in same store real estate tax expense due to a combination of increases in the real estate tax assessment value and the real estate tax rate; and

• an increase of $0.5 million in same store common area maintenance expense, including increases of $0.5 million in loss prevention expense and $0.2 in insurance expense, partially offset by a $0.2 million decrease in snow removal expense.

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Property operating expenses increased by $0.9 million, or 1%, in 2018 as compared to 2017, primarily due to:

• an increase of $6.7 million in same store real estate tax expense due to a combination of increases in the real estate tax assessment value and the real estate tax rate, as well as a successful real estate tax appeal at one of our properties resulting in lower real estate tax expense during 2017; and

• an increase of $0.1 million in same store other property operating expenses, including a $0.9 million increase in bad debt expense due to increased reserves for bankruptcy and other troubled tenants and a $0.2 million increase in non-reimbursable maintenance costs, partially offset by a $1.0 million decrease in personnel costs; partially offset by

• a decrease of $4.0 million in property operating expenses related to sold properties; and

• a decrease of $1.8 million in same store common area maintenance expense, including a $1.7 million decrease in housekeeping, maintenance and loss prevention expense due to negotiated rate reductions with the service providers and a $1.2 million decrease in personnel costs, partially offset by a $0.4 million increase in common area electric expense and a $0.2 million increase in snow removal expense due to extremely cold temperatures during January 2018 and higher snow fall amounts across the Mid-Atlantic states, where many of our properties are located.

General and Administrative Expenses

General and administrative expenses increased by $7.7 million, or 20%, in 2019 as compared to 2018, primarily due to certain internal leasing and legal costs that were previously capitalized under ASC 840 now being recorded as period costs under ASC 842 and included in general and administrative expenses. In 2018, we capitalized $5.2 million of internal leasing and legal salaries and benefits. No such costs were capitalized in 2019.

General and administrative expenses increased by $1.6 million, or 4%, in 2018 as compared to 2017, primarily due to increases in employee salaries, short-term incentive compensation expense and long-term deferred compensation amortization, as well as an increase in professional fee expense.

Insurance Recoveries, net

During the year ended December 31, 2019, we recorded net recoveries of approximately $4.4 million. These net recoveries primarily relate to remediation expenses and business interruption claims. $0.5 million of the recoveries received relate to business interruption.

During the year ended December 31, 2018, we recorded net recoveries of approximately $0.7 million. This amount consisted of combined estimated property impairment and remediation losses of $2.3 million, offset by a corresponding insurance claim recovery of $3.0 million.

During September 2018, Jacksonville Mall in Jacksonville, North Carolina incurred property damage and an interruption of business operations as a result of Hurricane Florence. The property was closed for business during and immediately after the natural disaster, however, significant remediation efforts were quickly undertaken and the mall was reopened shortly thereafter.  The net insurance proceeds described above primarily relate to this event.

Impairment of Assets

During the years ended December 31, 2019, 2018, and 2017, we recorded impairment of assets of $5.0 million, $137.5 million, and $55.8 million, respectively. The assets that incurred impairments and the amount of such impairments are as follows:

	For the Year Ended December 31,
(in thousands of dollars)	2019		2018		2017
Gainesville land	$	1,464	$	2,089	$	1,275
Woodland Mall		2,098		—		—
Exton Square Mall		—		73,218		—
Wyoming Valley Mall		—		32,177		—
Valley View Mall		1,408		14,294		15,521
Wiregrass Mall mortgage note receivable		—		8,122		—
New Garden Land		—		7,567		—
Logan Valley Mall		—		—		38,720
Sunrise land		—		—		226
Other		48		20		51
Total impairment of assets	$	5,018	$	137,487	$	55,793

See note 2 to our consolidated financial statements for a further discussion of impairment of assets.

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Interest Expense

Interest expense increased by $2.6 million, or 4%, in 2019 as compared to 2018 due to higher weighted average effective interest rates (4.31% in 2019 compared to 4.15% in 2018) and a higher weighted average debt balance ($2,052.7 million in 2019 compared to $1,624.6 million in 2018), partially offset by higher capitalized interest.

Interest expense increased by $2.9 million, or 5%, in 2018 as compared to 2017 due to a decrease in capitalized interest and higher weighted average effective interest rates (4.15% in 2018 compared to 4.01% in 2017), partially offset by lower weighted average debt balance ( $1,624.6 million in 2018 compared to $1,648.5 million in 2017).

Depreciation and Amortization

Depreciation and amortization expense increased by $4.7 million, or 4%, in 2019 as compared to 2018, primarily due to:

• an increase of $10.8 million due to a higher asset base resulting from capital improvements related to new tenants at our same store properties, as well as accelerated amortization of capital improvements associated with store closings; partially offset by

• a decrease of $3.9 million at two properties that have a lower asset base resulting from impairment charges during 2018; and

• a decrease of $2.2 million at Wyoming Valley Mall due to a lower asset base resulting from an impairment charge during 2018, as well as the property being conveyed to the lender of the mortgage loan secured by the mall on September 26, 2019.

Depreciation and amortization expense increased by $4.3 million, or 3%, in 2018 as compared to 2017, primarily because of:

• an increase of $5.7 million due to a higher asset base resulting from capital improvements related to new tenants at our same store properties, as well as accelerated amortization of capital improvements associated with store closings; partially offset by

• a decrease of $1.4 million related to sold properties.

Equity in Income of Partnerships

Equity in income of partnerships decreased by $3.1 million, or 27%, in 2019 as compared to 2018. This decrease was primarily due to lower lease revenue in 2019 at Same Store properties.

Equity in income of partnerships decreased by $3.0 million, or 21%, in 2018 as compared to 2017. This decrease was primarily due to unamortized below-market lease intangibles written off in 2017 related to Fashion District Philadelphia, partially offset by a $1.6 million mortgage prepayment penalty incurred at Lehigh Valley Mall in 2017 that did not recur.

Gains on Sale of Real Estate by Equity Method Investee

Gain on sale of real estate by equity method investee was $0.5 million in 2019, which resulted from our 25% share of a $2.0 million gain on the sale of a land parcel at Gloucester Premium Outlets in Blackwood, New Jersey recorded by a partnership in which we hold a 25% ownership interest.

Gain on sale of real estate by equity method investee was $2.8 million in 2018, which resulted from our 50% share of a $5.5 million gain on the sale of a condominium interest in 907 Market Street in Philadelphia, Pennsylvania recorded by a partnership in which we hold a 50% ownership interest.

Gain on sale of real estate by equity method investee was $6.5 million in 2017, which resulted from out 50% share of $13.1 million gain on the sale of a condominium interest in 801 Market Street in Philadelphia, Pennsylvania recorded by a partnership in which we hold a 50% ownership interest.

Gain (Loss) on Sales of Real Estate, net of Adjustments to Gain on Sales

Gain on sales of real estate was $2.8 million in 2019, which was primarily due to a $1.3 million gain on the sale of a Whole Foods store located on a parcel adjacent to Exton Square Mall, a $0.2 million gain on the sale of an undeveloped land parcel located in New Garden Township, Pennsylvania, and a $1.2 million gain on the sale of an outparcel located at Valley View Mall in La Crosse, Wisconsin.

Gain on sales of real estate was $1.5 million in 2018, which was primarily due to a $1.0 million gain on the sale of an outparcel on which two restaurants are located at Valley Mall in Hagerstown, Maryland and a $0.7 million gain on the sale of an outparcel on which a restaurant is located at Magnolia Mall in Florence, South Carolina, partially offset by adjustment to gains from properties sold in prior periods.

Loss on sale of real estate in 2017 was $0.4 million, which was primarily due to adjustments to gains of sales from properties sold in prior periods.

Gain on Sales of Non-operating Real Estate, net of Adjustment to Gain on Sales

Gain on sales of non-operating real estate was $2.7 million in 2019, which was primarily due to a $1.9 million gain from the sale of two parcels adjacent to Capital City Mall in Camp Hill, Pennsylvania and a $0.7 million gain from the sale of a parcel adjacent to Magnolia Mall in Florence, South Carolina.

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Gain on sales of non-operating real estate was $8.1 million in 2018, which was primarily due to the sale of a parcel adjacent to Exton Square Mall in Exton, Pennsylvania.

NON-GAAP SUPPLEMENTAL FINANCIAL MEASURES

Overview

The preceding discussion analyzes our financial condition and results of operations in accordance with generally accepted accounting principles, or GAAP, for the periods presented. We also use Net Operating Income (“NOI”) and Funds from Operations (“FFO”) which are non-GAAP financial measures, to supplement our analysis and discussion of our operating performance:

• We believe that NOI is helpful to management and investors as a measure of operating performance because it is an indicator of the return on property investment and provides a method of comparing property performance over time. When we use and present NOI, we also do so on a same store (“Same Store NOI”) and non-same store (“Non Same Store NOI”) basis to differentiate between properties that we have owned for the full periods presented and properties acquired, sold or under redevelopment during those periods. Furthermore, our use and presentation of NOI combines NOI from our consolidated properties and NOI attributable to our share of unconsolidated properties in order to arrive at total NOI. We believe that this is also helpful information because it reflects the pro rata contribution from our unconsolidated properties that are owned through investments accounted for under GAAP as equity in income of partnerships. See “Unconsolidated Properties and Proportionate Financial Information” below.

• We believe that FFO is also helpful to management and investors as a measure of operating performance because it excludes various items included in net income that do not relate to or are not indicative of operating performance, such as gains on sales of operating real estate and depreciation and amortization of real estate, among others. In addition to FFO and FFO per diluted share and OP Unit, when applicable, we also present FFO, as adjusted and FFO per diluted share and OP Unit, as adjusted, which we believe is helpful to management and investors because they adjust FFO to exclude items that management does not believe are indicative of operating performance, such as gain on debt extinguishment and insurance recoveries.

• We use both NOI and FFO, or related terms like Same Store NOI and, when applicable, Funds From Operations, as adjusted, for determining incentive compensation amounts under certain of our performance-based executive compensation programs.

NOI and FFO are commonly used non-GAAP financial measures of operating performance in the real estate industry, and we use them as supplemental non-GAAP measures to compare our performance between different periods and to compare our performance to that of our industry peers. Our computation of NOI, FFO and other non-GAAP financial measures, such as Same Store NOI, Non Same Store NOI, NOI attributable to our share of unconsolidated properties, and FFO, as adjusted, may not be comparable to other similarly titled measures used by our industry peers. None of these measures are measures of performance in accordance with GAAP, and they have limitations as analytical tools. They should not be considered as alternative measures of our net income, operating performance, cash flow or liquidity. They are not indicative of funds available for our cash needs, including our ability to make cash distributions. Please see below for a discussion of these non-GAAP measures and their respective reconciliation to the most directly comparable GAAP measure.

Unconsolidated Properties and Proportionate Financial Information

The non-GAAP financial measures presented below incorporate financial information attributable to our share of unconsolidated properties. This proportionate financial information is non-GAAP financial information, but we believe that it is helpful information because it reflects the pro rata contribution from our unconsolidated properties that are owned through investments accounted for under GAAP using the equity method of accounting. Under such method, earnings from these unconsolidated partnerships are recorded in our statements of operations prepared in accordance with GAAP under the caption entitled “Equity in income of partnerships.”

To derive the proportionate financial information reflected in the tables below as “unconsolidated,” we multiplied the percentage of our economic interest in each partnership on a property-by-property basis by each line item. Under the partnership agreements relating to our current unconsolidated partnerships with third parties, we own a 25% to 50% economic interest in such partnerships, and there are generally no provisions in such partnership agreements relating to special non-pro rata allocations of income or loss, and there are no preferred or priority returns of capital or other similar provisions. While this method approximates our indirect economic interest in our pro rata share of the revenue and expenses of our unconsolidated partnerships, we do not have a direct legal claim to the assets, liabilities, revenues or expenses of the unconsolidated partnerships beyond our rights as an equity owner in the event of any liquidation of such entity. Our percentage ownership is not necessarily indicative of the legal and economic implications of our ownership interest. Accordingly, NOI and FFO results based on our share of the results of unconsolidated partnerships do not represent cash generated from our investments in these partnerships.

We have determined that we hold a noncontrolling interest in each of our unconsolidated partnerships, and account for such partnerships using the equity method of accounting, because:

• Except for two properties that we co-manage with our partner, all of the other entities are managed on a day-to-day basis by one of our other partners as the managing general partner in each of the respective partnerships. In the case of the co-managed properties, all decisions in the ordinary course of business are made jointly.

• The managing general partner is responsible for establishing the operating and capital decisions of the partnership, including budgets, in the ordinary course of business.

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• All major decisions of each partnership, such as the sale, refinancing, expansion or rehabilitation of the property, require the approval of all partners.

• Voting rights and the sharing of profits and losses are generally in proportion to the ownership percentages of each partner.

We hold legal title to a property owned by one of our unconsolidated partnerships through a tenancy in common arrangement. For this property, such legal title is held by us and another entity, and each has an undivided interest in title to the property. With respect to this property, under the applicable agreements between us and the entity with ownership interests, we and such other entity have joint control because decisions regarding matters such as the sale, refinancing, expansion or rehabilitation of the property require the approval of both us and the other entity owning an interest in the property. Hence, we account for this property like our other unconsolidated partnerships using the equity method of accounting. The balance sheet items arising from this property appear under the caption “Investments in partnerships, at equity.”

For further information regarding our unconsolidated partnerships, see note 3 to our consolidated financial statements.

Net Operating Income (“NOI”)

NOI (a non-GAAP measure) is derived from real estate revenue (determined in accordance with GAAP, including lease termination revenue), minus property operating expenses (determined in accordance with GAAP), plus our pro rata share of revenue and property operating expenses of our unconsolidated partnership investments. NOI does not represent cash generated from operating activities in accordance with GAAP and should not be considered to be an alternative to net income (determined in accordance with GAAP) as an indication of our financial performance or to be an alternative to cash flow from operating activities (determined in accordance with GAAP) as a measure of our liquidity. It is not indicative of funds available for our cash needs, including our ability to make cash distributions. We believe NOI is helpful to management and investors as a measure of operating performance because it is an indicator of the return on property investment, and provides a method of comparing property performance over time. We believe that net income is the most directly comparable GAAP measure to NOI. NOI excludes other income, general and administrative expenses, provision for employee separation expenses, interest expense, depreciation and amortization, insurance recoveries, gain/loss on debt extinguishment, impairment of assets, gains on sales of real estate by equity method investees, gain on sale of non operating real estate, gain/loss on sale of interest in real estate, impairment of assets, project costs and other expenses.

Same Store NOI is calculated using retail properties owned for the full periods presented and excludes properties acquired or disposed of, under redevelopment, or designated as non-core during the periods presented. In 2018, Wyoming Valley Mall was designated as non-core and subsequently conveyed to the lender of the mortgage loan secured by that property in 2019. In 2019, Exton Square Mall and Valley View Mall were designated as non-core and are excluded from Same Store NOI. Non Same Store NOI is calculated using the retail properties excluded from the calculation of Same Store NOI.

The table below reconciles net income (loss) to NOI of our consolidated properties for the years ended 2019, 2018 and 2017:

	For the Year Ended December 31,
(in thousands of dollars)	2019			2018			2017
Net loss	$	(13,000	)	$	(126,503	)	$	(32,848	)
Other income		(1,834	)		(4,171	)		(5,966	)
Depreciation and amortization		137,784			133,116			128,822
General and administrative expenses		46,010			38,342			36,736
Provision for employee separation expenses		3,689			1,139			1,299
Project costs and other expenses		284			693			768
Insurance recoveries, net		(4,362	)		(689	)		—
Interest expense, net		63,987			61,355			58,430
Gain on debt extinguishment		(24,859	)		—			—
Impairment of assets		1,455			137,487			55,793
Impairment of development land parcel		3,562			—			—
Equity in income of Partnerships		(8,289	)		(11,375	)		(14,367	)
Gain on sales of real estate by equity method investee		(553	)		(2,772	)		(6,539	)
Gain on sales of real estate, net		(2,744	)		(1,525	)		361
Gain on sales of interests in non operating real estate		(2,718	)		(8,100	)		(1,270	)
Net operating income from consolidated properties	$	198,412		$	216,997		$	221,219

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The table below reconciles equity in income of partnerships to NOI of our share of unconsolidated properties for the years ended 2019, 2018 and 2017:

	For the Year Ended December 31,
(in thousands of dollars)	2019			2018			2017
Equity in income of partnerships	$	8,289		$	11,375		$	14,367
Other income		(76	)		(82	)		(594	)
Depreciation and amortization		9,874			8,612			10,974
Interest and other expenses		11,243			10,828			12,013
Net operating income from equity method investments at ownership share	$	29,330		$	30,733		$	36,760

The table below presents total NOI and total NOI excluding lease terminations for the years ended December 31, 2019 and 2018:

	Same Store				Non Same Store				Total (non-GAAP)
(in thousands of dollars)	2019		2018		2019		2018		2019		2018
NOI from consolidated properties	$	185,874	$	196,836	$	12,526	$	20,161	$	198,400	$	216,997
NOI from equity method investments at ownership share		28,597		30,161		732		572		29,329		30,733
Total NOI	$	214,471	$	226,997	$	13,258	$	20,733	$	227,729	$	247,730
Less: lease termination revenue		1,531		8,641		18		577		1,549		9,218
Total NOI - excluding lease termination revenue	$	212,940	$	218,356	$	13,240	$	20,156	$	226,180	$	238,512

Total NOI decreased by $20.0 million, or 8.1%, in 2019 as compared to 2018. NOI from Non Same Store properties decreased by $7.5 million. This decrease was primarily due to the conveyance of Wyoming Valley Mall and operating results at non-core properties. NOI from Same Store properties decreased by $12.5 million primarily due to property results as discussed in “—Results of Operations—Real Estate Revenue” and “—Property Operating Expenses.”

The table below presents total NOI and total NOI excluding lease terminations for the years ended December 31, 2018 and 2017:

	Same Store				Non Same Store				Total (non-GAAP)
(in thousands of dollars)	2018		2017		2018		2017		2018		2017
NOI from consolidated properties	$	210,112	$	209,244	$	6,885	$	11,975	$	216,997	$	221,219
NOI from equity method investments at ownership share		30,161		30,266		572		6,494		30,733		36,760
Total NOI	$	240,273	$	239,510	$	7,457	$	18,469	$	247,730	$	257,979
Less: lease termination revenue	$	9,183	$	3,142	$	35	$	85	$	9,218	$	3,227
Total NOI - excluding lease termination revenue	$	231,090	$	236,368	$	7,422	$	18,384	$	238,512	$	254,752

Total NOI decreased by $10.2 million, or 4.0%, in 2018 as compared to 2017. NOI from Non Same Store properties decreased by $11.0 million. This decrease was primarily due to the properties sold in 2018 and 2017. NOI from Same Store properties increased by $0.8 million primarily due to property results as discussed in “—Results of Operations—Real Estate Revenue” and “—Property Operating Expenses.”

Funds From Operations

The National Association of Real Estate Investment Trusts (“NAREIT”) defines Funds From Operations (“FFO”), which is a non-GAAP measure commonly used by REITs, as net income (computed in accordance with GAAP) excluding (i) depreciation and amortization of real estate, (ii) gains and losses on sales of certain real estate assets, (iii) gains and losses from change in control and (iv) impairment write-downs of certain real estate assets and investments in entities when the impairment is directly attributable to decreases in the value of depreciable real estate held by the entity. We compute FFO in accordance with standards established by NAREIT, which may not be comparable to FFO reported by other REITs that do not define the term in accordance with the current NAREIT definition, or that interpret the current NAREIT definition differently than we do. NAREIT’s established guidance provides that excluding impairment write downs of depreciable real estate is consistent with the NAREIT definition.

FFO is a commonly used measure of operating performance and profitability among REITs. We use FFO and FFO per diluted share and unit of limited partnership interest in our operating partnership (“OP Unit”) in measuring our performance against our peers and as one of the performance measures for determining incentive compensation amounts earned under certain of our performance-based executive compensation programs.

FFO does not include gains and losses on sales of operating real estate assets or impairment write downs of depreciable real estate (including development land parcels), which are included in the determination of net income in accordance with GAAP. Accordingly, FFO is not a comprehensive measure of our operating cash flows. In addition, since FFO does not include depreciation on real estate assets, FFO may not be a useful performance measure when comparing our operating performance to that of other non-real estate commercial enterprises. We compensate for these limitations by using FFO in conjunction with other GAAP financial performance measures, such as net income and net cash provided by operating activities, and other non-GAAP financial performance measures, such as NOI. FFO does not represent cash generated from operating

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activities in accordance with GAAP and should not be considered to be an alternative to net income (determined in accordance with GAAP) as an indication of our financial performance or to be an alternative to cash flow from operating activities (determined in accordance with GAAP) as a measure of our liquidity, nor is it indicative of funds available for our cash needs, including our ability to make cash distributions. We believe that net income is the most directly comparable GAAP measurement to FFO.

When applicable, we also present Funds From Operations, as adjusted, and Funds From Operations per diluted share and OP Unit, as adjusted, which are non-GAAP measures, for the years ended December 31, 2019, 2018 and 2017, respectively, to show the effect of such items as gain or loss on debt extinguishment (including accelerated amortization of financing costs), impairment of assets, provision for employee separation expense and insurance recoveries or losses, net, loss on redemption of preferred shares and loss on hedge ineffectiveness which had an effect on our results of operations, but are not, in our opinion, indicative of our ongoing operating performance.

We believe that FFO is helpful to management and investors as a measure of operating performance because it excludes various items included in net income that do not relate to or are not indicative of operating performance, such as gains on sales of operating real estate and depreciation and amortization of real estate, among others. We believe that Funds From Operations, as adjusted, is helpful to management and investors as a measure of operating performance because it adjusts FFO to exclude items that management does not believe are indicative of our operating performance, such as gain or loss on debt extinguishment (including accelerated amortization of financing costs), impairment of assets, provision for employee separation expense and insurance recoveries or losses, net, loss on redemption of preferred shares and loss on hedge ineffectiveness.

The following table presents a reconciliation of net income (loss) determined in accordance with GAAP to FFO attributable to common shareholders and OP Unit holders, FFO attributable to common shareholders and OP Unit holders per diluted share and OP Unit, FFO attributable to common shareholders and OP Unit holders, as adjusted and FFO attributable to common shareholders and OP Unit holders, as adjusted per diluted share and OP Unit, for the years ended December 31, 2019, 2018 and 2017:

	For the Year Ended December 31,
(in thousands, except per share amounts)	2019			% Change 2018 to 2019	2018			% Change 2017 to 2018	2017
Net loss	$	(13,000	)		$	(126,503	)		$	(32,848	)
Adjustments:
Depreciation and amortization of real estate
Consolidated		136,422				131,694				127,327
Unconsolidated		9,874				8,612				10,974
Gain on sale of real estate by equity method investee		—				(2,772	)			(6,539	)
Gains (losses) on sales of real estate, net		(2,756	)			(1,525	)			361
Impairment of real estate assets		1,456				129,365				55,793
Dividends on preferred shares		(27,375	)			(27,375	)			(27,845	)
Loss on redemption of preferred shares		—				—				(4,103	)
Funds from operations attributable to common shareholders and OP Unit holders	$	104,621		(6.2)%	$	111,496		(9.4)%	$	123,120
Impairment of mortgage loan receivable		—				8,122				—
Provision for employee separation expense		3,689				1,139				1,299
Insurance recoveries, net		(4,362	)			(689	)			—
Gain (loss) on debt extinguishment		(24,859	)			363				1,557
Loss on redemption of preferred shares		—				—				4,103
Impairment of development land parcel		3,562				—				—
Funds from operations attributable to common shareholders and OP Unit holders, as adjusted	$	82,651		(31.4)%	$	120,431		(7.4)%	$	130,079
Funds from operations attributable to common shareholders and OP Unit holders per diluted share and OP Unit	$	1.33		(7.0)%	$	1.43		(9.5)%	$	1.58
Funds from operations attributable to common shareholders and OP Unit holders, as adjusted, per diluted share and OP Unit	$	1.05		(32.0)%	$	1.54		(7.8)%	$	1.67
Weighted average number of shares outstanding		75,221				69,749				69,364
Weighted average effect of full conversion of OP Units		3,221				8,273				8,297
Effect of common share equivalents		453				203				93
Total weighted average shares outstanding, including OP Units		78,895				78,225				77,754

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FFO was $104.6 million for 2019, a decrease of $6.9 million, or 6.2%, compared to $111.5 million for 2018. This decrease was primarily due to:

• a $12.5 million decrease in Same Store NOI primarily due to tenant bankruptcies and a $7.1 million decrease in lease termination revenue;

• a $7.5 million decrease in Non Same Store NOI primarily due to three anchor store closings during 2018 and 2019 and associated co-tenancy concessions, as well as a decrease in lease revenue at Exton Square Mall due to the sale of an outparcel in 2019 and the conveyance of Wyoming Valley Mall;

• a $7.7 million increase in general and administrative expense primarily due to the implementation of ASC 842;

• a $4.8 million decrease in gains on non-operating real estate;

• a $2.6 million increase in net interest expense;

• a $2.6 million increase in provision for employee separation expenses;

• a $2.3 million decrease in other income; and

• a $3.6 million increase in impairment of development land parcels; partially offset by

• a $24.9 million net gain on debt extinguishment;

• a $8.1 million impairment on a mortgage loan receivable asset in 2018 that did not recur in 2019; and

• a $4.4 million increase in insurance proceeds, net.$1.05

FFO per diluted share and OP Unit decreased $(0.10) per share to $1.33 per share for 2019, compared to $1.43 per share for 2018 due to the factors noted above and higher share count in the 2018 period.

FFO was $111.5 million for 2018, a decrease of $11.6 million, or 9.4%, compared to $123.1 million for 2017. This decrease was primarily due to:

• a $11.0 million decrease in Non Same Store NOI primarily due to properties sold; and

• a $8.1 million impairment on a mortgage loan receivable asset; partially offset by

• a $4.1 million loss on preferred share redemption in 2017;

• a $1.7 million decrease in interest expense; and

• a $0.8 million increase in Same Store NOI.

FFO per diluted share and OP Unit decreased $0.15 per share to $1.43 per share for 2018, compared to $1.58 per share for 2017 due to the factors noted above and higher share count in the 2018 period.

LIQUIDITY AND CAPITAL RESOURCES

This “Liquidity and Capital Resources” section contains certain “forward-looking statements” that relate to expectations and projections that are not historical facts. These forward-looking statements reflect our current views about our future liquidity and capital resources, and are subject to risks and uncertainties that might cause our actual liquidity and capital resources to differ materially from the forward-looking statements. Additional factors that might affect our liquidity and capital resources include those discussed in the section entitled “Item 1A. Risk Factors.” We do not intend to update or revise any forward-looking statements about our liquidity and capital resources to reflect new information, future events or otherwise.

Capital Resources

We currently expect to meet our short-term liquidity requirements, including distributions to shareholders, recurring capital expenditures, tenant improvements and leasing commissions, but excluding acquisitions and redevelopment and development projects, generally through our available working capital and net cash provided by operations and our 2018 Revolving Facility, subject to the terms and conditions of our 2018 Revolving Facility. See “Identical covenants and common provisions contained in the Credit Agreements” below for covenant information. We expect to spend approximately $75.2 million related to our capital improvements and development projects and an additional $25.0 million in incremental leasing costs for these redevelopment and development projects. We believe that our net cash provided by operations will be sufficient to allow us to make any distributions necessary to enable us to continue to qualify as a REIT under the Internal Revenue Code of 1986, as amended. The aggregate distributions made to preferred shareholders, common shareholders and OP Unit holders for 2019 were $94.1 million, based on distributions of $1.8436 per Series B Preferred Share, distributions of $1.8000 per Series C Preferred Share, distributions of $1.7188 per Series D Preferred Share and distributions of $0.84 per common share and OP Unit. For the first quarter of 2020, we have announced a distribution of $0.21 per common share and OP Unit.

In December 2019, our universal shelf registration statement was filed with the SEC and became effective. We may use the availability under our shelf registration statement to offer and sell common shares of beneficial interest, preferred shares and various types of debt securities, among other types of securities, to the public.

During 2019, we raised capital from a number of sources, including proceeds of $50.4 million from our share of asset sales by us and our unconsolidated subsidiaries, $148.0 million in distributions from the proceeds of the Fashion District Philadelphia Term Loan ($124.0 million and $25.0 million in 2018 and 2019, respectively), and net proceeds of $190.0 million from our revolving facilities.

We are actively seeking to raise additional capital, including through asset dispositions identified through our portfolio property reviews. Disposing of these properties can enable us to redeploy or recycle our capital to other uses. During December 2019 and subsequently, we have

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executed agreements of sale that are expected to provide an aggregate of up to approximately $312.0 million in proceeds and net liquidity improvement of approximately $200.0 million. These agreements include a sale-leaseback transaction for five properties, the sale of land parcels for multifamily residential development, the sale of operating outparcels and the sale of land parcels for hotel development. Each of the transactions is subject to numerous closing conditions, including the completion of due diligence and securing of entitlements, and closing of the transactions cannot be assured or the timing of their completion yet estimated with certainty.

The following are some of the factors that could affect our cash flows and require the funding of future cash distributions, recurring capital expenditures, tenant improvements or leasing commissions with sources other than operating cash flows:

• adverse changes or prolonged downturns in general, local or retail industry economic, financial, credit or capital market or competitive conditions, leading to a reduction in real estate revenue or cash flows or an increase in expenses;

• deterioration in our tenants’ business operations and financial stability, including anchor or non-anchor tenant bankruptcies, leasing delays or terminations, or lower sales, causing deferrals or declines in rent, percentage rent and cash flows;

• inability to achieve targets for, or decreases in, property occupancy and rental rates, resulting in lower or delayed real estate revenue and operating income;

• increases in operating costs, including increases that cannot be passed on to tenants, resulting in reduced operating income and cash flows; and

• increases in interest rates, resulting in higher borrowing costs.

In addition, we are continuing to monitor the outbreak of a novel coronavirus (COVID-19) and the related business and travel restrictions and changes to behavior intended to reduce its spread, and its impact on our tenants, their supply chains and customers and the retail industry. The magnitude and duration of the pandemic and its impact on our operations and liquidity is uncertain as of the date of the Report as this continues to evolve globally. However, if the outbreak continues on its current trajectory, such impacts could grow and become material.  To the extent that our tenants and their customers and suppliers continue to be impacted by the coronavirus outbreak, or by the other risks identified in this Report, this could materially interrupt our business operations.

We expect to meet certain of our longer-term requirements, such as obligations to fund redevelopment and development projects, certain capital requirements (including scheduled debt maturities), future property and portfolio acquisitions, renovations, expansions and other non-recurring capital improvements, through a variety of capital sources, subject to the terms and conditions of our Credit Agreements, as further described below.

LIBOR Alternative

In July 2017, the Financial Conduct Authority (“FCA”), which is the authority that regulates LIBOR, announced it intends to stop compelling banks to submit rates for the calculation of LIBOR after 2021. The Alternative Reference Rates Committee (“ARRC”) has identified the Secured Overnight Financing Rate (“SOFR”) as the rate that represents best practice as the alternative to USD-LIBOR for use in derivatives and other financial contracts that are currently indexed to USD-LIBOR. We are not able to predict when LIBOR will cease to be available or when there will be sufficient liquidity in the SOFR markets. Any changes adopted by FCA or other governing bodies in the method used for determining LIBOR may result in a sudden or prolonged increase or decrease in reported LIBOR. If that were to occur, our interest payments could change, perhaps substantially. In addition, uncertainty about the extent and manner of future changes may result in interest rates and/or payments that are higher or lower than if LIBOR were to remain available in its current form.

We have material contracts that are indexed to LIBOR and are monitoring and evaluating the related risks, which include interest on loans or amounts received and paid on derivative instruments. These risks arise in connection with transitioning contracts to a new alternative rate, including any resulting value transfer that may occur. The value of loans, securities, and derivative instruments tied to LIBOR could also be affected if LIBOR is limited or discontinued. For some instruments, the method of transitioning to an alternative rate may be challenging, as they may require negotiation with the respective counterparty.

If a contract is not transitioned to an alternative rate and LIBOR is discontinued, the impact on our contracts is likely to vary by contract. If LIBOR is discontinued or if the methods of calculating LIBOR change from their current form, interest rates on our current or future indebtedness may be adversely affected.

While we expect LIBOR to be available in substantially its current form until the end of 2021, it is possible that LIBOR will become unavailable prior to that point. This could occur, for example, if a requisite number of banks decline to make submissions to the LIBOR administrator. In that case, the risks associated with the transition to an alternative reference rate would be accelerated and magnified.

Credit Agreements

We have entered into two credit agreements (collectively, as amended, the “Credit Agreements”): (1) the 2018 Credit Agreement, which, as described in more detail below, includes (a) the 2018 Revolving Facility, and (b) the 2018 Term Loan Facility, and (2) the 2014 7-Year Term Loan. The 2018 Term Loan Facility and the 2014 7-Year Term Loan are collectively referred to as the “Term Loans.”

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As of December 31, 2019, we had borrowed $550.0 million under the Term Loans and $255.0 million under the 2018 Revolving Facility. The carrying value of the Term Loans on our consolidated balance sheet as of December 31, 2019 is net of $1.8 million of unamortized debt issuance costs. The net operating income (“NOI”) from our unencumbered properties is at a level such that within the Unencumbered Debt Yield covenant (see note 4 in the notes to our consolidated financial statements) under the Credit Agreements, the maximum amount that was available to be borrowed by us under the 2018 Revolving Facility as of December 31, 2019 was $30.1 million.

Identical covenants and common provisions contained in the Credit Agreements

See note 4 in the notes to our consolidated financial statements for a description of the identical covenants and common provisions contained in the Credit Agreements.

As of December 31, 2019, we were in compliance with all such financial covenants. However, we anticipate not meeting certain financial covenants applicable under the Credit Agreements during 2020. We plan to continue to work with our lender group to obtain temporary debt covenant relief through September 2020 and then pursue a longer term financing solution prior to the expiration of the initial modification. In addition, we plan to execute the sale-leaseback of certain properties, sell certain real estate assets and control certain operational costs. Due to the inherent risks, unknown results and significant uncertainties associated with each of these matters and the direct correlation between these matters and our ability to satisfy our financial obligations that may arise over the applicable twelve month period, we are unable to conclude that it is probable that we will be able to meet our obligations arising within twelve months of the date of issuance of these financial statements and continue as a going concern.

As a result, management evaluated whether this was mitigated by our approved plans and expectations for the applicable period under the second step of the going concern accounting standard.

Our ability to satisfy obligations under our senior unsecured credit facility and mortgage loans, maintain compliance with our debt covenants and fund recurring costs of operations depends primarily on management’s ability to obtain relief from the lender group in regards to debt covenants, execute the sale-leaseback of certain properties, complete the sale of certain real estate assets which will provide cash from those sales, and continue to control operational costs. While controlling operational costs is within management’s control to some extent, executing the sale-leaseback transactions, selling real estate assets, and obtaining relief from the lender group through modified debt covenant requirements involve performance by third parties and therefore cannot be considered probable of occurring. In particular, as of the date of the filing of this Annual Report on Form 10-K, we are in active discussions with the banks participating in our credit facilities to modify the terms of the Credit Agreements and obtain debt covenant relief. See “Item 1A. Risk Factors – Risks Related to our Indebtedness and Our Financing – If we are unable to comply with the covenants in our credit agreements, we might be adversely affected.” and “Item 1A. Risk Factors – Risks Related to our Indebtedness and Our Financing – We have determined that there is substantial doubt about our ability to continue as a going concern within.”

Preferred Shares

We have 3,450,000 7.375% Series B Cumulative Redeemable Perpetual Preferred Shares (the “Series B Preferred Shares”) outstanding, 6,900,000 7.20% Series C Cumulative Redeemable Perpetual Preferred Shares (the “Series C Preferred Shares”) outstanding and 5,000,000 6.875% Series D Cumulative Redeemable Perpetual Preferred Shares (the “Series D Preferred Shares”) outstanding. Upon 30 days’ notice, we may redeem any or all of the Series B Preferred Shares at $25.00 per share plus any accrued and unpaid dividends. We may not redeem the Series C Preferred Shares and the Series D Preferred Shares before January 27, 2022 and September 15, 2022, respectively, except to preserve our status as a REIT or upon the occurrence of a Change of Control, as defined in the Trust Agreement addendums designating the Series C and Series D Preferred Shares, respectively. On and after January 27, 2022 and September 15, 2022, we may redeem any or all of the Series C Preferred Shares or the Series D Preferred Shares, respectively, at $25.00 per share plus any accrued and unpaid dividends. In addition, upon the occurrence of a Change of Control, we may redeem any or all of the Series C Preferred Shares or the Series D Preferred Shares for cash within 120 days after the first date on which such Change of Control occurred at $25.00 per share plus any accrued and unpaid dividends. The Series B Preferred Shares, the Series C Preferred Shares and the Series D Preferred Shares have no stated maturity, are not subject to any sinking fund or mandatory redemption and will remain outstanding indefinitely unless we redeem or otherwise repurchase them or they are converted.

Mortgage Loan Activity—Consolidated Properties

The following table presents the mortgage loans we have entered into or extended since January 1, 2017 related to our consolidated properties:

Financing Date	Property	Amount Financed or Extended (in millions of dollars)		Stated Interest Rate	Maturity
2018 Activity:
January	Francis Scott Key (1)	$	68.5	LIBOR plus 2.60%	January 2022
February	Viewmont Mall (2)	$	10.2	LIBOR Plus 2.35%	March 2021

⁽¹⁾ In January 2018, the $68.5 million mortgage loan secured by Francis Scott Key was amended to extend the initial maturity date to January 2022, and has a one-year extension option that would further extend the maturity date to January 2023.

⁽²⁾ In 2018, the mortgage was increased by $10.2 million to $67.2 million. In 2016, the mortgage was increased by $9.0 million and the interest rate was lowered to LIBOR plus 2.35% and the maturity date was extended to March 2021.

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We received a notice of transfer of servicing, dated July 9, 2018, from the special servicer for the mortgage loan secured by Wyoming Valley Mall, which had a balance of $72.8 million as of September 26, 2019. Our subsidiary that was the borrower under the loan also received a notice of default on the loan from the lender, dated December 14, 2018. The loan was subject to a cash sweep arrangement as a result of an anchor tenant trigger event. We had entered into an agreement with the lender to jointly market the property for sale for a stipulated period of time. The property did not sell and we conveyed the property to the lender by deed in lieu of foreclosure on September 26, 2019.

In April 2019, we received a notice from the servicer of the Cumberland Mall mortgage of a cash sweep event due to the failure of an anchor tenant to renew for a full term. We satisfied this requirement in August 2019.

In March 2017, we repaid a $150.6 million mortgage loan plus accrued interest secured by The Mall at Prince Georges in Hyattsville, Maryland using $110.0 million from our 2013 Revolving Facility and the balance from available working capital.

Mortgage Loans

Our mortgage loans, which are secured by ten of our consolidated properties, are due in installments over various terms extending to the year 2025.  Seven of these mortgage loans bear interest at fixed interest rates that range from 3.88% to 5.95% and had a weighted average interest rate of 4.08% at December 31, 2019. Three of our mortgage loans bear interest at variable rates and had a weighted average interest rate of 3.94% at December 31, 2019. The weighted average interest rate of all consolidated mortgage loans was 4.04% at December 31, 2019. Mortgage loans for properties owned by unconsolidated partnerships are accounted for in “Investments in partnerships, at equity” and “Distributions in excess of partnership investments,” and are not included in the table below.

The following table outlines the timing of principal payments and balloon payments pursuant to the terms of our mortgage loans on our consolidated properties as of December 31, 2019:

	Payments by Period
(in thousands of dollars)	Total		2020		2021		2022		2023-2024		Thereafter
Consolidated mortgage loans
Principal payments	$	64,985	$	16,266	$	17,862	$	13,462	$	12,989	$	4,406
Balloon payments		836,580		27,161		188,785		355,989		53,299		211,346
Total consolidated mortgage loans	$	901,565	$	43,427	$	206,647	$	369,451	$	66,288	$	215,752
Less: Unamortized debt issuance costs		1,812
Carrying value of mortgage notes payable	$	899,753

Contractual Obligations

The following table presents our consolidated aggregate contractual obligations as of December 31, 2019 for the periods presented:

(in thousands of dollars)	Total		2020		2021-2022		2023-2024		Thereafter
Mortgage loans	$	901,565	$	43,427	$	576,098	$	66,288	$	215,752
Term Loans	$	550,000		—		250,000		300,000		—
2018 Revolving Facility	$	255,000		—		255,000		—		—
Interest on indebtedness (1)	$	192,318		69,038		94,704		22,195		6,381
Operating leases	$	4,328		688		1,949		1,691		—
Ground leases	$	54,889		1,549		3,319		3,168		46,853
Development and redevelopment commitments (2)	$	75,224		73,306		1,918		—		—
Total	$	2,033,324	$	188,008	$	1,182,988	$	393,342	$	268,986

⁽¹⁾ Includes interest payments expected to be made on consolidated debt, including those in connection with interest rate swap agreements.

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⁽²⁾ The timing of the payments of these amounts is uncertain. We expect that a significant majority of such payments (of which we include 100% of obligations related to Fashion District Philadelphia, which opened in September 2019) will be made prior to December 31, 2020, but cannot provide any assurance that changed circumstances at these projects will not delay the settlement of these obligations. In addition, our operating partnership, PREIT Associates, has jointly and severally guaranteed the obligations of the joint venture we formed with Macerich to develop Fashion District Philadelphia to commence and complete a comprehensive redevelopment of that property costing not less than $300.0 million within 48 months after commencement of construction, which was March 14, 2016. As of December 31, 2019, we expect to meet this obligation.

Mortgage Loan Activity—Unconsolidated Properties

The following table presents the mortgage loans secured by our unconsolidated properties entered into since January 1, 2017:

Financing Date	Property	Amount Financed or Extended (in millions of dollars)		Stated Interest Rate	Maturity
2018 Activity:
February	Pavilion at Market East (1)	$	8.3	LIBOR plus 2.85%	February 2021
March	Gloucester Premium Outlets (2)		86.0	LIBOR plus 1.50%	March 2022
2017 Activity:
October	Lehigh Valley Mall (3)(4)	$	200.0	Fixed 4.06%	November 2027

⁽¹⁾ We own a 40% partnership interest in Pavilion at Market East and our share of this mortgage loan is $3.2 million.

⁽²⁾ We own a 25% partnership interest in Gloucester Premium Outlets and our share of this mortgage loan is $21.5 million.

⁽³⁾ The proceeds were used to repay the existing $124.6 million mortgage loan plus accrued interest. We own a 50% partnership interest in Lehigh Valley Mall and our share of this mortgage loan is $100.0 million.

⁽⁴⁾ We received $35.3 million of proceeds as a distribution in connection with the financing. In connection with this new mortgage loan financing, the unconsolidated entity recorded $3.1 million of prepayment penalty and accelerated the amortization of $0.1 million of unamortized financing costs in the fourth quarter of 2017.

Interest Rate Derivative Agreements

As of December 31, 2019, we had interest rate swap agreements outstanding with a weighted average base interest rate of 1.85% on a notional amount of $795.6 million, maturing on various dates through May 2023, and forward starting interest rate swap agreements with a weighted average base interest rate of 2.75% on a notional amount of $100.0 million, with effective dates in June 2020, and maturity dates in May 2023. We entered into these interest rate swap agreements in order to hedge the interest payments associated with our issuances of variable interest rate long term debt. The interest rate swap agreements are net settled monthly.

We assessed the effectiveness of these swap agreements as hedges at inception and do so on a quarterly basis. On December 31, 2019, we considered these interest rate swap agreements to be highly effective as cash flow hedges.

As of December 31, 2019, the fair value of derivatives in a liability position, which excludes accrued interest but includes any adjustment for nonperformance risk related to these agreements, was $13.1 million. If we had breached any of the default provisions in these agreements as of December 31, 2019, we might have been required to settle our obligations under the agreements at their termination value (including accrued interest) of $12 million. We had not breached any of these provisions as of December 31, 2019.

The carrying amount of the associated assets are recorded in “Deferred costs and other assets,” liabilities are reflected in “Fair value of derivative instruments” and the net unrealized loss is reflected in “Accumulated other comprehensive loss” in the accompanying consolidated balance sheets and consolidated statements of comprehensive income.

CASH FLOWS

Net cash provided by operating activities totaled $111.4 million for 2019 compared to $134.9 million for 2018 and $142.1 million for 2017.

The decrease in net cash provided by operating activities in 2019 is primarily due to dilution from sales of operating properties in 2018, partially offset by changes in working capital, distributions from partnerships, and other items. The decrease in net cash provided by operating activities in 2018 is primarily due to dilution from sales of operating properties in 2017, partially offset by changes in working capital and other items.

Cash flows used in investing activities were $131.4 million for 2019, compared to $41.6 million for 2018 and $105.4 million for 2017.

Investing activities in 2019 included investment in construction in progress of $113.8 million, investments in partnerships of $72.9 million (primarily at Fashion District Philadelphia) and real estate improvements of $34.3 million (primarily related to capital improvements at our properties, including tenant allowances), partially offset by $50.4 million of proceeds from land and outparcel sales, and $25.0 million of distributions from the FDP Term Loan.

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Investing activities in 2018 included investment in construction in progress of $75.6 million, investments in partnerships of $58.1 million (primarily at Fashion District Philadelphia) and real estate improvements of $35.2 million (primarily related to capital improvements at our properties, including tenant allowances), partially offset by $13.7 million of proceeds from land and outparcel sales, $123.0 million of distributions from the FDP Term Loan, and $19.7 million of proceeds from the sale of 907 Market Street by the Fashion District Philadelphia joint venture.

Investing activities for 2017 included investment in construction in progress of $116.6 million, investments in partnerships of $73.4 million (primarily at Fashion District Philadelphia) and real estate improvements of $51.9 million (primarily related to capital improvements at our properties, including tenant allowances), partially offset by $77.8 million of proceeds from the sale of three operating properties and two non-operating parcels, $35.2 million of distributions of refinancing proceeds from Lehigh Valley Mall and $30.3 million of proceeds from the sale of 801 Market Street by the Fashion District Philadelphia joint venture.

Cash flows provided by financing activities were $7.1 million for 2019 compared to cash flows used in financing activities of $94.8 million for 2018 and cash flows used in financing activities of $32.6 million for 2017.

Cash flows provided by financing activities for 2019 included aggregate dividends and distributions of $94.2 million and principal installments on mortgage loans of $17.9 million, offset by $190.0 million of net borrowings on our 2013 Revolving Facility.

Cash flows used in financing activities for 2018 included aggregate dividends and distributions of $93.5 million and principal installments on mortgage loans of $18.7 million, partially offset by $12.0 million of net borrowings on our 2013 Revolving Facility and a $10.2 million increase in Viewmont Mall’s mortgage principal.

Cash flows used in financing activities in 2017 included the mortgage loan repayments of $150.0 million on The Mall of Prince Georges, the Series A preferred share redemption of $115.0 million, aggregate dividends and distributions of $93.0 million, and principal installments on mortgage loans of $17.9 million, partially offset by $286.8 million of proceeds from our 2017 Series C and D Preferred Share offerings and $56.0 million of net borrowings from our 2013 Revolving Facility.

See note 1 to our consolidated financial statements for details regarding costs capitalized during 2019 and 2018.

COMMITMENTS

As of December 31, 2019, we had unaccrued contractual and other commitments related to our capital improvement projects and development projects of $75.2 million in the form of tenant allowances, lease termination fees, and contracts with general service providers and other professional service providers. In addition, our operating partnership, PREIT Associates, has jointly and severally guaranteed the obligations of the joint venture we formed with Macerich to develop Fashion District Philadelphia to commence and complete a comprehensive redevelopment of that property costing not less than $300.0 million within 48 months after commencement of construction, which was March 14, 2016. As of December 31, 2019, we expect to meet this obligation.

ENVIRONMENTAL

We are aware of certain environmental matters at some of our properties. We have, in the past, performed remediation of such environmental matters, and we are not aware of any significant remaining potential liability relating to these environmental matters or of any obligation to satisfy requirements for further remediation. We may be required in the future to perform testing relating to these matters. We have insurance coverage for certain environmental claims up to $25.0 million per occurrence and up to $25.0 million in the aggregate over our three year policy term. See “Item 1A. Risk Factors—We might incur costs to comply with environmental laws, which could have an adverse effect on our results of operations.”

COMPETITION AND TENANT CREDIT RISK

Competition in the retail real estate market is intense. We compete with other public and private retail real estate companies, including companies that own or manage malls, power centers, strip centers, lifestyle centers, factory outlet centers, theme/festival centers and community centers, as well as other commercial real estate developers and real estate owners, particularly those with properties near our properties, on the basis of several factors, including location and rent charged. We compete with these companies to attract customers to our properties, as well as to attract anchor and non-anchor store and other tenants. We also compete to acquire land for new site development or to acquire parcels or properties to add to our existing properties. Our malls and our other operating properties face competition from similar retail centers, including more recently developed or renovated centers that are near our retail properties. We also face competition from a variety of different retail formats, including internet retailers, discount or value retailers, home shopping networks, mail order operators, catalogs, and telemarketers. Our tenants face competition from companies at the same and other properties and from other retail formats as well, including internet retailers. This competition could have a material adverse effect on our ability to lease space and on the amount of rent and expense reimbursements that we receive.

The existence or development of competing retail properties and the related increased competition for tenants might, subject to the terms and conditions of the Credit Agreements, require us to make capital improvements to properties that we would have deferred or would not have otherwise planned to make and might also affect the total sales, sales per square foot, occupancy and net operating income of such properties. Any such capital improvements, undertaken individually or collectively, would involve costs and expenses that could adversely affect our results of operations.

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We compete with many other entities engaged in real estate investment activities for acquisitions of malls, other retail properties and prime development sites or sites adjacent to our properties, including institutional pension funds, other REITs and other owner-operators of retail properties. When we seek to make acquisitions, competitors might drive up the price we must pay for properties, parcels, other assets or other companies or might themselves succeed in acquiring those properties, parcels, assets or companies. In addition, our potential acquisition targets might find our competitors to be more attractive suitors if they have greater resources, are willing to pay more, or have a more compatible operating philosophy. In particular, larger REITs might enjoy significant competitive advantages that result from, among other things, a lower cost of capital, a better ability to raise capital, a better ability to finance an acquisition, better cash flow and enhanced operating efficiencies. We might not succeed in acquiring retail properties or development sites that we seek, or, if we pay a higher price for a property and/or generate lower cash flow from an acquired property than we expect, our investment returns will be reduced, which will adversely affect the value of our securities.

We receive a substantial portion of our operating income as rent under leases with tenants. At any time, any tenant having space in one or more of our properties could experience a downturn in its business that might weaken its financial condition. Such tenants might enter into or renew leases with relatively shorter terms. Such tenants might also defer or fail to make rental payments when due, delay or defer lease commencement, voluntarily vacate the premises or declare bankruptcy, which could result in the termination of the tenant’s lease or preclude the collection of rent in connection with the space for a period of time, and could result in material losses to us and harm to our results of operations. Also, it might take time to terminate leases of underperforming or nonperforming tenants and we might incur costs to remove such tenants. Some of our tenants occupy stores at multiple locations in our portfolio, and so the effect of any bankruptcy or store closings of those tenants might be more significant to us than the bankruptcy or store closings of other tenants. See “Item 2. Properties—Major Tenants.” In addition, under many of our leases, our tenants pay rent based, in whole or in part, on a percentage of their sales. Accordingly, declines in these tenants’ sales directly affect our results of operations. Also, if tenants are unable to comply with the terms of their leases, or otherwise seek changes to the terms, including changes to the amount of rent, we might modify lease terms in ways that are less favorable to us. Given current conditions in the economy, certain industries and the capital markets, in some instances retailers that have sought protection from creditors under bankruptcy law have had difficulty in obtaining debtor-in-possession financing, which has decreased the likelihood that such retailers will emerge from bankruptcy protection and has limited their alternatives.

SEASONALITY

There is seasonality in the retail real estate industry. Retail property leases often provide for the payment of all or a portion of rent based on a percentage of a tenant’s sales revenue, or sales revenue over certain levels. Income from such rent is recorded only after the minimum sales levels have been met. The sales levels are often met in the fourth quarter, during the November/December holiday season. Also, many new and temporary leases are entered into later in the year in anticipation of the holiday season and a higher number of tenants vacate their space early in the year. As a result, our occupancy and cash flows are generally higher in the fourth quarter and lower in the first and second quarters. Our concentration in the retail sector increases our exposure to seasonality and has resulted, and is expected to continue to result, in a greater percentage of our cash flows being received in the fourth quarter.

INFLATION

Inflation can have many effects on financial performance. Retail property leases often provide for the payment of rent based on a percentage of sales, which might increase with inflation. Leases might also provide for tenants to bear all or a portion of operating expenses, which might reduce the impact of such increases on us. However, rent increases might not keep up with inflation, or if we recover a smaller proportion of property operating expenses, we might bear more costs if such expenses increase because of inflation.

FORWARD LOOKING STATEMENTS

This Annual Report on Form 10-K for the year ended December 31, 2019, together with other statements and information publicly disseminated by us, contain certain forward-looking statements that can be identified by the use of words such as “anticipate,” “believe,” “estimate,” ”expect,” “intend,” “may,” “project,” and similar expressions. Forward-looking statements relate to expectations, beliefs, projections, future plans, strategies, anticipated events, trends and other matters that are not historical facts. These forward-looking statements reflect our current views about future events, achievements or results and are subject to risks, uncertainties and changes in circumstances that might cause future events, achievements or results to differ materially from those expressed or implied by the forward-looking statements. In particular, our business might be materially and adversely affected by the following:

• changes in the retail and real estate industries, including consolidation and store closings, particularly among anchor tenants;

• current economic conditions and the corresponding effects on tenant business performance, prospects, solvency and leasing decisions;

• our inability to collect rent due to the bankruptcy or insolvency of tenants or otherwise;

• our ability to maintain and increase property occupancy, sales and rental rates;

• increases in operating costs that cannot be passed on to tenants;

• the effects of online shopping and other uses of technology on our retail tenants;

• risks related to our development and redevelopment activities, including delays, cost overruns and our inability to reach projected occupancy or rental rates;

• acts of violence at malls, including our properties, or at other similar spaces, and the potential effect on traffic and sales;

• our ability to sell properties that we seek to dispose of or our ability to obtain prices we seek;

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• potential losses on impairment of certain long-lived assets, such as real estate, including losses that we might be required to record in connection with any dispositions of assets;

• our substantial debt and the liquidation preference of our preferred shares and our high leverage ratio and our ability to remain in compliance with our financial covenants under our debt facilities;

• our ability to refinance our existing indebtedness when it matures, on favorable terms or at all;

• our ability to raise capital, including through sales of properties or interests in properties and through the issuance of equity or equity-related securities if market conditions are favorable; and

• potential dilution from any capital raising transactions or other equity issuances.

Additional factors that might cause future events, achievements or results to differ materially from those expressed or implied by our forward-looking statements include those discussed in the section entitled “Item 1A. Risk Factors.” We do not intend to update or revise any forward-looking statements to reflect new information, future events or otherwise.

ITEM 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

The analysis below presents the sensitivity of the market value of our financial instruments to selected changes in market interest rates. As of December 31, 2019, our consolidated debt portfolio consisted of $899.8 million of fixed and variable rate mortgage loans (net of debt issuance costs), $300.0 million borrowed under our 2018 Term Loan Facility, which bore interest at a rate of 3.59% and $250.0 million borrowed under our 2014 7-Year Term Loan, which bore interest at a rate of 3.59%. As of December 31, 2019, $255.0 million was outstanding under our 2018 Revolving Facility, which bore interest at a rate of 3.31%.

Our mortgage loans, which are secured by 10 of our consolidated properties, are due in installments over various terms extending to October 2025. Seven of these mortgage loans bear interest at fixed interest rates that range from 3.88% to 5.95%, and had a weighted average interest rate of 4.08% at December 31, 2019. Three of our mortgage loans bear interest at variable rates, a portion of which has been swapped to fixed rates, and, taking into consideration the impact of interest rate swaps, had a weighted average interest rate of 3.94% at December 31, 2019. The weighted average interest rate of all consolidated mortgage loans was 4.04% at December 31, 2019. Mortgage loans for properties owned by unconsolidated partnerships are accounted for in “Investments in partnerships, at equity” and “Distributions in excess of partnership investments” on the consolidated balance sheets and are not included in the table below.

Our interest rate risk is monitored using a variety of techniques. The table below presents the principal amounts of the expected annual maturities due in the respective years and the weighted average interest rates for the principal payments in the specified periods:

	Fixed Rate Debt					Variable Rate Debt
(in thousands of dollars) For the Year Ending December 31,	Principal Payments		Weighted Average Interest Rate			Principal Payments		Weighted Average Interest Rate (1)
2020	$	41,747		5.03	%	$	1,680		3.69	%
2021	$	15,745		4.01	%	$	440,902		3.63	%
2022	$	302,539		3.96	%	$	321,912		3.26	%
2023	$	59,883		3.99	%	$	300,000		3.59	%
2024 and thereafter	$	222,156		4.04	%	$	—		—

⁽¹⁾ Based on the weighted average interest rate in effect as of December 31, 2019 and does not include the effect of our interest rate swap derivative instruments as described below.

As of December 31, 2019 and 2018, we had $1,064.5 million and $876.2 million, respectively, of variable rate debt.  To manage interest rate risk and limit overall interest cost, we may employ interest rate swaps, options, forwards, caps and floors, or a combination thereof, depending on the underlying exposure. Interest rate differentials that arise under swap contracts are recognized in interest expense over the life of the contracts. If interest rates rise, the resulting cost of funds is expected to be lower than that which would have been available if debt with matching characteristics was issued directly. Conversely, if interest rates fall, the resulting costs would be expected to be, and in some cases have been, higher. We may also employ forwards or purchased options to hedge qualifying anticipated transactions. Gains and losses are deferred and recognized in net income in the same period that the underlying transaction occurs, expires or is otherwise terminated. See Note 6 of the notes to our audited consolidated financial statements.

As of December 31, 2019, we had interest rate swap agreements outstanding with a weighted average base interest rate of 1.85% on a notional amount of $795.6 million, maturing on various dates through May 2023, and forward starting interest rate swap agreements with a weighted average base interest rate of 2.75% on a notional amount of $100.0 million, with effective dates in June 2020 and maturity dates in May 2023.

As of December 31, 2018, we had interest rate swap agreements outstanding with a weighted average base interest rate of 1.55% on a notional amount of $797.3 million, maturing on various dates through 2023, and forward starting interest rate swap agreements with a weighted average base interest rate of 2.71% on a notional amount of $250.0 million, with effective dates from January 2019 through June 2020 and maturity dates in May 2023.  

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Changes in market interest rates have different effects on the fixed and variable rate portions of our debt portfolio. A change in market interest rates applicable to the fixed portion of the debt portfolio affects the fair value, but it has no effect on interest incurred or cash flows. A change in market interest rates applicable to the variable portion of the debt portfolio affects the interest incurred and cash flows, but does not affect the fair value. The following sensitivity analysis related to our debt portfolio, which includes the effects of our interest rate swap agreements, assumes an immediate 100 basis point change in interest rates from their actual December 31, 2019 levels, with all other variables held constant.

A 100 basis point increase in market interest rates would have resulted in a decrease in our net financial instrument position of $36.9 million at December 31, 2019. A 100 basis point decrease in market interest rates would have resulted in an increase in our net financial instrument position of $38.3 million at December 31, 2019. Based on the variable rate debt included in our debt portfolio at December 31, 2019, a 100 basis point increase in interest rates would have resulted in an additional $2.7 million in interest expense annually. A 100 basis point decrease would have reduced interest incurred by $2.7 million annually.

A 100 basis point increase in market interest rates would have resulted in a decrease in our net financial instrument position of $49.2 million at December 31, 2018.  A 100 basis point decrease in market interest rates would have resulted in an increase in our net financial instrument position of $51.5 million at December 31, 2018.  Based on the variable rate debt included in our debt portfolio at December 31, 2018, a 100 basis point increase in interest rates would have resulted in an additional $0.8 million in interest expense annually.

Because the information presented above includes only those exposures that existed as of December 31, 2019, it does not consider changes, exposures or positions which have arisen or could arise after that date. The information presented herein has limited predictive value. As a result, the ultimate realized gain or loss or expense with respect to interest rate fluctuations will depend on the exposures that arise during the period, our hedging strategies at the time and interest rates.

ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

Our consolidated balance sheets as of December 31, 2019 and 2018, and the related consolidated statements of operations, comprehensive income, equity and cash flows for the years ended December 31, 2019, 2018 and 2017, and the notes thereto, our report on internal control over financial reporting, the reports of our independent registered public accounting firm thereon, our summary of unaudited quarterly financial information for the years ended December 31, 2019 and 2018, and the financial statement schedule begin on page F-1 of this report.

ITEM 9.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

None.

ITEM 9A.    CONTROLS AND PROCEDURES.

We are committed to providing accurate and timely disclosure in satisfaction of our SEC reporting obligations. In 2002, we established a Disclosure Committee to formalize our disclosure controls and procedures, which are periodically assessed by our Chief Executive Officer and Chief Financial Officer for effectiveness. Our Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2019, and have concluded as follows:

• Our disclosure controls and procedures are designed to ensure that the information that we are required to disclose in our reports under the Securities Exchange Act of 1934 (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

• Our disclosure controls and procedures are effective to ensure that information that we are required to disclose in our Exchange Act reports is accumulated and communicated to management, including our principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.

There was no change in our internal control over financial reporting that occurred during the fourth quarter of 2019 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

See “Management’s Report on Internal Control Over Financial Reporting” included before the consolidated financial statements contained in this report.

ITEM 9B.    OTHER INFORMATION.

None.

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PART III

ITEM 10.    TRUSTEES, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

The information required by this Item is incorporated by reference to, and will be contained in, our definitive proxy statement, and thus we have omitted such information in accordance with General Instruction G(3) to Form 10-K.

ITEM 11.    EXECUTIVE COMPENSATION.

The information required by this Item is incorporated by reference to, and will be contained in, our definitive proxy statement, and thus we have omitted such information in accordance with General Instruction G(3) to Form 10-K.

ITEM 12.     SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS.

The information required by this Item is incorporated by reference to, and will be contained in, our definitive proxy statement, and thus we have omitted such information in accordance with General Instruction G(3) to Form 10-K.

ITEM 13.     CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND TRUSTEE INDEPENDENCE.

The information required by this Item is incorporated by reference to, and will be contained in, our definitive proxy statement, and thus we have omitted such information in accordance with General Instruction G(3) to Form 10-K.

ITEM 14.    PRINCIPAL ACCOUNTANT FEES AND SERVICES.

The information required by this Item is incorporated by reference to, and will be contained in, our definitive proxy statement, and thus we have omitted such information in accordance with General Instruction G(3) to Form 10-K.

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PART IV

ITEM 15.    EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

The following documents are included in this report:

(1) Financial Statements
Management’s Report on Internal Control Over Financial Reporting	F-1
Reports of Independent Registered Public Accounting Firm	F-2
Consolidated Balance Sheets as of December 31, 2019 and 2018	F-4
Consolidated Statements of Operations for the years ended December 31, 2019, 2018 and 2017	F-5
Consolidated Statements of Comprehensive Income for the years ended December 31, 2019, 2018 and 2017	F-7
Consolidated Statements of Equity for the years ended December 31, 2019, 2018 and 2017	F-8
Consolidated Statements of Cash Flows for the years ended December 31, 2019, 2018 and 2017	F-9
Notes to Consolidated Financial Statements	F-10
(2) Financial Statement Schedules
III – Real Estate and Accumulated Depreciation	S-1

All other schedules are omitted because they are not applicable, not required or because the required information is reported in the consolidated financial statements or notes thereto.

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(3) Exhibits

2.1	Contribution Agreement, dated as of March 2, 2014, by and among Franconia Two, L.P., PR Springfield Town Center LLC, PREIT Associates, L.P. and Vornado Realty L.P., filed as Exhibit 10.1 to PREIT’s Quarterly Report on Form 10-Q filed on August 1, 2014, is incorporated herein by reference.
3.1	Amended and Restated Trust Agreement dated December 18, 2008, filed as Exhibit 3.1 to PREIT’s Current Report on Form 8-K filed on December 23, 2008, is incorporated herein by reference.
3.2	Amendment, dated June 7, 2012, to Amended and Restated Trust Agreement of Pennsylvania Real Estate Investment Trust dated December 18, 2008, as amended, filed as Exhibit 3.1 to PREIT’s Current Report on Form 8-K filed on June 12, 2012, is incorporated herein by reference.
3.3	By-Laws of PREIT as amended through July 26, 2007, filed as Exhibit 3.2 to PREIT’s Current Report on Form 8-K filed on August 1, 2007, is incorporated herein by reference.
3.4	Designating Amendment to Trust Agreement designating the rights, preferences, privileges, qualifications, limitations and restrictions of PREIT’s 8.25% Series A Cumulative Redeemable Perpetual Preferred Shares, liquidation preference $25.00 per share, par value $0.01 per share, filed as Exhibit 3.2 to PREIT’s Form 8-A filed on April 20, 2012, is incorporated herein by reference.
3.5	Second Designating Amendment to Trust Agreement designating the rights, preferences, privileges, qualifications, limitations and restrictions of PREIT’s 7.375% Series B Cumulative Redeemable Perpetual Preferred Shares, liquidation preference $25.00 per share, par value $0.01 per share, filed as Exhibit 3.2 to PREIT’s Form 8-A filed on October 11, 2012, is incorporated herein by reference.
3.6	Third Designating Amendment to Trust Agreement designating the rights, preferences, privileges, qualifications, limitations and restrictions of PREIT’s 7.20% Series C Cumulative Redeemable Perpetual Preferred Shares, liquidation preference $25.00 per share, par value $0.01 per share, filed as Exhibit 3.4 to PREIT’s Form 8-A filed on January 27, 2017, is incorporated by reference.
3.7	Fourth Designating Amendment to Trust Agreement designating the rights, preferences, privileges, qualifications, limitations and restrictions of PREIT’s 6.875% Series D Cumulative Redeemable Perpetual Preferred Shares, liquidation preference $25.00 per share, par value $0.01 per share, filed as Exhibit 3.5 to PREIT’s Form 8-A filed on September 11, 2017, is incorporated herein by reference.
4.1	First Amended and Restated Agreement of Limited Partnership, dated September 30, 1997, of PREIT Associates, L.P., filed as Exhibit 4.15 to PREIT’s Current Report on Form 8-K dated October 14, 1997, is incorporated herein by reference.
4.2	First Amendment to the First Amended and Restated Agreement of Limited Partnership, dated July 15, 1998, of PREIT Associates, L.P., filed as Exhibit 4.1 to PREIT’s Quarterly Report on Form 10-Q filed on November 13, 1998, is incorporated herein by reference.
4.3	Second Amendment to the First Amended and Restated Agreement of Limited Partnership, dated July 15, 1998, of PREIT Associates, L.P., filed as Exhibit 4.2 to PREIT’s Quarterly Report on Form 10-Q filed on November 13, 1998, is incorporated herein by reference.
4.4	Third Amendment to the First Amended and Restated Agreement of Limited Partnership, dated October 13, 1998, of PREIT Associates, L.P., filed as Exhibit 4.3 to PREIT’s Quarterly Report on Form 10-Q filed on November 13, 1998, is incorporated herein by reference.
4.5	Fourth Amendment to First Amended and Restated Agreement of Limited Partnership, dated May 13, 2003, of PREIT Associates L.P., filed as Exhibit 4.1 to PREIT’s Quarterly Report on Form 10-Q filed on November 7, 2003, is incorporated herein by reference.
4.6	Addendum to First Amended and Restated Agreement of Limited Partnership of PREIT Associates, L.P. designating the rights, obligations, duties and preferences of Series A Preferred Units, filed as Exhibit 10.1 to PREIT’s Current Report on Form 8-K filed on April 20, 2012, is incorporated herein by reference.
4.7	Second Addendum to First Amended and Restated Agreement of Limited Partnership of PREIT Associates, L.P. designating the rights, obligations, duties and preferences of the Series B Preferred Units, filed as Exhibit 10.1 to PREIT’s Current Report on Form 8-K filed on October 11, 2012, is incorporated herein by reference.
4.8	Third Addendum to First Amended and Restated Agreement of Limited Partnership of PREIT Associates, L.P. designating the rights, obligations, duties and preferences of the Series C Preferred Units, filed as Exhibit 10.1 to PREIT’s Current Report on Form 8-K filed on January 27, 2017, is incorporated herein by reference.

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4.9	Fourth Addendum to First Amended and Restated Agreement of Limited Partnership of PREIT Associates, L. P. designating the rights, obligations, duties and preferences of the Series D Preferred Units, filed as Exhibit 10.1 to PREIT’s Current Report on form 8-K filed on September 11, 2017, is incorporated herein by reference.
4.10	Form of share certificate evidencing the 8.25% Series A Cumulative Redeemable Perpetual Preferred Shares, filed as Exhibit 4.1 to PREIT’s Form 8-A filed on April 20, 2012, is incorporated herein by reference.
4.11	Form of share certificate evidencing the 7.375% Series B Cumulative Redeemable Perpetual Preferred Shares, filed as Exhibit 4.1 to PREIT’s Form 8-A filed on October 11, 2012, is incorporated herein by reference.
4.12	Form of share certificate evidencing the 7.20% Series C Cumulative Redeemable Perpetual Preferred Shares, filed as Exhibit 4.3 to PREIT’s Form 8-A filed on January 27, 2017, is incorporated herein by reference.
4.13	Form of share certificate evidencing the 6.875% Series D Cumulative Redeemable Perpetual Preferred Shares, filed as Exhibit 4.4 to PREIT’s Form 8-A filed on September 11, 2017, is incorporated herein by reference.
4.14	Registration Rights Agreement, dated March 31, 2015, between Pennsylvania Real Estate Investment Trust, Franconia Two, L.P. and PREIT Associates, L.P. filed as Exhibit 4.1 to PREIT’s Current Report on Form 8-K on April 1, 2015, is incorporated herein by reference.
4.15*	Description of Registrant’s Securities is filed herewith.
10.1	Amended and Restated Credit Agreement dated as of May 24, 2018 by and among PREIT Associates, L.P., PREIT-RUBIN, Inc., PREIT and the financial institutions party thereto, filed as Exhibit 10.1 to PREIT’s Quarterly Report on Form 10-Q filed on August 3, 2018, is incorporated herein by reference.
10.2	Amended and Restated Guaranty dated as of May 24, 2018 in favor of Wells Fargo Bank, National Association, executed by certain direct and indirect subsidiaries of PREIT Associates, L.P., filed as Exhibit 10.2 to PREIT’s Quarterly Report on Form 10-Q filed on August 3, 2018, is incorporated herein by reference.
10.3	Seven-Year Term Loan Agreement dated as of January 8, 2014 by and among  PREIT Associates, L.P., PREIT-RUBIN, Inc., PREIT and the financial institutions party thereto, filed as Exhibit 10.9 to PREIT’s Annual Report on Form 10-K filed on February 28, 2014, is incorporated herein by reference.
10.4	Seven-Year Term Loan Guaranty dated as of January 8, 2014 in favor of Wells Fargo Bank, National Association, executed by certain direct and indirect subsidiaries of PREIT Associates, L.P, filed as Exhibit 10.10 to PREIT’s Annual Report on Form 10-K filed on February 28, 2014, is incorporated herein by reference.
10.5	First Amendment to Seven-Year Term Loan Agreement dated as of November 3, 2014 by and among PREIT Associates, L.P., PREIT-RUBIN, Inc., PREIT and the financial institutions party thereto, filed as Exhibit 10.12 to PREIT’s Annual Report on Form 10-K filed on February 23, 2015, is incorporated herein by reference.
10.6*	Second Amendment to Seven-Year Term Loan Agreement dated as of November 12, 2014 by and among PREIT Associates, L.P., PREIT-RUBIN, Inc., PREIT and the financial institutions party thereto, is filed herewith.
10.7	Third Amendment to Seven-Year Term Loan Agreement dated as of June 26, 2015 by and among PREIT Associates, L.P., PREIT-RUBIN, Inc., PREIT and the financial institutions party thereto, filed as Exhibit 10.3 to PREIT’s Quarterly Report on Form 10-Q filed on August 3, 2015, is incorporated herein by reference.
10.8	Fourth Amendment to Seven-Year Term Loan Agreement dated as of June 30, 2016 by and among PREIT Associates, L.P., PREIT-RUBIN, Inc., PREIT and the financial institutions party thereto, filed as Exhibit 10.2 to PREIT’s Quarterly Report on Form 10-Q filed on July 28, 2016, is incorporated herein by reference.
10.9	Fifth Amendment to Seven-Year Term Loan Agreement dated as of June 5, 2018 by and among PREIT Associates, L.P., PREIT-RUBIN, Inc., PREIT and the financial institutions party thereto, filed as Exhibit 10.3 to PREIT’s Quarterly Report on Form 10-Q filed on August 3, 2018, is incorporated herein by reference.
10.10	Promissory Note, dated August 15, 2012, in the principal amount of $150.0 million, issued by Cherry Hill Center, LLC and PR Cherry Hill STW LLC in favor of New York Life Insurance Company, filed as Exhibit 10.3 to PREIT’s Quarterly Report on Form 10-Q filed on October 26, 2012, is incorporated herein by reference.
10.11	Promissory Note, dated August 15, 2012, in the principal amount of $150.0 million, issued by Cherry Hill Center, LLC and PR Cherry Hill STW LLC in favor of Teachers Insurance and Annuity Association of America, filed as Exhibit 10.4 to PREIT’s Quarterly Report on Form 10-Q filed on October 26, 2012, is incorporated herein by reference.
+10.12	Amended and Restated Employment Agreement dated as of April 25, 2012 by and between PREIT and Joseph F. Coradino, filed as Exhibit 10.1 to PREIT’s Current Report on Form 8-K filed on April 27, 2012, is incorporated herein by reference.

62

+10.13	Amended and Restated Nonqualified Supplemental Executive Retirement Agreement dated as of June 7, 2012 by and between PREIT and Joseph F. Coradino, filed as Exhibit 10.1 to PREIT’s Current Report on Form 8-K filed on June 12, 2012, is incorporated herein by reference.
+10.14	Amended and Restated Employment Agreement, dated as of December 31, 2008, between PREIT and Robert F. McCadden, filed as Exhibit 10.4 to PREIT’s Current Report on Form 8-K filed on December 31, 2008, is incorporated herein by reference.
+10.15	Amendment No. 1 to Amended and Restated Employment Agreement, dated as of May 6, 2009, between PREIT and Robert F. McCadden, filed as Exhibit 10.1 to PREIT’s Quarterly Report on Form 10-Q filed on May 11, 2009, is incorporated herein by reference.
+10.16	Employment Agreement, dated as of January 1, 2020, between PREIT and Mario C. Ventresca, Jr., filed as Exhibit 99.1 to PREIT’s Current Report on Form 8-K/A filed on March 9, 2020, is incorporated herein by reference.
+10.17	Nonqualified Supplemental Executive Retirement Agreement, effective as of January 1, 2009, between PREIT and Robert F. McCadden, filed as Exhibit 10.9 to PREIT’s Current Report on Form 8-K filed on December 31, 2008, is incorporated herein by reference.
+10.18	Letter Agreement, dated as of May 8, 2013 by and between PREIT Services, LLC and Mario C. Ventresca, Jr., filed as Exhibit 10.29 to PREIT’s Annual Report on form 10-K filed on February 26, 2016, is incorporated herein by reference.
+10.19	Letter Agreement, dated as of May 8, 2013 by and between PREIT Services, LLC and Andrew M. Ioannou, filed as Exhibit 10.70 to PREIT’s Annual Report on Form 10-K filed on February 28, 2017, is incorporated herein by reference.
+10.20	Letter Agreement, dated as of December 21, 2017 by and between PREIT Services, LLC and Lisa M. Most, filed as Exhibit 10.21 to PREIT’s Annual report on Form 10-K filed February 25, 2019 is incorporated herein by reference.
+10.21	Letter Agreement, dated as of May 8, 2013 by and between PREIT Services, LLC and Joseph J. Aristone, filed as Exhibit 10.46 to PREIT’s Annual Report on Form 10-K/A filed March 28, 2019 is incorporated herein by reference.
+10.22	Letter Agreement, dated as of February 24, 2014 by and between PREIT Services, LLC and Heather Crowell, filed as Exhibit 10.47 to Amendment No. 1 to PREIT’s Annual Report on Form 10-K/A filed March 28, 2019 is incorporated herein by reference.
+10.23	Amended and Restated Employment Agreement, effective as of December 31, 2008, between PREIT and Bruce Goldman, filed as Exhibit 10.59 to PREIT’s Annual Report on Form 10-K filed on March 2, 2009, is incorporated herein by reference.
+10.24	Nonqualified Supplemental Executive Retirement Agreement, effective as of January 1, 2009, between PREIT and Bruce Goldman, filed as Exhibit 10.73 to PREIT’s Annual Report on Form 10-K filed on March 2, 2009, is incorporated herein by reference.
+10.25	Separation of Employment Agreement, dated December 21, 2017 between PREIT and Bruce Goldman, filed as Exhibit 10.49 to PREIT’s Annual Report on Form 10-K filed on February 16, 2018 is incorporated herein by reference.
+10.26	Severance Agreement and General Release, dated September 7, 2018 between PREIT Services, LLC and Jonathan Bell, filed as Exhibit 10.1 to PREIT’s Quarterly Report on Form 10-Q filed on November 1, 2018, is incorporated herein by reference.
+10.27*	Separation of Employment Agreement, dated December 23, 2019 between PREIT and Robert F. McCadden is filed herewith.
+10.28	Amended and Restated Employee Share Purchase Plan, filed as Exhibit 10.2 to PREIT’s Current Report on Form 8-K filed on June 1, 2018, is incorporated herein by reference.
+10.29	PREIT’s Second Amended and Restated 2003 Equity Incentive Plan, filed as Exhibit 10.3 to PREIT’s Current Report on Form 8-K filed on June 12, 2012, is incorporated herein by reference.
+10.30	Amendment No. 1 to Second Amended and Restated 2003 Equity Plan, filed as Exhibit 10.1 to PREIT’s Current Report on Form 8-K filed on July 22, 2013, is incorporated herein by reference.
+10.31	Form of Restricted Share Award Agreement under PREIT’s 2003 Equity Incentive Plan, filed as Exhibit 10.1 to PREIT’s Current Report on Form 8-K filed on February 26, 2008, is incorporated herein by reference.
+10.32	Form of Restricted Share Award Agreement under PREIT’s 2003 Equity Incentive Plan filed as Exhibit 10.3 to PREIT’s Quarterly Report on Form 10-Q filed on May 4, 2018, is incorporated herein by reference.
+10.33	PREIT’s 2018 Equity Incentive Plan, filed as Exhibit 10.1 to PREIT’s Current Report on Form 8-K filed on June 1, 2018, is incorporated herein by reference.
+10.34	2016-2018 Restricted Share Unit Program, filed as Exhibit 10.1 to PREIT’s Quarterly Report on Form 10-Q filed on April 29, 2016, is incorporated herein by reference.
+10.35	Form of 2016-2018 Restricted Share Unit and Dividend Equivalent Rights Award Agreement, filed as Exhibit 10.2 to PREIT’s Quarterly Report on Form 10-Q filed on April 29, 2016, is incorporated herein by reference.

63

+10.36	2017-2019 Restricted Share Unit Program, filed as Exhibit 10.1 to PREIT’s Quarterly Report on Form 10-Q filed on November 2, 2017, is incorporated herein by reference.
+10.37	Form of 2017-2019 Restricted Share Unit and Dividend Equivalent Rights Award Agreement, filed as Exhibit 10.2 to PREIT’s Quarterly Report on Form 10-Q filed on November 2, 2017, is incorporated herein by reference.
+10.38	2018-2020 Restricted Share Unit Program, filed as Exhibit 10.1 to PREIT’s Quarterly Report on Form 10-Q filed on May 4, 2018, is incorporated herein by reference.
+10.39	Form of 2018-2020 Restricted Share Unit and Dividend Equivalent Rights Award Agreement, filed as Exhibit 10.2 to PREIT’s Quarterly Report on Form 10-Q on May 4, 2018, is incorporated herein by reference.
+10.40	2019-2021 Equity Award Program, filed as Exhibit 10.1 to PREIT’s Quarterly Report on Form 10-Q on May 7, 2019, is incorporated herein by reference.
+10.41	Form of 2019-2021 Restricted Share Unit and Dividend Equivalent Rights Award Agreement, filed as Exhibit 10.2 to PREIT’s Quarterly Report on Form 10-Q on May 7, 2019, is incorporated herein by reference.
+10.42	Form of Restricted Share and Outperformance Unit Award Agreement under PREIT’s 2018 Equity Incentive Plan, filed as Exhibit 10.3 to PREIT’s Quarterly Report on Form 10-Q on May 7, 2019, is incorporated herein by reference.
+10.43	Form of Restricted Share Award Agreement under PREIT’s 2018 Equity Incentive Plan, filed as Exhibit 10.4 to PREIT’s Quarterly Report on Form 10-Q on May 7, 2019, is incorporated herein by reference.
10.44	Registration Rights Agreement, dated as of September 30, 1997, between PREIT and Florence Mall Partners, filed as Exhibit 10.31 to PREIT’s Current Report on Form 8-K filed on October 14, 1997, is incorporated herein by reference.
10.45	Registration Rights Agreement, dated as of April 28, 2003, between PREIT and Pan American Associates, filed as Exhibit 10.8 to PREIT’s Current Report on Form 8-K filed on May 13, 2003, is incorporated herein by reference.
10.46	Registration Rights Agreement, dated as of April 28, 2003, among PREIT, The Albert H. Marta Revocable Inter Vivos Trust, Marta Holdings I, L.P. and Ivyridge Investment Corp, filed as Exhibit 10.9 to PREIT’s Current Report on Form 8-K filed on May 13, 2003, is incorporated herein by reference.
10.47	Real Estate Management and Leasing Agreement made as of August 1, 1996 between The Rubin Organization, Inc. and Bellevue Associates, filed as Exhibit 10.102 to PREIT’s Annual Report on Form 10-K filed on March 16, 2005, is incorporated by reference.
10.48	Amendment of Real Estate Management And Leasing Agreement dated as of January 1, 2005 between PREIT-RUBIN, Inc., successor-in-interest to The Rubin Organization, and Bellevue Associates, filed as Exhibit 10.103 to PREIT’s Annual Report on Form 10-K filed on March 16, 2005, is incorporated herein by reference.
10.49	Amended and Restated Office Lease between Bellevue Associates and PREIT effective as of July 12, 1999, as amended by the First Amendment to Office Lease effective as of June 18, 2002, as further amended by the Second Amendment to Office Lease effective as of June 1, 2004, filed as Exhibit 10.10 to PREIT’s Quarterly Report on Form 10-Q filed on August 10, 2009, is incorporated herein by reference.
10.50	Fourth Amendment to Office Lease between Bellevue Associates and PREIT signed on April 26, 2012, filed as Exhibit 10.56 to PREIT’s Annual Report on Form 10-K, filed on March 1, 2013, is incorporated herein by reference.
10.51*	Lease between PREIT Associates, L.P. and Commerce Square Partners – Philadelphia Plaza, L.P., dated December 3, 2018, is filed herewith.
10.52*	First Amendment to Office Lease between PREIT Associates, L.P. and Commerce Square Partners – Philadelphia Plaza, L.P., dated September 27, 2019, is filed herewith.
10.53	Tax Protection Agreement, dated March 31, 2015, between PREIT Associates, L.P., PR Springfield Town Center LLC, Franconia Two, L.P., and Vornado Realty L.P., filed as Exhibit 10.1 to PREIT’s Current Report on Form 8-K filed on April 1, 2015, is incorporated herein by reference.
+10.54	PREIT Services, LLC Severance Pay Plan for Certain Officers, effective January 1, 2007, filed as Exhibit 99.1 to PREIT’s Current Report on Form 8-K filed January 18, 2017, is incorporated herein by reference.
21*	Direct and Indirect Subsidiaries of the Registrant.
23.1*	Consent of KPMG LLP (Independent Registered Public Accounting Firm).
23.2*	Consent of Ernst & Young, LLP (Independent Registered Public Accounting Firm).
24*	Power of Attorney (included on signature page to this Form 10-K).

64

31.1*	Certification pursuant to Exchange Act Rules 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*	Certification pursuant to Exchange Act Rules 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1**	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2**	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
99.1*	Audited Financial Statements of Lehigh Valley Associates and Subsidiary as of and for the year ended December 31, 2019.
99.2*	Unaudited Financial Statements of Lehigh Valley Associates and Subsidiary as of December 31, 2018 and 2017, and for the two years ended December 31, 2018.
101.INS*	Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH*	Inline XBRL Taxonomy Extension Schema Document.
101.CAL*	Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF*	Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB*	Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE*	Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104*	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101.INS).

+ Management contract or compensatory plan or arrangement required to be filed as an Exhibit to this form.

(*) Filed herewith

(**) Furnished herewith

ITEM 16.    FORM 10-K SUMMARY.

None.

65

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

		PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
Date:	March 13, 2020	By:	/s/ Joseph F. Coradino
			Joseph F. Coradino
			Chairman and Chief Executive Officer

66

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Mario C. Ventresca, Jr. and Joseph F. Coradino, or either of them, his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agents, and either of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully as he or she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agents, or either of them or any substitute therefore, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:

Name	Capacity	Date
/s/    Joseph F. Coradino	Chairman, Chief Executive Officer (principal executive officer) and Trustee	March 13, 2020
Joseph F. Coradino
/s/    Mario C. Ventresca, Jr.	Executive Vice President and Chief Financial Officer (principal financial officer and principal accounting officer)	March 13, 2020
Mario C. Ventresca, Jr.
/s/    George J. Alburger, Jr.	Trustee	March 13, 2020
George J. Alburger, Jr.
/s/    Michael J. DeMarco	Trustee	March 13, 2020
Michael J. DeMarco
/s/    JoAnne A. Epps	Trustee	March 13, 2020
JoAnne A. Epps
/s/    Leonard I. Korman	Trustee	March 13, 2020
Leonard I. Korman
/s/    Mark E. Pasquerilla	Trustee	March 13, 2020
Mark E. Pasquerilla
/s/    Charles P. Pizzi	Trustee	March 13, 2020
Charles P. Pizzi
/s/    John J. Roberts	Trustee	March 13, 2020
John J. Roberts

67

Management’s Report on Internal Control Over Financial Reporting

Management of Pennsylvania Real Estate Investment Trust (“us” or the “Company”) is responsible for establishing and maintaining adequate internal control over financial reporting. As defined in the rules of the Securities and Exchange Commission, internal control over financial reporting is a process designed by, or under the supervision of, our principal executive and principal financial officers and effected by our Board of Trustees, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with U.S. generally accepted accounting principles.

Our internal control over financial reporting includes those policies and procedures that:

(1) Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the Company’s transactions and the dispositions of assets of the Company;

(2) Provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of the Company’s management and trustees; and

(3) Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the consolidated financial statements.

Because of its inherent limitations, a system of internal control over financial reporting can provide only reasonable assurance with respect to financial statement preparation and presentation and may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In connection with the preparation of the Company’s annual consolidated financial statements, management has conducted an assessment of the effectiveness of our internal control over financial reporting based on the framework set forth in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Management’s assessment included an evaluation of the design of the Company’s internal control over financial reporting and testing of the operational effectiveness of those controls. Based on this evaluation, we have concluded that, as of December 31, 2019, our internal control over financial reporting was effective to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles.

Our independent registered public accounting firm, KPMG LLP, independently assessed the effectiveness of the Company’s internal control over financial reporting. KPMG LLP has issued a report on the effectiveness of internal control over financial reporting that is included on page F-3 in this report.

F-1

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Trustees
Pennsylvania Real Estate Investment Trust:

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Pennsylvania Real Estate Investment Trust and subsidiaries (the Company) as of December 31, 2019 and 2018, the related consolidated statements of operations, comprehensive income (loss), equity, and cash flows for each of the years in the three‑year period ended December 31, 2019, and the related notes and financial statement schedule III (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the years in the three‑year period ended December 31, 2019, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated March 13, 2020 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, in the event the Company does not meet certain covenants applicable under its credit agreements during 2020 the Company’s liquidity would not be sufficient to meet its obligations within one year of the date of issuance of the financial statements, which raises substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Change in Accounting Principle

As discussed in Note 1 to the consolidated financial statements, the Company has changed its method of accounting for leases as of January 1, 2019 due to the adoption of Financial Accounting Standard Board’s Accounting Standards Codification (ASC) 842, Leases.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ KPMG LLP

We have served as the Company’s auditor since 2002.

Philadelphia, Pennsylvania

March 13, 2020

F-2

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Trustees
Pennsylvania Real Estate Investment Trust:

Opinion on Internal Control Over Financial Reporting

We have audited Pennsylvania Real Estate Investment Trust and subsidiaries’ (the Company) internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.  

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2019 and 2018, the related consolidated statements of operations, comprehensive income (loss), equity, and cash flows for each of the years in the three-year period ended December 31, 2019, and the related notes and financial statement schedule III (collectively, the consolidated financial statements), and our report dated March 13, 2020 expressed an unqualified opinion on those consolidated financial statements.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ KPMG LLP

Philadelphia, Pennsylvania

March 13, 2020

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PENNSYLVANIA REAL ESTATE INVESTMENT TRUST

CONSOLIDATED BALANCE SHEETS

	December 31,
(in thousands, except per share amounts)	2019			2018
ASSETS:
INVESTMENTS IN REAL ESTATE, at cost:
Operating properties	$	3,099,034		$	3,063,531
Construction in progress		106,011			115,182
Land held for development		5,881			5,881
Total investments in real estate		3,210,926			3,184,594
Accumulated depreciation		(1,202,722	)		(1,118,582	)
Net investments in real estate		2,008,204			2,066,012
INVESTMENTS IN PARTNERSHIPS, at equity:		159,993			131,124
OTHER ASSETS:
Cash and cash equivalents		12,211			18,084
Tenant and other receivables (net of allowance for doubtful accounts of $2,845 and $6,597 at December 31, 2019 and 2018, respectively)		41,261			38,914
Intangible assets (net of accumulated amortization of $18,248 and $15,543 at December 31, 2019 and 2018, respectively)		13,404			17,868
Deferred costs and other assets, net		103,688			110,805
Assets held for sale		12,506			22,307
Total assets	$	2,351,267		$	2,405,114
LIABILITIES:
Mortgage loans payable, net	$	899,753		$	1,047,906
Term Loans, net		548,025			547,289
Revolving Facilities		255,000			65,000
Tenants’ deposits and deferred rent		13,006			15,400
Distributions in excess of partnership investments		87,916			92,057
Fair value of derivative instruments		13,126			3,010
Accrued expenses and other liabilities		107,016			87,901
Total liabilities		1,923,842			1,858,563
COMMITMENTS AND CONTINGENCIES (Note 11)
EQUITY:
Series B Preferred Shares, $.01 par value per share; 25,000 shares authorized; 3,450 shares issued and outstanding at December 31, 2019 and 2018; liquidation preference of $86,250		35			35
Series C Preferred Shares, $.01 par value per share; 25,000 shares authorized; 6,900 shares issued and outstanding at December 31, 2019 and 2018; liquidation preference of $172,500		69			69
Series D Preferred Shares, $.01 par value per share; 25,000 shares authorized; 5,000 shares issued and outstanding at December 31, 2019 and 2018; liquidation preference of $125,000		50			50
Shares of beneficial interest, $1.00 par value per share; 200,000 shares authorized; 77,550 shares issued and outstanding at December 31, 2019 and 70,495 shares issued and outstanding at December 31, 2018		77,550			70,495
Capital contributed in excess of par		1,766,883			1,671,042
Accumulated other comprehensive (loss)/income		(12,556	)		5,408
Distributions in excess of net income		(1,408,352	)		(1,306,318	)
Total equity – Pennsylvania Real Estate Investment Trust		423,679			440,781
Noncontrolling interest		3,746			105,770
Total equity		427,425			546,551
Total liabilities and equity	$	2,351,267		$	2,405,114

See accompanying notes to consolidated financial statements.

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PENNSYLVANIA REAL ESTATE INVESTMENT TRUST

CONSOLIDATED STATEMENTS OF OPERATIONS

	For The Year Ended December 31,
(in thousands of dollars)	2019			2018			2017
REVENUE:
Real estate revenue:
Lease revenue	$	302,311		$	324,829		$	325,010
Expense reimbursements		19,979			21,322			22,468
Other real estate revenue		12,668			12,078			14,046
Total real estate revenue		334,958			358,229			361,524
Other income		1,834			4,171			5,966
Total revenue		336,792			362,400			367,490
EXPENSES:
Operating expenses:
Property operating expenses:
CAM and real estate taxes		(113,260	)		(113,235	)		(111,275	)
Utilities		(14,733	)		(15,990	)		(16,151	)
Other property operating expenses		(8,565	)		(12,007	)		(12,879	)
Total property operating expenses		(136,558	)		(141,232	)		(140,305	)
Depreciation and amortization		(137,784	)		(133,116	)		(128,822	)
General and administrative expenses		(46,010	)		(38,342	)		(36,736	)
Provision for employee separation expenses		(3,689	)		(1,139	)		(1,299	)
Insurance recoveries, net		4,362			689			—
Project costs and other expenses		(284	)		(693	)		(768	)
Total operating expenses		(319,963	)		(313,833	)		(307,930	)
Interest expense, net		(63,987	)		(61,355	)		(58,430	)
Gain on debt extinguishment, net		24,859			—			—
Impairment of assets		(1,455	)		(137,487	)		(55,793	)
Impairment of development land parcel		(3,562	)		—			—
Total expenses		(364,108	)		(512,675	)		(422,153	)
Loss before equity in income of partnerships, gain on sales of real estate by equity method investee, gain on sales of real estate, net, gain on sales of interest in non operating real estate, and adjustment to gain on sales of interests in non operating real estate		(27,316	)		(150,275	)		(54,663	)
Equity in income of partnerships		8,289			11,375			14,367
Gain on sales of real estate by equity method investee		553			2,772			6,567
Gain (loss) on sales of real estate, net		2,744			1,722			(27	)
Gain on sales of interests in non operating real estate		2,718			8,126			1,270
Adjustment to gain on sales of interests in non operating real estate		12			(223	)		(362	)
Net loss		(13,000	)		(126,503	)		(32,848	)
Less: net loss attributed to noncontrolling interest		2,128			16,174			6,895
Net loss attributable to PREIT		(10,872	)		(110,329	)		(25,953	)
Less: preferred share dividends		(27,375	)		(27,375	)		(27,845	)
Less: loss on redemption on preferred shares		—			—			(4,103	)
Net loss attributable to PREIT common shareholders	$	(38,247	)	$	(137,704	)	$	(57,901	)

See accompanying notes to consolidated financial statements.

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PENNSYLVANIA REAL ESTATE INVESTMENT TRUST

CONSOLIDATED STATEMENTS OF OPERATIONS (continued)

EARNINGS PER SHARE

	For The Year Ended December 31,
(in thousands of dollars, except per share amounts)	2019			2018			2017
Net loss	$	(13,000	)	$	(126,503	)	$	(32,848	)
Noncontrolling interest		2,128			16,174			6,895
Preferred share dividends		(27,375	)		(27,375	)		(27,845	)
Loss on redemption of preferred shares		—			—			(4,103	)
Dividends on unvested restricted shares		(883	)		(542	)		(372	)
Net loss used to calculate earnings per share – basic and diluted	$	(39,130	)	$	(138,246	)	$	(58,273	)
Basic and diluted loss per share	$	(0.52	)	$	(1.98	)	$	(0.84	)
(in thousands of shares)
Weighted average shares outstanding – basic		75,221			69,749			69,364
Effect of dilutive common share equivalents (1)		—			—			—
Weighted average shares outstanding – diluted		75,221			69,749			69,364

⁽¹⁾ For the years ended December 31, 2019, 2018 and 2017, there were net losses allocable to common shareholders, so the effect of common share equivalents of 452, 203 and 93 for the years ended December 31, 2019, 2018 and 2017, respectively, is excluded from the calculation of diluted loss per share, as their inclusion would be anti-dilutive.

See accompanying notes to consolidated financial statements.

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PENNSYLVANIA REAL ESTATE INVESTMENT TRUST

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

	For The Year Ended December 31,
(in thousands of dollars)	2019			2018			2017
Comprehensive loss:
Net loss	$	(13,000	)	$	(126,503	)	$	(32,848	)
Unrealized (loss) gain on derivatives		(18,937	)		(2,755	)		5,415
Amortization of losses on settled swaps, net of gains		85			721			859
Total comprehensive loss		(31,852	)		(128,537	)		(26,574	)
Less: Comprehensive loss attributable to noncontrolling interest		3,016			16,390			6,225
Comprehensive loss attributable to PREIT	$	(28,836	)	$	(112,147	)	$	(20,349	)

See accompanying notes to consolidated financial statements.

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PENNSYLVANIA REAL ESTATE INVESTMENT TRUST

CONSOLIDATED STATEMENTS OF EQUITY

For the Years Ended

December 31, 2019, 2018 and 2017

				PREIT Shareholders
				Preferred Shares $.01 par
(in thousands of dollars, except per share amounts)	Total Equity			Series A			Series B		Series C		Series D		Shares of Beneficial Interest, $1.00 par		Capital Contributed in Excess of par			Accumulated Other Comprehensive Income (Loss)			Distributions in Excess of Net Income			Non- controlling interest
Balance January 1, 2017		702,406			46			35		—		—		69,553		1,481,787			1,622			(993,359	)		142,722
Net loss		(32,848	)		—			—		—		—		—		—			—			(25,953	)		(6,895	)
Other comprehensive income		6,274			—			—		—		—		—		—			5,604			—			670
Preferred shares issued in Series C and D preferred share offerings, net		286,848			—			—		69		50		—		286,729			—			—			—
Preferred Shares redeemed		(115,000	)		(46	)		—		—		—		—		(110,851	)		—			(4,103	)		—
Amortization of deferred compensation		5,709			—			—		—		—		—		5,709			—			—			—
Shares issued upon redemption of Operating Partnership Units		—			—			—		—		—		39		375			—			—			(414	)
Shares issued under employee compensation plan, net of shares retired		608			—			—		—		—		391		217			—			—			—
Dividends paid to Series A preferred shareholders ($1.7016 per share)		(7,827	)		—			—		—		—		—		—			—			(7,827	)		—
Dividends paid to Series B preferred shareholders ($1.8438 per share)		(6,361	)		—			—		—		—		—		—			—			(6,361	)		—
Dividends paid to Series C preferred shareholders ($1.5900 per share)		(10,971	)		—			—				—		—		—			—			(10,971	)
Dividends paid to Series D preferred shareholders ($0.4488 per share)		(2,244	)		—			—				—		—		—			—			(2,244	)
Dividends paid to common shareholders ($0.84 per share)		(58,651	)		—			—		—		—		—		—			—			(58,651	)		—
Noncontrolling interests:
Distributions paid to Operating Partnership unit holders ($0.84 per unit)		(6,970	)		—			—		—		—		—		—			—			—			(6,970	)
Other contributions from noncontrolling interest, net		18			—			—		—		—		—		—			—			—			18
Balance December 31, 2017		760,991			—			35		69		50		69,983		1,663,966			7,226			(1,109,469	)		129,131
Net loss		(126,503	)		—			—				—		—		—			—			(110,329	)		(16,174	)
Other comprehensive income		(2,034	)		—			—		—		—		—		—			(1,818	)		—			(216	)
Shares issued under employee compensation plan, net of shares retired		663			—			—		—		—		512		151			—			—			—
Amortization of deferred compensation		6,925			—			—		—		—		—		6,925			—			—			—
Dividends paid to Series B preferred shareholders ($1.8438 per share)		(6,361	)		—			—		—		—		—		—			—			(6,361	)		—
Dividends paid to Series C preferred shareholders ($1.80 per share)		(12,420	)		—			—		—		—		—		—			—			(12,420	)		—
Dividends paid to Series D preferred shareholders ($1.719 per share)		(8,594	)		—			—		—		—		—		—			—			(8,594	)		—
Dividends paid to common shareholders ($0.84 per share)		(59,145	)		—			—		—		—		—		—			—			(59,145	)		—
Noncontrolling interests:
Distributions paid to Operating Partnership unit holders ($0.84 per unit)		(6,949	)		—			—		—		—		—		—			—			—			(6,949	)
Other distributions to noncontrolling interest, net		(22	)		—			—		—		—		—		—			—			—			(22	)
Balance December 31, 2018	$	546,551		$	—		$	35	$	69	$	50	$	70,495	$	1,671,042		$	5,408		$	(1,306,318	)	$	105,770
Net loss		(13,000	)		—			—		—		—		—		—			—			(10,872	)		(2,128	)
Other comprehensive income		(18,852	)		—			—		—		—		—		—			(17,964	)		—			(888	)
Shares issued upon redemption of Operating Partnership units		—			—			—		—		—		6,250		89,736			—			—			(95,986	)
Shares issued under employee compensation plan, net of shares retired		698			—			—		—		—		805		(107	)		—			—			—
Amortization of deferred compensation		6,212			—			—		—		—		—		6,212			—			—			—
Dividends paid to Series B preferred shareholders ($1.8436 per share)		(6,364	)		—			—		—		—		—		—			—			(6,364	)		—
Dividends paid to Series C preferred shareholders ($1.80 per share)		(12,419	)		—			—		—		—		—		—			—			(12,419	)		—
Dividends paid to Series D preferred shareholders ($1.719 per share)		(8,592	)		—			—		—		—		—		—			—			(8,592	)		—
Dividends paid to common shareholders ($0.84 per share)		(63,787	)		—			—		—		—		—		—			—			(63,787	)		—
Noncontrolling interests:		—			—			—		—		—		—		—			—			—			—
Distributions paid to Operating Partnership unit holders ($0.84 per unit)		(3,004	)		—			—		—		—		—		—			—			—			(3,004	)
Other distributions to noncontrolling interest, net		(18	)		—			—		—		—		—		—			—			—			(18	)
Balance December 31, 2019	$	427,425		$	—		$	35	$	69	$	50	$	77,550	$	1,766,883		$	(12,556	)	$	(1,408,352	)	$	3,746

See accompanying notes to consolidated financial statements.

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PENNSYLVANIA REAL ESTATE INVESTMENT TRUST

CONSOLIDATED STATEMENTS OF CASH FLOWS

	For The Year Ended December 31,
(in thousands of dollars)	2019			2018			2017
Cash flows from operating activities:
Net loss	$	(13,000	)	$	(126,503	)	$	(32,848	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation		126,583			121,644			119,441
Amortization		16,180			14,554			12,057
Straight-line rent adjustments		(5,166	)		(1,989	)		(2,686	)
Provision for doubtful accounts		—			2,461			1,763
Non-cash lease termination revenue		—			(4,200	)		—
Amortization of deferred compensation		6,212			6,925			5,709
Gain on debt extinguishment, net		(24,859	)		—			—
Insurance recoveries in excess of property loss		(3,861	)		(689	)		—
Gain on sale of interests in real estate and non-operating real estate, net		(5,474	)		(9,625	)		(881	)
Equity in income of partnerships		(8,289	)		(11,375	)		(14,367	)
Gain on sale of real estate by equity method investee		(553	)		(2,772	)		(6,567	)
Cash distributions from partnerships		22,570			9,421			16,849
Amortization of historic tax credits		—			(829	)		(1,768	)
Impairment of assets		1,455			129,365			55,793
Impairment of development land parcel		3,562			—			—
Impairment of mortgage loan receivable		—			8,122			—
Change in assets and liabilities:
Net change in other assets		(4,191	)		(5,998	)		(5,652	)
Net change in other liabilities		223			6,352			(4,752	)
Net cash provided by operating activities		111,392			134,864			142,091
Cash flows from investing activities:
Investments in consolidated real estate acquisitions		—			(17,611	)		—
Cash proceeds from sales of real estate		50,407			13,730			77,778
Cash proceeds from sale of mortgage		8,000			—			—
Net proceeds from insurance claims related to damage to real estate assets		6,977			700			—
Cash distributions from partnerships of proceeds from real estate sold		879			19,727			30,265
Investments in partnerships		(72,939	)		(58,112	)		(73,434	)
Investments in real estate improvements		(34,260	)		(35,170	)		(51,949	)
Additions to construction in progress		(113,791	)		(75,649	)		(116,550	)
Capitalized leasing costs		(568	)		(12,022	)		(6,066	)
Distribution of financing proceeds from equity method investee		25,000			123,000			35,221
Additions to leasehold improvements and corporate fixed assets		(1,055	)		(160	)		(683	)
Net cash used in investing activities		(131,350	)		(41,567	)		(105,418	)
Cash flows from financing activities:
Net proceeds from issuance of preferred shares		—			—			286,847
Redemption of Series A Preferred Shares		—			—			(115,000	)
Borrowings under revolving facilities		190,000			12,000			56,000
Repayments of mortgage loans and finance lease liabilities		(71,387	)		—			(150,000	)
Proceeds from mortgage loans		—			10,185			—
Principal installments on mortgage loans		(17,911	)		(18,655	)		(17,945	)
Payment of deferred financing costs		(95	)		(5,529	)		(71	)
Value of shares of beneficial interest issued		1,256			1,410			2,085
Dividends paid to common shareholders		(63,787	)		(59,145	)		(58,651	)
Dividends paid to preferred shareholders		(27,375	)		(27,375	)		(27,403	)
Distributions paid to Operating Partnership unit holders and noncontrolling interest		(3,004	)		(6,949	)		(6,970	)
Value of shares retired under equity incentive plans, net of shares issued		(556	)		(747	)		(1,477	)
Net cash provided by (used in) financing activities		7,141			(94,805	)		(32,585	)
Net change in cash, cash equivalents, and restricted cash		(12,817	)		(1,508	)		4,088
Cash, cash equivalents, and restricted cash, beginning of period		32,445			33,953			29,865
Cash, cash equivalents, and restricted cash, end of period	$	19,628		$	32,445		$	33,953

See accompanying notes to consolidated financial statements.

F-9

PENNSYLVANIA REAL ESTATE INVESTMENT TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended December 31, 2019, 2018 and 2017

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations

Pennsylvania Real Estate Investment Trust (“PREIT”), a Pennsylvania business trust founded in 1960 and one of the first equity real estate investment trusts (“REITs”) in the United States, has a primary investment focus on retail shopping malls located in the eastern half of the United States, primarily in the Mid-Atlantic region. As of December 31, 2019, our portfolio consists of a total of 26 properties operating in nine states, including 21 shopping malls, four other retail properties and one development property. The property in our portfolio that is classified as under development does not currently have any activity occurring.

We hold our interest in our portfolio of properties through our operating partnership, PREIT Associates, L.P. (“PREIT Associates” or the “Operating Partnership”). We are the sole general partner of the Operating Partnership and, as of December 31, 2019, held a 97.5% controlling interest in the Operating Partnership, and consolidated it for reporting purposes. The presentation of consolidated financial statements does not itself imply that the assets of any consolidated entity (including any special-purpose entity formed for a particular project) are available to pay the liabilities of any other consolidated entity, or that the liabilities of any consolidated entity (including any special-purpose entity formed for a particular project) are obligations of any other consolidated entity.

Pursuant to the terms of the Operating Partnership’s partnership agreement, each of its limited partners has the right to redeem such partner’s units of limited partnership interest in the Operating Partnership (“OP Units”) for cash or, at our election, we may acquire such OP Units in exchange for our common shares on a one-for-one basis, in some cases beginning one year following the respective issue date of the OP Units, and in other cases immediately. If all of the outstanding OP Units held by limited partners had been redeemed for cash as of December 31, 2019, the total amount that would have been distributed would have been $10.8 million, which is calculated using our December 31, 2019 closing share price on the New York Stock Exchange of $5.33 multiplied by the number of outstanding OP Units held by limited partners, which was 2,022,635 as of December 31, 2019.

We provide management, leasing and real estate development services through two of our subsidiaries: PREIT Services, LLC (“PREIT Services”), which generally develops and manages properties that we consolidate for financial reporting purposes, and PREIT-RUBIN, Inc. (“PRI”), which generally develops and manages properties that we do not consolidate for financial reporting purposes, including properties owned by partnerships in which we own an interest, and properties that are owned by third parties in which we do not have an interest. PREIT Services and PRI are consolidated. PRI is a taxable REIT subsidiary, as defined by federal tax laws, which means that it is able to offer additional services to tenants without jeopardizing our continuing qualification as a REIT under federal tax law.

We evaluate operating results and allocate resources on a property-by-property basis, and do not distinguish or evaluate our consolidated operations on a geographic basis. Due to the nature of our operating properties, which involve retail shopping, we have concluded that our individual properties have similar economic characteristics and meet all other aggregation criteria. Accordingly, we have aggregated our individual properties into one reportable segment. In addition, no single tenant accounts for 10% or more of our consolidated revenue, and none of our properties are located outside the United States.

Consolidation

We consolidate our accounts and the accounts of the Operating Partnership and other controlled subsidiaries, and we reflect the remaining interest in such entities as noncontrolling interest. All significant intercompany accounts and transactions have been eliminated in consolidation.

The operating partnership meets the criteria as a variable interest entity. The Company’s significant asset is its investment in the Operating Partnership, and consequently, substantially all of the Company’s assets and liabilities represent those assets and liabilities of the Operating Partnership. All of the Company’s debt is also an obligation of the Operating Partnership.

Going Concern Considerations

Under the accounting guidance related to the presentation of financial statements, when preparing financial statements for each annual and interim reporting period, management has the responsibility to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the financial statements are issued.  The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.  The financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern. As a result of the considerations articulated below, we believe there is substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the financial statements are issued.

In applying the accounting guidance, management considered our current financial condition and liquidity sources, including current funds available, forecasted future cash flows and our conditional and unconditional obligations due over the next twelve months. Management specifically considered the following: i) our senior unsecured facility, which includes a revolving facility maturing in 2022 with a balance of $255.0 million as of December 31, 2019 and term loans maturing in 2021 with a balance of $550.0 million as of December 31, 2019; ii) our mortgage loans with varying maturities through 2025 with a principal balance of $901.6 million as of December 31, 2019; iii) the financial covenant compliance requirements of our credit agreements; and (iv) recurring costs of operating our business.

F-10

The Company anticipates not meeting certain financial covenants applicable under the credit agreements during 2020. The Company plans to continue to work with the lender group to obtain temporary debt covenant relief through September 2020 and then pursue a longer term financing solution prior to the expiration of the initial modification. In addition, the Company plans to execute the sale-leaseback of certain properties, sell certain real estate assets and control certain operational costs. Due to the inherent risks, unknown results and significant uncertainties associated with each of these matters and the direct correlation between these matters and our ability to satisfy our financial obligations that may arise over the applicable twelve month period, we are unable to conclude that it is probable that we will be able to meet our obligations arising within twelve months of the date of issuance of these financial statements under the parameters set forth in this accounting guidance.

As a result, management evaluated whether this was mitigated by our approved plans and expectations for the applicable period under the second step of this accounting standard.

Our ability to satisfy obligations under our senior unsecured credit facility and mortgage loans, maintain compliance with our debt covenants and fund recurring costs of operations depends primarily on management’s ability to obtain relief from the lender group in regards to debt covenants, execute the sale-leaseback of certain properties, complete the sale of certain real estate assets which will provide cash from those sales, and continue to control operational costs. While controlling operational costs are within management’s control to some extent, executing the sale-leaseback transactions, selling real estate assets, and obtaining relief from the lender group through modified debt covenant requirements involve performance by third parties and therefore cannot be considered probable of occurring.

Partnership Investments

We account for our investments in partnerships that we do not control using the equity method of accounting. These investments, each of which represents a 25% to 50% noncontrolling ownership interest at December 31, 2019, are recorded initially at our cost, and subsequently adjusted for our share of net equity in income and cash contributions and distributions. We do not control any of these equity method investees for the following reasons:

• Except for two properties that we co-manage with our partner, the other entities are managed on a day-to-day basis by one of our other partners as the managing general partner in each of the respective partnerships. In the case of the co-managed properties, all decisions in the ordinary course of business are made jointly.

• The managing general partner is responsible for establishing the operating and capital decisions of the partnership, including budgets, in the ordinary course of business.

• All major decisions of each partnership, such as the sale, refinancing, expansion or rehabilitation of the property, require the approval of all partners.

• Voting rights and the sharing of profits and losses are in proportion to the ownership percentages of each partner.

We do not have a direct legal claim to the assets, liabilities, revenues or expenses of the unconsolidated partnerships beyond our rights as an equity owner, in the event of any liquidation of such entity, and our rights as a tenant in common owner of certain unconsolidated properties.

We record the earnings from the unconsolidated partnerships using the equity method of accounting in the consolidated statements of operations in the caption entitled “Equity in income of partnerships,” rather than consolidating the results of the unconsolidated partnerships with our results. Changes in our investments in these entities are recorded in the consolidated balance sheet caption entitled “Investment in partnerships, at equity.” In the case of deficit investment balances, such amounts are recorded in “Distributions in excess of partnership investments.”

We hold legal title to a property owned by one of our unconsolidated partnerships through a tenancy in common arrangement. For this property, such legal title is held by us and another entity, and each has an undivided interest in title to the property. With respect to this property, under the applicable agreement between us and the other entity with an ownership interest, we and such other entity have joint control because decisions regarding matters such as the sale, refinancing, expansion or rehabilitation of the property require the approval of both us and the other entity owning an interest in the property. Hence, we account for this property like our other unconsolidated partnerships using the equity method of accounting. The balance sheet items arising from the properties appear under the caption “Investments in partnerships, at equity.”

For further information regarding our unconsolidated partnerships, see note 3.

Statements of Cash Flows

We consider all highly liquid short-term investments with a maturity of three months or less at purchase or acquisition to be cash equivalents. At December 31, 2019 and 2018, cash and cash equivalents and restricted cash totaled $19.6 million and $32.4 million, respectively, and included tenant security deposits of $1.8 million and $2.3 million, respectively. Cash paid for interest was $59.4 million, $58.4 million and $55.4 million for the years ended December 31, 2019, 2018 and 2017, respectively, net of amounts capitalized of $7.7 million, $6.4 million and $7.6 million, respectively.

F-11

The following table provides a summary of cash, cash equivalents, and restricted cash reported within the statement of cash flows as of December 31, 2019, 2018 and 2017.

	December 31,
(in thousands of dollars)	2019		2018		2017
Cash and cash equivalents	$	12,211	$	18,084	$	15,348
Restricted cash included in other assets		7,417		14,361		18,605
Total cash, cash equivalents, and restricted cash shown in the statement of cash flows	$	19,628	$	32,445	$	33,953

Our restricted cash consists of cash held in escrow by banks for real estate taxes and other purposes.

Significant Non-Cash Transactions

In the third quarter of 2019, we conveyed Wyoming Valley Mall to the lender of the mortgage loan secured by the property. The loan had a balance of approximately $72.8 million as of the conveyance on September 26, 2019. The conveyance was a non-cash transaction with the exception of $7.5 million of cash and escrow balances which were transferred to the lender.

During the second quarter of 2018, we received the building and improvements formerly occupied by one of our tenants as part of the consideration for the termination of that tenant’s lease. We recorded non-cash lease termination income of $4.2 million in connection with this transaction, which we determined was the fair value of the building and improvements.

Paydowns of the 2014 5-Year Term Loan and the 2015 5-Year Term Loan of $150.0 million each were made in the year ended December 31, 2018, which were directly paid from the 2018 Term Loan Facility borrowing and are considered to be non-cash transactions.

During 2017, a $150.0 million paydown of the 2013 Revolving Facility was made, which was directly paid from an additional borrowing from our 2014 7-Year Term Loan, and is considered to be a non-cash transaction.

In our statement of cash flows, we report cash flows on our revolving facilities on a net basis. Aggregate borrowings on our revolving facilities were $229.0 million, $65.0 million and $309.0 million, and aggregate repayments were $39.0 million, $53.0 million and $403.0 million for the years ended December 31, 2019, 2018 and 2017, respectively.

Accrued construction costs decreased by $8.5 million in the year ended December 31, 2019, increased by $15.7 million in the year ended December 31, 2018 and decreased by $8.3 million in the year ended December 31, 2017, representing non-cash changes in construction in progress.

Accounting Policies

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires our management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenue and expense during the reporting periods. Actual results could differ from those estimates. We believe that our most significant and subjective accounting estimates and assumptions are those relating to asset impairment and fair value.

Our management makes complex or subjective assumptions and judgments in applying its critical accounting policies. In making these judgments and assumptions, our management considers, among other factors, events and changes in property, market and economic conditions, estimated future cash flows from property operations, and the risk of loss on specific accounts or amounts.

Revenue Recognition

We derive over 95% of our revenue from tenant rent and other tenant-related activities. Tenant rent includes base rent, percentage rent, expense reimbursements (such as reimbursements of costs of common area maintenance (“CAM”), real estate taxes and utilities), and the amortization of above-market and below-market lease intangibles (as described below under “Intangible Assets”).

On January 1, 2018, we adopted ASC 606, Revenue from Contracts with Customers. ASC 606 provides a single comprehensive model to use in accounting for revenue arising from contracts with customers, and gains and losses arising from transfers of non-financial assets including sales of property and equipment, real estate, and intangible assets. The majority of our revenues are derived from leases and are not subject to ASC 606; rather, they were governed by ASC 840 through December 31, 2018 and are subject to ASC 842 effective January 1, 2019. See Lease accounting related under New Accounting Developments for our adoption impact from ASC 842 on January 1, 2019.

F-12

We record base rent on a straight-line basis, which means that the monthly base rent revenue according to the terms of our leases with our tenants is adjusted so that an average monthly rent is recorded for each tenant over the term of its lease. When tenants vacate prior to the end of their lease, we accelerate amortization of any related unamortized straight-line rent balances, and unamortized above-market and below-market intangible balances are amortized as a decrease or increase to real estate revenue, respectively. The straight-line rent adjustment increased revenue by $1.6 million, $2.0 million, and $2.7 million in the years ended December 31, 2019, 2018 and 2017, respectively. The straight-line rent receivable balances included in tenant and other receivables on the accompanying consolidated balance sheet as of December 31, 2019 and 2018 were $30.4 million and $27.2 million, respectively.

Percentage rent represents rental revenue that the tenant pays based on a percentage of its sales, either as a percentage of its total sales or as a percentage of sales over a certain threshold. In the latter case, we do not record percentage rent until the sales threshold has been reached.

Revenue for rent received from tenants prior to their due dates is deferred until the period to which the rent applies.

In addition to base rent, certain lease agreements contain provisions that require tenants to reimburse a fixed or pro rata share of certain CAM costs, real estate taxes and utilities. Tenants generally make monthly expense reimbursement payments based on a budgeted amount determined at the beginning of the year. Effective January 1, 2019, we recognize fixed CAM revenue prospectively on a straight-line basis. Prior to that, during the year, our income increased or decreased based on actual expense levels and changes in other factors that influenced the reimbursement amounts, such as occupancy levels. As of December 31, 2018, our tenant accounts receivable included accrued income of $1.9 million because actual reimbursable expense amounts eligible to be billed to tenants under applicable contracts exceeded amounts actually billed. Prior to the adoption of ASC 842, we recorded reimbursement revenue from tenants whose leases include fixed CAM provisions in accordance with the contractual terms of the respective leases.

Certain lease agreements contain co-tenancy clauses that can change the amount of rent or the type of rent that tenants are required to pay, or, in some cases, can allow the tenant to terminate their lease, in the event that certain events take place, such as a decline in property occupancy levels below certain defined levels or the vacating of an anchor store. Co-tenancy clauses do not generally have any retroactive effect when they are triggered. The effect of co-tenancy clauses is applied on a prospective basis to recognize the new rent that is in effect.

Payments made to tenants as inducements to enter into a lease are treated as deferred costs that are amortized as a reduction of rental revenue over the term of the related lease.

Lease termination fee revenue is recognized in the period when a termination agreement is signed, collectibility is assured, and the tenant has vacated the space. In the event that a tenant is in bankruptcy when the termination agreement is signed, termination fee income is deferred and recognized when it is received.

We also generate revenue by providing management services to third parties, including property management, brokerage, leasing and development. Management fees generally are a percentage of managed property revenue or cash receipts. Leasing fees are earned upon the consummation of new leases. Development fees are earned over the time period of the development activity and are recognized on the percentage of completion method. These activities are collectively included in “Other income” in the consolidated statements of operations.

Revenue from the reimbursement of marketing expenses is generated through tenant leases that require tenants to reimburse a defined amount of property marketing expenses. Our contractual performance obligations are fulfilled as marketing expenditures are made. Tenant payments are received monthly as required by the respective lease terms. We defer income recognition if the reimbursements exceed the aggregate marketing expenditures made through that date. Deferred marketing reimbursement revenue is recorded in tenants’ deposits and deferred rent on the consolidated balance sheet, and was $0.2 million and $0.2 million as of December 31, 2019 and 2018, respectively. The marketing reimbursements are recognized as revenue at the time that the marketing expenditures occur. Marketing revenue, included in other real estate revenues in the consolidated statements of operations, was $4.1 million, $3.9 million, and $4.4 million and for the years ended December 31, 2019, 2018 and 2017, respectively.

Property management revenue from management and development activities is generated through contracts with third party owners of real estate properties or with certain of our joint ventures, and is recorded in other income in the consolidated statement of operations. In the case of management fees, our performance obligations are fulfilled over time as the management services are performed and the associated revenues are recognized on a monthly basis when the customer is billed. In the case of development fees, our performance obligations are fulfilled over time as we perform certain stipulated development activities as set forth in the respective development agreements and the associated revenues are recognized on a monthly basis when the customer is billed. Property management fee revenue was $0.5 million, $0.7 million, and $0.9 million for the years ended December 31, 2019, 2018 and 2017, respectively. Development fee revenue was $0.7 million, $0.8 million, and $0.9 million for the years ended December 31, 2019, 2018 and 2017, respectively.

Fair Value

Fair value accounting applies to reported balances that are required or permitted to be measured at fair value under relevant accounting authority.

F-13

Fair value measurements are determined based on the assumptions that market participants would use in pricing the asset or liability. As a basis for considering market participant assumptions in fair value measurements, these accounting requirements establish a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within Levels 1 and 2 of the hierarchy) and the reporting entity’s own assumptions about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy).

Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities that we have the ability to access.

Level 2 inputs are inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs might include quoted prices for similar assets and liabilities in active markets, as well as inputs that are observable for the asset or liability (other than quoted prices), such as interest rates, foreign exchange rates and yield curves that are observable at commonly quoted intervals.

Level 3 inputs are unobservable inputs for the asset or liability and are typically based on an entity’s own assumptions, as there is little, if any, related market activity.

In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability. We utilize the fair value hierarchy in our accounting for derivatives (Level 2) and financial instruments (Level 2) and in our reviews for impairment of real estate assets (Level 3) and goodwill (Level 3).

Financial Instruments

Carrying amounts reported on the consolidated balance sheet for cash and cash equivalents, tenant and other receivables, accrued expenses, other liabilities and the 2018 Revolving Facility approximate fair value due to the short-term nature of these instruments. Most of our variable rate debt is subject to interest rate derivative instruments that have effectively fixed the interest rates on the underlying debt. The estimated fair value for fixed rate debt, which is calculated for disclosure purposes, is based on the borrowing rates available to us for fixed rate mortgage loans with similar terms and maturities.

Impairment of Assets

Real estate investments and related intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the property might not be recoverable, which is referred to as a “triggering event.” In connection with our review of our long-lived assets for impairment, we utilize qualitative and quantitative factors in order to estimate fair value. The significant qualitative factors that we use include age and condition of the property, market conditions in the property’s trade area, competition with other shopping centers within the property’s trade area and the creditworthiness and performance of the property’s tenants. The significant quantitative factors that we use include historical and forecasted financial and operating information relating to the property, such as net operating income, occupancy statistics, vacancy projections and tenants’ sales levels. Our fair value assumptions relating to real estate assets are within Level 3 of the fair value hierarchy.

If there is a triggering event in relation to a property to be held and used, we will estimate the aggregate future cash flows, net of estimated capital expenditures, to be generated by the property, undiscounted and without interest charges. In addition, this estimate may consider a probability weighted cash flow estimation approach when alternative courses of action to recover the carrying amount of a long-lived asset are under consideration or when a range of possible values is estimated.

The determination of undiscounted cash flows requires significant estimates by our management, including the expected course of action at the balance sheet date that would lead to such cash flows. Subsequent changes in estimated undiscounted cash flows arising from changes in the anticipated action to be taken with respect to the property could affect the determination of whether an impairment exists, and the effects of such changes could materially affect our net income. If the estimated undiscounted cash flows are less than the carrying value of the property, the carrying value is written down to its fair value.

Assessment of our ability to recover certain lease related costs must be made when we have a reason to believe that a tenant might not be able to perform under the terms of the lease as originally expected. This requires us to make estimates as to the recoverability of such costs.

An other-than-temporary impairment of an investment in an unconsolidated joint venture is recognized when the carrying value of the investment is not considered recoverable based on evaluation of the severity and duration of the decline in value. To the extent impairment has occurred, the excess carrying value of the asset over its estimated fair value is recorded as a reduction to income.

F-14

Real Estate

Land, buildings, fixtures and tenant improvements are recorded at cost and stated at cost less accumulated depreciation. Expenditures for maintenance and repairs are charged to operations as incurred. Renovations or replacements, which improve or extend the life of an asset, are capitalized and depreciated over their estimated useful lives. For financial reporting purposes, properties are depreciated using the straight-line method over the estimated useful lives of the assets. The estimated useful lives are as follows:

Buildings	20-40 years
Land improvements	15 years
Furniture/fixtures	3-10 years
Tenant improvements	Lease term

We are required to make subjective assessments as to the useful lives of our real estate assets for purposes of determining the amount of depreciation to reflect on an annual basis with respect to those assets based on various factors, including industry standards, historical experience and the condition of the asset at the time of acquisition. These assessments affect our annual net income. If we were to determine that a different estimated useful life was appropriate for a particular asset, it would be depreciated over the newly estimated useful life, and, other things being equal, result in changes in annual depreciation expense and annual net income.

We recognize gains from sales of real estate properties and interests in partnerships when an enforceable contract is in place, control of the asset transfers to a buyer and it is probable that we will collect the consideration due in exchange for transferring the asset.

Real Estate Acquisitions

We account for our property acquisitions by allocating the purchase price of a property to the property’s assets based on management’s estimates of their fair value. Debt assumed in connection with property acquisitions is recorded at fair value at the acquisition date, and any resulting premium or discount is amortized through interest expense over the remaining term of the debt, resulting in a non-cash decrease (in the case of a premium) or increase (in the case of a discount) in interest expense. The determination of the fair value of intangible assets requires significant estimates by management and considers many factors, including our expectations about the underlying property, the general market conditions in which the property operates and conditions in the economy. The judgment and subjectivity inherent in such assumptions can have a significant effect on the magnitude of the intangible assets or the changes to such assets that we record.

Intangible Assets

Our intangible assets on the accompanying consolidated balance sheets as of December 31, 2019 and 2018 each included $5.2 million (in each case, net of $1.1 million of amortization expense recognized prior to January 1, 2002) of goodwill recognized in connection with the acquisition of The Rubin Organization in 1997. Approximately $1.5 million of this goodwill balance is allocated to three equity method investees with negative investment balances.

Changes in the carrying amount of goodwill for the three years ended December 31, 2019 were as follows:

			Accumulated
(in thousands of dollars)	Basis		Amortization			Total
Balance, January 1, 2017	$	6,322	$	(1,073	)	$	5,249
Goodwill divested		—		—			—
Balance, December 31, 2017		6,322		(1,073	)		5,249
Goodwill divested		—		—			—
Balance, December 31, 2018		6,322		(1,073	)		5,249
Goodwill divested		—		—			—
Balance, December 31, 2019	$	6,322	$	(1,073	)	$	5,249

We allocate a portion of the purchase price of a property to intangible assets. Our methodology for this allocation includes estimating an “as-if vacant” fair value of the physical property, which is allocated to land, building and improvements. The difference between the purchase price and the “as-if vacant” fair value is allocated to intangible assets. There are three categories of intangible assets to be considered: (i) value of leases, (ii) above- and below-market value of in-place leases and (iii) customer relationship value, including operating covenants.

The value of in-place leases is estimated based on the value associated with the costs avoided in originating leases comparable to the acquired in-place leases, as well as the value associated with lost rental revenue during the assumed lease-up period. The value of in-place leases is amortized as real estate amortization over the remaining lease term.

Above-market and below-market in-place lease values for acquired properties are recorded based on the present value of the difference between (i) the contractual amounts to be paid pursuant to the in-place leases and (ii) management’s estimates of fair market lease rates for comparable in-place leases, based on factors such as historical experience, recently executed transactions and specific property issues, measured over a period equal to the remaining non-cancelable term of the lease. Above-market lease values are amortized as a reduction of rental income over the remaining terms of the respective leases. Below-market lease values are amortized as an increase to rental income over the remaining terms of the respective leases, including any below-market optional renewal periods, and are included in “Accrued expenses and other liabilities” in the consolidated balance sheets.

F-15

We allocate purchase price to customer relationship intangibles based on management’s assessment of the fair value of such relationships.

The following table presents our intangible assets and liabilities, net of accumulated amortization, as of December 31, 2019 and 2018:

	December 31,
(in thousands of dollars)	2019		2018
Intangible Assets:
Value of lease intangibles, net	$	8,155	$	12,594
Above-market lease intangibles, net		—		25
Subtotal		8,155		12,619
Goodwill, net		5,249		5,249
Total intangible assets	$	13,404	$	17,868
Intangible Liabilities
Below-market lease intangibles, net	$	215	$	403
Above-market ground lease	$	—	$	5,484
Total intangible liabilities	$	215	$	5,887

Intangible liabilities are included in “Accrued expenses and other liabilities” in the consolidated balance sheets.  Amortization of lease intangibles was $3.3 million, $2.4 million, and $2.0 million for the years ended December 31, 2019, 2018 and 2017, respectively.

Net amortization of above-market and below-market lease intangibles increased revenue by $0.1 million, $0.2 million and $0.1 million for the years ended December 31, 2019, 2018 and 2017, respectively. Amortization of above-market ground lease intangibles increased expenses by $0.1 million for each of the years ended December 31, 2018 and 2017, respectively. In the normal course of business, our intangible assets will amortize in the next five years and thereafter as follows:

(in thousands of dollars)	Value of Lease		Customer		Below Market
For the Year Ending December 31,	Intangibles		Relationship Value		Leases, net
2020	$	1,518	$	77	$	(67	)
2021		1,429		—		(42	)
2022		1,299		—		(10	)
2023		1,296		—		(10	)
2024		1,251		—		(10	)
2025 and thereafter		1,285		—		(76	)
Total	$	8,078	$	77	$	(215	)

Assets Classified as Held for Sale

The determination to classify an asset as held for sale requires significant estimates by us about the property and the expected market for the property, which are based on factors including recent sales of comparable properties, recent expressions of interest in the property, financial metrics of the property and the physical condition of the property. We must also determine if it will be possible under those market conditions to sell the property for an acceptable price within one year. When assets are identified by our management as held for sale, we discontinue depreciating the assets and estimate the sales price, net of selling costs, of such assets. We generally consider operating properties to be held for sale when they meet criteria such as whether the sale transaction has been approved by the appropriate level of management and there are no known material contingencies relating to the sale such that the sale is probable and is expected to qualify for recognition as a completed sale within one year. If the expected net sales price of the asset that has been identified as held for sale is less than the net book value of the asset, the asset is written down to fair value less the cost to sell. Assets and liabilities related to assets classified as held for sale are presented separately in the consolidated balance sheet. If we determine that a property no longer meets the held-for-sale criteria, we reclassify the property’s assets and liabilities to their original locations on the consolidated balance sheet and record depreciation and amortization expense for the period that the property was in held-for-sale status.

In June 2018, we determined that the land parcel in Gainesville, Florida met the criteria to classify it as held for sale. This determination was made because the property was under contract, and we believed that we will likely complete a sale of the property within one year. We completed the sale of the land parcel in multiple transactions in 2019. Additionally, in December 2018, we determined that the land parcel in New Garden Township, Pennsylvania met the criteria to classify it as held for sale. This determination was made because we were in advanced negotiations with a buyer and believed that the sale would likely be complete within one year. In April 2019, we completed the sale of the New Garden Township land parcel.

As of December 31, 2019, we determined that 13 land parcels and outparcels met the criteria to be classified as held for sale. The determination was made because we entered into agreements to sell multiple outparcels to a buyer and two separate land parcels in separate transactions. We also believe that we would likely complete the sale transactions within one year. The outparcels were part of an agreement executed in November 2019 with one buyer to sell 14 outparcels across five properties, of which three were sold as of December 31, 2019. In January 2020, an additional outparcel under this arrangement was sold.

F-16

We also have two separate agreements to sell land parcels at Woodland Mall and Moorestown Mall.

Capitalization of Costs

Costs incurred in relation to development and redevelopment projects for interest, property taxes and insurance are capitalized only during periods in which activities necessary to prepare the property for its intended use are in progress. Costs incurred for such items after the property is substantially complete and ready for its intended use are charged to expense as incurred. Capitalized costs, as well as tenant inducement amounts and internal and external commissions, are recorded in construction in progress. We capitalize a portion of development department employees’ compensation and benefits related to time spent involved in development and redevelopment projects. We also capitalize interest on equity method investments while the investee is engaged in activities necessary to commence its planned principal activities.

We capitalize payments made to obtain options to acquire real property. Other related costs that are incurred before acquisition that are expected to have ongoing value to the project are capitalized if the acquisition of the property is probable. If the property is acquired, other expenses related to the acquisition are recorded to project costs and other expenses. When it is probable that the property will not be acquired, capitalized pre-acquisition costs are charged to expense.

For leases under which we are a lessor, certain internal leasing and legal costs such as salaries, commissions and benefits related to time spent by leasing and legal department personnel involved in originating leases with third-party tenants were previously capitalized under ASC 840. However, they are now being recorded as period costs in accordance with ASC 842. We will continue to amortize previously capitalized initial direct costs over the remaining terms of the associated leases.

The following table summarizes our capitalized salaries, commissions and benefits, real estate taxes and interest for the years ended December 31, 2019, 2018 and 2017:

	For the Year Ended December 31,
(in thousands of dollars)	2019		2018		2017
Development/Redevelopment:
Salaries and benefits	$	1,332	$	1,380	$	1,296
Real estate taxes	$	1,057	$	1,198	$	1,035
Interest	$	7,725	$	6,395	$	7,620
Leasing:
Salaries, commissions and benefits	$	568	$	7,022	$	6,066

Receivables

We review the collectibility of our tenant receivables related to tenant rent including base rent, straight-line rent, expense reimbursements and other revenue or income. We specifically analyze billed and unbilled revenues, including straight-line rent receivable, historical collection issues, customer creditworthiness and current economic and industry trends. The receivables analysis places particular emphasis on past-due accounts and considers the nature and age of the receivables, the payment history and financial condition of the payor, the basis for any disputes or negotiations with the payor, and other information that could affect collectibility. If deemed uncollectible, we record an offset for credit losses directly to lease revenue.

Income Taxes

We have elected to qualify as a real estate investment trust, or REIT, under Sections 856-860 of the Internal Revenue Code of 1986, as amended, and intend to remain so qualified.

In some instances, we follow methods of accounting for income tax purposes that differ from generally accepted accounting principles. Earnings and profits, which determine the taxability of distributions to shareholders, will differ from net income or loss reported for financial reporting purposes due to differences in cost basis, differences in the estimated useful lives used to compute depreciation, and differences between the allocation of our net income or loss for financial reporting purposes and for tax reporting purposes.

We could be subject to a federal excise tax computed on a calendar year basis if we were not in compliance with the distribution provisions of the Internal Revenue Code. We have, in the past, distributed a substantial portion of our taxable income in the subsequent fiscal year and might also follow this policy in the future. No provision for excise tax was made for the years ended December 31, 2019, 2018 and 2017, as no excise tax was due in those years.

F-17

The per share distributions paid to common shareholders had the following components for the years ended December 31, 2019, 2018 and 2017:

	For the Year Ended December 31,
	2019		2018		2017
Ordinary income	$	—	$	0.25	$	—
Non-dividend distribution		0.84		0.59		0.84
Per-share distributions	$	0.84	$	0.84	$	0.84

The per share distributions paid to Series A, Series B, Series C and Series D preferred shareholders had the following components for the years ended December 31, 2019, 2018 and 2017:

	For the Year Ended December 31,
	2019		2018		2017
Series A Preferred Share Dividends (1)
Ordinary income					$	—
Non-dividend distributions						1.70
					$	1.70
Series B Preferred Share Dividends
Ordinary income	$	—	$	1.84	$	—
Non-dividend distributions		1.84		—		1.84
	$	—	$	1.84	$	1.84
Series C Preferred Share Dividends
Ordinary income	$	—	$	1.80	$	—
Non-dividend distributions		1.80		—		1.59
	$	—	$	1.80	$	1.59
Series D Preferred Share Dividends
Ordinary income	$	—	$	1.72	$	—
Non-dividend distributions		1.72		—		0.45
	$	—	$	1.72	$	0.45

⁽¹⁾ The Series A Preferred Shares were redeemed in 2017.

We follow accounting requirements that prescribe a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken in a tax return. We must determine whether it is “more likely than not” that a tax position will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. Once it is determined that a position meets the “more likely than not” recognition threshold, the position is measured at the largest amount of benefit that is greater than 50% likely to be realized upon settlement to determine the amount of benefit to recognize in the consolidated financial statements.

PRI is subject to federal, state and local income taxes. We had no federal or state income tax provision or benefit in the year ended December 31, 2019, but had a nominal provision in the year ended December 31, 2018 and a nominal benefit in the year ended December 31, 2017. We had net deferred tax assets of $14.3 million and $16.7 million for the years ended December 31, 2019 and 2018, respectively. The deferred tax assets are primarily the result of net operating losses. A valuation allowance has been established for the full amount of the net deferred tax assets, because we have determined that it is more likely than not that these assets will not be realized based on recent earnings history for our taxable REIT subsidiaries. The deferred tax assets were remeasured for the year ended December 31, 2017 to account for the tax provisions in H.R. 1 (the Tax Cuts and Jobs Act), which was signed into law on December 22, 2017.

Deferred Financing Costs

Deferred financing costs include fees and costs incurred to obtain financing. Such costs are amortized to interest expense over the terms of the related indebtedness. Interest expense is determined in a manner that approximates the effective interest method in the case of costs associated with mortgage loans, or on a straight line basis in the case of costs associated with our 2018 Revolving Facility (and in prior years, our 2013 Revolving Facility) and Term Loans (see note 4).

Derivatives

In the normal course of business, we are exposed to financial market risks, including interest rate risk on our interest-bearing liabilities. We attempt to limit these risks by following established risk management policies, procedures and strategies, including the use of derivative financial instruments. We do not use derivative financial instruments for trading or speculative purposes.

F-18

Currently, we use interest rate swaps to manage our interest rate risk. The valuation of these instruments is determined using widely accepted valuation techniques, including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs.

Derivative financial instruments are recorded on the consolidated balance sheet as assets or liabilities based on the fair value of the instrument. Changes in the fair value of derivative financial instruments are recognized currently in earnings, unless the derivative financial instrument meets the criteria for hedge accounting. If the derivative financial instruments meet the criteria for a cash flow hedge, the gains and losses in the fair value of the instrument are deferred in other comprehensive income. Gains and losses on a cash flow hedge are reclassified into earnings when the forecasted transaction affects earnings. A contract that is designated as a hedge of an anticipated transaction that is no longer likely to occur is immediately recognized in earnings.

The anticipated transaction to be hedged must expose us to interest rate risk, and the hedging instrument must reduce the exposure and meet the requirements for hedge accounting. We must formally designate the instrument as a hedge and document and assess the effectiveness of the hedge at inception and on a quarterly basis. Interest rate hedges that are designated as cash flow hedges are designed to mitigate the risks associated with future cash outflows on debt.

We incorporate credit valuation adjustments to appropriately reflect both our own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of our derivative contracts for the effect of nonperformance risk, we have considered the impact of netting and any applicable credit enhancements. Although we have determined that the majority of the inputs used to value our derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with our derivatives utilize Level 3 inputs, such as estimates of current credit spreads, to evaluate the likelihood of default by us and our counterparties. As of December 31, 2019, we have assessed the significance of the effect of the credit valuation adjustments on the overall valuation of our derivative positions and have determined that the credit valuation adjustments are not significant to the overall valuation of our derivatives. As a result, we have determined that our derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy.

Operating Partnership Unit Redemptions

Shares issued upon redemption of OP Units are recorded at the book value of the OP Units surrendered.

Share-Based Compensation Expense

Share based payments to employees and non-employee trustees, including grants of restricted shares and share options, are valued at fair value on the date of grant, and are expensed over the applicable vesting period.

Earnings Per Share

The difference between basic weighted average shares outstanding and diluted weighted average shares outstanding is the dilutive effect of common share equivalents. Common share equivalents consist primarily of shares that are issued under employee share compensation programs and outstanding share options whose exercise price is less than the average market price of our common shares during these periods.

New Accounting Developments

Lease accounting related

Effective January 1, 2019, we adopted Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842) (“ASC 842”) and related guidance using the optional transition method and elected to apply the provisions of the standard as of the adoption date rather than the earliest date presented. Prior period amounts were not restated. We implemented the standard using the following practical expedients:

• We have elected the package of practical expedients that allows us to not reassess (i) whether any expired or existing contracts are or contain leases, (ii) the lease classification for any expired or existing leases, and (iii) initial direct costs for any existing leases.

• For leases under which we are the lessor, we also have elected to not separate non-lease components such as common area maintenance (“CAM”) and real estate reimbursements from the associated lease component (minimum rent). Instead, we account for the lease and non-lease components as a single component because such non-lease components would otherwise be accounted for under the new revenue guidance (ASC 606) and both (1) the timing and pattern of transfer are the same for the non-lease components and associated lease component, and (2) the lease component, if accounted for separately, would be classified as an operating lease. Utility reimbursements are presented separately and not in the single component as the pattern of transfer is not aligned with the use of the property and therefore the criteria for use of the practical expedient are not met.

The adoption of this standard had the following effects on our financial statements as of December 31, 2019 and for the year ended December 31, 2019:

F-19

As of January 1, 2019, for leases under which the Company is a lessee, we recorded a right-of-use (“ROU”) asset of $24.6 million and corresponding lease liability for all leases previously accounted for as operating leases under ASC 840. The Company also derecognized an unfavorable ground lease liability of $5.5 million and reduced the corresponding ROU asset by the same amount. As of December 31, 2019, the ROU asset was $24.1 million and is included in deferred costs and other assets, net and the lease liability was $30.3 million and is included in accrued expenses and other liabilities in the accompanying consolidated balance sheet.

Effective January 1, 2019, we changed our fixed CAM revenue recognition to be recognized prospectively on a straight-line basis. In the year ended December 31, 2019, $2.7 million, of such revenues were recognized and are included within lease revenue in the accompanying consolidated statements of operations; previously, such amounts were recognized as billed in accordance with the terms of the respective leases.

We review the collectability of both billed and unbilled lease revenues each reporting period, taking into consideration the tenant’s payment history, credit profile and other factors, including its operating performance. For any tenant receivable balances deemed to be uncollectible, under ASC 842 we record an offset for credit losses directly to Lease revenue in the consolidated statement of operations. Previously, under ASC 840, uncollectible tenants’ receivables were reported in Other property operating expenses in the consolidated statement of operations. We recorded offsets for credit losses of $2.8 million for the year ended December 31, 2019.

For leases under which the Company is a lessor, certain internal leasing and legal costs that were previously capitalized under ASC 840 are now recorded as period costs under ASC 842. For the year ended December 31, 2018, we capitalized $5.2 million of internal leasing and legal salaries and benefits, respectively. No such costs were capitalized for the year ended December 31, 2019. We will continue to amortize previously capitalized initial direct costs over the remaining terms of the associated leases.

Other accounting

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. ASU 2016-15 is intended to reduce diversity in the practice of how certain transactions are classified in the statement of cash flows, including classification guidance for distributions received from equity method investments. We adopted this new standard effective January 1, 2018 using the retrospective transition method. The statement of cash flows for the year ended December 31, 2017 has been restated to reflect the adoption of ASU 2016-15. Upon adoption, we changed the prior period presentation of the statement of cash flows for the year ended December 31, 2017 for $5.7 million of cash distributions from partnerships that was previously presented within net cash used in investing activities to now be reflected within net cash provided by operating activities for the year ended December 31, 2017 using the nature of the distribution approach.

In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230), which provides guidance on the presentation of restricted cash or restricted cash equivalents within the statement of cash flows. Accordingly, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. We adopted this standard effective January 1, 2018. The adoption of ASU No. 2016-18 changed our presentation of the statement of cash flows to provide additional details regarding changes in restricted cash and we utilized a retrospective transition method for each period presented within financial statements. In applying the retrospective transition method, net cash used in investing activities for the year ended December 31, 2017 increased by $1.5 million and net cash provided by investing activities for the year ended December 31, 2017 increased by $0.5 million, as the change in escrow accounts is now included directly in net change in cash, cash equivalents and restricted cash. See note 1 for details regarding cash and restricted cash as presented within the consolidated statement of cash flows.

In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business.  The update adds further guidance that assists preparers in evaluating whether a transaction will be accounted for as an acquisition of an asset or a business. We expect that future property acquisitions will generally qualify as asset acquisitions under the standard, which requires the capitalization of acquisition costs to the underlying assets. We adopted this new guidance effective January 1, 2017. This new guidance did not have a significant impact on our financial statements.

In October 2018, the FASB issued ASU 2018-16, Derivatives and Hedging (Topic 815): Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) as a Benchmark Interest Rate for Hedge Accounting.  This ASU adds the OIS rate based on SOFR as a U.S. benchmark interest rate to facilitate the LIBOR to SOFR transition and provide sufficient lead time for entities to prepare for changes to interest rate hedging strategies for both risk management and hedge accounting purposes. Because we adopted ASU 2017-12, this guidance became effective January 1, 2019. This new guidance did not have a material impact on our consolidated financial statements.

In January 2017, the FASB issued ASU 2017-04,  Intangibles—Goodwill and Other (Topic 350)—Simplifying the Test for Goodwill Impairment. ASU 2017-04 simplifies the accounting for goodwill impairments by eliminating the requirement to compare the implied fair value of goodwill with its carrying amount as part of step two of the goodwill impairment test referenced in ASC 350,  Intangibles—Goodwill and Other. As a result, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value. However, the impairment loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. In January 2018, we elected to early adopt ASU 2017-04 effective January 1, 2018. This new guidance did not have any impact on our consolidated financial statements.

F-20

In February 2017, the FASB issued ASU 2017-05, Other Income- Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance. ASU 2017-05 focuses on recognizing gains and losses from the transfer of nonfinancial assets with noncustomers. It provides guidance as to the definition of an “in substance nonfinancial asset,” and provides guidance for sales of real estate, including partial sales. We adopted this new guidance effective January 1, 2018. This new guidance did not have a significant impact on our consolidated financial statements.

In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging: Targeted Improvements to Accounting for Hedging Activities (ASU 2017-12). The purpose of this updated guidance is to better align a company’s financial reporting for hedging activities with the economic objectives of those activities. We early adopted ASU 2017-12 on January 1, 2018. ASU 2017-12 requires a modified retrospective transition method in which we will recognize the cumulative effect of the change on the opening balance of each affected component of equity in the statement of financial position as of the date of adoption. The adoption of this standard did not have a material impact on our consolidated financial statements.

In October 2018, the Financial Accounting Standards Board (“FASB”) issued ASU 2018-16, Derivatives and Hedging (Topic 815): Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) as a Benchmark Interest Rate for Hedge Accounting. This ASU adds the OIS rate based on SOFR as a U.S. benchmark interest rate to facilitate the LIBOR to SOFR transition and provide sufficient lead time for entities to prepare for changes to interest rate hedging strategies for both risk management and hedge accounting purposes. Because we adopted ASU 2017-12, this guidance became effective January 1, 2019. The adoption of this guidance did not have a material impact on our consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses, and subsequently issued amendments to the initial and transitional guidance within ASU 2018-19, ASU 2019-04 and ASU 2019-05 between November 2018 and May 2019. ASU 2016-13 introduced new guidance for an approach based on expected losses to estimate credit losses on certain types of financial instruments, and will affect our accounting for trade receivables and notes receivable. We adopted this new standard on January 1, 2020. Our receivables primarily relate to leases under ASC 842, which are not within the scope of ASU 2016-13. The adoption of this new standard is not expected to have a material impact on our consolidated financial statements.

Immaterial error correction

The Consolidated Statements of Operations and the Consolidated Statements of Comprehensive Income for the year ended December 31, 2017 includes the impact of correcting the reporting of net loss (income) attributable to noncontrolling interest and common shareholders. Specifically, the correction adjusts for a computational error by reducing net income (and comprehensive income) or by increasing the net loss (and comprehensive loss) attributable to noncontrolling interest by $3.4 million for the year ended December 31, 2017. The 2018 and 2017 quarterly results were also adjusted by increasing the net loss (and comprehensive loss) attributable to noncontrolling interest in the amount of $0.7 million for each of the three months ended March 31, 2018 and 2017; $0.7 million and $0.8 million for the three months ended June 30, 2018 and 2017, respectively; $0.8 million for the three months ended September 30, 2017; and $1.2 million for the three months ended December 31, 2017. The adjustments also increased the amount of net income (and comprehensive income) or decreased the amount of net loss (and comprehensive loss) attributable to PREIT and PREIT common shareholders by the corresponding amounts. The adjustments also increased the amount of basic and diluted earnings per share or decreased the amount of basic and diluted loss per share by $0.05 for the year ended December 31, 2017. The 2018 and 2017 quarterly results were also adjusted by increasing the amount of basic and diluted earnings per share or decreased the amount of basic and diluted loss per share by $0.01 for each of the three months ended March 31, 2018 and 2017; June 30, 2018 and 2017; and September 30, 2017; and, by $0.02 for the three months ended December 31, 2017.

The Consolidated Statement of Equity for the years ended December 31, 2018 and 2017 included the cumulative impact of $9.3 million and $7.8 million, respectively, which corrected the reporting of noncontrolling interest by decreasing noncontrolling interest and increasing Total Equity - Pennsylvania Real Investment Trust by the corresponding amount.

These corrections had no impact on the previously reported amounts of net income (loss), total equity, and consolidated cash flows from operating, investing or financing activities.

We evaluated these corrections and determined, based on quantitative and qualitative factors, that the changes were not material to the consolidated financial statements taken as a whole for any previously filed consolidated financial statements.

F-21

2. REAL ESTATE ACTIVITIES

Investments in real estate as of December 31, 2019 and 2018 were comprised of the following:

	December 31,
(in thousands of dollars)	2019			2018
Buildings, improvements and construction in progress	$	2,753,039		$	2,719,400
Land, including land held for development		457,887			465,194
Total investments in real estate		3,210,926			3,184,594
Accumulated depreciation		(1,202,722	)		(1,118,582	)
Net investments in real estate	$	2,008,204		$	2,066,012

Impairment of Assets

During the years ended December 31, 2019, 2018, and 2017, we recorded asset impairment losses of $5.0 million, $137.5 million, and $55.8 million, respectively. Such impairment losses are recorded in “Impairment of assets” for the years ended 2019, 2018 and 2017. The assets that incurred impairment losses and the amount of such losses are as follows:

	For the Year Ended December 31,
(in thousands of dollars)	2019		2018		2017
Gainesville land		1,464		2,089		1,275
Woodland Mall		2,098		—		—
Exton Square Mall		—		73,218		—
Wyoming Valley Mall		—		32,177		—
Valley View Mall		1,408		14,294		15,521
Wiregrass Mall mortgage loan receivable		—		8,122		—
New Garden Township land		—		7,567		—
Logan Valley Mall		—		—		38,720
Sunrise Plaza land		—		—		226
Other		47		20		51
Total Impairment of Assets	$	5,017	$	137,487	$	55,793

Multiple outparcels and land parcels

In November 2019, we entered into an agreement to sell 14 tenant occupied parcels across five properties — Magnolia Mall, Capital City Mall, Woodland Mall, Jacksonville Mall and Valley Mall — for total consideration of $29.9 million. As of December 31, 2019, we completed the dispositions on three outparcels at Capital City Mall and Magnolia Mall for total consideration of $5.2 million. In connection with these sales, we recorded a gain of $2.7 million. Of the remaining outparcels, impairment of assets was recorded for one at Woodland Mall, located in Grand Rapids, Michigan, for $1.5 million. In January 2020, the sale of the outparcel at Woodland Mall was complete.

We also entered into two agreements in December 2019 to sell two land parcels at Moorestown Mall, located in Moorestown, New Jersey, and Woodland Mall in 2020. An impairment of $0.6 million was recorded in 2019 for the land value of the parcel at Woodland Mall.

Gainesville development land parcel

We had an undeveloped land parcel in Gainesville, Florida. In 2018 and 2017, we recorded losses on impairment of assets on the land parcel located in Gainesville, Florida of $2.1 million and $1.3 million, respectively, in connection with negotiations with a potential buyer. In connection with these negotiations, we determined that the estimated undiscounted cash flows, net of capital expenditures for the property, were less than the carrying value of the property, and recorded losses on impairment of assets. In March 2019, we entered into an agreement of sale with a buyer to sell the undeveloped land parcel in Gainesville, Florida for total consideration of $15.0 million and the sale transaction was split into four parcels. The first parcel was sold in March 2019 for $5.0 million. In connection with this transaction, we recorded losses on impairment of assets of $1.5 million in the first quarter of 2019. Subsequently, we closed on the sale of two parcels in November 2019 and the final parcel closed in December 2019 for aggregate consideration for the three parcels of $10.0 million. The net gain from the sale of this undeveloped land parcel was less than $0.1 million. 

Exton Square Mall

In connection with the preparation of our annual financial statements for the year ended December 31, 2018, we recorded a loss on impairment of assets on Exton Square Mall in Exton, Pennsylvania of $73.2 million. In conjunction with the preparation of our annual business plan, we anticipated decreases in occupancy and net operating income at this property as a result, which led us to conduct an analysis of possible impairment at this property. Based upon our estimates, we determined that the estimated undiscounted cash flows, net of capital expenditures for the property, were less than the carrying value of the property, and recorded a loss on impairment of assets. Our fair value analysis was based on discounted estimated future cash flows for the mall parcel, using a discount rate of 10.5% and a terminal capitalization rate of 10.0% for the mall parcel, and a direct capitalization rate of 5.5% for a parcel adjacent to the mall. The discount and capitalization rates were determined using management’s assessment of property operating performance and general market conditions and were classified in Level 3 of the fair value hierarchy.

F-22

Wyoming Valley Mall

In connection with the preparation of our financial statements as of and for the quarter ended June 30, 2018, we recorded a loss on impairment of assets on Wyoming Valley Mall in Wilkes-Barre, Pennsylvania of $32.2 million as we determined that the pending closure of two anchor stores at the property (as further discussed in Note 4) was a triggering event, leading us to conduct an analysis of possible impairment at this property. Based upon our estimates, we determined that the estimated undiscounted cash flows, net of capital expenditures for the property, were less than the carrying value of the property, and recorded a loss on impairment of assets. Our fair value analysis was based on discounted estimated future cash flows at the property, using a discount rate of 10.5% and a terminal capitalization rate of 9.0%, which was determined using management’s assessment of property operating performance and general market conditions and were classified in Level 3 of the fair value hierarchy.

Valley View Mall

In connection with the preparation of our annual financial statements for the year ended December 31, 2019, we recorded a loss on impairment of assets on Valley View Mall in La Crosse, Wisconsin of $1.4 million. We noted a triggering event as a result of our determination to decrease the holding period of the property to one year. This led to us conduct an analysis of possible impairment at the property. Our fair value analysis was based on a direct capitalization rate of 13.2% for Valley View Mall, which was determined using management’s assessment of property operating performance and general market conditions. The capitalization rate was determined using management’s assessment of property operating performance and general market conditions and were classified in Level 3 of the fair value hierarchy.

In connection with the preparation of our annual financial statements for the year ended December 31, 2018, we recorded a loss on impairment of assets on Valley View Mall in La Crosse, Wisconsin of $14.3 million. In the fourth quarter of 2018, Sears ceased operations at this mall. In conjunction with the preparation of our annual business plan, we anticipated decreases in occupancy and net operating income at this property resulting from lower co-tenancy rents from other tenants in 2019 and beyond, which led us to conduct an analysis of possible impairment at this property. Based upon our estimates, we determined that the estimated undiscounted cash flows, net of capital expenditures for the property, based on a probability-weighted assessment were less than the carrying value of the property, and recorded a loss on impairment of assets. Our fair value analysis was based on a direct capitalization rate of 12.0% on stabilized NOI of the property. The capitalization rate was determined using management’s assessment of property operating performance and general market conditions and were classified in Level 3 of the fair value hierarchy.

We previously recorded a loss on impairment of assets on Valley View Mall in La Crosse, Wisconsin of $15.5 million in 2017 in connection with our decision to market the property for sale. In connection with this decision, we determined that the holding period of the property was less than previously estimated, which we concluded was a triggering event, leading us to conduct an analysis of possible impairment at this property. Based upon our estimates, we determined that the estimated undiscounted cash flows, net of capital expenditures for the property, were less than the carrying value of the property, and recorded a loss on impairment of assets. Our fair value analysis was based on an estimated capitalization rate of approximately 12.0% for Valley View Mall, which was determined using management’s assessment of property operating performance and general market conditions.

Wiregrass Mortgage loan receivable

In connection with the sale of three malls in 2016, we received a $17.0 million mortgage note secured by Wiregrass Commons Mall in Dothan, Alabama. The note has a fixed interest rate of 6.0% and we recorded $0.2 million, $1.0 million, and $1.0 million of interest income in the years ended December 31, 2019, 2018 and 2017, respectively. During 2018, the original buyer sold Wiregrass Commons Mall to an unrelated party and the mortgage note was assumed by this new buyer as part of that sale transaction. In the fourth quarter of 2018, we reclassified the mortgage note receivable from held-to-maturity to held-for-sale. In connection with this reclassification, we recorded an impairment loss of $8.1 million to reduce the $16.1 million carrying value of the mortgage note receivable to its estimated fair value of $8.0 million based on negotiations with a buyer. This mortgage note receivable was sold in February 2019 for $8.0 million.

New Garden Township development land parcel

In 2018, we recorded a loss on impairment of assets on a land parcel located in New Garden Township, Pennsylvania of $7.6 million in connection with negotiations with a potential buyer of the property. In connection with these negotiations, we determined that the estimated proceeds from the sale of the property would be less than the carrying value of the property, and recorded a loss on impairment of assets. As of December 31, 2018, this land parcel was classified as held-for-sale in our consolidated balance sheet.

Logan Valley Mall

In 2017, we recorded an aggregate loss on impairment of assets on Logan Valley Mall in Altoona, Pennsylvania of $38.7 million in connection with negotiations with the buyer of the property. In connection with these negotiations, we determined that the holding period of the property was less than previously estimated, which we concluded was a triggering event, leading us to conduct an analysis of possible impairment at this property. Based upon the negotiations, we determined that the estimated undiscounted cash flows, net of capital expenditures for the property, were less than the carrying value of the property, and recorded a loss on impairment of assets. We sold Logan Valley Mall in August 2017.

F-23

Sunrise Plaza land

In 2017, we recorded a loss on impairment of assets on a land parcel located at Sunrise Plaza in Forked River, New Jersey of $0.2 million in connection with negotiations with the buyer of the property. In connection with these negotiations, we determined that the holding period of the property was less than previously estimated, which we concluded was a triggering event, leading us to conduct an analysis of possible impairment at this property. Based upon the negotiations, we determined that the estimated undiscounted cash flows, net of capital expenditures for the property, were less than the carrying value of the property, and recorded a loss on impairment of assets.

Acquisitions

In 2018, we purchased certain real estate and related improvements at Moorestown Mall and Valley Mall for a total of $17.6 million.

In 2017, we purchased vacant anchor stores from Macy’s located at Moorestown Mall, Valley View Mall and Valley Mall for an aggregate of $13.9 million. We executed a lease with a replacement tenant for the Valley View Mall location and this tenant opened in September 2017 and subsequently closed in the third quarter of 2018. We also have replacement tenants for the Moorestown Mall and Valley Mall former anchors and currently have redevelopment activities at these locations.

In connection with the March 2015 acquisition of Springfield Town Center, the previous owner of the property was potentially entitled to receive consideration (the “Earnout”) under the terms of the Contribution Agreement which was to be calculated as of March 31, 2018. The estimated value of the Earnout was zero and no amounts were paid out at or after March 31, 2018.

Dispositions

The table below presents our dispositions in 2017. There were no dispositions of our mall properties in 2019 and 2018. Proceeds from property sales were used for general corporate purposes, repayment of mortgage loans that secured the properties (if applicable) and repayment of then-outstanding amounts on our Credit Agreements (see note 4), unless otherwise noted.

Sale Date	Property and Location	Description of Real Estate Sold	Capitalization Rate	Sale Price		Gain/ (Loss)
				(in millions of dollars)
2017 Activity:
January	Beaver Valley Mall, Monaca, Pennsylvania	Mall	15.6%	$	24.2	$	—
	Crossroads Mall, Beckley, West Virginia	Mall	15.5%		24.8		—
August	Logan Valley Mall, Altoona, Pennsylvania	Mall	16.5%		33.2		—

Dispositions – Other Activity

In 2020, we entered into an agreement of sale for the sale and leaseback of five properties for an estimated total consideration of $153.6 million. Additionally, we entered into agreements of sale for land parcels for anticipated multifamily development for an estimated total consideration of $125.3 million.  These agreements are subject to certain conditions and final closing of these sales transactions cannot be assured.

In 2019, we entered into an agreement of sale with a buyer to sell an undeveloped land parcel located in Gainesville, Florida for total consideration of $15.0 million and the sale transaction was split into four parcels. The first parcel was sold in March 2019 for $5.0 million. As a result of executing the agreement of sale, we recorded losses on impairment of assets of $1.5 million in the first quarter of 2019. Subsequently, we closed on two parcels in November 2019 and the final parcel closed in December 2019 for an aggregate consideration of $10.0 million.

In 2019, we sold an undeveloped land parcel located in New Garden Township, Pennsylvania, for total consideration of $11.0 million, consisting of $8.25 million in cash and $2.75 million of preferred stock. We ascribed no value for accounting purposes to the preferred shares as they are not tradeable, cannot be transferred or sold and have no redemption feature. Up to $1.25 million of the cash consideration received is subject to claw-back if the buyer does not receive entitlements for a stipulated number of housing units, which has been recorded as a liability in our consolidated balance sheet. In connection with this sale, we recorded a gain of $0.2 million.

In 2019, we sold an outparcel adjacent to Exton Square Mall where a Whole Foods store is located for total consideration of $22.1 million. In connection with this sale, we recorded a gain of $1.3 million.

In 2019, we sold an outparcel located at Valley View Mall in La Crosse, Wisconsin for total consideration of $1.4 million. In connection with this sale, we recorded a gain of $1.2 million.

In 2019, we conveyed Wyoming Valley Mall to the lender of the mortgage loan secured by the property. The loan had a balance of approximately $72.8 million as of the conveyance on September 26, 2019. As a result of the transfer, having previously recognized an asset impairment loss of approximately $32.2 million on the value of the property, we wrote off the remaining carrying value of the property of $43.2 million and recorded a net gain on extinguishment of debt of $29.6 million in 2019.  

F-24

In 2018, we sold a parcel located adjacent to Exton Square Mall in Exton, Pennsylvania for $10.3 million. We recorded a gain of $8.1 million on this sale in the fourth quarter of 2018.

In 2018, we sold an outparcel on which two operating restaurants are located at Valley Mall in Hagerstown, Maryland. for $2.4 million. We recorded a gain of $1.0 million on this sale in the fourth quarter of 2018.

In 2018, we sold an outparcel on which an operating restaurant is located at Magnolia Mall in Florence, South Carolina for $ 1.7 million. We recorded a gain of $0.7 million on this sale in the second quarter of 2018.

In 2017, we sold three non operating parcels located at Beaver Valley Mall, Exton Square Mall and Valley Mall for an aggregate of $6.4 million and recorded aggregate gains of $1.3 million on these parcels.

Development Activities

As of December 31, 2019 and 2018, we had capitalized amounts related to construction and development activities. The following table summarizes certain capitalized construction and development information for our consolidated properties as of December 31, 2019 and 2018:

	December 31,
(in thousands of dollars)	2019		2018
Construction in progress	$	106,011	$	115,182
Land held for development		5,881		5,881
Deferred costs and other assets		7,274		6,487
Total capitalized construction and development activities	$	119,166	$	127,550

3. INVESTMENTS IN PARTNERSHIPS

The following table presents summarized financial information of our equity investments in unconsolidated partnerships as of December 31, 2019 and 2018:

	December 31,
(in thousands of dollars)	2019			2018
ASSETS:
Investments in real estate, at cost:
Operating properties	$	883,530		$	575,149
Construction in progress		251,029			420,771
Total investments in real estate		1,134,559			995,920
Accumulated depreciation		(229,877	)		(212,574	)
Net investments in real estate		904,682			783,346
Cash and cash equivalents		34,766			20,446
Deferred costs and other assets, net		43,476			30,549
Total assets		982,924			834,341
LIABILITIES AND PARTNERS’ INVESTMENT:
Mortgage loans payable, net		499,057			507,090
FDP Term Loan, net		299,091			247,901
Other liabilities		79,166			34,463
Total liabilities		877,314			789,454
Net investment		105,610			44,887
Partners’ share		50,997			21,583
PREIT’s share		54,613			23,304
Excess investment (1)		17,464			15,763
Net investments and advances	$	72,077		$	39,067
Investment in partnerships, at equity	$	159,993		$	131,124
Distributions in excess of partnership investments		(87,916	)		(92,057	)
Net investments and advances	$	72,077		$	39,067

(1) Excess investment represents the unamortized difference between our investment and our share of the equity in the underlying net investment in the unconsolidated partnerships. The excess investment is amortized over the life of the properties, and the amortization is included in “Equity in income of partnerships.”

F-25

We present distributions from our equity investments using the nature of the distributions approach in the accompanying consolidated statement of cash flows.

The following table summarizes our share of equity in income of partnerships for the years ended December 31, 2019, 2018 and 2017:

	For the Year Ended December 31,
(in thousands of dollars)	2019			2018			2017
Real estate revenue	$	99,580		$	98,781		$	115,118
Expenses:
Property operating and other expenses		(34,955	)		(30,839	)		(33,273	)
Interest expense		(23,272	)		(23,373	)		(25,251	)
Depreciation and amortization		(21,942	)		(19,393	)		(24,872	)
Total expenses		(80,169	)		(73,605	)		(83,396	)
Net income		19,411			25,176			31,722
Less: Partners’ share		(10,768	)		(13,719	)		(17,607	)
PREIT’s share		8,643			11,457			14,115
Amortization of excess investment		(354	)		(82	)		252
Equity in income of partnerships	$	8,289		$	11,375		$	14,367

Dispositions

In March 2019, a partnership in which we hold a 25% interest sold an undeveloped land parcel adjacent to Gloucester Premium Outlets for $3.8 million. The partnership recorded a gain on sale of $2.3 million, of which our share was $0.6 million, which is recorded in gain on sale of real estate by equity method investee in the accompanying consolidated statement of operations.

In February 2018, a partnership in which we hold a 50% ownership share sold its office condominium interest in 907 Market Street in Philadelphia, Pennsylvania for $41.8 million. The partnership recorded a gain on sale of $5.5 million, of which our share was $2.8 million, which is recorded in gain on sale of real estate by equity method investee in the accompanying consolidated statement of operations. The partnership distributed to us proceeds of $19.7 million in connection with this transaction.

In September 2017, a partnership in which we hold a 50% ownership share sold its condominium interest in 801 Market Street in Philadelphia, Pennsylvania for $61.5 million. The partnership recorded a gain on sale of $13.1 million, of which our share was $6.5 million. The partnership distributed to us proceeds of $30.3 million in connection with this transaction in September 2017, which is recorded in gain on sale of real estate by equity method investee in the accompanying consolidated statement of operations.

Term Loan

In January 2018, our Fashion District Philadelphia redevelopment project joint venture entity entered into a $250.0 million term loan (the “FDP Term Loan”). We and our partner in the project, The Macerich Company (“Macerich”), each own a 50% partnership interest in Fashion District Philadelphia. The FDP Term Loan matures in January 2023, and bears interest at a variable rate of LIBOR plus 2.00%. PREIT and Macerich secured the FDP Term Loan by pledging their respective equity interests in the entities that own Fashion District Philadelphia. The entire $250.0 million available under the FDP Term Loan was drawn during the first quarter of 2018, and we received an aggregate $123.0 million as a distribution of our share of the draws in 2018. In July 2019, the FDP Term Loan was modified to increase the total potential borrowings from $250.0 million to $350.0 million. A total of $51.0 million was drawn during the third quarter of 2019 and we received aggregate distributions of $25.0 million as our share of the draws.

F-26

Mortgage Loans of Unconsolidated Properties

Mortgage loans, which are secured by seven of the unconsolidated properties (including one property under development), are due in installments over various terms extending to the year 2027. Five of the mortgage loans bear interest at a fixed interest rate and two of the mortgage loans bear interest at a variable interest rate. The balances of the fixed interest rate mortgage loans have interest rates that range from 4.06% to 5.56% and had a weighted average interest rate of 4.55% at December 31, 2019. The balances of the variable interest rate mortgage loans have interest rates that range from 3.19% to 4.60% and had a weighted average interest rate of 3.37% at December 31, 2019. The weighted average interest rate of all unconsolidated mortgage loans was 4.43% at December 31, 2019. The liability under each mortgage loan is limited to the unconsolidated partnership that owns the particular property. Our proportionate share, based on our respective partnership interest, of principal payments due in the next five years and thereafter is as follows:

	Company’s Proportionate Share
(in thousands of dollars) For the Year Ending December 31,	Principal Amortization		Balloon Payments		Total		Property Total
2020	$	4,378	$	—	$	4,378	$	8,801
2021		4,049		41,170		45,219		91,945
2022		3,738		21,500		25,238		93,476
2023		3,620		33,502		37,122		74,244
2024		2,886		—		2,886		5,772
2025 and thereafter		7,213		106,087		113,300		226,601
Total principal payments	$	25,884	$	202,259	$	228,143		500,839
Less: Unamortized debt issuance costs								1,782
Carrying value of mortgage notes payable							$	499,057

The following table presents the mortgage loans secured by the unconsolidated properties entered into since January 1, 2017:

Financing Date	Property	Amount Financed or Extended (in millions of dollars)		Stated Interest Rate	Maturity
2018 Activity:
February	Pavilion at Market East (1)	$	8.3	LIBOR plus 2.85%	February 2021
March	Gloucester Premium Outlets (2)	$	86.0	LIBOR plus 1.50%	March 2022
2017 Activity:
October	Lehigh Valley Mall (3)(4)	$	200.0	Fixed 4.06%	November 2027

(1) We own a 40% partnership interest in Pavilion at Market East and our share of this mortgage loan is $3.1 million.

(2) We own a 25% partnership interest in Gloucester Premium Outlets and our share of this mortgage loan is $21.5 million.

(3) The proceeds were used to repay the existing $124.6 million mortgage loan plus accrued interest. We own a 50% partnership interest in Lehigh Valley Mall and our share of this mortgage loan is $96.4 million.

(4) We received $35.3 million of proceeds as a distribution in connection with the financing. In connection with this new mortgage loan financing, the unconsolidated entity recorded $3.1 million of prepayment penalty and accelerated the amortization of $0.1 million of unamortized financing costs in the fourth quarter of 2017.

Significant Unconsolidated Subsidiary

We have a 50% ownership interest in each of Lehigh Valley Associates L.P. (“LVA”) and Fashion District Philadelphia (“FDP”). The financial information of LVA and FDP are included in the amounts above. Summarized balance sheet information as of December 31, 2019, 2018 and 2017, and summarized statement of operations information for the years ended December 31, 2019, 2018 and 2017 for these entities, which are accounted for using the equity method, are as follows:

LVA

	As of or for the year ended December 31,
(in thousands of dollars)	2019		2018		2017
Total assets	$	62,504	$	52,255	$	43,850
Mortgage payable		191,998		196,328		199,451
Revenue		32,906		35,662		34,945
Property operating expenses		8,448		9,014		9,038
Interest expense		8,055		8,222		10,907
Net income		13,162		15,605		11,389
PREIT’s share of equity in income of partnership		6,581		7,803		5,695

F-27

FDP

	As of or for the year ended December 31,
(in thousands of dollars)	2019			2018			2017
Total assets	$	641,377		$	497,419		$	428,827
FDP Term Loan, net		299,091			250,000			—
Revenue		8,028			4,053			18,708
Property operating expenses		6,995			3,630			6,909
Interest expense		178			126			126
Net income		(7,352	)		(4,990	)		2,436
PREIT’s share of equity in income of partnership		(3,676	)		(2,495	)		1,218

4. FINANCING ACTIVITY

Credit Agreements

We have entered into two credit agreements (collectively, as amended, the “Credit Agreements”): (1) the 2018 Credit Agreement, which, as described in more detail below, includes (a) the 2018 Revolving Facility, and (b) the 2018 Term Loan Facility, and (2) the 2014 7-Year Term Loan. The 2018 Term Loan Facility and the 2014 7-Year Term Loan are collectively referred to as the “Term Loans.”

As of December 31, 2019, we had borrowed $550.0 million under the Term Loans and $255.0 million under the 2018 Revolving Facility. The carrying value of the Term Loans on our consolidated balance sheet as of December 31, 2019 is net of $2.0 million of unamortized debt issuance costs. The net operating income (“NOI”) from our unencumbered properties is at a level such that within the Unencumbered Debt Yield covenant (as described below) under the Credit Agreements, the maximum unsecured amount that was available to us as of December 31, 2019 was $30.1 million.

Interest expense and the deferred financing fee amortization related to the Credit Agreements for the years ended December 31, 2019, 2018 and 2017 were as follows:

	For the Year Ended December 31,
(in thousands of dollars)	2019	2018	2017
Revolving Facilities:
Interest expense	$7,526	$1,807	$2,463
Deferred financing amortization	1,097	1,052	796
Term Loans:
Interest expense	20,922	17,585	14,935
Deferred financing amortization	760	763	759
Accelerated financing fee	—	363	—

F-28

Credit Agreements

On May 24, 2018, we entered into an Amended and Restated Credit Agreement (the “2018 Credit Agreement”) with Wells Fargo Bank, National Association, U.S. Bank National Association, Citizens Bank, N.A., and the other financial institutions signatory thereto, for an aggregate $700.0 million senior unsecured facility consisting of (i) a $400 million senior unsecured revolving credit facility (the “2018 Revolving Facility”), which replaced our previously existing $400 million revolving credit agreement (the “2013 Revolving Facility”), and (ii) a $300 million term loan facility (the “2018 Term Loan Facility”), which was used to pay off a previously existing $150 million five year term loan (the “2014 5-Year Term Loan”) and a second $150 million five year term loan (the “2015 5-Year Term Loan”). The maturity date of the 2018 Revolving Facility is May 23, 2022, subject to two six-month extensions at our election, and the maturity date of the 2018 Term Loan Facility is May 23, 2023. In connection with this activity, we recorded accelerated amortization of financing costs of $0.4 million.

As of December 31, 2019, $250.0 million was outstanding under the 2014 7-Year Term Loan, which matures on December 29, 2021.

On June 5, 2018, we entered into the Fifth Amendment (the “Amendment”) to the 2014 7-Year Term Loan. The Amendment was entered into to make certain provisions of the 2014 7-Year Term Loan consistent with the 2018 Credit Agreement. Among other things, the Amendment (i) adds and updates certain definitions and provisions, including tax-related provisions, relating to foreign lenders under the 2014 7-Year Term Loan, (ii) updates the definition of “Existing Credit Agreement” to refer to the 2018 Credit Agreement, which updates the cross defaults between the 2014 7-Year Term Loan and the 2018 Credit Agreement (replacing such cross defaults to the agreements the 2018 Credit Agreement replaced), (iii) adds and amends provisions consistent with those provided in the 2018 Credit Agreement for determining an alternative rate of interest to LIBOR, when and if required, and (iv) adjusts or eliminates some of the covenants applicable to the Borrower, as defined therein. The Amendment does not extend the maturity date of the 2014 7-Year Term Loan or change the amounts that can be borrowed thereunder.

Identical covenants and common provisions contained in the Credit Agreements

Each of the Credit Agreements contains certain affirmative and negative covenants and other provisions, which are identical to those contained in the other Credit Agreements, and which are described in detail below.

Amounts borrowed under the Credit Agreements bear interest at the rate specified below per annum, depending on our leverage, in excess of LIBOR, unless and until we receive an investment grade credit rating and provides notice to the Administrative Agent (the “Rating Date”), after which alternative rates would apply, as described below. In determining our leverage (the ratio of Total Liabilities to Gross Asset Value), the capitalization rate used to calculate Gross Asset Value is 6.50% for each property having an average sales per square foot of more than $500 for the most recent period of 12 consecutive months and (b) 7.50% for any other property. Capitalized terms used and not otherwise defined in this Annual Report on Form 10-K have the meanings ascribed to such terms in the applicable credit agreement document. The 2018 Revolving Facility is subject to a facility fee, which is currently 0.30%, depending upon leverage, and is recorded as interest expense in the consolidated statements of operations. In the event we seek and obtain an investment grade credit rating, alternative facility fees would apply.

		Applicable Margin
Level	Ratio of Total Liabilities to Gross Asset Value	Revolving Loans that are LIBOR Loans	Revolving Loans that are Base Rate Loans	Term Loans that are LIBOR Loans	Term Loans that are Base Rate Loans
1	Less than 0.450 to 1.00	1.20%	0.20%	1.35%	0.35%
2	Equal to or greater than 0.450 to 1.00 but less than 0.500 to 1.00	1.25%	0.25%	1.45%	0.45%
3	Equal to or greater than 0.500 to 1.00 but less than 0.550 to 1.00	1.30%	0.30%	1.60%	0.60%
4	Equal to or greater than 0.550 to 1.00 (1)	1.55%	0.55%	1.90%	0.90%

(1) The rates in effect under the Credit Agreements were based upon the Level 4 Ratio of Total Liabilities to Gross Asset Value as of December 31, 2019.

We may prepay the amounts due under the Credit Agreements at any time without premium or penalty, subject to reimbursement obligations for the lenders’ breakage costs for LIBOR borrowings.

The Credit Agreements contain certain affirmative and negative covenants, including, without limitation, requirements that PREIT maintain, on a consolidated basis: (1) Minimum Tangible Net Worth of $1,463.2 million, plus 75% of the Net Proceeds of all Equity Issuances effected at any time after March 31, 2018; (2) maximum ratio of Total Liabilities to Gross Asset Value of 0.60:1, provided that it will not be a Default if the ratio exceeds 0.60:1 but does not exceed 0.625:1 for more than two consecutive quarters on more than two occasions during the term; (3) minimum ratio of Adjusted EBITDA to Fixed Charges of 1.50:1; (4) minimum Unencumbered Debt Yield of (a) 11.0% through and including June 30, 2020, (b) 11.25% any time after June 30, 2020 through and including June 30, 2021, and (c) 11.50% anytime thereafter; (5) minimum Unencumbered NOI to Unsecured Interest Expense of 1.75:1; (6) maximum ratio of Secured Indebtedness to Gross Asset Value of 0.60:1; and (7) Distributions may not exceed (a) with respect to our preferred shares, the amounts required by the terms of the preferred shares, and (b) with respect to our common shares, the greater of (i) 95.0% of Funds From Operations (FFO) and (ii) 110% of REIT taxable income for a fiscal year. The covenants and restrictions in the Credit Agreements limit our ability to incur additional indebtedness, grant liens on assets and enter into negative pledge agreements, merge, consolidate or sell all or substantially all of our assets, and enter into transactions with affiliates. The Credit Agreements are subject to customary events of default and are cross-defaulted with one another.

F-29

As of December 31, 2019, we were in compliance with all such financial covenants. We anticipate not meeting certain financial covenants applicable under the credit agreements during 2020. See Going Concern Considerations section in Note 1.

Consolidated Mortgage Loans

Our consolidated mortgage loans, which are secured by 10 of our consolidated properties, are due in installments over various terms extending to the year 2025.  Seven of these mortgage loans bear interest at fixed interest rates that range from 3.88% to 5.95% and had a weighted average interest rate of 4.08% at December 31, 2019. Three of our mortgage loans bear interest at variable rates and had a weighted average interest rate of 3.94% at December 31, 2019. The weighted average interest rate of all consolidated mortgage loans was 4.04% at December 31, 2019. Mortgage loans for properties owned by unconsolidated partnerships are accounted for in “Investments in partnerships, at equity” and “Distributions in excess of partnership investments,” and are not included in the table below.

The following table outlines the timing of principal payments and balloon payments pursuant to the terms of our consolidated mortgage loans of our consolidated properties as of December 31, 2019:

(in thousands of dollars) For the Year Ending December 31,	Principal Amortization		Balloon Payments		Total
2020	$	16,266	$	27,161	$	43,427
2021		17,862		188,785		206,647
2022		13,463		355,988		369,451
2023		6,584		53,299		59,883
2024		6,405		-		6,405
2025 and thereafter		4,406		211,346		215,752
Total principal payments	$	64,986	$	836,579		901,565
Less: Unamortized debt issuance costs						1,812
Carrying value of mortgage notes payable					$	899,753

The estimated fair values of our consolidated mortgage loans based on year-end interest rates and market conditions at December 31, 2019 and 2018 are as follows:  

	2019				2018
(in millions of dollars)	Carrying Value		Fair Value		Carrying Value		Fair Value
Consolidated mortgage loans (1)	$	899.8	$	873.9	$	1,047.9	$	1,002.3

(1) The carrying value of consolidated mortgage loans has been reduced by unamortized debt issuance costs of $1.8 million and $3.1 million as of December 31, 2019 and 2018, respectively.

The consolidated mortgage loans contain various customary default provisions. As of December 31, 2019, we were not in default on any of the consolidated mortgage loans.

Mortgage Loan Activity

The following table presents the mortgage loans we have entered into or extended since January 1, 2018 relating to our consolidated properties:  

Financing Date	Property	Amount Financed or Extended (in millions of dollars )		Stated Interest Rate	Maturity
2018 Activity:
January	Francis Scott Key (1)	$	68.5	LIBOR plus 2.60%	January 2022
February	Viewmont Mall (2)	$	10.2	LIBOR Plus 2.35%	March 2021

⁽¹⁾ The $68.5 million mortgage loan’s maturity date was extended to January 2022, and has a one-year extension option that would further extend the maturity date to January 2023.

⁽²⁾ In 2018, the mortgage was increased by $10.2 million to $67.2 million.

F-30

Other Mortgage Loan Activity

In March 2019, we defeased a $58.5 million mortgage loan including accrued interest, secured by Capital City Mall in Camp Hill, Pennsylvania using funds from our 2018 Revolving Facility and the balance from available working capital. We recorded a loss on debt extinguishment of $4.8 million in March 2019 in connection with this defeasance.

As discussed in Note 2, in September 2019, we conveyed Wyoming Valley Mall to the lender of the mortgage loan secured by the property. The loan had a balance of approximately $72.8 million as of the conveyance on September 26, 2019. In connection with the conveyance, $7.5 million of cash and escrow balances were transferred to the lender and we recorded a net gain on extinguishment of debt of $29.6 million.

In April 2019, we received a notice from the servicer of the Cumberland Mall mortgage of a cash sweep event due to the failure of an anchor tenant to renew for a full term. We satisfied this requirement in August 2019.

We have a $27.4 million mortgage, secured by Valley View Mall in La Crosse, Wisconsin, which matures in July 2020. Subsequent to December 31, 2019, we have commenced disposition discussions with the lender regarding the property.

5. EQUITY OFFERINGS

Preferred Share Offerings

In January 2017, we issued 6,900,000 7.20% Series C Cumulative Redeemable Perpetual Preferred Shares (the “Series C Preferred Shares”) in a public offering at $25.00 per share. We received net proceeds from the offering of approximately $166.3 million after deducting payment of the underwriting discount of $5.4 million ($0.7875 per Series C Preferred Share) and offering expenses of $0.8 million. We used a portion of the net proceeds from this offering to repay all $117.0 million of then-outstanding borrowings under the 2013 Revolving Facility.

In September and October 2017, we issued an aggregate of 5,000,000 6.875% Series D Cumulative Redeemable Perpetual Preferred Shares (the “Series D Preferred Shares”) in a public offering at $25.00 per share, including 200,000 shares that were issued pursuant to the underwriter’s exercise of an overallotment option. We received aggregate net proceeds from the offering of approximately $120.5 million after deducting payment of the underwriting discount of $4.0 million ($0.7875 per Series D Preferred Share) and offering expenses of $0.5 million. We used the net proceeds from the offering of our Series D Preferred Shares to redeem all of our then outstanding 8.25% Series A Cumulative Redeemable Perpetual Preferred Shares (the “Series A Preferred Shares”) and for general corporate purposes.

We may not redeem the Series C Preferred Shares and the Series D Preferred Shares before January 27, 2022 and September 15, 2022, respectively, except to preserve our status as a REIT or upon the occurrence of a Change of Control, as defined in the Trust Agreement addendums designating the Series C Preferred Shares and Series D Preferred Shares. On and after January 27, 2022 for the Series C Preferred Shares and September 15, 2022 for the Series D Preferred Shares, we may redeem any or all of the Series C Preferred Shares or Series D Preferred Shares at $25.00 per share plus any accrued and unpaid dividends. In addition, upon the occurrence of a Change of Control, we may redeem any or all of the Series C Preferred Shares or Series D Preferred Shares for cash within 120 days after the first date on which such Change of Control occurred, at $25.00 per share plus any accrued and unpaid dividends. The Series C Preferred Shares and Series D Preferred Shares have no stated maturity, are not subject to any sinking fund or mandatory redemption provisions, and will remain outstanding indefinitely unless we redeem or otherwise repurchase them or they are converted.

Preferred Share Redemption

On October 12, 2017 (the “Redemption Date”), we redeemed all 4,600,000 of its Series A Preferred Shares remaining issued and outstanding as of the Redemption Date, for $115.0 million (the redemption price of $25.00 per share) plus accrued and unpaid dividends of $0.7 million (the amount equal to all accrued and unpaid dividends on the Series A Preferred Shares (whether or not declared) from September 15, 2017 up to but excluding the Redemption Date). The Series A Preferred Shares were initially issued in April 2012. As a result of this redemption, the $4.1 million excess of the redemption price over the carrying amount of the Series A Preferred Shares was deducted from Net income (loss) attributed to PREIT common shareholders in the fourth quarter of 2017.

6. DERIVATIVES

In the normal course of business, we are exposed to financial market risks, including interest rate risk on our interest bearing liabilities. We attempt to limit these risks by following established risk management policies, procedures and strategies, including the use of financial instruments such as derivatives. We do not use financial instruments for trading or speculative purposes.

Cash Flow Hedges of Interest Rate Risk

For derivatives that have been designated and that qualify as cash flow hedges of interest rate risk, the gain or loss on the derivative is recorded in “Accumulated other comprehensive income” and subsequently reclassified into “Interest expense, net” in the same periods during which the hedged transaction affects earnings. As of December 31, 2019, all of our outstanding derivatives were designated as cash flow hedges. We recognize all derivatives at fair value as either assets or liabilities in the accompanying consolidated balance sheets. Our derivative assets are recorded in “Deferred costs and other assets” and our derivative liabilities are recorded in “Fair value of derivative instruments.”

F-31

During 2020, we estimate that $2.7 million will be reclassified as an increase to interest expense in connection with derivatives. The recognition of these amounts could be accelerated in the event that we repay amounts outstanding on the debt instruments and do not replace them with new borrowings.

Interest Rate Swaps

As of December 31, 2019, we had interest rate swap agreements outstanding with a weighted average base interest rate of 1.86% on a notional amount of $795.6 million, maturing on various dates through May 2023, and forward starting interest rate swap agreements with a weighted average base interest rate of 2.75% on a notional amount of $100.0 million, with effective dates in June 2020, and maturity dates in May 2023. We entered into these interest rate swap agreements in order to hedge the interest payments associated with our issuances of variable interest rate long term debt. The interest rate swap agreements are net settled monthly.

The following table summarizes the terms and estimated fair values of our interest rate swap derivative instruments designated as cash flow hedges of interest rate risk at December 31, 2019 and 2018 based on the year they mature. The notional values provide an indication of the extent of our involvement in these instruments, but do not represent exposure to credit, interest rate or market risks.

Maturity Date	Aggregate Notional Value at December 31, 2019 (in millions of dollars)		Aggregate Fair Value at December 31, 2019 (1) (in millions of dollars)			Aggregate Fair Value at December 31, 2018 (1) (in millions of dollars)			Weighted Average Interest Rate
Interest Rate Swaps
2020	$	100.0	$	0.2		$	1.9			1.23	%
2021		495.6		(1.4	)		8.1			1.66	%
2022		—		—			—			—
2023		200.0		(7.3	)		(0.4	)		2.67	%
Forward Starting Swaps
2023		100.0		(3.4	)		(2.6	)		2.75	%
Total	$	895.6	$	(11.9	)	$	7.0			1.96	%

(1) As of December 31, 2019 and 2018, derivative valuations in their entirety were classified in Level 2 of the fair value hierarchy and we did not have any significant recurring fair value measurements related to derivative instruments using significant unobservable inputs (Level 3).

The tables below present the effect of derivative financial instruments on accumulated other comprehensive income and on our consolidated statements of operations for the years ended December 31, 2019 and 2018:

	Year Ended December 31,
	Amount of Gain or (Loss) Recognized in Other Comprehensive Income on Derivative Instruments								Amount of Gain or (Loss) Reclassified from Accumulated Other Comprehensive Income into Interest Expense
(in millions of dollars)	2019			2018			2017		2019			2018		2017
Derivatives in Cash Flow Hedging Relationships
Interest rate products	$	(15.8	)	$	(0.4	)	$	4.0	$	(3.1	)	$	2.4	$	2.3

	Year Ended December 31,
(in millions of dollars)	2019			2018			2017
Total interest expense presented in the consolidated statements of operations in which the effects of cash flow hedges are recorded	$	(64.0	)	$	(61.4	)	$	(58.4	)
Amount of gain (loss) reclassified from accumulated other comprehensive income into interest expense	$	(3.1	)	$	2.4		$	2.3

Credit-Risk-Related Contingent Features

We have agreements with some of our derivative counterparties that contain a provision pursuant to which, if our entity that originated such derivative instruments defaults on any of its indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, then we could also be declared to be in default on our derivative obligations. As of December 31, 2019, we were not in default on any of our derivative obligations.

We have an agreement with a derivative counterparty that incorporates the loan covenant provisions of our loan agreement with a lender affiliated with the derivative counterparty. Failure to comply with the loan covenant provisions would result in our being in default on any derivative instrument obligations covered by the agreement.

F-32

As of December 31, 2019, the fair value of derivatives in a liability position, which excludes accrued interest but includes any adjustment for nonperformance risk related to these agreements, was $13.1 million. If we had breached any of the default provisions in these agreements as of December 31, 2019, we might have been required to settle our obligations under the agreements at their termination value (including accrued interest) of $12.4 million. We had not breached any of these provisions as of December 31, 2019.

7. BENEFIT PLANS

401(k) Plan

We maintain a 401(k) Plan (the “401(k) Plan”) in which substantially all of our employees are eligible to participate. The 401(k) Plan permits eligible participants, as defined in the 401(k) Plan agreement, to defer up to 30% of their compensation, and we, at our discretion, may match a specified percentage of the employees’ contributions. Our and our employees’ contributions are fully vested, as defined in the 401(k) Plan agreement. Our contributions to the 401(k) Plan were $0.9 million, $0.9 million, and $0.9 million for the years ended December 31, 2019, 2018 and 2017, respectively.

Supplemental Retirement Plans

We maintain Supplemental Retirement Plans (the “Supplemental Plans”) covering certain senior management employees. Expenses under the provisions of the Supplemental Plans were $0.2 million, $0.2 million, and $0.3 million for the years ended December 31, 2019, 2018 and 2017, respectively.

Employee Share Purchase Plan

We maintain a share purchase plan through which our employees may purchase common shares at a 15% discount to the fair market value (as defined therein). In the years ended December 31, 2019, 2018 and 2017, approximately 44,000, 31,000, and 38,000 shares, respectively, were purchased for total consideration of $0.2 million, $0.2 million, and $0.4 million, respectively. We recorded expense of approximately $48 thousand, $43 thousand and $0.1 million for the years ended December 31, 2019, 2018 and 2017, respectively, related to the share purchase plan.

8. SHARE BASED COMPENSATION

Share Based Compensation Plans

As of December 31, 2019, we make share based compensation awards using our 2018 Equity Incentive Plan, which is a share based compensation plan that was approved by our shareholders in 2018. Previously, we maintained six other plans pursuant to which we granted equity awards in various forms. Certain restricted shares and certain options granted under these previous plans remain subject to restrictions or remain outstanding and exercisable, respectively. In addition, we previously maintained two plans pursuant to which we granted options to our non-employee trustees.

We recognize expense in connection with share based awards to employees and trustees by valuing all share based awards at their fair value on the date of grant, and then expensing them over the applicable vesting period.

For the years ended December 31, 2019, 2018 and 2017, we recorded aggregate compensation expense for share based awards of $7.0 million (including a net reversal of $1.1 million of amortization relating to employee separation), $6.9 million (including $0.1 million of accelerated amortization relating to employee separation), and $5.7 million (including a net reversal of $0.2 million of amortization relating to employee separation), respectively, in connection with the equity incentive programs described below. There was no income tax benefit recognized in the income statement for share based compensation arrangements. For the years ended December 31, 2019, 2018 and 2017, we capitalized compensation costs related to share based awards of $0.2 million, $0.1 million, and $0.1 million, respectively.

2018 Equity Incentive Plan

Subject to any future adjustments for share splits and similar events, the total remaining number of common shares that may be issued to employees or trustees under our 2018 Equity Incentive Plan (pursuant to options, restricted shares, shares issuable pursuant to current or future RSU Programs, or otherwise) was 1,145,956 as of December 31, 2019. The share based awards described in this footnote were made under the 2003 Equity Incentive Plan and the 2018 Equity Incentive Plan.

Restricted Shares Subject to Time Based Vesting

The aggregate fair value of the restricted shares that we granted to our employees and non-employee trustees in 2019, 2018 and 2017 was $5.6 million, $5.1 million, and $4.8 million, respectively, based on the share price on the date of the grant. As of December 31, 2019, there was $4.3 million of total unrecognized compensation cost related to unvested share based compensation arrangements granted under the 2003 Equity Incentive Plan and the 2018 Equity Incentive Plan. The cost is expected to be recognized over a weighted average period of 0.8 years.

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A summary of the status of our unvested restricted shares as of December 31, 2019 and changes during the years ended December 31, 2019, 2018 and 2017 is presented below:

	Shares			Weighted Average Grant Date Fair Value
Unvested at January 1, 2017		386,412		$	21.88
Shares granted		336,296			14.95
Shares vested		(238,859	)		19.56
Shares forfeited		(34,427	)		18.00
December 31, 2017		449,422		$	16.85
Shares granted		461,395			11.02
Shares vested		(260,178	)		16.58
Shares forfeited		(29,241	)		14.17
December 31, 2018		621,398		$	13.29
Shares granted		798,370			7.04
Shares vested		(349,533	)		13.14
Shares forfeited		(131,971	)		8.75
December 31, 2019		938,264		$	8.67

Restricted Shares Awarded to Employees

In 2019, 2018 and 2017, we made grants of restricted shares subject to time based vesting. The awarded shares vest over periods of one to three years, typically in equal annual installments, provided the recipient remains our employee on the vesting date. For all grantees, the shares generally vest immediately upon death or disability. Recipients are entitled to receive an amount equal to the dividends on the shares prior to vesting. We granted a total of 683,570, 392,697, and 245,950 restricted shares subject to time based vesting to our employees in 2019, 2018 and 2017, respectively. The weighted average grant date fair values of time based restricted shares was $7.15 per share in 2019, $10.99 per share in 2018, and $16.43 per share in 2017. The aggregate fair value of the restricted shares granted in 2019, 2018, and 2017 were $4.9 million, $4.3 million, and $4.0 million, respectively. Compensation cost relating to time based restricted share awards is recorded ratably over the respective vesting periods. We recorded $3.7 million (including a net reversal of $0.2 million of accelerated amortization relating to employee separation), $4.3 million (including $0.1 million of accelerated amortization relating to employee separation) and $3.9 million (including $0.2 million of accelerated amortization relating to employee separation) of compensation expense related to time based restricted shares for the years ended December 31, 2019, 2018 and 2017, respectively. The total fair value of shares vested during the years ended December 31, 2019, 2018 and 2017 was $3.8 million, $2.0 million, and $3.9 million, respectively.

On February 24, 2020, the Company granted 1,093,292 time-based restricted shares to employees that vest over periods of two to three years in annual installments. 

Outperformance Units (“OPUs”) Awarded to Employees

Of the time-based restricted shares granted to employees in 2019 described above, 517,783 have Outperformance Units (“OPUs”) attached to them. The OPUs will entitle the employees to receive additional shares tied to a multiple of the employee’s time-based restricted share award if the Company achieves certain specified operating performance metrics measured over a three-year period. If any shares are issued in respect of the OPUs at the end of the three-year measurement period, 50% will vest immediately, 25% will be subject to an additional one-year vesting requirement, and 25% will be subject to an additional two-year vesting requirement. Dividend equivalents on the common shares will accrue on any awarded OPUs and are credited to “acquire” more OPUs for the account of the employee at the 20-day average closing price per common share ending on the dividend payment date, but will vest only if performance measures are achieved. We recorded $0.8 million (including a net reversal of $0.1 million of accelerated amortization relating to employee separation) of compensation expense related to OPUs for the year ended December 31, 2019.

Restricted Shares Awarded to Non-Employee Trustees

As part of the compensation we pay to our non-employee trustees for their service, we grant restricted shares subject to time based vesting. The awarded shares vest over a one-year period. These annual awards have been made under the 2003 Equity Incentive Plan and the 2018 Equity Incentive Plan. We granted a total of 114,800, 68,698, and 64,358 restricted shares subject to time based vesting to our non-employee trustees in 2019, 2018, and 2017, respectively. The weighted average grant date fair values of time based restricted shares was $6.35 per share in 2019, $11.17 per share in 2018, and $11.45 per share in 2017. The aggregate fair value of the restricted shares granted in 2019, 2018 and 2017 were $0.7 million, $0.8 million, $0.7 million, respectively, based on the share price on the date of the grant. Compensation cost relating to time based restricted share awards is recorded ratably over the respective vesting periods. We recorded $0.7 million, $0.5 million, and $0.5 million of compensation expense related to time based vesting of non-employee trustee restricted share awards in 2019, 2018 and 2017, respectively. As of December 31, 2019, there was $0.3 million of total unrecognized compensation expense related to unvested restricted share grants to non-employee trustees. The total fair value of shares granted to non-employee trustees that vested was $0.8 million, $0.6 million, and $0.8 million for the years ended December 31, 2019, 2018 and 2017, respectively. In 2020, we will record compensation expense of $0.3 million in connection with the amortization of existing non-employee trustee restricted share awards.

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We will record future compensation expense in connection with the vesting of existing time based restricted share awards to employees and non-employee trustees as follows:

	Future Compensation Expense
(in thousands of dollars) For the Year Ending December 31,	Employees		Non-Employee Trustees		Total
2020	$	2,527	$	284	$	2,811
2021		1,352		—		1,352
2022		150		—		150
2023				—		—
Total	$	4,029	$	284	$	4,313

Restricted Share Unit Programs

In 2019, 2018, 2017, 2016 and 2015, our Board of Trustees established the 2019-2021 RSU Program, 2018-2020 RSU Program, 2017-2019 RSU Program, 2016-2018 RSU Program, and the 2015-2017 RSU Program, respectively (collectively, the “RSU Programs”).

Under the RSU Programs, we may make awards in the form of market based performance-contingent restricted share units, or RSUs. The RSUs represent the right to earn common shares in the future depending on our performance in terms of total return to shareholders (as defined in the RSU Programs) for applicable three year periods or a shorter period ending upon the date of a change in control of the Company (each, a “Measurement Period”) relative to the total return to shareholders, as defined, for the applicable Measurement Period of companies comprising an index of real estate investment trusts (the “Index REITs”). In both 2019 and 2018, only one half of the awarded RSUs were tied to our relative total return to shareholders compared to the Index REITs, with the other half of the RSUs being tied to our absolute level of total return to shareholders. Dividends are deemed credited to the participants’ RSU accounts and are applied to “acquire” more RSUs for the account of the participants at the 20 -day average price per common share ending on the dividend payment date. If earned, awards will be paid in common shares in an amount equal to the applicable percentage of the number of RSUs in the participant’s account at the end of the applicable Measurement Period.

The aggregate fair values of the RSU awards in 2019, 2018 and 2017 were determined using a Monte Carlo simulation probabilistic valuation model, and are presented in the table below. The table also sets forth the assumptions used in the Monte Carlo simulations used to determine the aggregate fair values of the RSU awards in 2019, 2018 and 2017 by grant date:

(in thousands of dollars, except per share data)	RSUs and assumptions by Grant Date
Grant Date:	January 29, 2019						January 19, 2018						February 27, 2017
Measurement Basis:	Absolute TSR RSUs			Relative TSR RSUs			Absolute TSR RSUs			Relative TSR RSUs			Relative TSR RSUs
RSUs granted		210,193			210,193			115,614			115,614			140,490
Aggregate fair value of shares granted	$	1,550		$	1,890		$	1,336		$	1,779		$	1,620
Weighted average fair value per share	$	7.38		$	8.99		$	10.93		$	14.56		$	11.53
Volatility		40.3	%		40.3	%		31.6	%		31.6	%		25.8	%
Risk free interest rate		2.58	%		2.58	%		2.19	%		2.19	%		1.42	%
PREIT Stock Beta compared to Dow Jones US Real Estate Index (1)	n/a			n/a			n/a			n/a				0.706

(1) 2019 and 2018’s RSU Award valuations used a matrix approach, where the correlation was calculated between PREIT and each of its peers and each peer against all other peers.

Compensation cost relating to the RSU awards is expensed ratably over the applicable three year vesting period. We recorded $1.8 million (including a reversal of $0.8 million of accelerated amortization relating to employee separation), $2.1 million, and $1.3 million (including a reversal of $0.4 million of accelerated amortization relating to employee separation) of compensation expense related to the RSU Programs for the years ended December 31, 2019, 2018 and 2017, respectively. We will record future aggregate compensation expense of $2.8 million related to the existing awards under the RSU Programs.

For the years ended December 31, 2019, 2018 and 2017, no shares were issued from the 2017-2019, 2016-2018, and 2015-2017 RSU programs because the required criteria were not met.

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On February 24, 2020, the Board of Trustees established the 2020-2022 Equity Award program, and the Company granted 709,943 RSUs to employees (the “2020 RSUs”). The 2020 RSUs have a three-year measurement period that ends on December 31, 2022 or a shorter period ending upon the change in control of the Company. The 2020 RSUs represent the right to receive common shares in the future depending on the Company’s performance in the achievement of operating performance measures and a modification based on total return to shareholders. The preliminary number of common shares to be issued by the Company with respect to the 2020 RSUs awarded is based on a multiple determined by achievement of certain specified operating performance measures during the applicable Measurement Period. These performance measures, the three-year core mall non-anchor occupancy and the three-year fixed charge coverage ratio, are each weighted 50%. The preliminary number of common shares to be issued by the Company as determined under the operating performance goals will be adjusted, upwards or downwards, depending on the Company’s total return to shareholders, as defined, for the applicable Measurement Period relative to the performance of other real estate investment trusts comprising a leading index of retail real estate investment trusts. Unlike the RSUs awarded in 2018 and 2019, the number of shares that may be issued with respect to the 2020 RSUs are not dependent on any absolute level of total return to shareholders.

9. LEASES

As discussed in Note 1, we adopted ASC 842, the new lease accounting standard, effective January 1, 2019.

As Lessee

We have entered into ground leases for portions of the land at Springfield Town Center and Plymouth Meeting Mall. We have also entered into an office lease for our headquarters location, as well as vehicle, solar panel and equipment leases as a lessee. The initial terms of these agreements generally range from three to 40 years, with certain agreements containing extension options for up to an additional 60 years. As of December 31, 2019, we included only those renewal options we were reasonably certain of exercising. Upon lease execution, the Company measures a liability for the present value of future lease payments over the noncancellable period of the lease and any renewal option period we are reasonably certain of exercising. Certain agreements require that we pay a portion of reimbursable expenses such as CAM, utilities, insurance and real estate taxes. These payments are not included in the calculation of the lease liability and are presented as variable lease costs.

We applied judgments related to the determination of the discount rates used to calculate the lease liability upon adoption at January 1, 2019. In order to calculate our incremental borrowing rate under ASC 842, we utilized judgments and estimates regarding our implied credit rating using market data and made other adjustments to determine an appropriate incremental borrowing rate as of January 1, 2019.

The following table presents additional information pertaining to the Company’s leases:

	For the Year Ended December 31, 2019
(in thousands of dollars)	Solar Panel Leases		Ground Leases		Office, equipment, and vehicle leases		Total
Finance lease cost:
Amortization of right-of-use assets	$	750	$	—	$	—	$	750
Interest on lease liabilities		294		—		—		294
Operating lease costs		—		1,583		1,932		3,515
Variable lease costs		—		165		457		622
Total lease costs	$	1,044	$	1,748	$	2,389	$	5,181

Other information related to leases as of and for the year ended December 31, 2019 is as follows:

(in thousands of dollars)
Cash paid for the amounts included in the measurement of lease liabilities
Operating cash flows used for finance leases	$	294
Operating cash flows used for operating leases	$	2,205
Financing cash flows used for finance leases	$	632
Weighted average remaining lease term-finance leases (months)		99
Weighted average remaining lease term-operating leases (months)		306
Weighted average discount rate-finance leases		4.42	%
Weighted average discount rate-operating leases		6.42	%

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Future payments against lease liabilities as of December 31, 2019 are as follows:

(in thousands of dollars)	Finance leases			Operating leases			Total
2020	$	925		$	2,237		$	3,162
2021		925			2,730			3,655
2022		925			2,538			3,463
2023		925			2,485			3,410
2024		925			2,373			3,298
Thereafter		2,999			46,853			49,852
Total undiscounted lease payments		7,624			59,216			66,840
Less imputed interest		(1,242	)		(28,965	)		(30,207	)
Total lease liabilities	$	6,382		$	30,251		$	36,633

Future minimum lease payments under these agreements as of December 31, 2018 were as follows:

(in thousands of dollars)	Finance leases		Operating leases		Total
Year ending December 31,
2019	$	925	$	3,264	$	4,189
2020		925		2,237		3,162
2021		925		2,730		3,655
2022		925		2,538		3,463
2023		925		2,485		3,410
Thereafter		3,923		49,226		53,149
	$	8,548	$	62,480	$	71,028

As Lessor

As of December 31, 2019, the fixed contractual lease payments, including minimum rents and fixed CAM amounts, to be received over the next five years pursuant to the terms of noncancellable operating leases with initial terms greater than one year are included in the table below. The amounts presented assume that no leases are renewed and no renewal options are exercised. Additionally, the table does not include variable lease payments that may be received under certain leases for percentage rents or the reimbursement of operating costs, such as common area expenses, utilities, insurance and real estate taxes. These variable lease payments are recognized in the period when the applicable expenditures are incurred or, in the case of percentage rents, when the sales data is made available.

(in thousands of dollars)
For the Year Ending December 31,
2020	$	205,574
2021		187,241
2022		168,671
2023		149,296
2024		127,355
2025 and thereafter		386,280
	$	1,224,417

10. RELATED PARTY TRANSACTIONS

Office Leases

During 2019, we leased our principal executive offices from Bellevue Associates, an entity that is owned by Ronald Rubin, one of our former trustees, collectively with members of his immediate family and affiliated entities. Total rent expense under this lease was $1.7 million, $1.3 million, and $1.3 million for the years ended December 31, 2019, 2018 and 2017, respectively. This lease terminated in December 2019.

In December 2018, we entered into a lease for new office space at One Commerce Square, which is located at 2005 Market Street, Philadelphia, Pennsylvania, with Brandywine Realty Trust. Our lead independent trustee is also a Trustee of Brandywine Realty Trust. The lease commenced in December 2019 and we moved into our new offices at One Commerce Square in January 2020.

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Employee Health Insurance

We purchase healthcare benefits for our employees through Independence Blue Cross (“IBX”). Our lead independent trustee became chairman of the board of directors of IBX during 2018. We paid total insurance healthcare premiums of $2.5 million to IBX during 2019 and $2.7 million during 2018.

11. COMMITMENTS AND CONTINGENCIES

Contractual Obligations

As of December 31, 2019, we had unaccrued contractual and other commitments related to our capital improvement projects and development projects of $75.2 million, including $33.1 million of commitments related to the redevelopment of Fashion District Philadelphia, in the form of tenant allowances and contracts with general service providers and other professional service providers. For the purposes of this disclosure, the contractual obligations and other commitments related to Fashion District Philadelphia are included at 100% of the obligation and not at our 50% ownership share. In addition, our operating partnership, PREIT Associates, has jointly and severally guaranteed the obligations of the joint venture we formed with Macerich to develop Fashion District Philadelphia to commence and complete a comprehensive redevelopment of that property costing not less than $300.0 million within 48 months after commencement of construction, which was March 14, 2016. As of December 31, 2019, we expect to meet this obligation.

Employment Agreements

One officer of the Company currently has employment agreements with terms that renew automatically each year for additional one-year terms. This employment agreement provided for aggregate base compensation for the year ended December 31, 2019 of $0.9 million, subject to increases as approved by the Executive Compensation and Human Resources Committee of our Board of Trustees in future years, as well as additional incentive compensation.

A former officer, the Executive Vice President and Chief Financial Officer, executed a Separation of Employment Agreement (the “Separation Agreement”) with the Company on December 23, 2019. Consistent with the officer’s amended and restated employment agreement dated as of December 30, 2008 (together with the May 6, 2009 Amendment thereto) as modified in certain respects by the Separation Agreement, the officer has been paid amounts that were fully earned but not yet paid on or before the last day of full-time employment, in addition to a payment equal to two times the current base salary and a payment equal to two times the average bonus amount in the last three calendar years. The officer may continue to participate in the Company’s benefit plans for eighteen months. The officer will also be paid the supplemental retirement plan account balance, as required by the terms of the employment agreements and the nonqualified supplemental executive retirement agreement.

In March 2020, the Company entered into an employment agreement with Mario C. Ventresca, Jr., its Executive Vice President and Chief Financial Officer.

Provision for Employee Separation Expense

We recorded $3.7 million, $1.1 million and $1.3 million of employee separation expense during the years ended December 31, 2019, 2018 and 2017, respectively, in connection with the termination of certain employees. As of December 31, 2019, $3.5 million of these amounts was accrued and unpaid.

Property Damage from Natural Disaster

During September 2018, Jacksonville Mall in Jacksonville, North Carolina incurred property damage and an interruption of business operations as a result of Hurricane Florence. The property was closed for business during and immediately after the natural disaster, however, significant remediation efforts were quickly undertaken and the mall was reopened shortly thereafter.

During the year ended December 31, 2019, we recorded net recoveries of $4.4 million. These net recoveries primarily relate to remediation expenses and business interruption claims. $0.5 million of the recoveries received relate to business interruption.

During the year ended December 31, 2018, we recorded net recoveries, of approximately $0.7 million. This amount consisted of combined estimated property impairment and remediation losses of $2.3 million, offset by a corresponding insurance claim recovery of $3.0 million.

Legal Actions

In the normal course of business, we have and might become involved in legal actions relating to the ownership and operation of our properties and the properties we manage for third parties. In management’s opinion, the resolutions of any such pending legal actions are not expected to have a material adverse effect on our consolidated financial position or results of operations.

Environmental

We are aware of certain environmental matters at some of our properties. We have, in the past, performed remediation of such environmental matters, and are not aware of any significant remaining potential liability relating to these environmental matters. We might be required in the future to perform testing relating to these matters. We do not expect these matters to have any significant impact on our liquidity or results of operations. However, we can provide no assurance that the amounts reserved will be adequate to cover further environmental costs. We have insurance coverage for certain environmental claims up to $25.0 million per occurrence and up to $25.0 million in the aggregate.

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Tax Protection Agreements

There were no tax protection agreements in effect as of December 31, 2019.

12. HISTORIC TAX CREDITS

In the second quarter of 2012, we closed a transaction with a Counterparty (the “Counterparty”) related to the historic rehabilitation of an office building located at 801 Market Street in Philadelphia, Pennsylvania (the “Project”). In December 2018, the historic tax credit arrangement ended when the Counterparty exercised its put option and the Project paid a total of $1.0 million, comprised of $0.9 million in exchange for the Counterparty’s ownership interest and an additional $0.1 million in accrued priority returns for 2018.

The tax credits received by the Counterparty were subject to five year credit recapture periods that ended in 2018. Our obligation to the Counterparty with respect to the tax credits was ratably relieved annually each year. In each of the third quarters of 2018 and 2017, we recognized $1.0 million and $1.9 million, respectively, as “Other income” in the consolidated statements of operations.

We also recorded $0.2 million of priority returns earned by the Counterparty during each of the third quarters of 2018 and 2017, respectively.

In aggregate, we recorded $0.8 million and $1.8 million in net income to “Other income” in the consolidated statements of operations in connection with the Project during the years ended December 31, 2018 and 2017, respectively.

13. SUMMARY OF QUARTERLY RESULTS (UNAUDITED)

The following presents a summary of the unaudited quarterly financial information for the years ended December 31, 2019 and 2018:

(in thousands of dollars, except per share amounts) For the Year Ended December 31, 2019	1st Quarter			2nd Quarter			3rd Quarter		4th Quarter (1)			Total
Total revenue	$	85,305		$	81,392		$	81,374	$	88,721		$	336,792
Net income (loss) (2)(3)		(16,223	)		(6,080	)		24,716		(15,413	)		(13,000	)
Net income (loss) attributable to PREIT (2)(3)(4)		(14,535	)		(5,751	)		24,262		(14,848	)		(10,872	)
Basic and diluted earnings (loss) per share (4)	$	(0.30	)	$	(0.17	)	$	0.22	$	(0.29	)		(0.52	)

(in thousands of dollars, except per share amounts) For the Year Ended December 31, 2018	1st Quarter			2nd Quarter			3rd Quarter			4th Quarter (1)			Total
Total revenue	$	86,282		$	91,973		$	88,103		$	96,042		$	362,400
Net loss (2)(3)		(3,712	)		(32,321	)		(1,636	)		(88,834	)		(126,503	)
Net loss attributable to PREIT (2)(3)(4)		(2,601	)		(28,201	)		(745	)		(78,782	)		(110,329	)
Basic and diluted loss per share (4)		(0.14	)		(0.50	)		(0.11	)		(1.23	)		(1.98	)

⁽¹⁾ Fourth Quarter revenue includes a significant portion of annual percentage rent as most percentage rent minimum sales levels are met in the fourth quarter.

⁽²⁾ Includes impairment losses of $1.5 million (1^st Quarter 2019), $3.5 million (4^th Quarter 2019), $34.2 million (2^nd Quarter 2018), and $103.2 million (4^th Quarter 2018).

⁽³⁾ Includes gain on sales of real estate by equity method investee of $0.6 million (1^st Quarter 2019) and $2.8 million (1^st Quarter 2018), gain on sales of real estate $1.5 million (2^nd Quarter 2019), $1.2 million (3^rd Quarter 2019), $0.1 million (4^th Quarter 2019), $0.7 million (2^nd Quarter 2018) and $0.8 million (4^th Quarter 2018) and gain on sales of interests in non operating real estate of $2.7 million (4^th Quarter 2019) and $8.1 million (4^th Quarter 2018).

⁽⁴⁾ Certain prior period amounts for net income (loss) attributable to PREIT common shareholders, basic and diluted earnings per share, noncontrolling interest, total equity - PREIT and cash flow amounts were adjusted to reflect immaterial financial statement error corrections and new accounting rules as discussed in Note 1 to our consolidated financial statements.

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SCHEDULE III

PENNSYLVANIA REAL ESTATE INVESTMENT TRUST

INVESTMENTS IN REAL ESTATE

As of December 31, 2019

(in thousands of dollars)	Initial Cost of Land		Initial Cost of Building & Improvements		Cost of Improvements Net of Retirements and Impairment Charges			Balance of Land and Land Held for Develop- ment		Balance of Building & Improvements and Construction in Progress		Accumulated Depreciation Balance		Current Encumbrance (1)		Date of Acquisition/ Construction	Life of Depre- ciation
Capital City Mall	$	11,380	$	65,575	$	59,801		$	11,321	$	125,435	$	51,408	$	—	2003		40
Cherry Hill Mall		29,938		185,611		265,297			48,608		432,238		261,070		268,753	2003		40
Cumberland Mall		8,711		43,889		31,394			9,842		74,152		31,239		42,247	2005		40
Dartmouth Mall		7,015		28,328		52,872			7,021		81,194		44,318		58,288	1998		40
Exton Square Mall		19,976		103,955		(74,961	)		23,714		25,256		11,470		—	2003		40
Francis Scott Key Mall		9,786		47,526		40,644			9,440		88,516		43,141		68,469	2003		40
Jacksonville Mall		9,913		47,139		36,515			9,913		83,654		40,110		—	2003		40
Magnolia Mall		8,149		42,302		56,657			14,511		92,597		49,356		—	1998		40
Monroe Land		1,177		—		—			1,177		—		—		—	2006		10
Moorestown Mall		10,934		62,995		112,615			23,060		163,484		72,684		—	2003		40
Patrick Henry Mall		16,075		86,643		53,740			16,397		140,061		73,125		88,910	2003		40
Plymouth Meeting Mall		29,265		58,388		153,745			31,738		209,660		99,496		—	2003		40
The Mall at Prince Georges		13,065		57,686		74,504			13,066		132,189		63,944		—	1998		40
Springfield Town Center		119,912		353,551		22,736			119,912		376,287		67,344		—	2015		40
Sunrise Plaza land		395		—		(29	)		366		—		—		—	2005	N/A
Swedes Square land		189		—		36			225		—		—		—	2004	N/A
Valley Mall		11,956		57,931		75,356			23,761		121,482		48,093		—	2003		40
Valley View Mall		9,402		45,351		(18,564	)		4,204		31,986		12,600		27,429	2003		40
Viewmont Mall		12,505		61,519		47,962			12,606		109,380		49,593		67,185	2003		40
Willow Grove Park		26,748		131,189		102,878			36,412		224,403		105,214		156,444	2003		40
Woodland Mall		31,835		121,965		127,859			40,593		241,065		78,517		123,840	2005		40
Investment In Real Estate	$	388,326	$	1,601,543	$	1,221,057		$	457,887	$	2,753,039	$	1,202,722	$	901,565

⁽¹⁾ Represents mortgage principal balances outstanding as of December 31, 2019 and does not include unamortized debt costs with an aggregate balance of $1.8 million.

The aggregate cost basis and depreciated basis for federal income tax purposes of our investment in real estate was $3,132.2 million and $2,225.4 million at December 31, 2019, respectively, and $3,302.7 million and $2,353.4 million at December 31, 2018, respectively. The changes in total real estate and accumulated depreciation for the years ended December 31, 2019, 2018 and 2017 are as follows:

(in thousands of dollars)	For the Year Ended December 31,
Total Real Estate Assets:	2019			2018			2017
Balance, beginning of year	$	3,184,594		$	3,299,702		$	3,300,014
Improvements and development		137,593			125,616			502,077
Acquisitions		—			21,250			2,613
Impairment of assets		(3,989	)		(201,818	)		(89,101	)
Dispositions		(81,118	)		(4,856	)		(402,783	)
Write-off of fully depreciated assets		(12,031	)		(32,993	)		(13,118	)
Reclassification to held for sale		(14,123	)		(22,307	)		—
Balance, end of year	$	3,210,926		$	3,184,594		$	3,299,702
Balance, end of year – held for sale	$	15,653		$	22,307		$	—

S-1

(in thousands of dollars)	For the Year Ended December 31,
Accumulated Depreciation:	2019			2018			2017
Balance, beginning of year	$	1,118,582		$	1,111,007		$	1,060,845
Depreciation expense		125,495			120,718			118,485
Impairment of assets		(484	)		(75,586	)		(39,264	)
Dispositions		(25,693	)		(4,564	)		(15,941	)
Write-off of fully depreciated assets		(12,031	)		(32,993	)		(13,118	)
Reclassification to held for sale		(3,147	)		—			—
Balance, end of year	$	1,202,722		$	1,118,582		$	1,111,007
Balance, end of year – held for sale	$	3,147		$	—		$	—

S-2

EX-4.15

Exhibit 4.15

DESCRIPTION OF THE REGISTRANT'S SECURITIES

REGISTERED PURSUANT TO SECTION 12 OF THE

SECURITIES EXCHANGE ACT OF 1934

For purposes of this exhibit, references to “we,” “our” and “our Company” refer only to Pennsylvania Real Estate Investment Trust and not to any of its subsidiaries.

DESCRIPTION OF COMMON SHARES

The following description of the Company’s common shares of beneficial interest is intended as a summary only. This description is based upon and is qualified by reference to our Trust Agreement and By-laws and applicable Pennsylvania law. Our Trust Agreement and By-laws are incorporated by reference as exhibits into the Annual Report on Form 10-K of which this exhibit is a part.

Authorized Common Shares

Under our Trust Agreement, we have the authority to issue up to 200,000,000 shares of beneficial interest, $1.00 par value per share, and up to 25,000,000 preferred shares.

Description of Common Shares

Voting, Dividend and Other Rights. Subject to the provisions of our Trust Agreement regarding excess shares, (1) the holders of our common shares are entitled to one vote per share on all matters voted on by shareholders, including elections of trustees, and (2) subject to the rights of holders of any preferred shares, the holders of our common shares are entitled to a pro rata portion of any distributions declared from time to time by our board of trustees from funds available for those distributions, and upon liquidation are entitled to receive pro rata all of the assets available for distribution to those holders. We generally must be current in our dividend payments on our currently outstanding Series B Preferred Shares, Series C Preferred Shares and Series D Preferred Shares in order to pay dividends on our common shares. The majority of common shares voting on a matter at a meeting at which at least a majority of the outstanding shares are present in person or by proxy constitutes the act of the shareholders, except with respect to the election of trustees (see below). Our Trust Agreement permits the holders of securities of our affiliates to vote with our shareholders on specified matters, and the partnership agreement of our operating partnership grants that right to certain holders of currently outstanding partnership units of our operating partnership, with respect to fundamental changes in us (i.e., mergers, consolidations and sales of substantially all of our assets). Shareholders do not have any pre-emptive rights to purchase our securities.

Our Trust Agreement provides that our board of trustees may authorize the issuance of multiple classes and series of shares of beneficial interest and classes and series of preferred shares having preferences to the existing shares in any matter, including rights in liquidation or to dividends and conversion rights (including shareholder rights plans), and other securities having conversion rights, and may authorize the creation and issuance by our subsidiaries and affiliates of securities having conversion rights in respect of our shares. Accordingly, the rights of holders of our existing common shares are subject and junior to preferred rights of our existing and outstanding preferred shares, as to dividends and in liquidation (and other such matters) and will be subject and junior to any subsequently authorized preferred shares or class of preferred shares to the extent set forth in the designating amendment with respect to such preferred shares.

Board of Trustees. Members of our board of trustees are elected at our annual meeting of shareholders to serve until the subsequent annual meeting of shareholders and until their respective successors have been duly elected and have qualified. Our Trust Agreement does not provide for cumulative voting in the election of trustees, and the candidates receiving the highest number of votes are elected to the office of trustee, subject to the majority voting provisions contained in our corporate governance guidelines.

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Trustee Nomination Process. Our Trust Agreement provides that nominations for election to the office of trustee at any annual or special meeting of shareholders shall be made by the trustees or by shareholders. Shareholder notice of a nomination of a trustee candidate for election at an annual meeting must generally be delivered not less than 90 days nor more than 120 days prior to the anniversary date of the prior year’s meeting, and for election at an annual meeting that is not within 30 days of such anniversary date or for a special meeting, not later than 10 days following the date on which notice of the meeting is mailed or disclosed publicly, whichever comes first. Shareholders making nominations of trustee candidates must hold at least two percent (2%) of the outstanding common shares. Nominations not made in accordance with the procedures in the Trust Agreement will not be considered.

Limited Liability of Shareholders

Our Trust Agreement provides that shareholders, to the fullest extent permitted by applicable law, are not liable for any act, omission or liability of a trustee and that the trustees have no power to bind shareholders personally. Nevertheless, there may be liability in some jurisdictions that may decline to recognize a business trust as a valid organization. With respect to all types of claims in any such jurisdiction, and with respect to tort claims, certain contract claims and possible tax claims in jurisdictions where the business trust is treated as a partnership for certain purposes, shareholders may be personally liable for such obligations to the extent that we do not satisfy those claims. In jurisdictions other than the Commonwealth of Pennsylvania, we conduct substantially all of our business through entities recognized in the relevant jurisdiction to limit the liability of equity owners. We carry insurance in amounts that we deem adequate to cover foreseeable claims.

Restrictions on Ownership

Among the requirements for qualification as a REIT under the Internal Revenue Code, or the Code, are (1) not more than 50% in value of our outstanding shares, including the common shares (after taking into account options to acquire shares), may be owned, directly or indirectly, by five or fewer individuals (as defined in the Code to include certain entities) during the last half of a taxable year, (2) the shares must be beneficially owned by 100 or more persons during at least 335 days of a taxable year of 12 months or during a proportionate part of a shorter taxable year, and (3) certain percentages of our gross income must be from particular activities. In order to continue to qualify as a REIT under the Code, our board of trustees has adopted, and our shareholders have approved, provisions of our Trust Agreement that restrict the ownership and transfer of shares, or the Ownership Limit Provisions.

The Ownership Limit Provisions provide that no person may beneficially own, or be deemed to own by virtue of the attribution provisions of the Code, more than 9.9% of any separate class of our shares. The trustees may exempt a person from the Ownership Limit Provisions with a ruling from the Internal Revenue Service or an opinion of counsel or our tax accountants to the effect that such ownership will not jeopardize our status as a REIT.

Issuance or transfers of shares in violation of the Ownership Limit Provisions or which would cause us to be beneficially owned by fewer than 100 persons are void ab initio and the intended transferee acquires no rights to the shares.

In the event of a purported transfer or other event that would, if effective, result in the ownership of shares in violation of the Ownership Limit Provisions, such transfer or other event with respect to that number of shares that would be owned by the transferee in excess of the Ownership Limit Provisions are automatically exchanged for an equal number of excess shares, or the Excess Shares, authorized by our Trust Agreement, according to the rules set forth therein, to the extent necessary to ensure that the purported transfer or other event does not result in the ownership of shares in violation of the Ownership Limit Provisions. Any purported transferee or other purported holder of Excess Shares is required to give written notice to us of a purported transfer or other event that would result in the issuance of Excess Shares.

Excess Shares are not treasury shares but rather continue as issued and outstanding shares of beneficial interest. While outstanding, Excess Shares will be held in trust. The trustee of such trust shall be our Company. The beneficiary of such trust shall be designated by the purported holder of the Excess Shares. Excess Shares are not entitled to any dividends or distributions. If, after the purported transfer or other event resulting in an exchange of shares of beneficial interest for Excess Shares and prior to our discovery of such exchange, dividends or distributions are paid with respect to the shares that were exchanged for Excess Shares, then such dividends or

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distributions are to be repaid to us upon demand. Excess Shares participate ratably (based on the total number of shares and Excess Shares) in any liquidation, dissolution or winding up of our Company. Except as required by law, holders of Excess Shares are not entitled to vote such shares on any matter. While Excess Shares are held in trust, any interest in that trust may be transferred by the trustee only to a person whose ownership of shares will not violate the Ownership Limit Provisions, at which time the Excess Shares will be automatically exchanged for the same number of shares of the same type and class as the shares for which the Excess Shares were originally exchanged. Prior to any transfer of any interest in the Excess Shares held in trust, the purported transferee or other purported holder, as the case may be, must give advance notice to us of the intended transfer and we must waive in writing our purchase rights. Our Trust Agreement contains provisions that are designed to ensure that the purported transferee or other purported holder of Excess Shares does not receive in return for such a transfer an amount that reflects any appreciation in the shares for which Excess Shares were exchanged during the period that such Excess Shares were outstanding. Any amount received by a purported transferee or other purported holder in excess of the amount permitted to be received must be paid to our Company. If the foregoing restrictions are determined to be invalid by any court of competent jurisdiction, then the intended transferee or holder of any Excess Shares may be deemed, at our option, to have acted as an agent on our behalf in acquiring such Excess Shares and to hold such Excess Shares on our behalf.

Our Trust Agreement further provides that Excess Shares shall be deemed to have been offered for sale to our Company at the lesser of (1) the price paid for the shares by the purported transferee or, in the case of a gift, devise or other transaction, the market price for such shares at the time of such gift, devise or other transaction or (2) the market price for the shares on the date we or our designee exercises its option to purchase the Excess Shares. We may purchase such Excess Shares during a 90-day period, beginning on the date of the violative transfer if the original transferee-shareholder gives notice to us of the transfer or, if no notice is given, the date the board of trustees determines that a violative transfer or other event resulting in an exchange of shares for the Excess Shares has occurred.

Each shareholder, upon demand, is required to disclose to us in writing such information with respect to the direct, indirect and constructive ownership of shares as the board of trustees deems necessary to comply with the provisions of our Trust Agreement or the Code applicable to a REIT or to comply with the requirements of any taxing authority or governmental agency. Certificates or recorded book entries representing shares of any class or series issued after September 29, 1997 will bear a legend or have a notation referring to the restrictions described above.

Registrar and Transfer Agent

The registrar and transfer agent for our common shares is EQ Shareowner Services.

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DESCRIPTION OF PREFERRED SHARES OF BENEFICIAL INTEREST

The following description of the Company’s outstanding preferred shares of beneficial interest, each issued as a separate class, is intended as a summary only. These descriptions are based upon our Trust Agreement, including the designating amendments to our Trust Agreement, setting forth the terms of our Series B Preferred Shares, our Series C Preferred Shares, and our Series D Preferred Shares, our By-laws and applicable Pennsylvania law. Our Trust Agreement, designating amendments and By-laws are incorporated by reference into this Annual Report on Form 10-K of which this exhibit is a part.

General

Our Trust Agreement provides that we may issue up to 25,000,000 preferred shares. Our Trust Agreement authorizes our Board of Trustees to increase or decrease the number of authorized shares without shareholder approval.

In April 2012, we issued 4,600,000 8.25% Series A Cumulative Redeemable Perpetual Preferred Shares (the “Series A Preferred Shares”) in a public offering at a price of $25.00 per share. In October 2012, we issued 3,450,000 7.375% Series B Cumulative Redeemable Perpetual Preferred Shares (the “Series B Preferred Shares”) in a public offering at a price of $25.00 per share. In January 2017, we issued 6,900,000 7.20% Series C Cumulative Redeemable Perpetual Preferred Shares (the “Series C Preferred Shares”) in a public offering at a price of $25.00 per share. In September and October 2017, we issued an aggregate of 5,000,000 6.875% Series D Cumulative Redeemable Perpetual Preferred Shares (the “Series D Preferred Shares”) in a public offering at a price of $25.00 per share.

On April 20, 2017 and October 11, 2017, the Series A Preferred Shares and the Series B Preferred Shares, respectively, became redeemable at our option at $25.00 per share plus any accrued and unpaid dividends. In October 2017, we used a portion of the net proceeds from the offering of our Series D Preferred Shares to redeem all of our then outstanding Series A Preferred Shares.

We may not redeem the Series C Preferred Shares or the Series D Preferred Shares before January 27, 2022 and September 15, 2022, respectively, except to preserve our status as a REIT or upon the occurrence of a change of control, as defined in the Trust Agreement addenda designating the Series C Preferred Shares and Series D Preferred Shares, respectively. On each such date, the respective class of securities will become redeemable at our option at $25.00 per share plus any accrued and unpaid dividends.

Subject to the limitations prescribed by Pennsylvania law and our Trust Agreement and By-Laws, our Board of Trustees is authorized to establish the number of shares constituting each class or series of preferred shares and to fix the designations and powers, preferences and relative, participating, optional or other special rights and qualifications, limitations or restrictions thereof, including such provisions as may be desired concerning voting, redemption, dividends, dissolution or the distribution of assets, conversion or exchange, and such other subjects or matters as may be fixed by resolution of the Board of Trustees or a duly authorized committee thereof.

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7.375% Series B Cumulative Redeemable Perpetual Preferred Shares

(Liquidation Preference $25.00 Per Share)

In October 2012, we adopted a designating amendment to our Trust Agreement to classify 3,450,000 shares of our authorized preferred shares as 7.375% Series B Cumulative Redeemable Perpetual Preferred Shares and authorize the issuance thereof (the “Series B Preferred Shares Amendment.”) The holders of Series B Preferred Shares have no preemptive rights with respect to any of our shares or any of our other securities convertible into or carrying rights or options to purchase any shares of our shares.

Our Series B Preferred Shares are not subject to any sinking fund and we have no obligation to redeem or repurchase our Series B Preferred Shares. Unless converted by the holder in connection with a Change of Control or redeemed or repurchased by us, our Series B Preferred Shares will have a perpetual term, with no maturity.

The Series B Preferred Shares Amendment setting forth the terms of our Series B Preferred Shares permits us to “reopen” this series, without the consent of the holders of our Series B Preferred Shares, in order to issue additional Series B Preferred Shares from time to time. Thus, we may in the future issue additional Series B Preferred Shares without the holders’ consent. Any additional Series B Preferred Shares will have the same terms as the Series B Preferred Shares being issued in October 2012. Any additional Series B Preferred Shares will, together with the Series B Preferred Shares issued in October 2012, constitute a single series of preferred shares under the Trust Agreement.

Ranking

Our Series B Preferred Shares rank senior to the Junior Shares (as defined under “— Dividends” below), including our common shares, and equally with our Series C Preferred Shares, our Series D Preferred Shares and any other parity equity securities that we might issue in the future, with respect to payment of dividends and amounts upon liquidation, dissolution or winding up. While any Series B Preferred Shares are outstanding, we may not authorize or create any class or series of capital shares that ranks senior to our Series B Preferred Shareswith respect to the payment of dividends or amounts upon liquidation, dissolution or winding up without the consent of the holders of two-thirds of the outstanding Series B Preferred Shares voting as a single class. However, we may create additional classes or series of shares, amend our Trust Agreement to increase the authorized number of preferred shares or issue any class or series of equity securities ranking equally with our Series B Preferred Shares with respect, in each case, to the payment of dividends and amounts upon liquidation, dissolution or winding up (“Parity Shares”) without the consent of any holder of Series B Preferred Shares. See “— Voting Rights” below for a discussion of the voting rights applicable if we seek to create any class or series of equity securities senior to our Series B Preferred Shares.

Dividends

Holders of Series B Preferred Shares are entitled to receive, when, as and if authorized by our Board of Trustees, out of funds legally available for payment, and declared by us, cumulative cash dividends at the rate of 7.375% per annum per share of its liquidation preference (equivalent to $1.84375 per annum per Series B Preferred Share).

Dividends on each Series B Preferred Share shall accrue daily and shall be cumulative from, and including, the date of original issue and are payable quarterly in arrears on or about the 15th day of each March, June, September and December (each, a “dividend payment date”), at the then applicable annual rate; provided, however, that if any dividend payment date falls on any day other than a business day, as defined in the Series B Preferred Shares Amendment setting forth the terms of the Series B Preferred Shares, the dividend due on such dividend payment date shall be paid on the first business day immediately following such dividend payment date and no interest, additional dividends or other sum will accrue on the amount so payable for the period from and after that dividend payment date to that next succeeding business day. Each dividend is payable to holders of record as they appear on our share records at the close of business on the record date, not exceeding 30 days preceding the payment dates thereof as fixed by our Board of Trustees. Dividends are cumulative from, and including, the date of original issue or the most recent dividend payment date to which dividends have been paid, whether or not in any dividend

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period or periods there shall be funds of ours legally available for the payment of such dividends. Accumulations of dividends on our Series B Preferred Shares will not bear interest and holders of our Series B Preferred Shares will not be entitled to any dividends in excess of full cumulative dividends. Dividends payable on our Series B Preferred Shares for any period greater or less than a full dividend period will be computed on the basis of a 360-day year consisting of twelve 30-day months. Dividends payable on our Series B Preferred Shares for each full dividend period will be computed by dividing the annual dividend rate by four.

No dividend will be declared or paid on any Parity Shares unless full cumulative dividends have been declared and paid or are contemporaneously declared and funds sufficient for payment set aside on our Series B Preferred Shares for all prior dividend periods; provided, however, that if accrued dividends on our Series B Preferred Shares for all prior dividend periods have not been paid in full or a sum sufficient for such payment is not set apart, then any dividend declared on our Series B Preferred Shares for any dividend period and on any Parity Shares will be declared ratably in proportion to accrued and unpaid dividends on our Series B Preferred Shares and such Parity Shares. All of our dividends on our Series B Preferred Shares will be credited first to the earliest accrued and unpaid dividend.

Our Board of Trustees will not authorize and we will not (i) declare, pay or set apart funds for the payment of any dividend or other distribution with respect to any Junior Shares (other than in the form of Junior Shares) or (ii) redeem, purchase or otherwise acquire for consideration any Junior Shares through a sinking fund or otherwise (other than a redemption or purchase or other acquisition of our common shares made for purposes of an employee incentive or benefit plan of our Company or any subsidiary, or a conversion into or exchange for Junior Shares or redemptions for the purpose of preserving ourqualification as a REIT), unless all cumulative dividends with respect to our Series B Preferred Shares and any Parity Shares at the time such dividends are payable have been paid or funds have been set apart for payment of such dividends.

As used herein, (i) the term “dividend” does not include dividends payable solely in Junior Shares on Junior Shares, or in options, warrants or rights to holders of Junior Shares to subscribe for or purchase any Junior Shares, and (ii) the term “Junior Shares” means our common shares, and any other class or series of our capital shares now or hereafter issued and outstanding that ranks junior as to the payment of dividends or amounts upon liquidation, dissolution and winding up to our Series B Preferred Shares.

Liquidation Preference

The holders of Series B Preferred Shares will be entitled to receive in the event of any liquidation, dissolution or winding up of our Company, whether voluntary or involuntary, $25.00 per Series B Preferred Share, which we refer to in this exhibit as the “Liquidation Preference,” plus an amount per share of Series B Preferred Shares equal to all dividends (whether or not earned or declared) accrued and unpaid thereon to, but not including, the date of final distribution to such holders.

Until the holders of Series B Preferred Shares have been paid their entire Liquidation Preference per share, plus all accrued and unpaid dividends thereon (whether or not declared) to, but not including, the date of final distribution to such holders, no payment will be made to any holder of Junior Shares upon the liquidation, dissolution or winding up of our Company. If, upon any liquidation, dissolution or winding up of our Company, our assets, or proceeds thereof, distributable among the holders of our Series B Preferred Shares are insufficient to pay in full the Liquidation Preference plus all accrued and unpaid dividends thereon (whether or not declared) to, but not including, the date of final distribution to such holders, and the liquidation preference and all accrued and unpaid dividends with respect to any Parity Shares, then such assets, or the proceeds thereof, will be distributed among the holders of Series B Preferred Shares and any Parity Shares ratably in accordance with the respective amounts which would be payable on such Series B Preferred Shares and any Parity Shares if all amounts payable thereon were paid in full. None of (i) a consolidation or merger of our Company with one or more entities, (ii) a statutory share exchange by our Company or (iii) a sale or transfer of all or substantially all of our assets, individually or as part of a series of transactions, will be considered a liquidation, dissolution or winding up, voluntary or involuntary, of our Company.

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Optional Redemption

We were not permitted to redeem our Series B Preferred Shares prior to October 11, 2017, except in certain limited circumstances relating to the ownership limitation necessary to preserve our qualification as a REIT or in connection with our special optional redemption right to redeem Series B Preferred Shares upon a Change of Control (as defined under “— Conversion Rights — Definitions” below). For further information regarding these exceptions, see “— Special Optional Redemption” below. To assist us in complying with the limitations on the concentration of ownership of a REIT imposed by the Internal Revenue Code, we may, at our option, redeem our Series B Preferred Shares, in whole, at any time, or in part, from time to time, for cash at $25.00 per share, plus, subject to exceptions, any accrued and unpaid dividends (whether or not declared) to, but not including, the date fixed for redemption. On or after October 11, 2017, we, at our option upon not less than 30 nor more than 60 days written notice, may redeem our Series B Preferred Shares, in whole, at any time, or in part, from time to time, for cash at a redemption price of $25.00 per share, plus all accrued and unpaid dividends thereon (whether or not declared) to, but not including, the date fixed for redemption, which we refer to in this exhibit collectively as the “redemption price.”

A notice of optional redemption (which may be contingent on the occurrence of a future event) will be mailed, postage prepaid, not less than 30 nor more than 60 days prior to the redemption date, addressed to the holders of record of our Series B Preferred Shares at their addresses as they appear on our share transfer records. A failure to give such notice or any defect in the notice or in its mailing will not affect the validity of the proceedings for the redemption of any Series B Preferred Shares except as to the holder to whom notice was defective or not given. Each notice will state:

• the redemption date;

• the redemption price and whether or not accrued and unpaid dividends will be payable to holders surrendering Series B Preferred Shares or to the persons who were holders of record at the close of business on the relevant dividend record date;

• the number of Series B Preferred Shares to be redeemed;

• the place or places where the certificates, if any, evidencing the Series B Preferred Shares are to be surrendered for payment;

• the procedures that the holders of Series B Preferred Shares must follow to surrender the certificates, if any, for redemption, including whether the certificates, if any, shall be properly endorsed or assigned for transfer; and

• that dividends on the shares to be redeemed will cease to accrue on such redemption date.

If fewer than all the Series B Preferred Shares held by any holder are to be redeemed, the notice mailed to such holder will also specify the number of Series B Preferred Shares to be redeemed from such holder. If fewer than all of the outstanding Series B Preferred Shares are to be redeemed, the shares to be redeemed shall be selected by lot or pro rata or by any other equitable method we may choose. If any redemption date is not a business day, then the redemption price may be paid on the next business day and no interest, additional dividends or other sums will accrue on the amount payable for the period from and after that redemption date to that next business day.

Special Optional Redemption

Upon the occurrence of a Change of Control (as defined under “— Conversion Rights” below), we have the option to redeem our Series B Preferred Shares, in whole, at any time, or in part, from time to time, within 120 days after the date on which such Change of Control has occurred for cash at a redemption price of $25.00 per share, plus any accrued and unpaid dividends (whether or not declared) to, but not including, the redemption date. If, prior to the Change of Control Conversion Date (as defined below), we have provided or provide notice of our election to redeem some or all of the Series B Preferred Shares (whether pursuant to our optional redemption right described above under “— Optional Redemption” or this special optional redemption right), the holders of Series B Preferred Shares will not have the Change of Control Conversion Right (as defined below) with respect to the shares called for redemption. If we elect to redeem any Series B Preferred Shares as described in this paragraph, we may use any available cash to pay the redemption price, and we will not be required to pay the redemption price only out of the proceeds from the issuance of other classes and series of our capital shares or any other specific source.

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A notice of special optional redemption will be mailed, postage prepaid, not less than 30 nor more than 60 days prior to the redemption date, addressed to the holders of record of our Series B Preferred Shares at their addresses as they appear on our share transfer records. A failure to give such notice or any defect in the notice or in its mailing will not affect the validity of the proceedings for the special optional redemption of the Series B Preferred Shares except as to the holder to whom notice was defective or not given. Each notice will state:

• the redemption date;

• the redemption price and whether or not accrued and unpaid dividends will be payable to holders surrendering Series B Preferred Shares or to the persons who were holders of record at the close of business on the relevant dividend record date;

• the number of Series B Preferred Shares to be redeemed;

• the place or places where the certificates, if any, evidencing the Series B Preferred Shares are to be surrendered for payment;

• the procedures that the holders of Series B Preferred Shares must follow to surrender the certificates, if any, for redemption, including whether the certificates, if any, shall be properly endorsed or assigned for transfer;

• that the Series B Preferred Shares are being redeemed pursuant to our special optional redemption right in connection with the occurrence of a Change of Control and a brief description of the transaction or transactions constituting such Change of Control;

• that the holders of Series B Preferred Shares to which the notice relates will not be able to tender such Series B Preferred Shares for conversion in connection with the Change of Control and each Series B Preferred Share tendered for conversion that is selected, prior to the Change of Control Conversion Date, for redemption will be redeemed on the related date of redemption instead of converted on the Change of Control Conversion Date; and

• that dividends on the shares to be redeemed will cease to accrue on such redemption date.

If fewer than all the Series B Preferred Shares held by any holder are to be redeemed, the notice mailed to such holder will also specify the number of Series B Preferred Shares to be redeemed from such holder. If fewer than all of the outstanding Series B Preferred Shares are to be redeemed, the shares to be redeemed shall be selected by lot or pro rata or by any other equitable method we may choose (including by electing to exercise our special optional redemption right only with respect to our Series B Preferred Shares for which holders have exercised their Change of Control Conversion Right discussed below). If any redemption date is not a business day, then the redemption price may be paid on the next business day and no interest, additional dividends or other sums will accrue on the amount payable for the period from and after that redemption date to that next business day.

General Provisions Applicable to Redemptions

On the redemption date, we must pay on each Series B Preferred Share to be redeemed any accrued and unpaid dividends, in arrears, for any dividend period ending on or prior to the redemption date. In the case of a redemption date falling after a dividend payment record date and on or prior to the related payment date, the holders of Series B Preferred Shares at the close of business on such record date will be entitled to receive the dividend payable on such shares on the corresponding dividend payment date, notwithstanding the redemption of such shares on or prior to such dividend payment date. Except as provided for in the two preceding sentences, no payment or allowance will be made for unpaid dividends, whether or not in arrears, on any Series B Preferred Shares called for redemption.

If full cumulative dividends on our Series B Preferred Shares and any Parity Shares have not been paid or declared and set apart for payment, we may not purchase, redeem or otherwise acquire any Series B Preferred Shares or any Parity Shares other than in exchange for Junior Shares; provided, however, that the foregoing shall not prevent the purchase by us of shares held in excess of the limits in our Trust Agreement in order to ensure that we continue to meet the requirements for qualification as a REIT. See “— Series B Restrictions on Ownership and Transfer.”

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On and after the date fixed for redemption, provided that we have made available at the office of the registrar and transfer agent a sufficient amount of cash to effect the redemption, dividends will cease to accrue on the Series B Preferred Shares called for redemption (except that, in the case of a redemption date after a dividend payment record date and on or prior to the related payment date, holders of Series B Preferred Shares on the dividend payment record date will be entitled to receive the dividend payable on such shares on the corresponding dividend payment date), such shares shall no longer be deemed to be outstanding and all rights of the holders of such shares as holders of Series B Preferred Shares shall cease except the right to receive the cash payable upon such redemption, without interest from the date of such redemption.

Conversion Rights

Definitions

As used in this exhibit, the following terms shall have the following meanings:

A “Change of Control” will be deemed to have occurred at such time after the original issuance of the Series B Preferred Shares when the following has occurred:

• the acquisition by any person, including any syndicate or group deemed to be a “person” under Section 13(d)(3) of the Exchange Act, of beneficial ownership, directly or indirectly, through a purchase, merger or other acquisition transaction or series of purchases, mergers or other acquisition transactions of shares of the Company entitling that person to exercise more than 50% of the total voting power of all shares of the Company entitled to vote generally in the election of our trustees (except that such person will be deemed to have beneficial ownership of all securities that such person has the right to acquire, whether such right is currently exercisable or is exercisable only upon the occurrence of a subsequent condition); and

• following the closing of any transaction referred to in the bullet point above, neither we nor the acquiring or surviving entity has a class of common securities (or American Depositary Receipts representing such securities) listed on the New York Stock Exchange (the “NYSE”), the NYSE Amex Equities (the “NYSE Amex”), or the NASDAQ Stock Market (“NASDAQ”), or listed or quoted on an exchange or quotation system that is a successor to the NYSE, the NYSE Amex or NASDAQ.

The “Common Share Price” will be (i) if the consideration to be received in the Change of Control by the holders of our common shares is solely cash, the amount of cash consideration per common share or (ii) if the consideration to be received in the Change of Control by holders of our common shares is other than solely cash (x) the average of the closing sale prices per common share (or, if no closing sale price is reported, the average of the closing bid and ask prices per share or, if more than one in either case, the average of the average closing bid and the average closing ask prices per share) for the ten consecutive trading days immediately preceding, but not including, the date on which such Change of Control occurred as reported on the principal U.S. securities exchange on which our common shares are then traded, or (y) the average of the last quoted bid prices for our common shares in the over-the-counter market as reported by Pink OTC Markets Inc. or similar organization for the ten consecutive trading days immediately preceding, but not including, the date on which such Change of Control occurred, if our common shares are not then listed for trading on a U.S. securities exchange.

Conversion

Upon the occurrence of a Change of Control, each holder of Series B Preferred Shares has the right (unless, prior to the Change of Control Conversion Date, we have provided or provide notice of our election to redeem some or all of the Series B Preferred Shares held by such holder as described above under “— Optional Redemption” or “— Special Optional Redemption,” in which case such holder will have the right only with respect to Series B Preferred Shares that are not called for redemption) to convert some or all of the Series B Preferred Shares held by such holder (referred to as the “Change of Control Conversion Right”) on the Change of Control Conversion Date into a number of our common shares per Series B Preferred Share (referred to as the “Common Shares Conversion Consideration”) equal to the lesser of:

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• the quotient obtained by dividing (i) the sum of the $25.00 liquidation preference per Series B Preferred Share plus the amount of any accrued and unpaid dividends thereon to but excluding the Change of Control Conversion Date (unless the Change of Control Conversion Date is after a record date for a Series B Preferred Shares dividend payment and prior to the corresponding dividend payment date for the Series B Preferred Shares, in which case no additional amount for such accrued and unpaid dividends will be included in this sum) by (ii) the Common Share Price, as defined above (such quotient is referred to as the “Conversion Rate”); and

• 3.1348 (referred to as the “Share Cap”).

Anything in the Series B Preferred Shares Amendment to the contrary notwithstanding and except as otherwise required by law, the persons who are the holders of record of Series B Preferred Shares at the close of business on a record date for the payment of dividends will be entitled to receive the dividend payable on the corresponding dividend payment date notwithstanding the conversion of those shares after such record date and on or prior to such dividend payment date and, in such case, the full amount of such dividend shall be paid on such dividend payment date to the persons who were the holders of record at the close of business on such record date.

The Share Cap is subject to pro rata adjustments for any share splits (including those effected pursuant to a distribution of our common shares), subdivisions or combinations (in each case referred to as a “Share Split”) with respect to our common shares as follows: the adjusted Share Cap as the result of a Share Split will be the number of our common shares that is equivalent to the product obtained by multiplying (i) the Share Cap in effect immediately prior to such Share Split by (ii) a fraction, the numerator of which is the number of our common shares outstanding immediately after giving effect to such Share Split and the denominator of which is the number of our common shares outstanding immediately prior to such Share Split.

For the avoidance of doubt, subject to the immediately succeeding sentence, the number of our common shares (or equivalent Alternative Conversion Consideration (as defined below), as applicable) issuable or deliverable, as applicable, in connection with the exercise of the Change of Control Conversion Right will not exceed 10,815,060 common shares in total (or equivalent Alternative Conversion Consideration, as applicable) (referred to as the “Exchange Cap”). The Exchange Cap is subject to pro rata adjustments for any Share Splits on the same basis as the corresponding adjustment to the Share Cap, and shall be increased on a pro rata basis with respect to any additional Series B Preferred Shares designated and authorized for issuance pursuant to any subsequent amendments to our Trust Agreement.

In the case of a Change of Control as a result of which holders of our common shares are entitled to receive consideration in a form other than solely our common shares, including other securities, other property or assets (including cash or any combination thereof) with respect to or in exchange for our common shares (the “Alternative Form Consideration”), a holder of Series B Preferred Shares will be entitled thereafter to convert (subject to our redemption rights as described above) such Series B Preferred Shares not into our common shares but solely into the kind and amount of Alternative Form Consideration which the holder of Series B Preferred Shares would have owned or been entitled to receive upon such Change of Control as if such holder of Series B Preferred Shares then held the Common Shares Conversion Consideration immediately prior to the effective time of the Change of Control (the “Alternative Conversion Consideration,” and the Common Shares Conversion Consideration or the Alternative Conversion Consideration, as may be applicable to a Change of Control, are referred to as the “Conversion Consideration”).

If the holders of our common shares have the opportunity to elect the form of consideration to be received in such Change of Control, the Conversion Consideration will be deemed to be the kind and amount of consideration actually received by holders of a majority of our common shares that voted for such an election (if electing between two types of consideration) or holders of a plurality of our common shares that voted for such an election (if electing between more than two types of consideration), as the case may be.

We will not issue fractional common shares upon the conversion of our Series B Preferred Shares. Instead, we will pay the cash value of such fractional shares.

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Within 15 days following the occurrence of a Change of Control, we will provide to holders of Series B Preferred Shares a notice of occurrence of the Change of Control that describes the resulting Change of Control Conversion Right. This notice will state the following:

• the events constituting the Change of Control;

• the date of the Change of Control;

• the last date on which the holders of Series B Preferred Shares may exercise their Change of Control Conversion Right;

• the method and period for calculating the Common Share Price;

• the Change of Control Conversion Date, which will be a business day that is no less than 20 days nor more than 35 days following the date of the notice;

• that if, prior to the Change of Control Conversion Date, we have provided or provide notice of our election to redeem all or any Series B Preferred Shares, holders will not be able to convert the Series B Preferred Shares called for redemption and such shares will be redeemed on the related redemption date, even if such shares have already been tendered for conversion pursuant to the Change of Control Conversion Right;

• if applicable, the type and amount of Alternative Conversion Consideration entitled to be received per Series B Preferred Share;

• the name and address of the paying agent, transfer agent and the conversion agent;

• the procedures that the holders of Series B Preferred Shares must follow to exercise the Change of Control Conversion Right (including procedures for surrendering shares for conversion through the facilities of a depositary), including the form of conversion notice to be delivered by such holders as described below; and

• the last date on which holders of Series B Preferred Shares may withdraw shares surrendered for conversion and the procedures that such holders must follow to effect such a withdrawal.

We will issue a press release for publication on Dow Jones & Company, Inc., Business Wire, PR Newswire or Bloomberg Business News (or, if such organizations are not in existence at the time of issuance of such press release, such other news or press organization as is reasonably calculated to broadly disseminate the relevant information to the public), or post notice on our website, in any event prior to the opening of business on the first business day following any date on which we provide the notice described above to the holders of Series B Preferred Shares.

In order to exercise the Change of Control Conversion Right, a holder of Series B Preferred Shares will be required to deliver, on or before the close of business on the Change of Control Conversion Date, the certificates (if any) evidencing Series B Preferred Shares to be converted, duly endorsed for transfer, together with a written conversion notice completed, to our transfer agent. The conversion notice must state:

• the relevant Change of Control Conversion Date;

• the number of Series B Preferred Shares to be converted; and

• that the Series B Preferred Shares are to be converted pursuant to the applicable provisions of the Series B Preferred Shares.

The “Change of Control Conversion Date” will be a business day that is no less than 20 days nor more than 35 days after the date on which we provide the notice described above to the holders of Series B Preferred Shares.

Holders of Series B Preferred Shares may withdraw any notice of exercise of a Change of Control Conversion Right (in whole or in part) by a written notice of withdrawal delivered to our transfer agent prior to the close of business on the business day prior to the Change of Control Conversion Date. The notice of withdrawal must state:

• the number of withdrawn Series B Preferred Shares;

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• if certificated Series B Preferred Shares have been issued, the certificate numbers of the withdrawn Series B Preferred Shares; and

• the number of Series B Preferred Shares, if any, which remain subject to the conversion notice.

Notwithstanding the foregoing, if the Series B Preferred Shares are held in global form, the conversion notice and/or the notice of withdrawal, as applicable, must comply with applicable procedures of The Depository Trust Company, or DTC.

Subject to the exercise of our redemption rights, Series B Preferred Shares as to which the Change of Control Conversion Right has been properly exercised and for which the conversion notice has not been properly withdrawn will be converted into the applicable Conversion Consideration in accordance with the Change of Control Conversion Right on the Change of Control Conversion Date.

In connection with the exercise of any Change of Control Conversion Right, we will comply with all U.S. federal and state securities laws and stock exchange rules in connection with any conversion of Series B Preferred Shares into common shares. Notwithstanding any other provision of our Series B Preferred Shares, no holder of our Series B Preferred Shares will be entitled to convert such Series B Preferred Shares for our common shares to the extent that receipt of such common shares would cause such holder (or any other person) to exceed the share ownership limits contained in our Trust Agreement and the Series B Preferred Shares Amendment setting forth the terms of the Series B Preferred Shares. See “— Series B Restrictions on Ownership and Transfer.”

These Change of Control conversion and redemption features may make it more difficult for or discourage a party from taking over our Company. The change of control feature of our Series B Preferred Shares may not allow you to recover the liquidation preference of the Series B Preferred Shares, and the change of control conversion and redemption features of the Series B Preferred Shares may make it more difficult for, or discourage, a party from taking over our Company. We are not aware, however, of any specific effort to accumulate our shares with the intent to obtain control of our Company by means of a merger, tender offer, solicitation or otherwise. In addition, the Change of Control redemption feature is not part of a plan by us to adopt a series of anti-takeover provisions. Instead, the Change of Control conversion and redemption features are a result of negotiations between us and the underwriters.

Except as provided above in connection with a Change of Control, the Series B Preferred Shares are not convertible into or exchangeable for any other securities or property.

Voting Rights

Except as indicated below, the holders of Series B Preferred Shares have no voting rights.

If and whenever six quarterly dividends (whether or not consecutive) payable on our Series B Preferred Shares are in arrears, whether or not earned or declared, the number of members then constituting our Board of Trustees will be increased by two and the holders of Series B Preferred Shares, voting together as a single class with the holders of any other class or series of Parity Shares upon which like voting rights have been conferred and are exercisable (any such other series, the “Voting Preferred Shares”), will have the right to elect two additional trustees of the Company (the “Preferred Share Trustees”) at an annual meeting of shareholders or a properly called special meeting of the holders of our Series B Preferred Shares and such Voting Preferred Shares and at each subsequent annual meeting of shareholders until all such dividends and dividends for the then current quarterly period on our Series B Preferred Shares and such other Voting Preferred Shares have been paid or declared and set aside for payment. Whenever all arrears in dividends on our Series B Preferred Shares and the Voting Preferred Shares then outstanding have been paid and full dividends on our Series B Preferred Shares and the Voting Preferred Shares for the then current quarterly dividend period have been paid in full or declared and set apart for payment in full, then the right of the holders of our Series B Preferred Shares and the Voting Preferred Shares to elect the Preferred Share Trustees will cease, the terms of office of the Preferred Share Trustees will forthwith terminate and the number of members of the Board of Trustees will be reduced accordingly. However, the right of the holders of our Series B Preferred Shares and the Voting Preferred Shares to elect the Preferred Share Trustees will again vest if and whenever six quarterly dividends (whether or not consecutive) are in arrears, as described above. In no event shall the holders of Series B PreferredShares be entitled pursuant to these voting rights to elect a trustee that would cause us to fail to satisfy a requirement relating to director independence of any national securities exchange on which any class or series of our shares is listed. In class votes with other Voting Preferred Shares, preferred shares of different classes or series shall vote in proportion to the liquidation preference of the respective preferred shares.

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In addition, the approval of two-thirds of the votes entitled to be cast by the holders of outstanding Series B Preferred Shares, voting separately as a class, either at a meeting of shareholders or by written consent, is required (i) to amend, alter or repeal any provisions of our Trust Agreement or the Series B Preferred Shares Amendment setting forth the terms of the Series B Preferred Shares, whether by merger, consolidation or otherwise, to affect materially and adversely the voting powers, rights or preferences of the holders of our Series B Preferred Shares, (ii) to enter into any share exchange that affects the Series B Preferred Shares or to consolidate with or merge into any other entity, or to permit any other entity to consolidate with or merge into us, unless in each such case each Series B Preferred Share remains outstanding without a material adverse change to its terms and rights or is converted into or exchanged for preferred shares of the surviving or resulting entity having preferences, rights, dividends, voting powers, restrictions, limitations as to dividends, qualifications and terms and conditions of redemption substantially identical to and in any event without any material adverse change to those of the Series B Preferred Shares, or (iii) to authorize, create, or increase the authorized amount of any class or series of capital shares having rights senior to our Series B Preferred Shares with respect to the payment of dividends or amounts upon liquidation, dissolution or winding up (provided that if such amendment affects materially and adversely the rights, preferences, privileges or voting powers of one or more but not all of the other class or series of Voting Preferred Shares, the consent of the holders of at least two-thirds of the outstanding shares of each such class or series so affected is required). However, we may create additional classes of Parity Shares and Junior Shares, amend our Trust Agreement to increase the authorized number of Series B Preferred Shares, Parity Shares and Junior Shares and issue additional classes or series of Parity Shares and Junior Shares without the consent of any holder of Series B Preferred Shares.

Information Rights

During any period in which we are not subject to Section 13 or 15(d) of the Exchange Act and any Series B Preferred Shares are outstanding, we will (i) transmit by mail (or other permissible means under the Exchange Act) to all holders of Series B Preferred Shares, as their names and addresses appear in our record books and without cost to such holders, copies of the annual reports on Form 10-K and quarterly reports on Form 10-Q that we would have been required to file with the SEC pursuant to Section 13 or 15(d) of the Exchange Act if we were subject thereto (other than any exhibits that would have been required) and (ii) promptly, upon request, supply copies of such reports to any prospective holder of Series B Preferred Shares. We will mail (or otherwise provide) the information to the holders of Series B Preferred Shares within 15 days after the respective dates by which a periodic report on Form 10-K or Form 10-Q, as the case may be, in respect of such information would have been required to be filed with the SEC if we were subject to Section 13 or 15(d) of the Exchange Act, in each case, based on the dates on which we would be required to file such periodic reports if we were a “non-accelerated filer” within the meaning of the Exchange Act.

Series B Restrictions on Ownership and Transfer

Holders of Series B Preferred Shares will be subject to the ownership and transfer restrictions of our Trust Agreement and the Series B Preferred Shares Amendment setting forth the terms of the Series B Preferred Shares. For us to qualify as a REIT under the Code, not more than 50% in value of our outstanding shares, including any preferred shares, may be owned directly or indirectly by five or fewer individuals (as defined in the Code to include certain entities) during the last half of the taxable year. Accordingly, we may take actions to limit the beneficial ownership directly or indirectly by a single person of our outstanding securities including any preferred shares.

Our Trust Agreement generally prohibits any person (other than a person who has been granted an exception) from beneficially or constructively owning more than 9.9% of the aggregate of our outstanding common shares, or 9.9% of the aggregate of the outstanding shares of a class or series of our preferred shares. In addition, pursuant to the Series B Preferred Shares Amendment setting forth theterms of the Series B Preferred Shares, no person may own, or be deemed to own by virtue of the attribution provisions of the Code, more than 9.9% (by value or number of shares, whichever is more restrictive) of our Series B Preferred Shares.

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Our board of trustees, in its sole discretion, may exempt a person from the above ownership limits. However, our board of trustees may not grant an exemption to any person unless our board of trustees obtains such representations and undertakings as our board of trustees may deem appropriate in order to determine that granting the exemption would not result in our losing our qualification as a REIT. As a condition of granting the exemption, our board of trustees will require a ruling from the Internal Revenue Service or an opinion of counsel or PREIT’s tax accountants to the effect that such exemption will not result in PREIT being “closely held” within the meaning of Section 856(h) of the Internal Revenue Code.

In addition to the 9.9% ownership limit discussed above, the Series B Preferred Shares are subject to the transfer restrictions set forth in our Trust Agreement, as amended by the Series B Preferred Shares Amendment, setting forth the terms of the Series B Preferred Shares. Generally, the Trust Agreement, as amended by the Series B Preferred Shares Amendment, prohibits the transfer of Series B Preferred Shares which, if effective, would result in any person beneficially or constructively owning Series B Preferred Shares in excess, or in violation, of the transfer or ownership limitations. In that event, that number of Series B Preferred Shares, the beneficial or constructive ownership of which otherwise would cause such person to violate the transfer or ownership limitations (rounded up to the nearest whole share), will be automatically exchanged for an equal number of Excess Shares (as defined in the Trust Agreement), which Excess Shares shall be deemed to have been transferred to the Company, as trustee of a Special Trust (as defined in the Trust Agreement) for the exclusive benefit of the beneficiaries thereof. The prohibited owner will not acquire any rights in such Series B Preferred Shares. This automatic transfer will be considered effective as of the close of business on the business day before the violative transfer.

Transfer Agent, Registrar, Dividend Disbursing Agent, Conversion Agent and Redemption Agent

The transfer agent, registrar, dividend disbursing agent, conversion agent and redemption agent for our Series B Preferred Shares is EQ Shareowner Services.

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7.20% Series C Cumulative Redeemable Perpetual Preferred Shares

(Liquidation Preference $25.00 Per Share)

In January 2017, we adopted a designating amendment to our Trust Agreement to classify 6,900,000 shares of our authorized preferred shares as 7.20% Series C Cumulative Redeemable Perpetual Preferred Shares and authorize the issuance thereof (the “Series C Preferred Shares Amendment.”) The holders of Series C Preferred Shares have no preemptive rights with respect to any of our shares or any of our other securities convertible into or carrying rights or options to purchase any shares of our shares.

Our Series C Preferred Shares are not subject to any sinking fund and we will have no obligation to redeem or repurchase our Series C Preferred Shares. Unless converted by the holder in connection with a Change of Control or redeemed or repurchased by us, our Series C Preferred Shares will have a perpetual term, with no maturity.

The Series C Preferred Shares Amendment setting forth the terms of our Series C Preferred Shares permits us to “reopen” this series, without the consent of the holders of our Series C Preferred Shares, in order to issue additional Series C Preferred Shares from time to time. Thus, we may in the future issue additional Series C Preferred Shares without the holders’ consent. Any additional Series C Preferred Shares will have the same terms as the Series C Preferred Shares being issued in January 2017. Any additional Series C Preferred Shares will, together with the Series C Preferred Shares issued in January 2017, constitute a single series of preferred shares under the Trust Agreement.

Ranking

Our Series C Preferred Shares rank senior to the Junior Shares (as defined under “— Dividends” below), including our common shares, and equally with our Series B Preferred Shares, Series D Preferred Shares and any other parity equity securities that we might issue in the future, with respect to payment of dividends and amounts upon liquidation, dissolution or winding up. While any Series C Preferred Shares are outstanding, we may not authorize or create any class or series of capital shares that ranks senior to our Series C Preferred Shares with respect to the payment of dividends or amounts upon liquidation, dissolution or winding up without the consent of the holders of two-thirds of the outstanding Series C Preferred Shares voting as a single class. However, we may create additional classes or series of shares, amend our Trust Agreement to increase the authorized number of preferred shares or issue any class or series of equity securities ranking equally with our Series C Preferred Shares with respect, in each case, to the payment of dividends and amounts upon liquidation, dissolution or winding up (“Parity Shares”) without the consent of any holder of Series C Preferred Shares. See “— Voting Rights” below for a discussion of the voting rights applicable if we seek to create any class or series of equity securities senior to our Series C Preferred Shares.

Dividends

Holders of Series C Preferred Shares are entitled to receive, when, as and if authorized by our Board of Trustees, out of funds legally available for payment, and declared by us, cumulative cash dividends at the rate of 7.20% per annum per share of its liquidation preference (equivalent to $1.80 per annum per Series C Preferred Share).

Dividends on each Series C Preferred Share shall accrue daily and shall be cumulative from, and including, the date of original issue and are payable quarterly in arrears on or about the 15th day of each March, June, September and December (each, a “dividend payment date”), at the then applicable annual rate; provided, however, that if any dividend payment date falls on any day other than a business day, as defined in the Series C Preferred Shares Amendment setting forth the terms of the Series C Preferred Shares, the dividend due on such dividend payment date shall be paid on the first business day immediately following such dividend payment date and no interest, additional dividends or other sum will accrue on the amount so payable for the period from and after that dividend payment date to that next succeeding business day. Each dividend is payable to holders of record as they appear on our share records at the close of business on the record date, not exceeding 30 days preceding the payment dates thereof as fixed by our Board of Trustees. Dividends are cumulative from, and including, the date of original issue or the most recent dividend payment date to which dividends have been paid, whether or not in any dividend

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period or periods there shall be funds of ours legally available for the payment of such dividends. Accumulations of dividends on our Series C Preferred Shares will not bear interest and holders of our Series C Preferred Shares will not be entitled to any dividends in excess of full cumulative dividends. Dividends payable on our Series C Preferred Shares for any period greater or less than a full dividend period will be computed on the basis of a 360-day year consisting of twelve 30-day months. Dividends payable on our Series C Preferred Shares for each full dividend period will be computed by dividing the annual dividend rate by four.

No dividend will be declared or paid on any Parity Shares unless full cumulative dividends have been declared and paid or are contemporaneously declared and funds sufficient for payment set aside on our Series C Preferred Shares for all prior dividend periods; provided, however, that if accrued dividends on our Series C Preferred Shares for all prior dividend periods have not been paid in full or a sum sufficient for such payment is not set apart, then any dividend declared on our Series C Preferred Shares for any dividend period and on any Parity Shares will be declared ratably in proportion to accrued and unpaid dividends on our Series C Preferred Shares and such Parity Shares. All of our dividends on our Series C Preferred Shares will be credited first to the earliest accrued and unpaid dividend.

Our Board of Trustees will not authorize and we will not (i) declare, pay or set apart funds for the payment of any dividend or other distribution with respect to any Junior Shares (other than in the form of Junior Shares) or (ii) redeem, purchase or otherwise acquire for consideration any Junior Shares through a sinking fund or otherwise (other than a redemption or purchase or other acquisition of our common shares made for purposes of an employee incentive or benefit plan of our Company or any subsidiary, or a conversion into or exchange for Junior Shares or redemptions for the purpose of preserving our qualification as a REIT), unless all cumulative dividends with respect to our Series C Preferred Shares and any Parity Shares at the time such dividends are payable have been paid or funds have been set apart for payment of such dividends.

As used herein, (i) the term “dividend” does not include dividends payable solely in Junior Shares on Junior Shares, or in options, warrants or rights to holders of Junior Shares to subscribe for or purchase any Junior Shares, and (ii) the term “Junior Shares” means our common shares, and any other class or series of our capital shares now or hereafter issued and outstanding that ranks junior as to the payment of dividends or amounts upon liquidation, dissolution and winding up to our Series C Preferred Shares.

Liquidation Preference

The holders of Series C Preferred Shares will be entitled to receive in the event of any liquidation, dissolution or winding up of our Company, whether voluntary or involuntary, $25.00 per Series C Preferred Share, which we refer to in this exhibit as the “Liquidation Preference,” plus an amount per share of Series C Preferred Shares equal to all dividends (whether or not earned or declared) accrued and unpaid thereon to, but not including, the date of final distribution to such holders.

Until the holders of Series C Preferred Shares have been paid their entire Liquidation Preference per share, plus all accrued and unpaid dividends thereon (whether or not declared) to, but not including, the date of final distribution to such holders, no payment will be made to any holder of Junior Shares upon the liquidation, dissolution or winding up of our Company. If, upon any liquidation, dissolution or winding up of our Company, our assets, or proceeds thereof, distributable among the holders of our Series C Preferred Shares are insufficient to pay in full the Liquidation Preference plus all accrued and unpaid dividends thereon (whether or not declared) to, but not including, the date of final distribution to such holders, and the liquidation preference and all accrued and unpaid dividends with respect to any Parity Shares, then such assets, or the proceeds thereof, will be distributed among the holders of Series C Preferred Shares and any Parity Shares ratably in accordance with the respective amounts which would be payable on such Series C Preferred Shares and any Parity Shares if all amounts payable thereon were paid in full. None of (i) a consolidation or merger of our Company with one or more entities, (ii) a statutory share exchange by our Company or (iii) a sale or transfer of all or substantially all of our assets, individually or as part of a series of transactions, will be considered a liquidation, dissolution or winding up, voluntary or involuntary, of our Company.

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Optional Redemption

We may not redeem our Series C Preferred Shares prior to January 27, 2022, except in certain limited circumstances relating to the ownership limitation necessary to preserve our qualification as a REIT or in connection with our special optional redemption right to redeem Series C Preferred Shares upon a Change of Control (as defined under “— Conversion Rights — Definitions” below). For further information regarding these exceptions, see “— Special Optional Redemption” below. To assist us in complying with the limitations on the concentration of ownership of a REIT imposed by the Internal Revenue Code, we may, at our option, redeem our Series C Preferred Shares, in whole, at any time, or in part, from time to time, for cash at $25.00 per share, plus, subject to exceptions, any accrued and unpaid dividends (whether or not declared) to, but not including, the date fixed for redemption. On or after January 27, 2022, we, at our option upon not less than 30 nor more than 60 days written notice, may redeem our Series C Preferred Shares, in whole, at any time, or in part, from time to time, for cash at a redemption price of $25.00 per share, plus all accrued and unpaid dividends thereon (whether or not declared) to, but not including, the date fixed for redemption, which we refer to in this exhibit collectively as the “redemption price.”

A notice of optional redemption (which may be contingent on the occurrence of a future event) will be mailed, postage prepaid, not less than 30 nor more than 60 days prior to the redemption date, addressed to the holders of record of our Series C Preferred Shares at their addresses as they appear on our share transfer records. A failure to give such notice or any defect in the notice or in its mailing will not affect the validity of the proceedings for the redemption of any Series C Preferred Shares except as to the holder to whom notice was defective or not given. Each notice will state:

• the redemption date;

• the redemption price and whether or not accrued and unpaid dividends will be payable to holders surrendering Series C Preferred Shares or to the persons who were holders of record at the close of business on the relevant dividend record date;

• the number of Series C Preferred Shares to be redeemed;

• the place or places where the certificates, if any, evidencing the Series C Preferred Shares are to be surrendered for payment;

• the procedures that the holders of Series C Preferred Shares must follow to surrender the certificates, if any, for redemption, including whether the certificates, if any, shall be properly endorsed or assigned for transfer; and

• that dividends on the shares to be redeemed will cease to accrue on such redemption date.

If fewer than all the Series C Preferred Shares held by any holder are to be redeemed, the notice mailed to such holder will also specify the number of Series C Preferred Shares to be redeemed from such holder. If fewer than all of the outstanding Series C Preferred Shares are to be redeemed, the shares to be redeemed shall be selected by lot or pro rata. If any redemption date is not a business day, then the redemption price may be paid on the next business day and no interest, additional dividends or other sums will accrue on the amount payable for the period from and after that redemption date to that next business day.

Special Optional Redemption

Upon the occurrence of a Change of Control (as defined under “— Conversion Rights” below), we have the option to redeem our Series C Preferred Shares, in whole, at any time, or in part, from time to time, within 120 days after the date on which such Change of Control has occurred for cash at a redemption price of $25.00 per share, plus any accrued and unpaid dividends (whether or not declared) to, but not including, the redemption date. If, prior to the Change of Control Conversion Date (as defined below), we have provided or provide notice of our election to redeem some or all of the Series C Preferred Shares (whether pursuant to our optional redemption right described above under “— Optional Redemption” or this special optional redemption right), the holders of Series C Preferred Shares will not have the Change of Control Conversion Right (as defined below) with respect to the shares called for redemption. If we elect to redeem any Series C Preferred Shares as described in this paragraph, we may use any available cash to pay the redemption price, and we will not be required to pay the redemption price only out of the proceeds from the issuance of other classes and series of our capital shares or any other specific source.

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A notice of special optional redemption will be mailed, postage prepaid, not less than 30 nor more than 60 days prior to the redemption date, addressed to the holders of record of our Series C Preferred Shares at their addresses as they appear on our share transfer records. A failure to give such notice or any defect in the notice or in its mailing will not affect the validity of the proceedings for the special optional redemption of the Series C Preferred Shares except as to the holder to whom notice was defective or not given. Each notice will state:

• the redemption date;

• the redemption price and whether or not accrued and unpaid dividends will be payable to holders surrendering Series C Preferred Shares or to the persons who were holders of record at the close of business on the relevant dividend record date;

• the number of Series C Preferred Shares to be redeemed;

• the place or places where the certificates, if any, evidencing the Series C Preferred Shares are to be surrendered for payment;

• the procedures that the holders of Series C Preferred Shares must follow to surrender the certificates, if any, for redemption, including whether the certificates, if any, shall be properly endorsed or assigned for transfer;

• that the Series C Preferred Shares are being redeemed pursuant to our special optional redemption right in connection with the occurrence of a Change of Control and a brief description of the transaction or transactions constituting such Change of Control;

• that the holders of Series C Preferred Shares to which the notice relates will not be able to tender such Series C Preferred Shares for conversion in connection with the Change of Control and each Series C Preferred Share tendered for conversion that is selected, prior to the Change of Control Conversion Date, for redemption will be redeemed on the related date of redemption instead of converted on the Change of Control Conversion Date; and

• that dividends on the shares to be redeemed will cease to accrue on such redemption date.

If fewer than all the Series C Preferred Shares held by any holder are to be redeemed, the notice mailed to such holder will also specify the number of Series C Preferred Shares to be redeemed from such holder. If fewer than all of the outstanding Series C Preferred Shares are to be redeemed, the shares to be redeemed shall be selected by lot or pro rata. If any redemption date is not a business day, then the redemption price may be paid on the next business day and no interest, additional dividends or other sums will accrue on the amount payable for the period from and after that redemption date to that next business day.

General Provisions Applicable to Redemptions

On the redemption date, we must pay on each Series C Preferred Share to be redeemed any accrued and unpaid dividends, in arrears, for any dividend period ending on or prior to the redemption date. In the case of a redemption date falling after a dividend payment record date and on or prior to the related payment date, the holders of Series C Preferred Shares at the close of business on such record date will be entitled to receive the dividend payable on such shares on the corresponding dividend payment date, notwithstanding the redemption of such shares on or prior to such dividend payment date. Except as provided for in the two preceding sentences, no payment or allowance will be made for unpaid dividends, whether or not in arrears, on any Series C Preferred Shares called for redemption.

If full cumulative dividends on our Series C Preferred Shares and any Parity Shares have not been paid or declared and set apart for payment, we may not purchase, redeem or otherwise acquire any Series C Preferred Shares or any Parity Shares other than in exchange for Junior Shares; provided, however, that the foregoing shall not prevent the purchase by us of shares held in excess of the limits in our Trust Agreement in order to ensure that we continue to meet the requirements for qualification as a REIT. See “— Series C Restrictions on Ownership and Transfer.”

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On and after the date fixed for redemption, provided that we have made available at the office of the registrar and transfer agent a sufficient amount of cash to effect the redemption, dividends will cease to accrue on the Series C Preferred Shares called for redemption (except that, in the case of a redemption date after a dividend payment record date and on or prior to the related payment date, holders of Series C Preferred Shares on the dividend payment record date will be entitled to receive the dividend payable on such shares on the corresponding dividend payment date), such shares shall no longer be deemed to be outstanding and all rights of the holders of such shares as holders of Series C Preferred Shares shall cease except the right to receive the cash payable upon such redemption, without interest from the date of such redemption.

Conversion Rights

Definitions

As used in this exhibit, the following terms shall have the following meanings:

A “Change of Control” will be deemed to have occurred at such time after the original issuance of the Series C Preferred Shares when the following has occurred:

• the acquisition by any person, including any syndicate or group deemed to be a “person” under Section 13(d)(3) of the Exchange Act, of beneficial ownership, directly or indirectly, through a purchase, merger or other acquisition transaction or series of purchases, mergers or other acquisition transactions of shares of the Company entitling that person to exercise more than 50% of the total voting power of all shares of the Company entitled to vote generally in the election of our trustees (except that such person will be deemed to have beneficial ownership of all securities that such person has the right to acquire, whether such right is currently exercisable or is exercisable only upon the occurrence of a subsequent condition); and

• following the closing of any transaction referred to in the bullet point above, neither we nor the acquiring or surviving entity has a class of common securities (or American Depositary Receipts representing such securities) listed on NYSE, NYSE MKT, or NASDAQ, or listed or quoted on an exchange or quotation system that is a successor to the NYSE, NYSE MKT or NASDAQ.

The “Common Share Price” will be (i) if the consideration to be received in the Change of Control by the holders of our common shares is solely cash, the amount of cash consideration per common share or (ii) if the consideration to be received in the Change of Control by holders of our common shares is other than solely cash (x) the average of the closing sale prices per common share (or, if no closing sale price is reported, the average of the closing bid and ask prices per share or, if more than one in either case, the average of the average closing bid and the average closing ask prices per share) for the ten consecutive trading days immediately preceding, but not including, the date on which such Change of Control occurred as reported on the principal U.S. securities exchange on which our common shares are then traded, or (y) the average of the last quoted bid prices for our common shares in the over-the-counter market as reported by Pink OTC Markets Inc. or similar organization for the ten consecutive trading days immediately preceding, but not including, the date on which such Change of Control occurred, if our common shares are not then listed for trading on a U.S. securities exchange.

Conversion

Upon the occurrence of a Change of Control, each holder of Series C Preferred Shares has the right (unless, prior to the Change of Control Conversion Date, we have provided or provide notice of our election to redeem some or all of the Series C Preferred Shares held by such holder as described above under “— Optional Redemption” or “— Special Optional Redemption,” in which case such holder will have the right only with respect to Series C Preferred Shares that are not called for redemption) to convert some or all of the Series C Preferred Shares held by such holder (referred to as the “Change of Control Conversion Right”) on the Change of Control Conversion Date into a number of our common shares per Series C Preferred Share (referred to as the “Common Shares Conversion Consideration”) equal to the lesser of:

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• the quotient obtained by dividing (i) the sum of the $25.00 liquidation preference per Series C Preferred Share plus the amount of any accrued and unpaid dividends thereon to but excluding the Change of Control Conversion Date (unless the Change of Control Conversion Date is after a record date for a Series C Preferred Shares dividend payment and prior to the corresponding dividend payment date for the Series C Preferred Shares, in which case no additional amount for such accrued and unpaid dividends will be included in this sum) by (ii) the Common Share Price, as defined above (such quotient is referred to as the “Conversion Rate”); and

• 2.72035 (referred to as the “Share Cap”).

Anything in the Series C Preferred Shares Amendment to the contrary notwithstanding and except as otherwise required by law, the persons who are the holders of record of Series C Preferred Shares at the close of business on a record date for the payment of dividends will be entitled to receive the dividend payable on the corresponding dividend payment date notwithstanding the conversion of those shares after such record date and on or prior to such dividend payment date and, in such case, the full amount of such dividend shall be paid on such dividend payment date to the persons who were the holders of record at the close of business on such record date.

The Share Cap is subject to pro rata adjustments for any share splits (including those effected pursuant to a distribution of our common shares), subdivisions or combinations (in each case referred to as a “Share Split”) with respect to our common shares as follows: the adjusted Share Cap as the result of a Share Split will be the number of our common shares that is equivalent to the product obtained by multiplying (i) the Share Cap in effect immediately prior to such Share Split by (ii) a fraction, the numerator of which is the number of our common shares outstanding immediately after giving effect to such Share Split and the denominator of which is the number of our common shares outstanding immediately prior to such Share Split.

For the avoidance of doubt, subject to the immediately succeeding sentence, the number of our common shares (or equivalent Alternative Conversion Consideration (as defined below), as applicable) issuable or deliverable, as applicable, in connection with the exercise of the Change of Control Conversion Right will not exceed 16,322,100 common shares in total (or equivalent Alternative Conversion Consideration, as applicable), subject to proportionate increase to the extent the underwriters’ option to purchase additional Series C Preferred Shares is exercised, not to exceed 18,770,415 common shares in total (or equivalent Alternative Conversion Consideration, as applicable) (referred to as the “Exchange Cap”). The Exchange Cap is subject to pro rata adjustments for any Share Splits on the same basis as the corresponding adjustment to the Share Cap, and shall be increased on a pro rata basis with respect to any additional Series C Preferred Shares designated and authorized for issuance pursuant to any subsequent amendments to our Trust Agreement.

In the case of a Change of Control as a result of which holders of our common shares are entitled to receive consideration in a form other than solely our common shares, including other securities, other property or assets (including cash or any combination thereof) with respect to or in exchange for our common shares (the “Alternative Form Consideration”), a holder of Series C Preferred Shares will be entitled thereafter to convert (subject to our redemption rights as described above) such Series C Preferred Shares not into our common shares but solely into the kind and amount of Alternative Form Consideration which the holder of Series C Preferred Shares would have owned or been entitled to receive upon such Change of Control as if such holder of Series C Preferred Shares then held the Common Shares Conversion Consideration immediately prior to the effective time of the Change of Control (the “Alternative Conversion Consideration,” and the Common Shares Conversion Consideration or the Alternative Conversion Consideration, as may be applicable to a Change of Control, are referred to as the “Conversion Consideration”).

If the holders of our common shares have the opportunity to elect the form of consideration to be received in such Change of Control, the Conversion Consideration will be deemed to be the kind and amount of consideration actually received by holders of a majority of our common shares that voted for such an election (if electing between two types of consideration) or holders of a plurality of our common shares that voted for such an election (if electing between more than two types of consideration), as the case may be.

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We will not issue fractional common shares upon the conversion of our Series C Preferred Shares. Instead, we will pay the cash value of such fractional shares.

Within 15 days following the occurrence of a Change of Control, we will provide to holders of Series C Preferred Shares a notice of occurrence of the Change of Control that describes the resulting Change of Control Conversion Right. This notice will state the following:

• the events constituting the Change of Control;

• the date of the Change of Control;

• the last date on which the holders of Series C Preferred Shares may exercise their Change of Control Conversion Right;

• the method and period for calculating the Common Share Price;

• the Change of Control Conversion Date, which will be a business day that is no less than 20 days nor more than 35 days following the date of the notice;

• that if, prior to the Change of Control Conversion Date, we have provided or provide notice of our election to redeem all or any Series C Preferred Shares, holders will not be able to convert the Series C Preferred Shares called for redemption and such shares will be redeemed on the related redemption date, even if such shares have already been tendered for conversion pursuant to the Change of Control Conversion Right;

• if applicable, the type and amount of Alternative Conversion Consideration entitled to be received per Series C Preferred Share;

• the name and address of the paying agent, transfer agent and the conversion agent;

• the procedures that the holders of Series C Preferred Shares must follow to exercise the Change of Control Conversion Right (including procedures for surrendering shares for conversion through the facilities of a depositary), including the form of conversion notice to be delivered by such holders as described below; and

• the last date on which holders of Series C Preferred Shares may withdraw shares surrendered for conversion and the procedures that such holders must follow to effect such a withdrawal.

We will issue a press release for publication on Dow Jones & Company, Inc., Business Wire, PR Newswire or Bloomberg Business News (or, if such organizations are not in existence at the time of issuance of such press release, such other news or press organization as is reasonably calculated to broadly disseminate the relevant information to the public), or post notice on our website, in any event prior to the opening of business on the first business day following any date on which we provide the notice described above to the holders of Series C Preferred Shares.

In order to exercise the Change of Control Conversion Right, a holder of Series C Preferred Shares will be required to deliver, on or before the close of business on the Change of Control Conversion Date, the certificates (if any) evidencing Series C Preferred Shares to be converted, duly endorsed for transfer, together with a written conversion notice completed, to our transfer agent. The conversion notice must state:

• the relevant Change of Control Conversion Date;

• the number of Series C Preferred Shares to be converted; and

• that the Series C Preferred Shares are to be converted pursuant to the applicable provisions of the Series C Preferred Shares.

The “Change of Control Conversion Date” will be a business day that is no less than 20 days nor more than 35 days after the date on which we provide the notice described above to the holders of Series C Preferred Shares.

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Holders of Series C Preferred Shares may withdraw any notice of exercise of a Change of Control Conversion Right (in whole or in part) by a written notice of withdrawal delivered to our transfer agent prior to the close of business on the business day prior to the Change of Control Conversion Date. The notice of withdrawal must state:

• the number of withdrawn Series C Preferred Shares;

• if certificated Series C Preferred Shares have been issued, the certificate numbers of the withdrawn Series C Preferred Shares; and

• the number of Series C Preferred Shares, if any, which remain subject to the conversion notice.

Notwithstanding the foregoing, if the Series C Preferred Shares are held in global form, the conversion notice and/or the notice of withdrawal, as applicable, must comply with applicable procedures of The Depository Trust Company, or DTC.

Subject to the exercise of our redemption rights, Series C Preferred Shares as to which the Change of Control Conversion Right has been properly exercised and for which the conversion notice has not been properly withdrawn will be converted into the applicable Conversion Consideration in accordance with the Change of Control Conversion Right on the Change of Control Conversion Date.

In connection with the exercise of any Change of Control Conversion Right, we will comply with all U.S. federal and state securities laws and stock exchange rules in connection with any conversion of Series C Preferred Shares into common shares. Notwithstanding any other provision of our Series C Preferred Shares, no holder of our Series C Preferred Shares will be entitled to convert such Series C Preferred Shares for our common shares to the extent that receipt of such common shares would cause such holder (or any other person) to exceed the share ownership limits contained in our Trust Agreement and the Series C Preferred Shares Amendment setting forth the terms of the Series C Preferred Shares. See “— Series C Restrictions on Ownership and Transfer.”

These Change of Control conversion and redemption features may make it more difficult for or discourage a party from taking over our Company. The change of control feature of our Series C Preferred Shares may not allow you to recover the liquidation preference of the Series C Preferred Shares, and the change of control conversion and redemption features of the Series C Preferred Shares may make it more difficult for, or discourage, a party from taking over our Company. We are not aware, however, of any specific effort to accumulate our shares with the intent to obtain control of our Company by means of a merger, tender offer, solicitation or otherwise. In addition, the Change of Control redemption feature is not part of a plan by us to adopt a series of anti-takeover provisions. Instead, the Change of Control conversion and redemption features are a result of negotiations between us and the underwriters.

Except as provided above in connection with a Change of Control, the Series C Preferred Shares are not convertible into or exchangeable for any other securities or property.

Voting Rights

Except as indicated below, the holders of Series C Preferred Shares have no voting rights.

If and whenever six quarterly dividends (whether or not consecutive) payable on our Series C Preferred Shares are in arrears, whether or not earned or declared, the number of members then constituting our Board of Trustees will be increased by two and the holders of Series C Preferred Shares, voting together as a single class with the holders of any other class or series of Parity Shares upon which like voting rights have been conferred and are exercisable (collectively, the “Voting Preferred Shares”), will have the right to elect two additional trustees of the Company (the “Preferred Share Trustees”) at an annual meeting of shareholders or a properly called special meeting of the holders of our Series C Preferred Shares and such Voting Preferred Shares and at each subsequent annual meeting of shareholders until all such dividends and dividends for the then current quarterly period on our Series C Preferred Shares and such other Voting Preferred Shares have been paid. Whenever all arrears in dividends on our Series C Preferred Shares and the Voting Preferred Shares then outstanding have been paid and full dividends on our Series C Preferred Shares and the Voting Preferred Shares for the then current quarterly dividend period have been paid in full or declared and set apart for payment in full, then the right of the holders of our Series C Preferred

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Shares and the Voting Preferred Shares to elect the Preferred Share Trustees will cease, the terms of office of the Preferred Share Trustees will forthwith terminate and the number of members of the Board of Trustees will be reduced accordingly. However, the right of the holders of our Series C Preferred Shares and the Voting Preferred Shares to elect the PreferredShare Trustees will again vest if and whenever six quarterly dividends (whether or not consecutive) are in arrears, as described above. In class votes with other Voting Preferred Shares, preferred shares of different classes or series shall vote in proportion to the liquidation preference of the respective preferred shares.

In addition, the approval of two-thirds of the votes entitled to be cast by the holders of outstanding Series C Preferred Shares, voting separately as a class, either at a meeting of shareholders or by written consent, is required (i) to amend, alter or repeal any provisions of our Trust Agreement or the Series C Preferred Shares Amendment setting forth the terms of the Series C Preferred Shares, whether by merger, consolidation or otherwise, to affect materially and adversely the voting powers, rights or preferences of the holders of our Series C Preferred Shares, (ii) to enter into any share exchange that affects the Series C Preferred Shares or to consolidate with or merge into any other entity, or to permit any other entity to consolidate with or merge into us, unless in each such case each Series C Preferred Share remains outstanding without a material adverse change to its terms and rights or is converted into or exchanged for preferred shares of the surviving or resulting entity having preferences, rights, dividends, voting powers, restrictions, limitations as to dividends, qualifications and terms and conditions of redemption substantially identical to and in any event without any material adverse change to those of the Series C Preferred Shares, or (iii) to authorize, create, or increase the authorized amount of any class or series of capital shares having rights senior to our Series C Preferred Shares with respect to the payment of dividends or amounts upon liquidation, dissolution or winding up (provided that if such amendment affects materially and adversely the rights, preferences, privileges or voting powers of one or more but not all of the other class or series of Voting Preferred Shares, the consent of the holders of at least two-thirds of the outstanding shares of each such class or series so affected is required). However, we may create additional classes of Parity Shares and Junior Shares, amend our Trust Agreement to increase the authorized number of Series C Preferred Shares, Parity Shares and Junior Shares and issue additional classes or series of Parity Shares and Junior Shares without the consent of any holder of Series C Preferred Shares.

Information Rights

During any period in which we are not subject to Section 13 or 15(d) of the Exchange Act and any Series C Preferred Shares are outstanding, we will (i) transmit by mail (or other permissible means under the Exchange Act) to all holders of Series C Preferred Shares, as their names and addresses appear in our record books and without cost to such holders, copies of the annual reports on Form 10-K and quarterly reports on Form 10-Q that we would have been required to file with the SEC pursuant to Section 13 or 15(d) of the Exchange Act if we were subject thereto (other than any exhibits that would have been required) and (ii) promptly, upon request, supply copies of such reports to any prospective holder of Series C Preferred Shares. We will mail (or otherwise provide) the information to the holders of Series C Preferred Shares within 15 days after the respective dates by which a periodic report on Form 10-K or Form 10-Q, as the case may be, in respect of such information would have been required to be filed with the SEC if we were subject to Section 13 or 15(d) of the Exchange Act, in each case, based on the dates on which we would be required to file such periodic reports if we were a “non-accelerated filer” within the meaning of the Exchange Act.

Series C Restrictions on Ownership and Transfer

Holders of Series C Preferred Shares will be subject to the ownership and transfer restrictions of our Trust Agreement and the Series C Preferred Shares Amendment setting forth the terms of the Series C Preferred Shares. For us to qualify as a REIT under the Code, not more than 50% in value of our outstanding shares, including any preferred shares, may be owned directly or indirectly by five or fewer individuals (as defined in the Code to include certain entities) during the last half of the taxable year. Accordingly, we may take actions to limit the beneficial ownership directly or indirectly by a single person of our outstanding securities including any preferred shares.

Our Trust Agreement generally prohibits any person (other than a person who has been granted an exception) from beneficially or constructively owning more than 9.9% of the aggregate of our outstanding common shares, or 9.9% of the aggregate of the outstanding shares of a class or series of our preferred shares. In addition, pursuant to the Series C Preferred Shares Amendment setting forth the terms of the Series C Preferred Shares, no person may own, or be deemed to own by virtue of the attribution provisions of the Code, more than 9.9% (by value or number of shares, whichever is more restrictive) of our Series C Preferred Shares.

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Our board of trustees, in its sole discretion, may exempt a person from the above ownership limits. However, our board of trustees may not grant an exemption to any person unless our board of trustees obtains such representations and undertakings as our board of trustees may deem appropriate in order to determine that granting the exemption would not result in our losing our qualification as a REIT. As a condition of granting the exemption, our board of trustees will require a ruling from the Internal Revenue Service or an opinion of counsel or PREIT’s tax accountants to the effect that such exemption will not result in PREIT being “closely held” within the meaning of Section 856(h) of the Internal Revenue Code.

In addition to the 9.9% ownership limit discussed above, the Series C Preferred Shares are subject to the transfer restrictions set forth in our Trust Agreement, as amended by the Series C Preferred Shares Amendment, setting forth the terms of the Series C Preferred Shares. Generally, the Trust Agreement, as amended by the Series C Preferred Shares Amendment, prohibits the transfer of Series C Preferred Shares which, if effective, would result in any person beneficially or constructively owning Series C Preferred Shares in excess, or in violation, of the transfer or ownership limitations. In that event, that number of Series C Preferred Shares, the beneficial or constructive ownership of which otherwise would cause such person to violate the transfer or ownership limitations (rounded up to the nearest whole share), will be automatically exchanged for an equal number of Excess Shares (as defined in the Trust Agreement), which Excess Shares shall be deemed to have been transferred to the Company, as trustee of a Special Trust (as defined in the Trust Agreement) for the exclusive benefit of the beneficiaries thereof. The prohibited owner will not acquire any rights in such Series C Preferred Shares. This automatic transfer will be considered effective as of the close of business on the business day before the violative transfer.

Transfer Agent, Registrar, Dividend Disbursing Agent, Conversion Agent and Redemption Agent

The transfer agent, registrar, dividend disbursing agent, conversion agent and redemption agent for our Series C Preferred Shares is EQ Shareowner Services.

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6.875% Series D Cumulative Redeemable Perpetual Preferred Shares

(Liquidation Preference $25.00 Per Share)

In September 2017, we adopted a designating amendment to our Trust Agreement to classify 5,520,000 shares of our authorized preferred shares as 6.875% Series D Cumulative Redeemable Perpetual Preferred Shares and authorize the issuance thereof (the “Series D Preferred Shares Amendment.”) The holders of Series D Preferred Shares have no preemptive rights with respect to any of our shares or any of our other securities convertible into or carrying rights or options to purchase any shares of our shares.

Our Series D Preferred Shares are not subject to any sinking fund and we have no obligation to redeem or repurchase our Series D Preferred Shares. Unless converted by the holder in connection with a Change of Control or redeemed or repurchased by us, our Series D Preferred Shares will have a perpetual term, with no maturity.

The Series D Preferred Shares Amendment setting forth the terms of our Series D Preferred Shares permits us to “reopen” this series, without the consent of the holders of our Series D Preferred Shares, in order to issue additional Series D Preferred Shares from time to time. Thus, we may in the future issue additional Series D Preferred Shares without the holders’ consent. Any additional Series D Preferred Shares will have the same terms as the Series D Preferred Shares issued in September 2017. Any additional Series D Preferred Shares will, together with the Series D Preferred Shares issued in September 2017, constitute a single series of preferred shares under the Trust Agreement.

Ranking

Our Series D Preferred Shares rank senior to the Junior Shares (as defined under “— Dividends” below), including our common shares, and equally with our Series B Preferred Shares, Series C Preferred Shares and any other parity equity securities that we might issue in the future, with respect to payment of dividends and amounts upon liquidation, dissolution or winding up. While any Series D Preferred Shares are outstanding, we may not authorize or create any class or series of capital shares that ranks senior to our Series D Preferred Shares with respect to the payment of dividends or amounts upon liquidation, dissolution or winding up without the consent of the holders of two-thirds of the outstanding Series D Preferred Shares voting as a single class. However, we may create additional classes or series of shares, amend our Trust Agreement to increase the authorized number of preferred shares or issue any class or series of equity securities ranking equally with our Series D Preferred Shares with respect, in each case, to the payment of dividends and amounts upon liquidation, dissolution or winding up (“Parity Shares”) without the consent of any holder of Series D Preferred Shares. See “— Voting Rights” below for a discussion of the voting rights applicable if we seek to create any class or series of equity securities senior to our Series D Preferred Shares.

Dividends

Holders of Series D Preferred Shares are entitled to receive, when, as and if authorized by our Board of Trustees, out of funds legally available for payment, and declared by us, cumulative cash dividends at the rate of 6.875% per annum per share of its liquidation preference (equivalent to $1.71875 per annum per Series D Preferred Share).

Dividends on each Series D Preferred Share shall accrue daily and shall be cumulative from, and including, the date of original issue and are payable quarterly in arrears on or about the 15th day of each March, June, September and December (each, a “dividend payment date”), at the then applicable annual rate; provided, however, that if any dividend payment date falls on any day other than a business day, as defined in the Series D Preferred Shares Amendment setting forth the terms of the Series D Preferred Shares, the dividend due on such dividend payment date shall be paid on the first business day immediately following such dividend payment date and no interest, additional dividends or other sum will accrue on the amount so payable for the period from and after that dividend payment date to that next succeeding business day. Each dividend is payable to holders of record as they appear on our share records at the close of business on the record date, not exceeding 30 days preceding the payment dates thereof as fixed by our Board of Trustees. Dividends are cumulative from, and including, the date of original issue or the most recent dividend payment date to which dividends have been paid, whether or not in any dividend

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period or periods there shall be funds of ours legally available for the payment of such dividends. Accumulations of dividends on our Series D Preferred Shares will not bear interest and holders of our Series D Preferred Shares will not be entitled to any dividends in excess of full cumulative dividends. Dividends payable on our Series D Preferred Shares for any period greater or less than a full dividend period will be computed on the basis of a 360-day year consisting of twelve 30-day months. Dividends payable on our Series D Preferred Shares for each full dividend period will be computed by dividing the annual dividend rate by four.

No dividend will be declared or paid on any Parity Shares unless full cumulative dividends have been declared and paid or are contemporaneously declared and funds sufficient for payment set aside on our Series D Preferred Shares for all prior dividend periods; provided, however, that if accrued dividends on our Series D Preferred Shares for all prior dividend periods have not been paid in full or a sum sufficient for such payment is not set apart, then any dividend declared on our Series D Preferred Shares for any dividend period and on any Parity Shares will be declared ratably in proportion to accrued and unpaid dividends on our Series D Preferred Shares and such Parity Shares. All of our dividends on our Series D Preferred Shares will be credited first to the earliest accrued and unpaid dividend.

Our Board of Trustees will not authorize and we will not (i) declare, pay or set apart funds for the payment of any dividend or other distribution with respect to any Junior Shares (other than in the form of Junior Shares) or (ii) redeem, purchase or otherwise acquire for consideration any Junior Shares through a sinking fund or otherwise (other than a redemption or purchase or other acquisition of our common shares made for purposes of an employee incentive or benefit plan of our Company or any subsidiary, or a conversion into or exchange for Junior Shares or redemptions for the purpose of preserving our qualification as a REIT), unless all cumulative dividends with respect to our Series D Preferred Shares and any Parity Shares at the time such dividends are payable have been paid or funds have been set apart for payment of such dividends.

As used herein, (i) the term “dividend” does not include dividends payable solely in Junior Shares on Junior Shares, or in options, warrants or rights to holders of Junior Shares to subscribe for or purchase any Junior Shares, and (ii) the term “Junior Shares” means our common shares, and any other class or series of our capital shares now or hereafter issued and outstanding that ranks junior as to the payment of dividends or amounts upon liquidation, dissolution and winding up to our Series D Preferred Shares.

Liquidation Preference

The holders of Series D Preferred Shares will be entitled to receive in the event of any liquidation, dissolution or winding up of our Company, whether voluntary or involuntary, $25.00 per Series D Preferred Share, which we refer to in this exhibit as the “Liquidation Preference,” plus an amount per share of Series D Preferred Shares equal to all dividends (whether or not earned or declared) accrued and unpaid thereon to, but not including, the date of final distribution to such holders.

Until the holders of Series D Preferred Shares have been paid their entire Liquidation Preference per share, plus all accrued and unpaid dividends thereon (whether or not declared) to, but not including, the date of final distribution to such holders, no payment will be made to any holder of Junior Shares upon the liquidation, dissolution or winding up of our Company. If, upon any liquidation, dissolution or winding up of our Company, our assets, or proceeds thereof, distributable among the holders of our Series D Preferred Shares are insufficient to pay in full the Liquidation Preference plus all accrued and unpaid dividends thereon (whether or not declared) to, but not including, the date of final distribution to such holders, and the liquidation preference and all accrued and unpaid dividends with respect to any Parity Shares, then such assets, or the proceeds thereof, will be distributed among the holders of Series D Preferred Shares and any other Parity Shares ratably in accordance with the respective amounts which would be payable on such Series D Preferred Shares and any Parity Shares if all amounts payable thereon were paid in full. None of (i) a consolidation or merger of our Company with one or more entities, (ii) a statutory share exchange by our Company or (iii) a sale or transfer of all or substantially all of our assets, individually or as part of a series of transactions, will be considered a liquidation, dissolution or winding up, voluntary or involuntary, of our Company.

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Optional Redemption

We may not redeem our Series D Preferred Shares prior to September 15, 2022, except in certain limited circumstances relating to the ownership limitation necessary to preserve our qualification as a REIT or in connection with our special optional redemption right to redeem Series D Preferred Shares upon a Change of Control (as defined under “— Conversion Rights — Definitions” below). For further information regarding these exceptions, see “— Special Optional Redemption” below. To assist us in complying with the limitations on the concentration of ownership of a REIT imposed by the Internal Revenue Code, we may, at our option, redeem our Series D Preferred Shares, in whole, at any time, or in part, from time to time, for cash at $25.00 per share, plus, subject to exceptions, any accrued and unpaid dividends (whether or not declared) to, but not including, the date fixed for redemption. On or after September 15, 2022, we, at our option upon not less than 30 nor more than 60 days written notice, may redeem our Series D Preferred Shares, in whole, at any time, or in part, from time to time, for cash at a redemption price of $25.00 per share, plus all accrued and unpaid dividends thereon (whether or not declared) to, but not including, the date fixed for redemption, which we refer to in this exhibit collectively as the “redemption price.”

A notice of optional redemption (which may be contingent on the occurrence of a future event) will be mailed, postage prepaid, not less than 30 nor more than 60 days prior to the redemption date, addressed to the holders of record of our Series D Preferred Shares at their addresses as they appear on our share transfer records. A failure to give such notice or any defect in the notice or in its mailing will not affect the validity of the proceedings for the redemption of any Series D Preferred Shares except as to the holder to whom notice was defective or not given. Each notice will state:

• the redemption date;

• the redemption price and whether or not accrued and unpaid dividends will be payable to holders surrendering Series D Preferred Shares or to the persons who were holders of record at the close of business on the relevant dividend record date;

• the number of Series D Preferred Shares to be redeemed;

• the place or places where the certificates, if any, evidencing the Series D Preferred Shares are to be surrendered for payment;

• the procedures that the holders of Series D Preferred Shares must follow to surrender the certificates, if any, for redemption, including whether the certificates, if any, shall be properly endorsed or assigned for transfer; and

• that dividends on the shares to be redeemed will cease to accrue on such redemption date.

If fewer than all the Series D Preferred Shares held by any holder are to be redeemed, the notice mailed to such holder will also specify the number of Series D Preferred Shares to be redeemed from such holder. If fewer than all of the outstanding Series D Preferred Shares are to be redeemed, the shares to be redeemed shall be selected by lot or pro rata. If any redemption date is not a business day, then the redemption price may be paid on the next business day and no interest, additional dividends or other sums will accrue on the amount payable for the period from and after that redemption date to that next business day.

Special Optional Redemption

Upon the occurrence of a Change of Control (as defined under “— Conversion Rights” below), we have the option to redeem our Series D Preferred Shares, in whole, at any time, or in part, from time to time, within 120 days after the date on which such Change of Control has occurred for cash at a redemption price of $25.00 per share, plus any accrued and unpaid dividends (whether or not declared) to, but not including, the redemption date. If, prior to the Change of Control Conversion Date (as defined below), we have provided or provide notice of our election to redeem some or all of the Series D Preferred Shares (whether pursuant to our optional redemption right described above under “— Optional Redemption” or this special optional redemption right), the holders of Series D Preferred Shares will not have the Change of Control Conversion Right (as defined below) with respect to the shares called for redemption. If we elect to redeem any Series D Preferred Shares as described in this paragraph, we may use any available cash to pay the redemption price, and we will not be required to pay the redemption price only out of the proceeds from the issuance of other classes and series of our capital shares or any other specific source.

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A notice of special optional redemption will be mailed, postage prepaid, not less than 30 nor more than 60 days prior to the redemption date, addressed to the holders of record of our Series D Preferred Shares at their addresses as they appear on our share transfer records. A failure to give such notice or any defect in the notice or in its mailing will not affect the validity of the proceedings for the special optional redemption of the Series D Preferred Shares except as to the holder to whom notice was defective or not given. Each notice will state:

• the redemption date;

• the redemption price and whether or not accrued and unpaid dividends will be payable to holders surrendering Series D Preferred Shares or to the persons who were holders of record at the close of business on the relevant dividend record date;

• the number of Series D Preferred Shares to be redeemed;

• the place or places where the certificates, if any, evidencing the Series D Preferred Shares are to be surrendered for payment;

• the procedures that the holders of Series D Preferred Shares must follow to surrender the certificates, if any, for redemption, including whether the certificates, if any, shall be properly endorsed or assigned for transfer;

• that the Series D Preferred Shares are being redeemed pursuant to our special optional redemption right in connection with the occurrence of a Change of Control and a brief description of the transaction or transactions constituting such Change of Control;

• that the holders of Series D Preferred Shares to which the notice relates will not be able to tender such Series D Preferred Shares for conversion in connection with the Change of Control and each Series D Preferred Share tendered for conversion that is selected, prior to the Change of Control Conversion Date, for redemption will be redeemed on the related date of redemption instead of converted on the Change of Control Conversion Date; and

• that dividends on the shares to be redeemed will cease to accrue on such redemption date.

If fewer than all the Series D Preferred Shares held by any holder are to be redeemed, the notice mailed to such holder will also specify the number of Series D Preferred Shares to be redeemed from such holder. If fewer than all of the outstanding Series D Preferred Shares are to be redeemed, the shares to be redeemed shall be selected by lot or pro rata. If any redemption date is not a business day, then the redemption price may be paid on the next business day and no interest, additional dividends or other sums will accrue on the amount payable for the period from and after that redemption date to that next business day.

General Provisions Applicable to Redemptions

On the redemption date, we must pay on each Series D Preferred Share to be redeemed any accrued and unpaid dividends, in arrears, for any dividend period ending on or prior to the redemption date. In the case of a redemption date falling after a dividend payment record date and on or prior to the related payment date, the holders of Series D Preferred Shares at the close of business on such record date will be entitled to receive the dividend payable on such shares on the corresponding dividend payment date, notwithstanding the redemption of such shares on or prior to such dividend payment date. Except as provided for in the two preceding sentences, no payment or allowance will be made for unpaid dividends, whether or not in arrears, on any Series D Preferred Shares called for redemption.

If full cumulative dividends on our Series D Preferred Shares and any Parity Shares have not been paid or declared and set apart for payment, we may not purchase, redeem or otherwise acquire any Series D Preferred Shares or any Parity Shares other than in exchange for Junior Shares; provided, however, that the foregoing shall not prevent the purchase by us of shares held in excess of the limits in our Trust Agreement in order to ensure that we continue to meet the requirements for qualification as a REIT. See “— Series D Restrictions on Ownership and Transfer.”

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On and after the date fixed for redemption, provided that we have made available at the office of the registrar and transfer agent a sufficient amount of cash to effect the redemption, dividends will cease to accrue on the Series D Preferred Shares called for redemption (except that, in the case of a redemption date after a dividend payment record date and on or prior to the related payment date, holders of Series D Preferred Shares on the dividend payment record date will be entitled to receive the dividend payable on such shares on the corresponding dividend payment date), such shares shall no longer be deemed to be outstanding and all rights of the holders of such shares as holders of Series D Preferred Shares shall cease except the right to receive the cash payable upon such redemption, without interest from the date of such redemption.

Conversion Rights

Definitions

As used in this exhibit, the following terms shall have the following meanings:

A “Change of Control” will be deemed to have occurred at such time after the original issuance of the Series D Preferred Shares when the following has occurred:

• the acquisition by any person, including any syndicate or group deemed to be a “person” under Section 13(d)(3) of the Exchange Act, of beneficial ownership, directly or indirectly, through a purchase, merger or other acquisition transaction or series of purchases, mergers or other acquisition transactions of shares of the Company entitling that person to exercise more than 50% of the total voting power of all shares of the Company entitled to vote generally in the election of our trustees (except that such person will be deemed to have beneficial ownership of all securities that such person has the right to acquire, whether such right is currently exercisable or is exercisable only upon the occurrence of a subsequent condition); and

• following the closing of any transaction referred to in the bullet point above, neither we nor the acquiring or surviving entity has a class of common securities (or American Depositary Receipts representing such securities) listed on NYSE, NYSE American, or NASDAQ, or listed or quoted on an exchange or quotation system that is a successor to the NYSE, NYSE American or NASDAQ.

The “Common Share Price” will be (i) if the consideration to be received in the Change of Control by the holders of our common shares is solely cash, the amount of cash consideration per common share or (ii) if the consideration to be received in the Change of Control by holders of our common shares is other than solely cash (x) the average of the closing sale prices per common share (or, if no closing sale price is reported, the average of the closing bid and ask prices per share or, if more than one in either case, the average of the average closing bid and the average closing ask prices per share) for the ten consecutive trading days immediately preceding, but not including, the date on which such Change of Control occurred as reported on the principal U.S. securities exchange on which our common shares are then traded, or (y) the average of the last quoted bid prices for our common shares in the over-the-counter market as reported by Pink OTC Markets Inc. or similar organization for the ten consecutive trading days immediately preceding, but not including, the date on which such Change of Control occurred, if our common shares are not then listed for trading on a U.S. securities exchange.

Conversion

Upon the occurrence of a Change of Control, each holder of Series D Preferred Shares has the right (unless, prior to the Change of Control Conversion Date, we have provided or provide notice of our election to redeem some or all of the Series D Preferred Shares held by such holder as described above under “— Optional Redemption” or “— Special Optional Redemption,” in which case such holder will have the right only with respect to Series D Preferred Shares that are not called for redemption) to convert some or all of the Series D Preferred Shares held by such holder (referred to as the “Change of Control Conversion Right”) on the Change of Control Conversion Date into a number of our common shares per Series D Preferred Share (referred to as the “Common Shares Conversion Consideration”) equal to the lesser of:

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• the quotient obtained by dividing (i) the sum of the $25.00 liquidation preference per Series D Preferred Share plus the amount of any accrued and unpaid dividends thereon to but excluding the Change of Control Conversion Date (unless the Change of Control Conversion Date is after a record date for a Series D Preferred Shares dividend payment and prior to the corresponding dividend payment date for the Series D Preferred Shares, in which case no additional amount for such accrued and unpaid dividends will be included in this sum) by (ii) the Common Share Price, as defined above (such quotient is referred to as the “Conversion Rate”); and

• 4.9068 (referred to as the “Share Cap”).

Anything in the Series D Preferred Shares Amendment to the contrary notwithstanding and except as otherwise required by law, the persons who are the holders of record of Series D Preferred Shares at the close of business on a record date for the payment of dividends will be entitled to receive the dividend payable on the corresponding dividend payment date notwithstanding the conversion of those shares after such record date and on or prior to such dividend payment date and, in such case, the full amount of such dividend shall be paid on such dividend payment date to the persons who were the holders of record at the close of business on such record date.

The Share Cap is subject to pro rata adjustments for any share splits (including those effected pursuant to a distribution of our common shares), subdivisions or combinations (in each case referred to as a “Share Split”) with respect to our common shares as follows: the adjusted Share Cap as the result of a Share Split will be the number of our common shares that is equivalent to the product obtained by multiplying (i) the Share Cap in effect immediately prior to such Share Split by (ii) a fraction, the numerator of which is the number of our common shares outstanding immediately after giving effect to such Share Split and the denominator of which is the number of our common shares outstanding immediately prior to such Share Split.

For the avoidance of doubt, subject to the immediately succeeding sentence, the number of our common shares (or equivalent Alternative Conversion Consideration (as defined below), as applicable) issuable or deliverable, as applicable, in connection with the exercise of the Change of Control Conversion Right will not exceed 23,552,640 common shares in total (or equivalent Alternative Conversion Consideration, as applicable), subject to proportionate increase to the extent the underwriters’ option to purchase additional Series D Preferred Shares is exercised, not to exceed 27,085,536 common shares in total (or equivalent Alternative Conversion Consideration, as applicable) (referred to as the “Exchange Cap”). The Exchange Cap is subject to pro rata adjustments for any Share Splits on the same basis as the corresponding adjustment to the Share Cap, and shall be increased on a pro rata basis with respect to any additional Series D Preferred Shares designated and authorized for issuance pursuant to any subsequent amendments to our Trust Agreement.

In the case of a Change of Control as a result of which holders of our common shares are entitled to receive consideration in a form other than solely our common shares, including other securities, other property or assets (including cash or any combination thereof) with respect to or in exchange for our common shares (the “Alternative Form Consideration”), a holder of Series D Preferred Shares will be entitled thereafter to convert (subject to our redemption rights as described above) such Series D Preferred Shares not into our common shares but solely into the kind and amount of Alternative Form Consideration which the holder of Series D Preferred Shares would have owned or been entitled to receive upon such Change of Control as if such holder of Series D Preferred Shares then held the Common Shares Conversion Consideration immediately prior to the effective time of the Change of Control (the “Alternative Conversion Consideration,” and the Common Shares Conversion Consideration or the Alternative Conversion Consideration, as may be applicable to a Change of Control, are referred to as the “Conversion Consideration”).

If the holders of our common shares have the opportunity to elect the form of consideration to be received in such Change of Control, the Conversion Consideration will be deemed to be the kind and amount of consideration actually received by holders of a majority of our common shares that voted for such an election (if electing between two types of consideration) or holders of a plurality of our common shares that voted for such an election (if electing between more than two types of consideration), as the case may be.

We will not issue fractional common shares upon the conversion of our Series D Preferred Shares. Instead, we will pay the cash value of such fractional shares.

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Within 15 days following the occurrence of a Change of Control, we will provide to holders of Series D Preferred Shares a notice of occurrence of the Change of Control that describes the resulting Change of Control Conversion Right. This notice will state the following:

• the events constituting the Change of Control;

• the date of the Change of Control;

• the last date on which the holders of Series D Preferred Shares may exercise their Change of Control Conversion Right;

• the method and period for calculating the Common Share Price;

• the Change of Control Conversion Date, which will be a business day that is no less than 20 days nor more than 35 days following the date of the notice;

• that if, prior to the Change of Control Conversion Date, we have provided or provide notice of our election to redeem all or any Series D Preferred Shares, holders will not be able to convert the Series D Preferred Shares called for redemption and such shares will be redeemed on the related redemption date, even if such shares have already been tendered for conversion pursuant to the Change of Control Conversion Right;

• if applicable, the type and amount of Alternative Conversion Consideration entitled to be received per Series D Preferred Share;

• the name and address of the paying agent, transfer agent and the conversion agent;

• the procedures that the holders of Series D Preferred Shares must follow to exercise the Change of Control Conversion Right (including procedures for surrendering shares for conversion through the facilities of a depositary), including the form of conversion notice to be delivered by such holders as described below; and

• the last date on which holders of Series D Preferred Shares may withdraw shares surrendered for conversion and the procedures that such holders must follow to effect such a withdrawal.

We will issue a press release for publication on Dow Jones & Company, Inc., Business Wire, PR Newswire or Bloomberg Business News (or, if such organizations are not in existence at the time of issuance of such press release, such other news or press organization as is reasonably calculated to broadly disseminate the relevant information to the public), or post notice on our website, in any event prior to the opening of business on the first business day following any date on which we provide the notice described above to the holders of Series D Preferred Shares.

In order to exercise the Change of Control Conversion Right, a holder of Series D Preferred Shares will be required to deliver, on or before the close of business on the Change of Control Conversion Date, the certificates (if any) evidencing Series D Preferred Shares to be converted, duly endorsed for transfer, together with a written conversion notice completed, to our transfer agent. The conversion notice must state:

• the relevant Change of Control Conversion Date;

• the number of Series D Preferred Shares to be converted; and

• that the Series D Preferred Shares are to be converted pursuant to the applicable provisions of the Series D Preferred Shares.

The “Change of Control Conversion Date” will be a business day that is no less than 20 days nor more than 35 days after the date on which we provide the notice described above to the holders of Series D Preferred Shares.

Holders of Series D Preferred Shares may withdraw any notice of exercise of a Change of Control Conversion Right (in whole or in part) by a written notice of withdrawal delivered to our transfer agent prior to the close of business on the business day prior to the Change of Control Conversion Date. The notice of withdrawal must state:

• the number of withdrawn Series D Preferred Shares;

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• if certificated Series D Preferred Shares have been issued, the certificate numbers of the withdrawn Series D Preferred Shares; and

• the number of Series D Preferred Shares, if any, which remain subject to the conversion notice.

Notwithstanding the foregoing, if the Series D Preferred Shares are held in global form, the conversion notice and/or the notice of withdrawal, as applicable, must comply with applicable procedures of The Depository Trust Company, or DTC.

Subject to the exercise of our redemption rights, Series D Preferred Shares as to which the Change of Control Conversion Right has been properly exercised and for which the conversion notice has not been properly withdrawn will be converted into the applicable Conversion Consideration in accordance with the Change of Control Conversion Right on the Change of Control Conversion Date.

In connection with the exercise of any Change of Control Conversion Right, we will comply with all U.S. federal and state securities laws and stock exchange rules in connection with any conversion of Series D Preferred Shares into common shares. Notwithstanding any other provision of our Series D Preferred Shares, no holder of our Series D Preferred Shares will be entitled to convert such Series D Preferred Shares for our common shares to the extent that receipt of such common shares would cause such holder (or any other person) to exceed the share ownership limits contained in our Trust Agreement and the Series D Preferred Shares Amendment setting forth the terms of the Series D Preferred Shares. See “— Series D Restrictions on Ownership and Transfer.”

These Change of Control conversion and redemption features may make it more difficult for or discourage a party from taking over our Company. See The change of control feature of our Series D Preferred Shares may not allow you to recover the liquidation preference of the Series D Preferred Shares, and the change of control conversion and redemption features of the Series D Preferred Shares may make it more difficult for, or discourage, a party from taking over our Company. We are not aware, however, of any specific effort to accumulate our shares with the intent to obtain control of our Company by means of a merger, tender offer, solicitation or otherwise. In addition, the Change of Control redemption feature is not part of a plan by us to adopt a series of anti-takeover provisions. Instead, the Change of Control conversion and redemption features are a result of negotiations between us and the underwriters.

Except as provided above in connection with a Change of Control, the Series D Preferred Shares are not convertible into or exchangeable for any other securities or property.

Voting Rights

Except as indicated below, the holders of Series D Preferred Shares have no voting rights.

If and whenever six quarterly dividends (whether or not consecutive) payable on our Series D Preferred Shares are in arrears, whether or not earned or declared, the number of members then constituting our Board of Trustees will be increased by two and the holders of Series D Preferred Shares, voting together as a class with the holders any other class or series of Parity Shares upon which like voting rights have been conferred and are exercisable (any such other class or series, the “Voting Preferred Shares”), will have the right to elect two additional trustees of the Company (the “Preferred Share Trustees”) at an annual meeting of shareholders or a properly called special meeting of the holders of our Series D Preferred Shares and such Voting Preferred Shares and at each subsequent annual meeting of shareholders until all such dividends and dividends for the then current quarterly period on our Series D Preferred Shares and such other Voting Preferred Shares have been paid. Whenever all arrears in dividends on our Series D Preferred Shares and the Voting Preferred Shares then outstanding have been paid and full dividends on our Series D Preferred Shares and the Voting Preferred Shares for the then current quarterly dividend period have been paid in full or declared and set apart for payment in full, then the right of the holders of our Series D Preferred Shares and the Voting Preferred Shares to elect the Preferred Share Trustees will cease, the terms of office of the Preferred Share Trustees will forthwith terminate and the number of members of the Board of Trustees will be reduced accordingly. However, the right of the holders of our Series D Preferred Shares and the Voting Preferred Shares to elect the Preferred Share Trustees will again vest if and whenever six quarterly dividends (whether or not consecutive) are in arrears, as described above. In class votes with other Voting Preferred Shares, preferred shares of different classes or series shall vote in proportion to the liquidation preference of the respective preferred shares.

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In addition, the approval of two-thirds of the votes entitled to be cast by the holders of outstanding Series D Preferred Shares, voting separately as a class, either at a meeting of shareholders or by written consent, is required (i) to amend, alter or repeal any provisions of our Trust Agreement or the Series D Preferred Shares Amendment setting forth the terms of the Series D Preferred Shares, whether by merger, consolidation or otherwise, to affect materially and adversely the voting powers, rights or preferences of the holders of our Series D Preferred Shares, (ii) to enter into any share exchange that affects the Series D Preferred Shares or to consolidate with or merge into any other entity, or to permit any other entity to consolidate with or merge into us, unless in each such case each Series D Preferred Share remains outstanding without a material adverse change to its terms and rights or is converted into or exchanged for preferred shares of the surviving or resulting entity having preferences, rights, dividends, voting powers, restrictions, limitations as to dividends, qualifications and terms and conditions of redemption substantially identical to and in any event without any material adverse change to those of the Series D Preferred Shares, or (iii) to authorize, create, or increase the authorized amount of any class or series of capital shares having rights senior to our Series D Preferred Shares with respect to the payment of dividends or amounts upon liquidation, dissolution or winding up (provided that if such amendment affects materially and adversely the rights, preferences, privileges or voting powers of one or more but not all of the other class or series of Voting Preferred Shares, the consent of the holders of at least two-thirds of the outstanding shares of each such class or series so affected is required). However, we may create additional classes of Parity Shares and Junior Shares, amend our Trust Agreement to increase the authorized number of Series D Preferred Shares, Parity Shares and Junior Shares and issue additional classes or series of Parity Shares and Junior Shares without the consent of any holder of Series D Preferred Shares.

Information Rights

During any period in which we are not subject to Section 13 or 15(d) of the Exchange Act and any Series D Preferred Shares are outstanding, we will (i) transmit by mail (or other permissible means under the Exchange Act) to all holders of Series D Preferred Shares, as their names and addresses appear in our record books and without cost to such holders, copies of the annual reports on Form 10-K and quarterly reports on Form 10-Q that we would have been required to file with the SEC pursuant to Section 13 or 15(d) of the Exchange Act if we were subject thereto (other than any exhibits that would have been required) and (ii) promptly, upon request, supply copies of such reports to any prospective holder of Series D Preferred Shares. We will mail (or otherwise provide) the information to the holders of Series D Preferred Shares within 15 days after the respective dates by which a periodic report on Form 10-K or Form 10-Q, as the case may be, in respect of such information would have been required to be filed with the SEC if we were subject to Section 13 or 15(d) of the Exchange Act, in each case, based on the dates on which we would be required to file such periodic reports if we were a “non-accelerated filer” within the meaning of the Exchange Act.

Series D Restrictions on Ownership and Transfer

Holders of Series D Preferred Shares will be subject to the ownership and transfer restrictions of our Trust Agreement and the Series D Preferred Shares Amendment setting forth the terms of the Series D Preferred Shares. For us to qualify as a REIT under the Code, not more than 50% in value of our outstanding shares, including any preferred shares, may be owned directly or indirectly by five or fewer individuals (as defined in the Code to include certain entities) during the last half of the taxable year. Accordingly, we may take actions to limit the beneficial ownership directly or indirectly by a single person of our outstanding securities including any preferred shares.

Our Trust Agreement generally prohibits any person (other than a person who has been granted an exception) from beneficially or constructively owning more than 9.9% of the aggregate of our outstanding common shares, or 9.9% of the aggregate of the outstanding shares of a class or series of our preferred shares. In addition, pursuant to the Series D Preferred Shares Amendment setting forth the terms of the Series D Preferred Shares, no person may own, or be deemed to own by virtue of the attribution provisions of the Code, more than 9.9% (by value or number of shares, whichever is more restrictive) of our Series D Preferred Shares.

Our board of trustees, in its sole discretion, may exempt a person from the above ownership limits. However, our board of trustees may not grant an exemption to any person unless our board of trustees obtains such representations and undertakings as our board of trustees may deem appropriate in order to determine that granting the exemption would not result in our losing our qualification as a REIT. As a condition of granting the exemption, our board of trustees will require a ruling from the Internal Revenue Service or an opinion of counsel or PREIT’s tax accountants to the effect that such exemption will not result in PREIT being “closely held” within the meaning of Section 856(h) of the Internal Revenue Code.

ACTIVE.121895887.06

In addition to the 9.9% ownership limit discussed above, the Series D Preferred Shares are subject to the transfer restrictions set forth in our Trust Agreement, as amended by the Series D Preferred Shares Amendment, setting forth the terms of the Series D Preferred Shares. Generally, the Trust Agreement, as amended by the Series D Preferred Shares Amendment, prohibits the transfer of Series D Preferred Shares which, if effective, would result in any person beneficially or constructively owning Series D Preferred Shares in excess, or in violation, of the transfer or ownership limitations. In that event, that number of Series D Preferred Shares, the beneficial or constructive ownership of which otherwise would cause such person to violate the transfer or ownership limitations (rounded up to the nearest whole share), will be automatically exchanged for an equal number of Excess Shares (as defined in the Trust Agreement), which Excess Shares shall be deemed to have been transferred to the Company, as trustee of a Special Trust (as defined in the Trust Agreement) for the exclusive benefit of the beneficiaries thereof. The prohibited owner will not acquire any rights in such Series D Preferred Shares. This automatic transfer will be considered effective as of the close of business on the business day before the violative transfer.

Transfer Agent, Registrar, Dividend Disbursing Agent, Conversion Agent and Redemption Agent

The transfer agent, registrar, dividend disbursing agent, conversion agent and redemption agent for our Series D Preferred Shares is EQ Shareowner Services.

ACTIVE.121895887.06

EX-10.6

Exhibit 10.6

Loan No. 1011175-0

Wells Fargo Bank, National Association

550 South Tryon Street

Charlotte, North Carolina 28202

November 12, 2014

PREIT Associates, L.P.

200 South Broad Street

Philadelphia, PA 19102

Attention: Andrew Ioannou

Dear Sir:

Reference is made to that certain Seven-Year Term Loan Agreement dated as of January 8, 2014 (as amended and in effect prior to the date hereof, the “Term Loan Agreement”), by and among PREIT ASSOCIATES, LP, a limited partnership formed under the laws of the State of Delaware (the “PREIT”), PREIT-RUBIN, INC., a c corporation formed under the laws of the State of Delaware (“PREIT-RUBIN”), and PENNSYLVANIA REAL ESTATE INVESTMENT TRUST, a business trust formed under the laws of the State of Pennsylvania (the “Parent”; together with PREIT and PREIT-RUBIN, each individually a “Borrower” and collectively, the “Borrowers”), each of the financial institutions that are from time to time party thereto (the “Lenders”), WELLS FARGO BANK, NATIONAL ASSOCIATION, as Administrative Agent (the “Administrative Agent”), and the other parties thereto. Capitalized terms used herein and not otherwise defined have the meanings given to such terms in the Term Loan Agreement.

The Borrowers and the Administrative Agent have identified a mistake in the reference to the date “January 8, 2015” in the last sentence of Section 2.1.(a) of the Term Loan Agreement because it is inconsistent with the date referenced in clause (a) of the defined term “Commitment Termination Date”, as such defined term was amended by that certain First Amendment to Five-Year Term Loan Agreement dated November 7, 2014, among the Borrowers, the Lenders and the Administrative Agent. Pursuant to Section 11.7.(d) of the Term Loan Agreement, the Borrowers and the Administrative Agent desire to amend the last sentence of Section 2.1.(a) of the Term Loan Agreement to correct the mistake and inconsistency and to reflect accurately the correct date. By signing a counterpart of this letter agreement, each of the Borrowers and the Administrative Agent agrees that, effective as of November 7, 2014, the Term Loan Agreement is amended by deleting the reference to “January 8, 2015”, in the last sentence of Section 2.1.(a) and substituting in its place a reference to “the Commitment Termination Date”.

Except as set forth above, all terms and conditions of the Term Loan Agreement and the other Loan Documents shall remain in full force and effect. Each Borrower acknowledges and agrees that except as set forth above, this letter agreement shall not be construed to be a waiver or amendment of any of the other terms and conditions of the Term Loan Agreement or any other Loan Documents.

Each Borrower further acknowledges that this letter agreement is a Loan Document and that each reference to the Term Loan Agreement in any of the Loan Documents (including the Term Loan Agreement) shall be deemed to be a reference to the Term Loan Agreement, as amended by this letter agreement.

Loan No. 1011175-0

This letter agreement may be executed in any number of counterparts (which may be effectively delivered by facsimile, in portable document format (“PDF”) or other similar electronic means) and shall be governed by, and construed in accordance with, the laws of the Commonwealth of Pennsylvania applicable to contracts executed, and to be fully performed, in such Commonwealth.

Very truly yours,
WELLS FARGO BANK, NATIONAL ASSOCIATION,
as Administrative Agent
By:	/s/ D. Bryan Gregory
	Name:	D. Bryan Gregory
	Title:	Director

Acknowledged and agreed this November 12, 2014
PREIT ASSOCIATES, L.P.
By: Pennsylvania Real Estate Investment Trust, its general partner
By:	/s/ Andrew M. Ioannou
	Name:	ANDREW M. IOANNOU
	Title:	SENIOR VICE PRESIDENT, CAPITAL MARKETS & TREASURER
PREIT-RUBIN, INC.
By:	/s/ Andrew M. Ioannou
	Name:	ANDREW M. IOANNOU
	Title:	SENIOR VICE PRESIDENT, CAPITAL MARKETS & TREASURER
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
By:	/s/ Andrew M. Ioannou
	Name:	ANDREW M. IOANNOU
	Title:	SENIOR VICE PRESIDENT, CAPITAL MARKETS & TREASURER

EX-10.27

Exhibit 10.27

SEPARATION OF EMPLOYMENT AGREEMENT

This SEPARATION OF EMPLOYMENT AGREEMENT (the “Agreement”) is made this 23rd day of December 2019, by and between PENNSYLVANIA REAL ESTATE INVESTMENT TRUST, a Pennsylvania business trust (“PREIT” or the “Company”), and PREIT SERVICES, LLC, a Pennsylvania limited liability company (“Services”) and ROBERT MCCADDEN (“Executive”). PREIT and Executive shall be referred to herein as the “Parties” or each separately as a “Party.”

WHEREAS, Executive is employed as Chief Financial Officer of PREIT pursuant to the Amended and Restated Employment Agreement between PREIT and Executive, effective as of December 30, 2008 together with the May 6, 2009 Amendment to the Agreement (collectively the “Employment Agreement”);

WHEREAS, on September 12, 2019, PREIT provided Executive with a notice of termination without cause that terminated Executive’s employment under the Employment Agreement effective as of December 31, 2019; and

WHEREAS, the Parties desire to set forth the terms and conditions related to the termination of their employment relationship.

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties, intending to be legally bound, agree as follows:

1. General Terms of Termination. Regardless of whether Executive signs this Agreement:

(a) Executive’s last day of employment shall be December 31, 2019 or such earlier date as the Parties agree to as the separation date (the “Separation Date”). Effective on the Separation Date, Executive hereby resigns from his position as Chief Financial Officer and all or any other positions with the Company, PREIT ASSOCIATES, LP., a Pennsylvania limited partnership (“Associates”), Services, PREIT-RUBIN, INC. (“PREIT-RUBIN”), and/or any of their direct or indirect parents, subsidiaries, related or affiliated companies (“Affiliates”), or with any other entity with respect to which Company has requested Executive to perform services. Upon request by Company, Executive shall execute all additional documents and take all additional actions necessary to effectuate or memorialize such resignations. The Parties agree that, on the Separation Date, Executive shall experience a separation from service as such term is described in Section 409A of the Internal Revenue Code, (the “Code”) and the Treasury regulations thereunder.

(b) Executive shall be paid for (i) all time worked up to and including the Separation Date, (ii) all paid time off days accrued but unused as of the Separation Date, and (iii) all otherwise unreimbursed business expenses incurred in accordance with Company’s regular policies prior to the Separation Date, in each case in the next regular payroll period following the Separation Date.

(c) The Company shall pay to Executive all amounts credited to Executive’s supplemental retirement plan account, as referenced in Section 3.7 of the Employment Agreement, and the Parties’ Nonqualified Supplemental Executive Retirement Agreement (as Amended and Restated Effective January 1, 2009) (“Retirement Agreement”) at the time(s) therein specified (taking into account the delay required by Treas. Reg. § 1.409A-3(i)(2) for a portion of those payments).

(d) Executive’s eligibility to participate in Company sponsored health, vision, and dental insurance as an employee of the Company shall end effective at the end of the month of Executive’s Separation Date. However, Executive shall be eligible to continue to participate in the Company’s sponsored benefit plans in accordance with the federal law called the Consolidated Omnibus Budget Reconciliation Act (“COBRA”), subject to COBRA’s terms, conditions and restrictions. However, if Executive signs this Agreement, the Company shall provide Executive with certain other health insurance benefits and shall pay Executive’s COBRA costs, as described below in Paragraph 2(c).

(e) Executive’s eligibility to participate in the Company’s other group insurance programs (for example, life, disability, and accidental death and dismemberment coverage) shall end effective on the Separation Date.

(f) Executive’s eligibility to make salary deferrals and to receive allocations of Company non-elective contributions shall end effective on the Separation Date. Executive is required to comply with Paragraphs 6 and 7 below.

(g) Executive acknowledges and agrees that he will not be entitled to any 2019 annual bonus.

2. If Executive Signs the Agreement. If Executive signs this Agreement, and as consideration for the termination of his employment:

(a) On the later of (i) the 8^th day after Executive signs this Agreement and the attached Release and Waiver of Claims, or (ii) January 15, 2020 (the “Payment Date”), Services will pay Executive two (2) times Executive’s current base salary discounted from the dates that the base salary would have been payable in accordance with the Company’s regular payroll practices, which amount the Parties agree is $991,425.

(b) On the Payment Date, Services will pay Executive two (2) times Executive’s average bonus amount, which will be equal to the average of the percentages of base salary paid to Executive as cash bonuses in the last three full calendar years (2016, 2017 and 2018) multiplied by Executive’s base salary on the Separation Date, and which the Parties agree is $993,196.

(c) On the Payment Date, Services will take steps to continue the Company’s group medical, vision and dental plans for Executive (as well as Executive’s spouse and eligible dependents, if applicable) for a period of eighteen (18) months following the Separation Date, at the Services’ expense if Executive timely and properly elects to continue Executive’s group medical, vision and dental benefits under applicable federal law (commonly referred to as

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“COBRA”). Employee will receive a separate notice concerning his rights to elect COBRA coverage at the address listed above. Services will pay on Executive’s behalf the monthly COBRA premium for the period of eighteen (18) months following Executive’s Separation Date (the “Continuation Period”). In the event the Services is unable to make such payments for any reason, the Services will make such monthly payments directly to Executive and Executive will be responsible for making such payments as necessary to maintain Executive’s COBRA continuation coverage. If required in order to avoid the adverse tax consequences of Section 105(h) of the Code, such payments will be treated as taxable income to Executive and Executive will receive an additional amount for any tax obligations Executive incurs as a result of such payments. Notwithstanding the foregoing, the Services’ payment of the monthly COBRA premium will cease immediately if the Services determines in its discretion that such payment would result in the Services being in violation of, or incurring any fine, penalty, or excise tax under, applicable law (including, without limitation, the Patient Protection and Affordable Care Act or guidance issued thereunder), in which case Services will make a monthly payment to Executive during the remainder of such COBRA Continuation Period of the amount(s) that it would have otherwise paid on Executive’s behalf under such plans, plus an additional amount to pay for the taxes Executive incurs on such payments. Following the Continuation Period, Executive’s continued participation in the Company’s group health, vision, and dental coverage pursuant to COBRA or otherwise, as applicable, shall be at Executive’s sole expense. In the event Services cannot provide such continuation coverage under such plans, programs and/or arrangements, either directly or through COBRA, at any time on or prior through the end of the Continuation Period, Services shall reimburse Executive for any premiums he pays to obtain equivalent coverage (or if equivalent coverage is not available, substantially equivalent or comparable coverage) through the end of the Continuation Period, provided that (i) the premiums paid are competitive with premiums that would be charged by other providers for equivalent coverage (or if equivalent coverage is not available, substantially equivalent or comparable coverage), and (ii) Executive submits proof of payment of such premiums no later than 120 days from the date he makes such payments.

(d) If Employee becomes employed prior to the end of the Continuation Period and receives comparable health benefits coverage, Services’ obligation to pay the COBRA premiums, as set forth above, will cease. Employee agrees that he will promptly notify the Company’s Human Resources if he becomes employed prior to the end of the Continuation Period and is receiving comparable health benefits so that the Company can take prompt steps to terminate Employee’s health coverage under COBRA.

(e) The Parties agree and confirm that as of the date of this Agreement, Executive holds 99,870 of time-based unvested shares of restricted shares in PREIT (“Restricted Shares”). All such Restricted Shares are hereby immediately forfeited to Company and, in exchange therefor, Services will pay Executive $537,300 (the “RS Payment”) on or prior to December 31, 2019; provided, however, that if Executive revokes or fails to timely execute the attached Release and Waiver of Claims, Executive will be obligated to repay the gross amount of the RS Payment to Services not later than January 31, 2020.

(f) The Parties agree and confirm that, as of the date of this Agreement, Executive holds 158,150 performance-vested restricted share units and 75,755 outperformance units issued by PREIT (collectively, the “RSUs”). All such RSUs are hereby immediately forfeited to Company and, in exchange therefor, the Services will pay Executive $830,700 on the Payment Date.

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(g) Executive will be granted ownership of his Company-issued iPhone and iPad, subject to Executive’s compliance with arrangements to remove all information belonging to the Company, Associates, Services, PREIT RUBIN, and the Affiliates, in the ordinary course.

(h) Services will pay the reasonable legal fees incurred by Executive in connection with the documentation of this Agreement promptly following his delivery of invoices evidencing those fees.

3. Employment Agreement. The Parties confirm that the post-employment restrictions and obligations placed on Executive in Section 6.3 of the Employment Agreement shall survive the termination of Executive’s employment with the Company and its Affiliates and Executive agrees that he shall continue to be bound by such terms after his separation to the extent that such terms are not inconsistent with this Agreement.

4. Release and Waiver of Claims. Attached hereto, as Exhibit A, is a copy of the Release and Waiver of Claims that Executive is required to sign on or within 21 days following the Separation Date and which Executive agrees he shall sign in exchange for the consideration set forth in Section 2 above.

5. References. Executive agrees that Executive shall direct any and all prospective employers seeking a reference to contact only the Company’s Chief Executive Officer.

6. Prohibition on Executive Using or Disclosing Certain Information. At no time shall Executive directly or indirectly use, publish, or otherwise disclose or divulge to any third party without the express authorization of the Company, any confidential information of the Company, Associates, Services, PREIT-RUBIN or the Affiliates, including, without limitation, trade secrets, private or confidential information, investment technology, programs, or products of the Company, Associates, Services, PREIT-RUBIN or the Affiliates, any information concerning, referring, or relating to customers, vendors, services, products, processes, client lists, client files, prospect lists, transaction lists, shareholder information, contract forms, marketing information, books, records, files, pricing policies, business plans, records, any technical or financial information or data, or other information. This also includes any business, financial, or personal information or data relating to the computers, files, e-mails, databases, or other information belonging to, maintained, received or prepared by any of the Company’s, Associates’, Services’, PREIT-RUBIN’s or the Affiliates’, officers, owners, or employees, no matter where such information is maintained or stored. After Executive’s Separation Date, Executive agrees that Executive shall not, directly or indirectly, access, retrieve, view, or use in any manner any of the Company’s, Associates’, Services’, PREIT-RUBIN’s or the Affiliates’ computers, databases, e-mail, files, or other Company, Associates, Services, PREIT-RUBIN or Affiliates information for any purpose. This restriction is subject to and limited by Executive’s retained rights in Paragraph 10 below.

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7. Company Property and Documents. Upon or immediately following the Separation Date, Executive must return to the Company’s Human Resources Department, retaining no copies, (i) all Company, Associates, Services, PREIT-RUBIN and Affiliates property (including, but not limited to, office, desk or file cabinet keys, Company identification/pass cards, Company-provided credit cards and Company equipment, such as computers and prints outs) and (ii) all Company, Associates, Services, PREIT-RUBIN and Affiliates documents (including, but not limited to, all hard copy, electronic and other files, forms, lists, charts, photographs, correspondence, computer records, programs, notes, memos, disks, DVDs, etc.) Executive also must download all electronically stored information (including but not limited to emails) related to the Company, Associates, Services, PREIT-RUBIN and/or the Affiliates from any personal computer and/or other storage devices or equipment or personal email accounts and return all downloaded material or otherwise electronically stored information and completely remove all such electronically stored information from the hard drive of such personal computer and/or all other storage devices or personal email accounts and certify, in writing, to the Company’s Human Resources Department that Executive has done so.

8. Confidentiality; Required Disclosure. Executive understands that Company, Associates, Services, PREIT-RUBIN and the Affiliates shall disclose the nature and terms of this Agreement in satisfaction of its disclosure requirements under applicable securities laws. In further consideration of the agreements of the Parties as set forth herein, neither Company nor Executive shall, prior to the date of such public disclosure by Company, communicate or disclose the terms of this Agreement to any persons with the exception of their attorneys, and accountants and/or tax advisors, or members of Executive’s immediate family, each of whom shall be informed of this confidentiality obligation and shall agree to be bound by its terms. This restriction is subject to and limited by the retained rights in Paragraph 10 below.

9. Non-Disparagement. Neither Company nor Executive shall disparage the professional or personal reputation or character of the other, including the disparagement by Executive of Associates, Services, PREIT-RUBIN and/or Affiliates and any of the Company’s Associates’, Services’ PREIT-RUBIN’s or Affiliates’ respective officers, trustees, partners, directors, managers, shareholders, employees, attorneys, other agents or representatives. Moreover, Executive shall not disparage or comment unfavorably upon the business properties, policies or prospects of Company, Associates, Services, PREIT-RUBIN or Affiliates. For purposes of the restriction applicable to Company, the restriction shall only apply to Company officers at or above the level of Senior Vice President and to Company trustees, in each case for only so long as such person is employed or engaged by the Company, it being understood that Company cannot control statements of other employees or of any former employee. Notwithstanding the foregoing, nothing in this Section shall be deemed to prohibit Company or Executive from providing truthful testimony in response to any valid subpoena or as otherwise ordered by a court or required applicable law. This restriction is subject to and limited by the retained rights in Paragraph 10 below.

10. Retained Rights. Nothing in this Agreement is intended to or shall be interpreted: (i) to restrict or otherwise interfere with your obligation to testify truthfully in any forum; or (ii) to restrict or otherwise interfere with your right and/or obligation to contact, cooperate with or provide information to any government agency or commission. Similarly, nothing in this Agreement is intended to or shall be interpreted to restrict (i) the obligation of any of the officers of Associates, Services, PREIT-RUBIN or Affiliates to testify truthfully or (ii) the right and/or obligation of the officers of Associates, Services, PREIT-RUBIN or Affiliates to provide information to a government agency or commission.

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11. Indemnification.

(a) Following the Separation Date, Company shall continue to indemnify, defend, and hold harmless, and provide advancement of expenses to Executive to the same extent he is indemnified or has the right to advancement of expenses as of the Separation Date, pursuant to the Company’s Trust Agreement, Bylaws, the Employment Agreement and any indemnification agreements with Executive in existence on the Separation Date.

(b) Following the Separation Date, Company shall continue to maintain directors’ and officers’ liability insurance, employment practices liability insurance and fiduciary liability insurance covering acts or omissions occurring on or prior to the Separation Date with respect to Executive on terms with respect to such coverage and in amounts no less favorable than those benefiting active Company executive officers.

12. Cooperation. Executive agrees to provide fair and reasonable cooperation in connection with transition matters and then going forward with such other matters as may reasonably require Executive’s assistance or input based on legal, regulatory, or accounting requirements or based on Executive’s personal knowledge of or involvement with particular matters during the course of his employment with Company. Company agrees to reimburse Executive for any reasonable and necessary expenses (not including attorneys’ fees) incurred in connection with such cooperation, subject to pre-approval by the Company, and to otherwise compensate Executive for such cooperation in accordance with Section 6.5 of the Employment Agreement. Company agrees to exercise its reasonable best efforts to schedule and limit the need for Executive’s cooperation hereunder so as to avoid any interference with Executive’s personal or other professional obligations.

13. Attorney Consultation. Executive hereby certifies that the Company has advised him to review this document with an attorney of his choosing, and that he has done so.

14. Notices. All notices hereunder shall be in writing and shall be sufficiently given if hand- delivered, sent by documented overnight delivery service or registered or certified mail, postage prepaid, return receipt requested, or by telegram, fax, or telecopy (confirmed by U.S. mail), receipt acknowledged, addressed as set forth below or to such other person and/or at such other address as may be furnished in writing by any Party hereto to the other. Any such notice shall be deemed to have been given as of the date received, in the case of personal delivery, or on the date shown on the receipt or confirmation therefor, in all other cases. Any and all service of process and any other notice in any action, suit, or proceeding shall be effective against any Party if given as provided in this Agreement; provided that nothing herein shall be deemed to affect the right of any Party to serve process in any other manner permitted by law.

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(a) If to Company or Services:

Pennsylvania Real Estate Investment Trust

2005 Market Street,

Suite 1000

Philadelphia, PA 19103

Fax: (215) 547-7311

Attention: Lisa M. Most

With a copy to:

Dilworth Paxson LLP

1500 Market Street

Suite 3500E

Philadelphia, PA 19103

Fax: (215) 575-7200

Attention: Marjorie M. Obod, Esquire

(b) If to Executive:

Robert F. McCadden

1344 Barton Drive

Fort Washington, PA 19034

15. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania and without the aid of any canon, custom or rule of law requiring construction against the draftsperson.

16. Successors. This Agreement shall be an obligation of and inure to the benefit of Executive and the Company and their respective successors.

17. Company Guarantee. The Company absolutely, unconditionally, irrevocably guarantees the full, complete and punctual performance and satisfaction of all of the obligations set forth in this Agreement, and the obligations set forth under this Agreement shall in no way be affected or impaired by reason of the voluntary or involuntary liquidation, dissolution, sale of all of substantially all of the assets, marshaling of assets and liabilities, receivership, insolvency, bankruptcy, assignment for the benefit of creditors, reorganization, arrangement or composition or readjustment of, or other proceeding affecting Executive or the Company.

18. No Admission of Liability. This Agreement is not and shall not be construed to be an admission of any violation of any federal, state or local statute or regulation or of any duty (contractual or otherwise) owed by any Party to another, and this Agreement is made voluntarily to provide an amicable conclusion of Executive’s employment with the Company, Associates, Services, PREIT-RUBIN and/or the Affiliates. This Agreement shall not be construed strictly for or against any of the Parties.

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19. Interpretation of Agreement. Nothing in this Agreement is intended to violate any law or shall be interpreted to violate any law. If any paragraph or part or subpart of any paragraph in this Agreement or the application thereof is construed to be overbroad and/or unenforceable, then the court making such determination shall have the authority to narrow the paragraph or part or subpart of the paragraph as necessary to make it enforceable and the paragraph or part or subpart of the paragraph shall then be enforceable in its/their narrowed form. Moreover, each paragraph or part or subpart of each paragraph in this Agreement is independent of and severable (separate) from each other. In the event that any paragraph or part or subpart of any paragraph in this Agreement is determined to be legally invalid or unenforceable by a court and is not modified by a court to be enforceable, the affected paragraph or part or subpart of such paragraph shall be stricken from the Agreement, and the remaining paragraphs or parts or subparts of such paragraphs of this Agreement shall remain in full, force and effect.

20. Acknowledgment. Executive acknowledges and agrees that, subsequent to the termination of Executive’s employment, Executive shall not be eligible for any payments from the Company, Associates, Services, PREIT-RUBIN or Affiliates, or any benefits paid by the Company, Associates, Services, PREIT-RUBIN or Affiliates, except as expressly set forth in this Agreement or the attached Release and Waiver of Claims.

21. Headings. The headings contained in this Agreement are for convenience of reference only and are not intended, and shall not be construed, to modify, define, limit, or expand the intent of the parties as expressed in this Agreement, and they shall not affect the meaning or interpretation of this Agreement.

22. Days. All references to a number of days throughout this Agreement refer to calendar days.

23. Entire Agreement. This Agreement and the Release and Waiver of Claims attached hereto, constitute the entire agreement of the Parties with respect to Executive’s termination of employment.

24. Amendments. Amendments and modifications to this Agreement shall not be effective unless they are in writing signed by Executive or a representative of Executive’s estate and a duly authorized representative of Company.

25. 409A Compliance. It is intended that this Agreement comply with the applicable provisions of Section 409A of the Code and the applicable Treasury regulations and related guidance with respect thereto. To the extent that any payment under this Agreement is deemed to be deferred compensation subject to the requirements of Section 409A of the Code, this Agreement shall be interpreted and administered in a manner that complies with Section 409A of the Code and this Agreement shall be amended so that such payments shall be made in accordance with the requirements of Section 409A of the Code to the extent necessary to avoid noncompliance therewith. In the event that the period during which Employee can execute or revoke the Release and Waiver of Claims can straddle two of Employee’s tax years, payment of severance compensation shall commence in such second tax year.

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26. Severability. If any term or provision of this Agreement is invalid, illegal or unenforceable in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other term or provision of this Agreement or invalidate or render unenforceable such term or provision in any other jurisdiction.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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IN WITNESS WHEREOF, and intending to be legally bound hereby, the Parties have executed the foregoing Agreement as of the date first written above.

WITNESS: /s/ Robert McCadden

ROBERT MCCADDEN
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
BY:	/s/ Lisa M. Most
Name:	Lisa M. Most
Title:	General Counsel & Secretary
PREIT SERVICES, LLC
BY:	/s/ Lisa M. Most
Name:	Lisa M. Most
Title:	SVP & General Counsel

[Signature Page for Separation of Employment Agreement]

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RELEASE AND WAIVER OF CLAIMS

This RELEASE AND WAIVER OF CLAIMS (“Release”) is entered into by ROBERT MCCADDEN (“Executive”) in connection with the termination of his employment relationship with PENNSYLVANIA REAL ESTATE INVESTMENT TRUST, a Pennsylvania business trust (“PREIT” or the “Company”).

1. Release of Claims. Executive, for and in consideration of the payments to him described in Section 2 of that certain Separation of Employment Agreement dated December 23, 2019 (the “Separation Agreement”) does hereby confirm the severance of his employment with the Company effective on December 31, 2019 (the “Separation Date”), and Executive does hereby remise, release, waive, and forever discharge the Company, PREIT ASSOCIATES, LP., a Pennsylvania limited partnership (“Associates”), PREIT Services, LLC (“Services”), PREIT-RUBIN, INC. (“PREIT-RUBIN”), and any of their direct or indirect parent, subsidiary, related or affiliated companies (“Affiliates”), and each of their respective current and former officers, trustees, partners, directors, managers, shareholders, employees, attorneys, and other agents, and all such entities’ and individuals’ respective successors and assigns, heirs, executors, administrators and representatives (hereinafter referred to collectively as the “Released Parties”) of and from any and all rights, obligations, promises, agreements, losses, controversies, claims, actions, causes of action, suits, debts, claims and demands, of any nature whatsoever, in law or in equity, whether known or unknown, asserted or unasserted, which Executive ever had, now has, or hereafter may have against any or all of the Released Parties relating to or arising out of Executive’s service as an officer, employee or manager of Company, Associates, Services, or any Affiliate, Executive’s employment and any other business relationships with Company, Associates, Services, or any Affiliate, the December 30, 2008 Employment Agreement, together with the May 6, 2009 Addendum between PREIT and Executive (the “Employment Agreement”), and/or Executive’s separation from employment with the Company, Associates, Services, or any Affiliate, except for obligations of the Company, Associates, Services, or any Affiliate, including payments, due to Executive under the Employment Agreement and/or the Separation Agreement but which have not been paid or completed on the date of this Release. This Release includes, but is not limited to, any such claims arising under any federal, state or local statutes, ordinances or common law principles governing employment relations or regulating terms and conditions of employment, including, without limitation, the National Labor Relations Act of 1947, the Civil Rights Acts of 1866, 1871, 1964, and 1991, the Equal Pay Act, the Age Discrimination in Employment Act of 1967, the Rehabilitation Act of 1973, the Bankruptcy Code, the Fair Credit Reporting Act, the Worker Adjustment and Retraining Notification Act, the Employee Retirement Income Security Act of 1974 (except as to vested benefits, which are expressly exempted from this release), the Americans with Disabilities Act of 1990, the Family and Medical Leave Act of 1993, the Health Insurance Portability and Accountability Act of 1996, the Sarbanes-Oxley Act of 2002, the Pennsylvania Human Relations Act, the Pennsylvania Wage Payment and Collection Law, the Philadelphia Fair Practices Ordinance, and any other employee-protective law of any jurisdiction that may apply to the employment relationship between Executive and the Company, Associates, Services, or any Affiliate, each as they may have been amended, as well as any claim for wrongful discharge, breach of contract or implied contact, breach of covenant of good faith and fair dealing, intentional or negligent infliction of emotional distress, negligence, misrepresentation, fraud, detrimental reliance, promissory estoppel, defamation, invasion of privacy, breach of laws governing safety in the workplace, loss of consortium, or tortious interference with business relations.

2. Exceptions to Release of Claims. Notwithstanding the foregoing, Executive does not release Company, Associates, Services, PREIT-RUBIN or any Affiliate, from any obligations that it may have, or any rights or claims that Executive may have, arising (i) under the Separation Agreement, (ii) from events occurring after the Separation Date or the date on which Executive executes this Release, whichever is later, (iii) with respect to any continuing obligations of the Company, Associates, Services, or any Affiliate or rights of the Executive under the Employment Agreement that survive the termination of his employment (including, without limitation, Executive’s rights under Sections 4.5(c) and 6.5 of the Employment Agreement), (iv) with respect to unemployment compensation benefits which Executive may seek after the Separation Date (and Company agrees that it shall not contest a claim by Executive for such unemployment compensation benefits), or (v) other claims which may not be waived by law.

3. Confidentiality. Executive agrees to maintain the confidentiality of this Release and shall not communicate or disclose its terms, except to his attorneys, accountants and/or tax advisors, or members of his immediate family, each of whom shall be informed of this confidentiality obligation and shall agree to be bound by its terms.

4. Indemnification. Executive shall indemnify and hold harmless Company, Associates, Services, PREIT-RUBIN and Affiliates from any and all claims, losses, damages, liabilities, costs and other expenses incurred by Associates, Services, PREIT-RUBIN or Affiliates resulting from a breach by Executive of this Release.

5. Review Period. By signing below, Executive certifies that he has had a period of not less than twenty-one (21) calendar days to review this Release prior to signing it. Executive has been permitted to use as much or as little of this twenty-one day period as he desires. Any negotiations between counsel for the Parties as to the terms hereof shall not restart this period.

6. Revocation Period. Even if Executive enters into this Release, he shall have a period of seven (7) calendar days thereafter in which he may revoke it. If he revokes it, this Release shall become null and void and have no legal effect and Executive shall not receive the severance payment described in this Release. In order to timely revoke this Release, Executive must deliver notice to the Company, to the attention of Lisa M. Most, by hand delivery or facsimile, such that Ms. Most receives such notice not later than 5:00 pm on the close of business on the seventh business day after Executive has signed this Release.

IN WITNESS WHEREOF, and intending to be legally bound, the undersigned has executed this Release and Waiver of Claims on the 31st day of Dec, 2019.

WITNESS:		/s/ Robert McCadden                                                                 (SEAL)
		ROBERT MCCADDEN

A-2

EX-10.51

Exhibit 10.51

Tenant: PREIT Associates, L.P. Premises: One Commerce Square, Suites 1000 & 1120

LEASE

THIS LEASE (“Lease”) is entered into as of December 3rd, 2018, between COMMERCE SQUARE PARTNERS - PHILADELPHIA PLAZA, L.P., a Delaware limited partnership (“Landlord”), and PREIT ASSOCIATES, L.P., a Delaware limited partnership (“Tenant”).

In consideration of the mutual covenants stated below, and intending to be legally bound, Landlord and Tenant covenant and agree as follows:

1. KEY DEFINED TERMS.

(a) “Abatement Period” means the period that begins on the Commencement Date and ends on the day immediately prior to the 15-month anniversary of the Commencement Date. Notwithstanding the foregoing, if the commencement Date is after September 15 but prior to November 1, 2019, then the Abatement Period shall be extended by the number of days occurring from and after the Commencement Date through October 31, 2019. For example, if the Commencement Date is October 30, 2019, then the Abatement Period shall be extended by an additional 2 days. During the Abatement Period, no Fixed Rent or Tenant’s Share of Operating Expenses is due or payable, but Tenant shall pay to Landlord: (i) utilities as set forth in Section 6; and (ii) use and occupancy taxes.

(b) “Additional Rent” means all costs and expenses other than Fixed Rent that Tenant is obligated to pay Landlord pursuant to this Lease.

(c) “Broker” means Stockton Real Estate Advisors.

(d) “Building” means the building known as One Commerce Square located at 2005 Market Street, Philadelphia, Pennsylvania 19103, containing approximately 942,866 rentable square feet. Landlord hereby represents that the usable square footage of the Building and Premises has been determined pursuant to guidelines generally established by the Standard Method for Measuring Floor Area in Office Buildings (ANSI/BOMA Z65.1 - 1996) (“BOMA”).

(e) “Business Hours” means the hours of 8:00 a.m. to 6:00 p.m. on weekdays, and 9:00 a.m. to 1:00 p.m. on Saturdays, excluding Building holidays. The current Building holidays are: New Year’s Day, Memorial Day, Independence Day, Labor Day, Thanksgiving Day, and Christmas Day; any change in Building holidays shall be consistent to other national holidays for which first class buildings in the Philadelphia, Pennsylvania area also closed for business.

(f) “Commencement Date” means the date that is the earlier of: (i) the date on which Tenant first conducts business from all or any portion of the Premises, specifically excluding Tenant’s move-in to the Premises; or (ii) the later of Substantial Completion (as defined in Exhibit C) of the Leasehold Improvements (as defined in Exhibit C) and delivery of the Premises to Tenant, or September 1, 2019.

(g) “Common Areas” means, to the extent they exist at the Project, the lobby, parking facilities, passenger and freight elevators, rooftop terrace, fitness or health center, plaza and sidewalk areas, multi-tenanted floor restrooms, and other similar areas of unrestricted access at the Project or designated for the benefit of Building tenants, and the areas on multi-tenant floors in the Building devoted to corridors, elevator lobbies, and other similar facilities serving the Premises.

(h) “Expiration Date” means the last day of the Term, or such earlier date of termination of this Lease pursuant to the terms hereof.

Office Lease

(i) “Fixed Rent” means fixed rent in the amounts set forth below:

	FIXED RENT PER	ANNUALIZED	MONTHLY
TIME PERIOD	R.S.F.	FIXED RENT	INSTALLMENT
Commencement Date – end of Abatement Period	$0.00	$0.00	$0.00
Fixed Rent Start Date – end of Rent Period 1	$17.00	$748,969.00	$62,414.08
Rent Period 2	$17.43	$767,913.51	$63,992.79
Rent Period 3	$17.87	$787,298.59	$65,608.22
Rent Period 4	$18.32	$807,124.24	$67,260.35
Rent Period 5	$18.78	$827,390.46	$68,949.21
Rent Period 6	$19.25	$848,097.25	$70,674.77
Rent Period 7	$19.73	$869,244.61	$72,437.05
Rent Period 8	$20.22	$890,832.54	$74,236.05
Rent Period 9	$20.73	$913,301.61	$76,108.47
Rent Period 10	$21.25	$936,211.25	$78,017.60
Rent Period 11	$21.78	$959,561.46	$79,963.46
Rent Period 12 – End of Initial Term	$22.32	$983,352.24	$81,946.02

(j) “Fixed Rent Start Date” means the day immediately following the end of the Abatement Period.

(k) “Initial Term” means the period commencing on the Commencement Date, and ending at 11:59 p.m. on: (i) if the Fixed Rent Start Date is the first day of a calendar month, the day immediately prior to the 135-month anniversary of the Fixed Rent Start Date; or (ii) if the Fixed Rent Start Date is not the first day of a calendar month, the last day of the calendar month containing the 135-month anniversary of the Fixed Rent Start Date.

(1) “Laws” means federal, state, county, and local governmental and municipal laws, statutes, ordinances, rules, regulations, codes, decrees, orders, and other such requirements, and decisions by courts in cases where such decisions are considered binding precedents in the state or commonwealth in which the Premises are located (“State”), and decisions of federal courts applying the laws of the State, including without limitation Title III of the Americans with Disabilities Act of 1990, 42 U.S.C. §12181 et seq. and its regulations.

(m) “Premises” means the space on the 10^th and 11^th floors of the Building which is deemed to contain 44,057 rentable square feet in the aggregate, and comprised of: (i) the space presently known as Suite 1000, as shown on Exhibit A attached hereto, which is deemed to contain 29,233 rentable square feet (“Suite 1000”); and (ii) the space presently known as Suite 1120, as shown on Exhibit A attached hereto, which is deemed to contain 14,824 rentable square feet (“Suite 1120”). Landlord hereby represents that the rentable square footage of the Premises has been determined pursuant to BOMA.

(n) “Project” means the Building, together with the parcel of land owned by Landlord upon which the Building is located, and all Common Areas.

(o) “Rent” means Fixed Rent and Additional Rent. Landlord may apply payments received from Tenant to any obligations of Tenant then due and owing without regard to any contrary Tenant instructions or requests. Additional Rent shall be paid by Tenant in the same manner as Fixed Rent, without setoff, deduction, or counterclaim, except as otherwise expressly set forth herein.

(p) “Rent Period” means, with respect to the first Rent Period, the period that begins on the Fixed Rent Start Date and ends on the last day of the calendar month preceding the month in which the first anniversary of the Fixed Rent Start Date occurs; thereafter each succeeding Rent Period shall commence on the day following the end of the preceding Rent Period, and shall extend for 12 consecutive months.

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(q) “Tenant’s NAICS Code” means Tenant’s 6-digit North American Industry Classification number under the North American Industry Classification System as promulgated by the Executive Office of the President, Office of Management and Budget, which is 531120.

(r) “Term” means the Initial Term together with any extension of the term of this Lease agreed to by the parties in writing.

2. PREMISES. Landlord leases to Tenant, and Tenant leases from Landlord, the Premises for the Term subject to the terms and conditions of this Lease. Tenant accepts the Premises in their “AS IS”, “WHERE IS”, “WITH ALL FAULTS” condition, except that Landlord shall complete the Leasehold Improvements pursuant to Exhibit C attached hereto, and subject to any representations and warranties made by Landlord herein, and further subject to Landlord’s continuing obligations under this Lease.

3. TERM.

(a) The Term shall commence on the Commencement Date. The terms and provisions of this Lease are binding on the parties upon Tenant’s and Landlord’s execution of this Lease notwithstanding a later Commencement Date for the Term. The rentable area of the Premises and the Building on the Commencement Date shall be deemed to be as stated in Section 1. By execution and delivery of a Confirmation of Lease Term substantially in the form of Exhibit B attached hereto (“COLT”), Landlord and Tenant shall confirm the Commencement Date, rentable square footage of the Premises and all other matters stated therein. If Tenant fails to respond to a proposed COLT within 10 business days after Tenant’s receipt of such request, Landlord may thereafter send to Tenant a second proposed COLT, which includes in bold and 14-point capitalized type the following statement: “SECOND AND FINAL REQUEST—TENANT HAS 10 BUSINESS DAYS TO RESPOND PURSUANT TO SECTION 3 OF THE LEASE”. If Tenant then fails to respond to such second proposed COLT within 10 business days after receipt thereof, Tenant shall be deemed to have approved all matters set forth therein, which shall then be conclusive and binding on Tenant.

(b) Landlord shall use commercially reasonable efforts to obtain Substantial Completion by September 1, 2019. If Substantial Completion does not occur on or before the Outside Completion Date and provided there is no Event of Default, then notwithstanding anything to the contrary herein from and after the Fixed Rent Start Date, Tenant shall receive 2.5 days’ abatement of Fixed Rent (in addition to the Abatement Period) for each day that elapses after the Outside Completion Date until Substantial Completion occurs. The “Outside Completion Date” means November 1, 2019; provided, however, the Outside Completion Date shall be pushed back on a day-for-day basis for each day (if any) that (i) Substantial Completion is delayed due to a Force Majeure Event (as defined in Section 25(g)); and (ii) elapses after March 1, 2019 until Tenant submits Proposed CD’s (as defined in Exhibit C) for Landlord’s approval in accordance with Section 1 of Exhibit C. The rental abatement set forth in this paragraph shall be Tenant’s sole and exclusive remedy in connection with any delay in Substantial Completion, and Landlord shall not be liable for any other direct, indirect, special, consequential, or other damages suffered by Tenant as a result of any such delay.

4. FIXED RENT: LATE FEE.

(a) Tenant covenants and agrees to pay to Landlord during the Term, without notice, demand, setoff, deduction, or counterclaim except as otherwise set forth in this Lease, Fixed Rent in the amounts set forth in Section 1. The Monthly Installment of Fixed Rent, the monthly amount of Estimated Operating Expenses as set forth in Section 5, and any estimated amount of utilities as set forth in Section 6, shall be payable to Landlord in advance on or before the first day of each month of the Term. If the Fixed Rent Start Date is not the first day of a calendar month, then the Fixed Rent due for the partial month commencing on the Fixed Rent Start Date shall be prorated based on the number of days in such month. All Rent payments shall be made by electronic funds transfer as follows (or as otherwise directed in writing by Landlord to Tenant from time to time): (i) ACH debit of funds, provided Tenant shall first complete Landlord’s then-current forms authorizing Landlord to automatically debit Tenant’s bank account; or (ii) ACH credit of immediately available funds to an account designated by Landlord. “ACH” means Automated Clearing House network or similar system designated by Landlord. All Rent payments shall include the Building number and the Lease number, which numbers will be provided to Tenant in the COLT.

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(b) If Landlord does not receive the full payment from Tenant of any Rent when due under this Lease (without regard to any notice and/or cure period to which Tenant might be entitled), Tenant shall also pay to Landlord as Additional Rent a late fee in the amount of 5% of such overdue amount. Notwithstanding the foregoing, Landlord shall waive the above-referenced late fee 2 times during any 12 consecutive months of the Term provided Tenant makes the required payment within 3 business days after receipt of notice of such late payment. With respect to any Rent payment (whether it be by check, ACH/wire, or other method) that is returned unpaid for any reason, Landlord shall have the right to assess a reasonable fee to Tenant as Additional Rent, which fee is currently $40.00 per returned payment.

5. OPERATING EXPENSES.

(a) Certain Definitions.

(i) “Janitorial Expenses” means all costs associated with trash and garbage removal, recycling, cleaning, and sanitizing the Building, and the items of work set forth in Exhibit D attached hereto.

(ii) “Operating Expenses” means collectively Project Expenses and Taxes.

(iii) “Project Expenses” means all costs and expenses paid, incurred, or accrued by Landlord in connection with the maintenance, operation, repair, and replacement of the Project including, without limitation: a management fee not to exceed 3% of gross rents and revenues from the Project; all costs associated with the removal of snow and ice from the Project; property management office rent; costs for “touchdown space” for tenants of Landlord and Landlord’s affiliates; conference room and fitness center costs; security measures; Janitorial Expenses; Project Utility Costs (as defined in Section 6 below); capital expenditures, repairs, and replacements, necessary to comply with new or changes in applicable Laws effective after the Commencement Date or when made with the reasonable expectation of reducing other Project Expenses (but only to the extent of the actual reduction), and then only to the extent of the amortized costs of such capital item over the useful life of the improvement as reasonably determined by Landlord; valet, concierge, and card-access parking system costs; all insurance premiums and deductibles paid or payable by Landlord with respect to the Project; and the cost of providing those services required to be furnished by Landlord under this Lease. Notwithstanding the foregoing, “Project Expenses” shall not include any of the following: (A) repairs or other work occasioned by fire, windstorm, or other insured casualty or by the exercise of the right of eminent domain to the extent Landlord actually receives insurance proceeds or condemnation awards therefor; (B) leasing commissions, accountants’, consultants’, auditors or attorneys’ fees, costs and disbursements and other expenses incurred in connection with negotiations or disputes with other tenants or prospective tenants or other occupants, or associated with the enforcement of any other leases or the defense of Landlord’s title to or interest in the real property or any part thereof; (C) costs incurred by Landlord in connection with the original construction of the Building and related facilities; (D) costs (including permit, licenses and inspection fees) incurred in renovating or otherwise improving or decorating, painting, or redecorating leased space for other tenants or other occupants or vacant space; (E) interest on debt or amortization payments on any mortgage or deeds of trust or any other borrowings and any ground rent; (F) any compensation paid to clerks, attendants or other persons in commercial concessions operated by Landlord; (G) any fines or fees for Landlord’s failure to comply with Laws; (H) legal, accounting, and other expenses related to Landlord’s financing, refinancing, mortgaging, or selling the Building or the Project; (I) any increase in an insurance premium caused by the non-general office use, occupancy or act of another tenant or occupant; (J) costs for sculpture, decorations, painting or other objects of art in excess of amounts typically spent for such items in office buildings of comparable quality in the competitive area of the Building; (K) cost of any political, charitable, or civic contribution or donation; (L) reserves for repairs, maintenance, and replacements; (M) Taxes; (N) cost of utilities directly metered or submetered to Building tenants or other occupants and paid separately by such tenants or occupants; (O) fines, interest, penalties, or liens arising by reason of Landlord’s failure to pay any Project Expenses when due, except that Project Expenses shall include interest or similar charges if the collecting authority permits such Project Expenses to be paid in installments with interest thereon, such payments are not considered overdue by such authority and Landlord pays the Project Expenses in such installments; (P) costs and expenses associated with hazardous waste or hazardous substances including but not limited to the cleanup of such hazardous waste or hazardous substances and the costs of any litigation (including, but not limited to reasonable attorneys’ fees) arising out of the discovery of such hazardous waste or hazardous substances; (Q) any

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wages, salaries, fees, or fringe benefits paid to personnel above the level of regional property manager, provided the costs attributable to the regional property manager shall be allocated to all buildings under such manager’s supervision with such allocation based on the square footage of such buildings; (R) costs of extraordinary services provided to other tenants or occupants of the Building or services to which Tenant is not entitled (including, without limitation, costs specially billed to and paid by specific tenants or occupants); (S) all costs relating to activities for the solicitation and execution of leases of space in the Building, including legal fees, real estate brokers’ commissions, expenses, fees, and advertising, moving expenses, design fees, rental concessions, rental credits, tenant improvement allowances, lease assumptions or any other cost and expenses incurred in the connection with the leasing of any space in the Building; (T) costs representing an amount paid to an affiliate of Landlord (exclusive of any management fee permitted under the Operating Expense inclusions (including the limitation set forth herein)) to the extent in excess of market rates for comparable services if rendered by unrelated third parties; (U) costs arising from Landlord’s default under this Lease or any other lease for space in the Building; (V) costs of selling the Project or any portion thereof or interest therein, including, without limitation any realty transfer taxes resulting from such sale; (W) costs or expenses arising from the gross negligence of Landlord or its agents or employees; (X) costs incurred to remedy, repair, or otherwise correct violations of Laws that exist on the Commencement Date or, with respect to new or changes in applicable Laws effective after the Commencement Date, violation of those Laws after first becoming in compliance with such Laws; (Y) the depreciation of the Building and other real property structures in the Project, if any; (Z) legal, accounting, auditing and other related expenses associated with the negotiation and enforcement of leases or the defense of Landlord’s title to the Building or other portions of the Project; (AA) Landlord’s general corporate overhead and general administrative expenses not directly related to the operation of the Project; (BB) cost of payroll for clerks and attendants, bookkeeping, garage keepers’ liability insurance, parking management fees, tickets and uniforms directly incurred in operating the parking facilities; (CC) costs or expenses incurred by Landlord for use of any portions of the Building to accommodate events including, but not limited to shows, promotions, kiosks, displays, filming, photography, private events or parties, ceremonies, and advertising beyond the normal expenses otherwise attributable to providing Building services, such as lighting and HVAC to such public portions of the Building in normal Building operations during standard Building hours of operation, and for the avoidance of doubt, Project Expenses shall not include any expenses related to “Center City Sips” or similar events; (DD) any bad debt loss, rent loss or reserves for bad debts or rent loss; (EE) any costs that duplicate costs for which Landlord is reimbursed by any other party other than through Project Expenses; (FF) any costs or expenses which are of a type or nature not permitted to be included in operating expenses under sound accounting practices applicable generally to Class A office buildings in Philadelphia; (GG) any recalculation of or additional Project Expenses actually incurred more than two (2) years prior to the year in which Landlord proposes that such costs be included; (HH) costs actually reimbursed (or, if Landlord does not carry insurance that Landlord is required pursuant to this Lease to carry, then such costs as would have been reimbursed) through insurance proceeds to repair or replace damage by fire or other casualty, including specifically, Without limitation, any deductible under any insurance policy in excess of the maximum deductible permitted in this Lease, as well as any other costs for which Landlord is actually reimbursed by any vendors or other third parties; (II) costs actually reimbursed through condemnation proceeds to repair, replace or rebuild the Building after a condemnation of any portion thereof; (JJ) expenditures for capital improvements or replacements, or other capital expenditures, except as expressly permitted above in this subsection (iii); (KK) advertising costs relating to marketing the Building; (LL) costs for overtime HVAC to tenants or other occupants, it being intended that the costs of all overtime HVAC shall be billed (if not otherwise paid directly to the utility provider) to the tenants and occupants separately based on their respective usages; (MM) rentals for items which if purchased, rather than rented, would constitute a capital item except to the extent a capital expense is permitted above; (NN) costs, including permit, license and inspection costs, incurred with respect to the installation of any individual tenant’s or other occupant’s improvements in the Building or incurred in renovating or otherwise improving, decorating, painting or redecorating vacant space for any individual tenant or other occupant of the Building; (00) tax penalties incurred as a result of Landlord’s failure to make payments and/or to file any tax or informational returns when due; (PP) costs arising from Landlord’s charitable or political contributions whether in cash or in-kind; (QQ) costs for the acquisition of (as contrasted with the maintenance of) sculpture, paintings or other objects of art in excess of amounts typically spent for such items in office buildings of comparable quality in the competitive area of the Building; (RR) costs associated with the operation of the business of the partnership or entity which constitutes Landlord as the same are distinguished from the costs of operation of the Project, including partnership accounting and legal matters, costs of defending any lawsuits with or claims by any mortgagee, costs of selling, syndicating, financing, mortgaging or hypothecating any of Landlord’s interest in the Project, costs of any disputes between Landlord and its employees not engaged in Project operation, costs of disputes between Landlord and the building manager, or fees, damages, settlements or other amounts paid in connection with, or other amounts paid in connection with disputes with other tenants or occupants;

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(SS) any entertainment, dining or travel expenses for any purpose not related to property management; (TT) other than in connection with customary tenant appreciation events, any flowers, balloons or other gifts provided to any entity whatsoever, including, but not limited to, Tenant, other tenants, occupants, employees, vendors, contractors, prospective tenants and agents; (UU) costs of installing, operating and maintaining any specialty improvement that is not available to Tenant as a Building amenity, such as a cafeteria, fitness facility (except as expressly provided in this Section), child care facility or the like; (W) all costs for materials, utilities, goods, services or other benefits furnished by Landlord which are required to be directly paid for by Tenant or other tenants or occupants to Landlord or the service provider, or for which Tenant or other tenants or occupants contract directly with the service provider, including, without limitation, electricity costs which are paid directly by Tenant or other tenants or occupants to the provider of electric power; and any taxes, charges, assessments or other costs relating to such costs; (WW) any and all costs for the repair or replacement of any items under warranty from third parties (to the extent of the warranty coverage), including, without limitation, any defects in the original construction of the Building or Premises, or any costs of Landlord’s performance of any construction warranty to Tenant or any other Building tenant or occupant; and (XX) any and all other expenses for which Landlord is reimbursed (other than pursuant to a general operating costs pass through); and Landlord shall exercise all commercially reasonable remedies to obtain reimbursement of all amounts to which it is entitled from any and all third parties. Landlord shall not collect or be entitled to collect Project Expenses from all of its tenants and other occupants in an amount in excess of 100% of the Project Expenses actually incurred by Landlord.

(iv) “Taxes” means all taxes, assessments, and other governmental charges, whether general or special, ordinary or extraordinary, foreseen or unforeseen, including without limitation business improvement district charges, improvement contributions paid to business improvement districts or similar organizations, gross receipts tax for the Building, and special assessments for public improvements or traffic districts, that are levied or assessed against, or with respect to the ownership of, all or any portion of the Project during the Term or, if levied or assessed prior to the Term, are properly allocable to the Term, business property operating license charges, and real estate tax appeal expenditures incurred by Landlord, provided such tax appeal expenditures shall not exceed the savings realized from the tax appeal or be included in Taxes payable by Tenant with respect to any Tax year not included in the Term. “Taxes” shall not include: (i) any inheritance, estate, succession, transfer, gift, franchise, corporation, income or profit tax or capital levy that is or may be imposed upon Landlord; or (ii) any transfer tax or recording charge resulting from a transfer of the Building or the Project; provided, however, if at any time during the Term the method of taxation prevailing at the commencement of the Term shall be altered such that in lieu of or as a substitute in whole or in part for any Taxes now levied, assessed, or imposed on real estate there shall be levied, assessed, or imposed: (A) a tax on the rents received from such real estate; or (B) a license fee measured by the rents receivable by Landlord from the Premises or any portion thereof; or (C) a tax or license fee imposed upon the Premises or any portion thereof, then the same shall be included in Taxes. Tenant may not file or participate in any Tax appeals for any tax lot in the Project. Further, “Taxes” shall not include any sales, use, use and occupancy, transaction privilege, or other excise tax that may at any time be levied or imposed upon Tenant, or measured by any amount payable by Tenant under this Lease, whether such tax exists on the date of this Lease or is adopted hereafter (collectively, “Other Taxes”). Tenant shall pay all Other Taxes monthly or otherwise when due, whether collected by Landlord or collected directly by the applicable governmental agency; if applicable Law requires Landlord to collect any Other Taxes, such Other Taxes shall be payable to Landlord as Additional Rent.

(v) “Tenant’s Share” means the rentable square footage of the Premises divided by the rentable square footage of the Building on the date of calculation, which on the date of this Lease is stipulated to be 4.67%.

(b) Commencing on the Fixed Rent Start Date and continuing thereafter during the Term, Tenant shall pay to Landlord in advance on a monthly basis, payable pursuant to Section 5(c) below, Tenant’s Share of Operating Expenses. If the Building is operated as part of a complex of buildings or in conjunction with other buildings or parcels of land, then Landlord may prorate the common expenses and costs with respect to each such building or parcel of land in such manner as Landlord, in its sole but reasonable judgment, shall determine. Landlord shall calculate Operating Expenses using generally accepted accounting principles, and may allocate certain categories of Operating Expenses to the applicable tenants on a commercially reasonable basis.

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(c) For each calendar year (or portion thereof) for which Tenant has an obligation to pay any Operating Expenses, Landlord shall send to Tenant a statement of the monthly amount of projected Operating Expenses due from Tenant for such calendar year (“Estimated Operating Expenses”), and Tenant shall pay to Landlord such monthly amount of Estimated Operating Expenses as provided in Section 5(b). without further notice, demand, setoff, deduction, or counterclaim. As soon as administratively available after each calendar year, Landlord shall send to Tenant a reconciliation statement of the actual Operating Expenses for the prior calendar year (“Reconciliation Statement”). Landlord shall use commercially reasonable efforts to provide Tenant with a Reconciliation Statement with 4 months after the end of each applicable calendar year; provided, however, if Landlord does not provide such statements within such period, Landlord shall not have been deemed to waive its right to collect any amounts as Additional Rent unless Landlord fails to provide such statement within 12 months after the end of the applicable calendar year. If the amount actually paid by Tenant as Estimated Operating Expenses exceeds the amount due per the Reconciliation Statement, Tenant shall receive a credit in an amount equal to the overpayment, which credit shall be applied towards future Rent until fully credited. If the credit exceeds the aggregate future Rent owed by Tenant, and there is no Event of Default, Landlord shall pay the excess amount to Tenant within 60 days after delivery of the Reconciliation Statement. If Landlord has undercharged Tenant, then Landlord shall either send Tenant an invoice setting forth the additional amount due or indicate the amount due as part of the Reconciliation Statement, which amount shall be paid in full by Tenant within 60 days after receipt of such invoice.

(d) If, during the Term, less than 95% of the rentable area of the Building is or was occupied by tenants, Project Expenses shall be deemed for such year to be an amount equal to the costs that would have been incurred had the occupancy of the Building been 95% throughout such year, as reasonably determined by Landlord and taking into account that certain expenses fluctuate with the Building’s occupancy level (e.g., Janitorial Expenses) and certain expenses do not so fluctuate (e.g., landscaping). In addition, if Landlord is not obligated or otherwise does not offer to furnish an item or a service to a particular tenant or portion of the Building (e.g., if a tenant separately contracts with an office cleaning firm to clean such tenant’s premises) and the cost of such item or service would otherwise be included in Project Expenses, Landlord shall equitably adjust the Project Expenses so the cost of the item or service is shared only by tenants actually receiving such item or service. All payment calculations under this Section shall be prorated for any partial calendar years during the Term and all calculations shall be based upon Project Expenses as grossed-up in accordance with the terms of this Lease. Tenant’s obligations under this Section shall survive the Expiration Date.

(e) If Landlord or any affiliate of Landlord has elected to qualify as a real estate investment trust (“REIT”), any service required or permitted to be performed by Landlord pursuant to this Lease, the charge or cost of which may be treated as impermissible tenant service income under the laws governing a REIT, may be performed by an independent contractor of Landlord, Landlord’s property manager, or a taxable REIT subsidiary that is affiliated with either Landlord or Landlord’s property manager (each, a “Service Provider”). If Tenant is subject to a charge under this Lease for any such service, then at Landlord’s direction Tenant shall pay the charge for such service either to Landlord for further payment to the Service Provider or directly to the Service Provider and, in either case: (a) Landlord shall credit such payment against any charge for such service made by Landlord to Tenant under this Lease; and (b) Tenant’s payment of the Service Provider shall not relieve Landlord from any obligation under this Lease concerning the provisions of such services.

(f) Landlord shall maintain in a safe and orderly manner all of its records pertaining to the Operating Expenses payable pursuant to this Lease in accordance with generally accepted accounting principles. Provided there is no outstanding uncured monetary default by Tenant under this Lease, Tenant shall have the right, at its sole cost and expense, to cause Landlord’s records related to a Reconciliation Statement to be audited provided: (i) Tenant provides notice of its intent to audit such Reconciliation Statement within 6 months after receipt of the Reconciliation Statement; (ii) the audit is performed by a certified public accountant that has not been retained on a contingency basis or other basis where its compensation relates to the cost savings of Tenant; (iii) any such audit may not occur more frequently than once during each 12-month period of the Term, nor apply to any year prior to the year of the then-current Reconciliation Statement being reviewed; (iv) the audit is completed within three (3) months after the date that Landlord makes all of the necessary and applicable records available to Tenant or Tenant’s auditor; (v) the contents of Landlord’s records shall be kept confidential by Tenant, its auditor, and its other professional advisors, other than as required by applicable Law or as required to enforce the terms of this Lease, and if requested by Landlord, Tenant and its auditor shall execute Landlord’s standard confidentiality agreement in form reasonably acceptable to Tenant as a condition to Tenant’s audit rights under this paragraph; and (vi) if Tenant’s auditor determines that an overpayment is due Tenant, Tenant’s auditor shall produce a detailed report addressed to both Landlord and Tenant, which report shall be delivered within 30 days after Tenant’s auditor’s completion of the audit. During completion of

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Tenant’s audit, Tenant shall nonetheless timely pay all of Tenant’s Share of Operating Expenses without setoff or deduction (except as expressly provided by this Lease). If Tenant’s audit report discloses any discrepancy, Landlord and Tenant shall use good faith efforts to resolve the dispute. If the parties are unable to reach agreement within 30 days after Landlord’s receipt of the audit report, Tenant shall have the right to refer the matter to a mutually acceptable independent certified public accountant (such approval by either party not to be unreasonably withheld, conditioned or delayed), who shall work in good faith with Landlord and Tenant to resolve the discrepancy; provided if Tenant does not do so within such 30-day period (which period shall be extended on a day-for-day basis for each day Landlord fails to approve Tenant’s reasonable selection of an accountant), Landlord’s calculations and the Reconciliation Statement at issue shall be deemed final and accepted by Tenant. The fees and costs of such independent accountant to which such dispute is referred shall be borne by the unsuccessful party and shall be shared pro rata to the extent each party is unsuccessful as determined by such independent certified public accountant, whose decision shall be final and binding. Within 60 days after resolution of the dispute, whether by agreement of the parties or a final decision of an independent accountant, Landlord shall pay or credit to Tenant, or Tenant shall pay to Landlord, as the case may be, all unpaid Operating Expenses due and owing.

6. UTILITIES.

(a) Commencing on the Commencement Date, and continuing throughout the Term, Tenant shall pay for utility services as follows without setoff, deduction, or counterclaim (except as otherwise set forth herein): (i) Tenant shall pay directly to the applicable utility service provider for any utilities that are separately metered (not submetered) to the Premises; (ii) Tenant shall pay Landlord for any utilities serving the Premises that are separately submetered based upon Tenant’s submetered usage without markup (Landlord shall be responsible for any maintenance and replacement costs associated with such submeters; the costs of which may be included in Operating Expenses); and (iii) Tenant shall pay Landlord for Tenant’s Share of Project Utility Costs, as set forth in Section 5 above. “Project Utility Costs” means the total cost for all utilities serving the Project, excluding the costs of utilities that are directly metered or submetered to Building tenants or paid separately by such tenants. Notwithstanding anythingto the contrary in this Lease, Landlord shall have the right to install meters, submeters, or other energy-reducing systems in the Premises at any time to measure any or all utilities serving the Premises, the costs of which shall be included in Project Expenses. For those utilities set forth in subsection (i) above, Tenant shall pay the applicable utility provider directly for such utilities. For those utilities set forth in subsection (ii) above, Landlord shall invoice Tenant for such utilities as Additional Rent (payable within 20 days after receipt of an invoice therefor). For those utilities set forth in subsection (iii) above, Landlord shall have the right to either invoice Tenant for such utilities as Additional Rent (payable within 20 days after receipt of an invoice therefor), or together with Operating Expenses. Landlord shall have the right to reasonably estimate the utility charge, which estimated amount shall be payable to Landlord within 60 days after receipt of an invoice therefor and may be included along with the invoice for Project Expenses, provided Landlord shall be required to reconcile on an annual basis based on utility invoices received for such period. The cost of utilities payable by Tenant under this Section shall include all applicable taxes and Landlord’s then-current charges for reading the applicable meters, provided Landlord shall have the right to engage a third party to read the submeters, and Tenant shall reimburse Landlord for both the utilities consumed as evidenced by the meters plus the costs for reading the meters within 60 days after receipt of an invoice therefor. Tenant shall pay such rates as Landlord may establish from time to time, which shall not be in excess of any applicable rates chargeable by Law, or in excess of the general service rate or other such rate that would apply to Tenant’s consumption if charged by the utility or municipality serving the Building or general area in which the Building is located. If Tenant fails to pay timely any direct-metered utility charges from the applicable utility provider, Landlord shall have the right but not the obligation to pay such charges on Tenant’s behalf and bill Tenant for such costs plus the Administrative Fee (as defined in Section 17). which amount shall be payable to Landlord as Additional Rent within 60 days after receipt of an invoice therefor. Tenant shall at all times comply with the rules, regulations, terms, policies, and conditions applicable to the service, equipment, wiring, and requirements of the utility supplying electricity to the Building.

(b) For any separately metered utilities, Landlord is hereby authorized to request and obtain, on behalf of Tenant, Tenant’s utility consumption data from the applicable utility provider for informational purposes and to enable Landlord to obtain full building Energy Star scoring for the Building. Landlord shall have the right to shut down the Building systems (including electricity and HVAC systems) for required maintenance, safety inspections, or any other reason, including without limitation in cases of emergency. Landlord shall provide Tenant, whenever reasonably practicable, advanced notice of any service slowdowns, interruptions or stoppages and, to the extent any equipment being maintained, repaired, replaced or improved is located within the Premises, shall use its

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commercially reasonable efforts (subject to union and governmental requirements) to schedule such work outside of Business Hours, except in the case of emergencies. Landlord shall not be liable for any interruption in providing any utility that Landlord is obligated to provide under this Lease, unless such interruption or delay: (i) renders the Premises or any material portion thereof untenantable for the normal conduct of Tenant’s business at the Premises and Tenant has ceased using such untenantable portion, provided Tenant shall first endeavor to use any generator that serves the Premises or of which Tenant has the beneficial use; (ii) results from Landlord’s negligence or willful misconduct or is in Landlord’s control to remediate; and (iii) extends for a period longer than 3 consecutive business days, in which case, Tenant’s obligation to pay Fixed Rent and Project Expenses shall be abated with respect to the untenantable portion of the Premises that Tenant has ceased using for the period beginning on the 4^th consecutive business day after such conditions are met and ending on the earlier of: (A) the date Tenant recommences using the Premises or the applicable portion thereof; or (B) the date on which the service(s) is substantially restored. The rental abatement described above shall be Tenant’s sole remedy in the event of a utility interruption, and Tenant hereby waives any other rights against Landlord in connection therewith. Landlord shall have the right to change the utility providers to the Project at any time. In the event of a casualty or condemnation affecting the Building and/or the Premises, the terms of Sections 14 and 15; respectively, shall control over the provisions of this Section.

(c) If Landlord reasonably determines that: (i) Tenant exceeds the design conditions for the heating, ventilation, and air conditioning (“HVAC”) system serving the Premises, introduces into the Premises equipment that overloads such system, or causes such system to not adequately perform its proper functions; or (ii) the heavy concentration of personnel, motors, machines, or equipment used in the Premises, including telephone and computer equipment, or any other condition in the Premises caused by Tenant (for example, more than one shift per day or 24-hour use of the Premises), adversely affects the temperature or humidity otherwise maintained by such system, then Landlord shall notify Tenant in writing and Tenant shall have 20 days to remedy the situation to Landlord’s reasonable satisfaction. Landlord represents that the use of the Premises for general office use during Business Hours consistent with the use by other office tenants in the Building will not cause any of the adverse conditions set forth in the preceding sentence nor permit Landlord to have any right to install additional equipment at Tenant’s cost. Landlord shall notify Tenant at the time of approval of the Tenant’s plans for the Leasehold Improvements whether any component of the Leasehold Improvements would exceed the design conditions for the HVAC system serving the Premises or would adversely affect the temperature or humidity otherwise maintained by such system, failing which Landlord shall have no rights under clause (i) above with respect to the initial Leasehold Improvements. If Tenant fails to timely remedy the situation to Landlord’s reasonable satisfaction, Landlord shall have the right to install one or more supplemental air conditioning units in the Premises with the cost thereof, including the cost of installation, operation and maintenance, being payable by Tenant to Landlord within 60 days after Landlord’s written demand. Tenant shall not change or adjust any closed or sealed thermostat or other element of the HVAC system serving the Premises without Landlord’s express prior written consent, such consent not to be unreasonably conditioned, withheld, or delayed. Landlord may install and operate meters or any other reasonable system for monitoring or estimating any services or utilities used by Tenant in excess of those required to be provided by Landlord (including a system for Landlord’s engineer reasonably to estimate any such excess usage). If such system indicates materially excess services or utilities, Tenant shall pay Landlord’s reasonable charges for installing and operating such system and any supplementary air conditioning, ventilation, heat, electrical, or other systems or equipment (or adjustments or modifications to the existing Building systems and equipment), and Landlord’s reasonable charges for such amount of excess services or utilities used by Tenant. All supplemental HVAC systems and equipment serving the Premises (including without limitation Tenant’s Supplemental HVAC, as defined in Section 11(a) below) shall be separately metered to the Premises at Tenant’s cost, and Tenant shall be solely responsible for all electricity registered by, and the maintenance and replacement of, such meters. Landlord has no obligation to keep cool any of Tenant’s information technology equipment that is placed together in one room, on a rack, or in any similar manner (“IT Equipment”), and Tenant waives any claim against Landlord in connection with Tenant’s IT Equipment. Landlord shall have the option to require that the computer room and/or information technology closet in the Premises shall be separately submetered at Tenant’s expense (subject to application of the Improvement Allowance), and Tenant shall pay Landlord for all electricity registered in such submeter. Within 1 month after written request, Tenant shall provide to Landlord electrical load information reasonably requested by Landlord with respect to any computer room and/or information technology closet in the Premises.

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7. LANDLORD SERVICES.

(a) Subject to Section 5 and Section 6, Landlord shall provide the following to the Premises during the Term: (i) HVAC service in accordance with the following temperature specifications during Business Hours: 72 degrees at 50% relative humidity; provided HVAC service to the Premises on Saturdays will be provided only upon Tenant’s prior request to Landlord received no later than noon on the preceding business day; (ii) electricity for lighting and standard office equipment for comparable buildings in the market in which the Project is located; (iii) water, sewer, and, to the extent applicable to the Building, gas, oil, and steam service; (iv) security as reasonably determined by Landlord for the Building and Common Areas on a 24/7 basis; and (v) cleaning services meeting the minimum specifications set forth in Exhibit D attached hereto. Tenant, at Tenant’s expense, shall make arrangements with the applicable utility companies and public bodies to provide, in Tenant’s name, telephone, cable, and any other utility service not provided by Landlord that Tenant desires at the Premises. The Building electrical system will be capable of providing an average of 6 watts per square foot of rentable area to the Premises for lighting and measured load.

(b) Landlord shall not be obligated to furnish any services, supplies, or utilities other than as set forth in this Lease; provided, however, upon Tenant’s prior request sent in accordance with Section 25(p) below, Landlord may furnish additional services, supplies, or utilities, in which case Tenant shall pay to Landlord, immediately upon demand, Landlord’s then-current charge for such additional services, supplies, or utilities, or Tenant’s pro rata share thereof, if applicable, as reasonably determined by Landlord. Landlord’s current rate for HVAC service outside of Business Hours requested with at least 24 hours’ prior notice (or by noon for weekend service) is the following, with a 2-hour minimum if the service does not commence immediately following the end of a day’s Business Hours: $92.00 per hour, per floor for cooling ($56.00 per hour, per floor for multi-floor cooling), and $57.00 per hour for heating.

8. USE; SIGNS; PARKING; COMMON AREAS.

(a) Tenant shall use the Premises for general office use (non-medical) befitting a class A office building and storage incidental thereto, and for no other purpose (“Permitted Use”). Tenant’s use of the Premises for the Permitted Use shall be subject to all applicable Laws, and to all reasonable requirements of the insurers of the Building. Tenant represents and warrants to Landlord, for informational purposes only, that Tenant’s current NAICS Code is set forth in Section 1 hereof, provided the foregoing shall not be construed in any manner as a restriction on the Permitted Use. Notwithstanding anything to the contrary in this Lease, Tenant shall not permit the Premises to be used primarily as a conference or meeting center.

(b) Landlord shall provide Tenant with Building-standard identification signage on any Building lobby directories and at the main entrance to the Premises, and directional signage at the elevator lobbies on any multi-tenant floors, the costs of which shall be paid for by Landlord for the originally named Tenant, otherwise by Tenant as Additional Rent within 10 days after written demand. Tenant shall not place, erect, or maintain any signs at the Premises, the Building, or the Project that are visible from outside of the Premises. Notwithstanding the foregoing, provided all of the Pylon Signage Conditions are fully satisfied, Tenant shall have the nonexclusive right to install a panel sign (“Panel”) on the existing Pylon sign of the Building (to the extent it exists) (“Pylon Sign”), subject to applicable Laws (including without limitation all necessary local governmental approvals) and satisfaction of all of the following terms and conditions: (i) the size and location and Tenant’s specifications and design of the Panel shall be subject to Landlord’s prior written consent, such consent not to be unreasonably conditioned, withheld or delayed, and generally consistent with the aesthetic standards of the Building; (ii) Landlord shall obtain the Panel on Tenant’s behalf, at Tenant’s sole cost and expense (subject to application of the Improvement Allowance); (iii) Landlord shall install the Panel, at Tenant’s sole and expense; (iv) Landlord shall maintain and repair the Pylon Sign, the costs of which shall be proportionately paid by the tenants having panel signs on such Pylon Sign; (v) Landlord shall maintain and repair the Panel, at Tenant’s sole cost and expense; (vi) if the Pylon Sign is illuminated, Tenant shall pay its proportionate share of the costs of such illumination (equitably allocated in Landlord’s reasonable determination); and (vii) if the Panel requires replacement, such replacement shall be at Tenant’s sole cost and expense. The “Pylon Signage Conditions” are that: (a) Tenant is occupying and paying full Rent on at least 1 full floor of the Building; and (b) this Lease is in full force and effect. From and after the Surrender Date (as defined in Section 18(a)), or immediately upon any of the Pylon Signage Conditions no longer being satisfied, Landlord shall have the right, at Tenant’s sole cost and expense, to remove the Panel and repair and restore the Pylon Sign to its prior existing condition. With respect to clause (i) above, Landlord’s determination and selection of the size, location, specifications, and design of the Panel may take into account the necessity to reserve or reallocate space for signage for existing and future tenants of the Building and in furtherance of the foregoing, Landlord shall have the right to require that the

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Panel be replaced, at Landlord’s sole cost and expense, with a Panel of a different size, configuration, or design, from time to time, and the Panel’s placement on the Pylon Sign may be relocated on such sign by Landlord, from time to time. Tenant shall pay Landlord for all costs due under this paragraph as Additional Rent within 60 days after receipt of Landlord’s invoice therefor.

(c) Subject to the Building rules and regulations, Tenant shall have the nonexclusive right in common with others to use the Common Areas for their intended purposes. Tenant shall have the right throughout the Term to obtain 12 permits for unreserved, and 2 permits for reserved parking of standard-size automobiles of Tenant and its employees within the parking facility serving the Building: (i) by entering from time to time into the parking garage operator’s standard agreement covering the use of parking spaces in such garage; (ii) upon the terms and subject to the conditions set forth in such agreements; and (iii) subject to Tenant’s monthly payment to such operator of its fee for the right to such parking spaces (which fee shall be the then-current market rate). Tenant shall have the right to cause its employees to enter into such parking agreements and pay the parking fees directly to the parking operator. To the extent not included in the fee (if any) charged for parking in the parking facility for the Building, Tenant shall be solely liable for all parking taxes (if any) imposed by the applicable governmental authority with respect to Tenant’s parking spaces. If Landlord elects (in its sole and absolute discretion) to operate the parking facility, Tenant shall pay Landlord such taxes within 60 days after receipt of an invoice therefor and Landlord shall then remit such taxes to the applicable governmental authority. If the parking facility is not operated by Landlord, Tenant shall pay the operator such taxes and the operator shall then remit such taxes to the applicable governmental authority.

(d) Provided Landlord does not unreasonably and materially interfere with Tenant’s normal and customary business operations and to the extent that the Tenant’s Leasehold Improvements are not damaged, and Tenant is not denied the beneficial use of its Premises, Landlord shall have the right in its sole but reasonable discretion to, from time to time, construct, maintain, operate, repair, close, limit, take out of service, alter, change, and modify all or any part of the Common Areas. Landlord, Landlord’s agents, contractors, and utility service providers shall have the right to install, use, and maintain ducts, pipes, wiring, and conduits in and through the Premises provided such use does not cause the usable area of the Premises to be reduced beyond a de minimis amount. Landlord shall use commercially reasonable efforts to schedule and conduct all such construction, maintenance, repairs, closures, alterations or changes so as to reasonably minimize any disruption or interference to Tenant’s business.

(e) Subject to Landlord’s security measures and Force Majeure Events (as defined in Section 25(g)), Landlord shall provide Tenant with access to the Building and, if applicable, passenger elevator service for use in common with others for access to and from the Premises 24 hours per day, 7 days per week, except during emergencies. Landlord shall have the right to limit the number of elevators (if any) to be operated during repairs and during non-Business Hours and on weekends. Landlord shall provide Tenant with access to the freight elevator(s) of the Building from time to time following receipt of Tenant’s prior request, and Tenant shall pay Landlord’s then-current charge for use of such freight elevators (current charge is $69 per hour for after Business Hours on weekdays and at all times on weekends, with a 4-hour minimum). If at any time during the Term Tenant does not have reasonable elevator access the Premises and such lack of access: (i) is a result of Landlord’s negligence or willful misconduct or is in Landlord’s control to remediate; and (ii) extends for a period longer than 3 consecutive business days, then in such case Tenant’s obligation to pay Fixed Rent and Project Expenses shall be abated for the period beginning on the 4^th consecutive business day after such conditions are met and ending on the earlier of: (A) the date Tenant recommences using the Premises; or (B) the date on which reasonable elevator access to the Premises is restored. The rental abatement described above shall be Tenant’s sole remedy in the event Tenant does not have reasonable elevator access the Premises, and Tenant hereby waives any other rights against Landlord in connection therewith.

9. TENANT’S ALTERATIONS.

(a) The construction of the initial Leasehold Improvements (as defined in Exhibit C) shall be governed by the terms of Exhibit C attached hereto and made a part hereof. Except for the Leasehold Improvements and as otherwise set forth below, Tenant shall not, and shall not permit any Tenant Agent to, cut, drill into, or secure any fixture, apparatus, or equipment, or make alterations, improvements, or physical additions of any kind to any part of the Premises (collectively, “Alterations”) without first obtaining the written consent of Landlord, which consent shall not be unreasonably withheld, conditioned, or delayed. If Landlord fails to respond to a request for consent to a proposed Alteration within 10 business days after Landlord’s receipt of such request, the request shall be deemed denied. Notwithstanding the foregoing, if Landlord fails to respond within such 10 business-day period, Tenant may

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thereafter send to Landlord a second written requesting approval of the proposed Alteration, which request must set forth in bold and 14-point capitalized type on the first page thereof the following statement: “SECOND AND FINAL REQUEST—LANDLORD HAS 10 BUSINESS DAYS TO RESPOND PURSUANT TO SECTION 9 OF THE LEASE” (“Second Alteration Request”). If Landlord then fails to respond to the Second Alteration Request within 10 business days after receipt thereof (“Second Alteration Request Response Period”), Landlord shall be deemed to have elected to consent to the proposed Alteration, provided Tenant shall otherwise have complied with all provisions of this Lease relating to such Alterations. Notwithstanding the foregoing, if Landlord notifies Tenant in writing within the Second Alteration Request Response Period that Landlord requires additional time to review the request, then the Second Alteration Request Response Period shall be extended by an additional 10 business days. “Tenant Agent” means any agent, employee, subtenant, contractor, client, licensee, customer, invitee, assignee, or guest of Tenant. All Alterations shall be completed in compliance with all applicable Laws, and Landlord’s reasonable rules and regulations for construction, and sustainable guidelines and procedures, using new or comparable materials only, by a contractor reasonably approved in writing by Landlord, and on days and at times reasonably approved in writing by Landlord. Notwithstanding the foregoing, Landlord’s consent shall not be required for any Alteration costing less than $75,000.00 and that: (i) is nonstructural; (ii) does not impact any of the Building systems, involve electrical work, require a building permit, materially affect the air quality in the Building, or require Landlord to incur material additional costs as a result thereof; and (iii) is not visible from outside of the Premises.

(b) Throughout the performance of Alterations, Tenant shall carry, or cause any contractor, subcontractor, or design professional to carry, via written contract, workers’ compensation insurance in statutory limits together with employer’s liability insurance, commercial general liability insurance (including, but not limited to, coverage for ongoing and products-completed operations), automobile liability, and umbrella/excess liability insurance in like form and limits in accordance with the terms and conditions required of Tenant under Section 12 below, and such other insurance coverage and limits as Landlord may otherwise reasonably require, which may include, without limitation, reasonable amounts of professional liability insurance with respect to design professionals, as well as contractor’s pollution liability with respect to contractors and subcontractors. Tenant shall also require any such contractor, subcontractor, or design professional to satisfy the same additional coverage terms as required of Tenant under Section 12 below with respect to naming Landlord, Landlord’s Property Manager, and Additional Insureds (as defined in Section 12) and any other applicable party whose name and address shall have been furnished to Tenant each as an additional insured, which have been furnished to Tenant by way of endorsement ISO CG 20 37 together with CG 20 10 or their equivalent, which shall be primary, and any other insurance that may be available to Landlord and any such additional insured will be excess and noncontributory, and waiving all rights of recovery and subrogation. In addition, Tenant shall carry “all risk” Builder’s Risk insurance covering the Alterations, unless otherwise agreed upon in writing by Landlord and Tenant. Tenant shall provide to Landlord prior written notice of its intention to perform any Alteration, together with a certificate of insurance from each contractor evidencing that the insurance required under this Lease is in effect during all construction activities.

(c) Promptly after final completion of Alterations, Tenant shall provide Landlord with a release of liens from all contractors, subcontractors with respect to work costing more than $10,000, and design professionals associated with all Alterations. Tenant shall be solely responsible for the installation and maintenance of its data, telecommunication, and security systems and wiring at the Premises, which shall be done in compliance with all applicable Laws, and Landlord’s rules and regulations. Tenant shall be responsible for all elements of Alterations (including, without limitation, compliance with Laws, and functionality of the design), and Landlord’s approval of any Alteration and the plans therefor shall in no event relieve Tenant of the responsibility for such design, or create responsibility or liability on Landlord’s part for their completeness, design sufficiency, or compliance with Laws. With respect to all improvements and Alterations made after the date hereof, Tenant acknowledges that: (A) Tenant is not, under any circumstance, acting as the agent of Landlord; (B) Landlord did not cause or request such Alterations to be made; (C) Landlord has not ratified such work; and (D) Landlord did not authorize such Alterations within the meaning of applicable State statutes.. Nothing in this Lease or in any consent to the making of Alterations or improvements shall be deemed or construed in any way as constituting a request by Landlord, express or implied, to any contractor, subcontractor, or supplier for the performance of any labor or the furnishing of any materials for the use or benefit of Landlord. Tenant shall not overload any floor or part thereof in the Premises or the Building, including any public corridors or elevators, by bringing in, placing, storing, installing or removing any large or heavy articles, and Landlord may prohibit, or may direct and control the location and size of, safes and all other heavy articles, and may reasonably require, at Tenant’s sole cost and expense, supplementary supports of such material and dimensions as Landlord may deem necessary to properly distribute the weight. Any articles of personal property including business

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and trade fixtures not attached to, or built into, the Premises, Tenant’s trade machinery and equipment, free-standing cabinet work, and movable partitions, which were installed by Tenant in the Premises as part of the Leasehold Improvements or otherwise shall be and remain the property of Tenant and may be removed by Tenant at any time during the Term as long as Tenant is not in default hereunder (following the lapse of any applicable notice and cure periods) and provided Tenant repairs to Landlord’s reasonable satisfaction any damage to the Premises, the Building and any other part of the Project caused by such removal.

10. ASSIGNMENT AND SUBLETTING.

(a) Except as expressly permitted pursuant to Section 10(c), neither Tenant nor Tenant’s legal representatives or successors-in-interest by operation of law or otherwise, shall sell, assign, transfer, hypothecate, mortgage, encumber, grant concessions or licenses, sublet, or otherwise dispose of all or any interest in this Lease or the Premises, or permit any person or entity other than Tenant to occupy any portion of the Premises (each of the foregoing is a “Transfer” to a “Transferee”), without Landlord’s prior written consent, which consent shall not be unreasonably withheld, conditioned, or delayed. If Landlord fails to respond to a request for consent to a proposed Transfer within 10 business days after Landlord’s receipt of such request and all of the Transfer Information, the request shall be deemed denied. Notwithstanding the foregoing, if Landlord fails to respond within such 10 business-day period, Tenant may thereafter send to Landlord a second written request for approval of the proposed Transfer, which request must set forth in bold and 14-point capitalized type on the first page thereof the following statement: “SECOND AND FINAL REQUEST—LANDLORD HAS 10 BUSINESS DAYS TO RESPOND PURSUANT TO SECTION 10” (“Second Transfer Request”). If Landlord then fails to respond to the Second Transfer Request within 10 business days after receipt thereof (“Second Transfer Request Response Period”), Landlord shall be deemed to have elected to consent to the proposed Transfer, but Landlord shall not be estopped by or deemed to have approved any specific terms of the Transfer (such as, for example, if the assignment document were to release Tenant from any further liability under this Lease or if the sublease provides for a sublease term extending beyond the term of this Lease). Notwithstanding the foregoing, if Landlord notifies Tenant in writing within the Second Transfer Request Response Period that Landlord requires additional time to review the request, then the Second Transfer Request Response Period shall be extended by an additional 5 business days. Any Transfer undertaken without Landlord’s prior written consent (other than pursuant to Section 10(c)) shall, at Landlord’s option exercised by providing written notice to Tenant within ten (10) business days after Landlord has knowledge of such Transfer, be void. For purposes of this Lease, a Transfer shall include, without limitation, any assignment by operation of law, and any merger, consolidation, or asset sale involving Tenant, any direct or indirect transfer of control of Tenant, and any transfer of a majority of the ownership interests in Tenant. Consent by Landlord to any one Transfer shall be held to apply only to the specific Transfer authorized, and shall not be construed as a waiver of the duty of Tenant, or Tenant’s legal representatives or assigns, to obtain from Landlord consent to any other or subsequent Transfers pursuant to the foregoing, or as modifying or limiting the rights of Landlord under the foregoing covenant by Tenant.

(b) Without limiting the bases upon which Landlord may reasonably withhold its consent to a proposed Transfer, it shall not be unreasonable for Landlord to withhold its consent if: (i) the proposed assignee shall have a net worth that is not acceptable to Landlord in Landlord’s reasonable discretion, taking into account the remaining obligations under this Lease and the fact that Tenant is not released; (ii) Tenant is proposing to Transfer to an existing tenant of the Building or the building known as Two Commerce Square if owned by Landlord or Landlord’s affiliate(s), or to another prospect with whom Landlord or Landlord’s affiliate(s) are then actively negotiating in the Building or One Commerce Square, and comparable space is available in such buildings; or (iii) the nature of such Transferee’s proposed business operation would violate the terms of this Lease or of any other lease for the Building (including any exclusivity provisions).

(c) Notwithstanding anything to the contrary in this Lease, Tenant shall have the right without the prior consent of Landlord, but after at least 15 days’ prior written notice to Landlord, to make a Transfer to any Affiliate (as defined below), or an entity into which Tenant merges or that acquires substantially all of the assets or stock of Tenant (“Surviving Entity”) (the Surviving Entity or Affiliate are also referred to as a “Permitted Transferee”); provided: (i) Tenant delivers to Landlord the Transfer Information (as defined below); (ii) the Surviving Entity shall have a tangible net worth at least equal to the net worth of Tenant on the date of this Lease or otherwise reasonably acceptable to Landlord taking into account the fact that the originally named Tenant is not being released; (iii) the originally named Tenant shall not be released or discharged from any liability under this Lease by reason of such Transfer, and the Permitted Transferee shall assume in writing all of the obligations and liabilities of Tenant under

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this Lease; (iii) the use of the Premises shall not change; and (iv) such Transfer is not being made to circumvent Tenant’s obligations under this Lease. An “Affiliate” means a corporation, limited liability company, partnership, or other registered entity, 50% or more of whose equity interest is owned by the same persons or entities owning 50% or more of Tenant’s equity interests, a subsidiary, or a parent corporation.

(d) If at any time during the Term Tenant desires to complete a Transfer, Tenant shall give written notice to Landlord of such desire together with the Transfer Information.

(e) The “Transfer Information” means the following information: (i) a copy of the proposed form of or fully executed assignment and assumption agreement, or sublease agreement, as applicable (with respect to a Permitted Transfer, such agreement to be delivered to Landlord within 10 business days after the transaction closes and with respect to all other Transfers, such agreement shall be provided in draft form and shall not be executed until Landlord’s consent has been given); (ii) a copy of the then-current financials of the Transferee (either audited or certified by the chief financial officer or other officer of the Transferee); and (iii) such other reasonably requested information by Landlord needed to confirm or determine Tenant’s compliance with the terms and conditions of this Section.

(f) Any sums or other economic consideration received by Tenant as a result of any Transfer (except rental or other payments received that are attributable to the amortization of the cost of leasehold improvements made to the transferred portion of the Premises by Tenant for the Transferee), less Tenant’s reasonable expenses incident to the Transfer, including, without limitation, standard leasing commission) whether denominated rentals under the sublease or otherwise, that exceed, in the aggregate, the total sums which Tenant is obligated to pay Landlord under this Lease (prorated to reflect obligations allocable to that portion of the Premises subject to such Transfer) shall, at Landlord’s option, either be retained by Tenant or divided evenly between Landlord and Tenant, with Landlord’s portion being payable to Landlord as Additional Rent without affecting or reducing any other obligation of Tenant hereunder, provided such difference shall be further reduced by the sum of the following: (i) rental or other payments received that are attributable to the amortization of the cost of leasehold improvements made to the transferred portion of the Premises by Tenant for the Transferee; (ii) reasonable expenses incident to the Transfer, including standard leasing commissions other economic concessions including, without limitation, planning allowance, lease takeover payments, moving expenses and the like paid by Tenant to or on behalf of the Transferee in connection with the Transfer; (iii) reasonable costs incurred by Tenant in advertising the transfer space; and (iv) Tenant’s and Landlord’s reasonable attorneys’ fees paid by Tenant to third parties in connection with the Transfer. Any amounts payable by Tenant to Landlord pursuant to this subsection (f) shall be referred to herein as “Transfer Profits”.

(g) Regardless of Landlord’s consent to a proposed Transfer, no Transfer shall release Tenant from Tenant’s obligations or alter Tenant’s primary liability to fully and timely pay all Rent when due from time to time under this Lease and to fully and timely perform all of Tenant’s other obligations under this Lease, and the originally named Tenant and all assignees shall be jointly and severally liable for all Tenant obligations under this Lease. The acceptance of rental by Landlord from any other person shall not be deemed to be a waiver by Landlord of any provision hereof. If a Transferee defaults in the performance of any of the terms of this Lease, Landlord may proceed directly against the originally named Tenant without the necessity of exhausting remedies against such Transferee. If there has been a Transfer and an Event of Default occurs, Landlord may collect Rent from the Transferee and apply the net amount collected to the Rent herein reserved; but no such collection shall be deemed a waiver of the provisions of this Section, an acceptance of such Transferee as tenant hereunder or a release of Tenant from further performance of the covenants herein contained.

11. REPAIRS AND MAINTENANCE.

(a) Except with respect to Landlord Repairs (as defined below) and any other obligations of Landlord expressly set forth in this Lease, Tenant, at Tenant’s expense, shall keep and maintain the Premises in good order and condition including promptly making all repairs necessary to keep and maintain such in good order and condition. When used in this Lease, “repairs” shall include repairs and any reasonably necessary replacements. Tenant shall have the option of replacing lights, ballasts, tubes, ceiling tiles, outlets and similar equipment itself or advising Landlord of Tenant’s desire to have Landlord make such repairs, in which case Tenant shall pay to Landlord for such repairs at Landlord’s then-standard rate. To the extent that Tenant requests that Landlord make any other repairs that

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are Tenant’s obligation to make under this Lease, Landlord may elect to make such repairs on Tenant’s behalf, at Tenant’s expense, and Tenant shall pay to Landlord such expense along with the Administrative Fee. If there is an uncured Event of Default, Landlord may elect to require that Tenant prepay the amount of such repair. All Tenant repairs shall comply with Laws and utilize materials and equipment that are at least equal in quality to those being repaired. In addition, Tenant shall maintain, at Tenant’s expense, Tenant’s Supplemental HVAC, Premises Hot Water Heaters, and/or Alterations in a clean and safe manner and in proper operating condition throughout the Term. “Tenant’s Supplemental HVAC” means any supplemental HVAC system serving only the Premises (regardless of who installed it). “Premises Hot Water Heater” means any hot water heater serving only the Premises (regardless of who installed it), including without limitation expansion tanks and any associated piping. Tenant shall maintain Tenant’s Supplemental HVAC under a service contract with a firm and upon such terms as may be reasonably satisfactory to Landlord, including inspection and maintenance on at least a semiannual basis, and provide Landlord with a copy thereof. Within ten (10) days after Landlord’s request, Tenant shall provide Landlord with evidence that such contract is in place. Further, Tenant shall ensure that all Premises Hot Water Heaters have a working automatic water shut-off device with audible alarm and a leak pan underneath with the drain line run to a suitable floor drain. All repairs to the Building and/or the Project made necessary by reason of the installation, maintenance, and operation of Tenant’s Supplemental HVAC, Premises Hot Water Heaters, and Alterations shall be Tenant’s expense. In the event of an emergency, such as a burst waterline or act of God, Landlord shall have the right to make repairs for which Tenant is responsible hereunder (at Tenant’s cost) without giving Tenant prior notice, but in such case Landlord shall provide notice to Tenant as soon as practicable thereafter, and Landlord shall take commercially reasonable steps to minimize the costs incurred. Further, Landlord shall have the right to make repairs for which Tenant is responsible hereunder (at Tenant’s cost) with prior notice to Tenant if Landlord believes in its sole and absolute discretion that the repairs are necessary to prevent harm or damage to the Building, and Landlord shall take commercially reasonable steps to minimize the costs incurred.

(b) Landlord, at Landlord’s expense (except to the extent such expenses are includable in Project Expenses), shall make all necessary repairs to: (i) the footings and foundations and the structural elements of the Building; (ii) the roof of the Building; (iii) the HVAC, plumbing, elevators (if any), electric, fire protection and fire alert systems within the Building core from the core to the point of connection for service to the Premises, but specifically excluding Tenant’s Supplemental HVAC, Premises Hot Water Heaters, and Alterations; (iv) the Building exterior; and (v) the Common Areas (collectively, “Landlord Repairs”). All Landlord Repairs shall be made in accordance with the standard of a first class office building. Any provision of this Lease to the contrary notwithstanding, any repairs to the Project or any portion thereof made necessary by the willful misconduct of Tenant or any Tenant Agent shall be made at Tenant’s expense, subject to the waivers set forth in Section 12(c). Landlord shall, with respect to Landlord Repairs, use commercially reasonable efforts to minimize the disruption or interference to Tenant’s normal and customary business operations in the Premises.

12. INSURANCE; SUBROGATION RIGHTS.

(a) Tenant shall not violate, or permit the violation of, any condition imposed by any insurance policy then issued in respect of the Project and shall not do, or permit anything to be done, or keep or permit anything to be kept in the Premises, that would subject Landlord to any liability or responsibility for personal injury or death or property damage, increase any insurance rate in respect of the Project over the rate that would otherwise then be in effect, result in insurance companies of good standing refusing to insure the Project in amounts reasonably satisfactory to Landlord, or result in the cancellation of, or the assertion of any defense by the insurer in whole or in part to claims under, any policy of insurance in respect of the Project. If, by reason of any failure of Tenant to comply with this Lease, the premiums on Landlord’s insurance on the Project are higher than they otherwise would be, Tenant shall reimburse Landlord, on demand, for that part of such premiums attributable to such failure on the part of Tenant.

(b) Tenant, at Tenant’s expense, shall obtain and keep in full force and effect at all times as of the Commencement Date (or Tenant’s earlier accessing of the Premises), all of the following insurance policies:

(i) commercial general liability insurance written on an ISO CG 00 01 occurrence policy form or its equivalent, including a Separation of Insureds clause, coverage for contractual liability covering Tenant’s contractual obligations under this Lease as an insured contract, personal injury liability, host liquor liability, premises-operations and hazards thereto, as well as liability arising out of this Lease in respect of the Premises and the conduct or operation of business therein. The minimum limits of coverage shall be no less than $1,000,000 per

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occurrence and $2,000,000 general aggregate (applying per location) for bodily injury (including death and mental anguish) and property damage, $1,000,000 personal and advertising injury, and $2,000,000 products-completed operations (for which coverage shall be maintained continuously for a minimum period equal to the applicable statute of limitations or statute of repose, whichever is greater) or in such other amounts as Landlord may from time to time require.

(ii) business automobile liability insurance covering liability arising from any auto (including, owned, non-owned, and hired auto, provided such non-owned and hired auto liability may be satisfied by endorsement to the commercial general liability policy) in an amount of no less than $ 1,000,000 combined single limit per accident for bodily injury and property damage.

(iii) workers’ compensation in statutory limits together with employer’s liability insurance in amounts of no less than $1,000,000 each accident, $1,000,000 disease policy limit, and $1,000,000 disease each employee.

(iv) umbrella/excess liability insurance on a follow form basis in amounts of no less than $10,000,000 per occurrence and $10,000,000 annual aggregate (applying per location) in excess of commercial general liability, employer’s liability, and automobile liability insurance policies, concurrent to, and no more restrictive than such underlying insurance policies. Such policy shall be endorsed to provide that this insurance is primary to, and noncontributory with, any other insurance in which Landlord and any Additional Insured is an insured, whether such other insurance is primary, excess, self-insurance, or insurance on any other basis, which must cause the umbrella/excess coverage to be vertically exhausted, whereby such coverage is not subject to any “Other Insurance” provision under Tenant’s umbrella/excess liability policy. The limits of liability may be satisfied by a combination of primary and excess liability insurance.

(v) property insurance written on an ISO CP 10 30-Cause of Loss-Special Form, commonly referred to as the “all risk” policy form, or its equivalent, including, but not limited to, coverage against sprinkler leakage and other damage due to water, fire, windstorm, cyclone, tornado, hail, earthquake, explosion, riot, civil commotion, aircraft, vehicle, smoke damage, vandalism, and malicious mischief insuring all present and future Tenant’s Property leased by or in the care, custody, and control of Tenant and located in the Premises in an amount of no less than the full replacement cost thereof, with an agreed amount endorsement (waiving applicable co-insurance clause). “Tenant’s Property” means Tenant’s trade fixtures, equipment, personal property, signage, and Specialty Alterations (as defined in Section 18(b)). Tenant shall not self-insure. Tenant shall neither have, nor make, any claim against Landlord for any loss or damage to Tenant’s Property, regardless of the cause of the loss or damage, including, without limitation, fire, explosion, falling plaster, steam, gas, air contaminants or emissions, electricity, electrical or electronic emanations or disturbance, water, rain, snow, or leaks from any part the Building or from the pipes, appliances, equipment, or plumbing works or from the roof or from any other place, nor shall Landlord be liable for any loss of or damage to property of Tenant or of others entrusted to employees of Landlord.

(vi) business interruption insurance covering any loss due to the occurrence of any of the hazards required to be insured against by Tenant pursuant to this Lease, in an amount sufficient to cover Tenant’s monetary obligations under this Lease for a period of at least 12 months.

(vii) boiler and machinery, if there is a boiler, supplemental air conditioning unit, or pressure object or similar equipment in the Premises. When applicable, this insurance coverage requirement may be satisfied through the all-risk coverage required in Section 12(b)(v).

(c) All insurance policies required of Tenant under this Lease, including ongoing and products-completed operations coverage but exclusive of workers’ compensation, shall name Landlord, Landlord’s property manager, Brandywine Realty Trust, and any other applicable party whose name and address have been furnished to Tenant, each as an additional insured (collectively, “Additional Insureds”). All such coverages shall be primary and any other insurance that may be available to Landlord and any Additional Insured will be excess and noncontributory. Each Additional Insured shall be afforded coverage as broad as if this Lease had expressly covered the claim against the Additional Insured, and for the greater of the minimum amount called for by this Lease or Tenant’s actual policy limit.

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(d) Prior to the Commencement Date (or Tenant’s earlier accessing of the Premises), Tenant shall provide Landlord and/or Landlord’s designated agent with certificates that evidence that all insurance coverages required under this Lease are in place for the policy periods. Tenant shall also furnish to Landlord and/or Landlord’s designated agent throughout the Term replacement certificates at least 30 days prior to the expiration dates of the then-current policy or policies or, upon request by Landlord and/or Landlord’s designated agent from time to time, sufficient information to evidence that the insurance required under this Section is in full force and effect. In addition, all such policies shall contain a provision whereby the same cannot be canceled or materially altered without at least 30 days’ prior written notice of such cancellation or material alteration provided to Landlord, which shall be afforded by policy endorsement extending such notice to Landlord. Tenant shall include a waiver of the insurer’s right of subrogation against Landlord and Additional Insureds during the Term in each of Tenant’s liability and workers’ compensation policies. If Tenant fails to provide Landlord and/or Landlord’s designated agent with a requested insurance certificate as required under this Lease within 30 days after receipt of Landlord’s written request therefor, Tenant shall pay to Landlord a fee equal to $25.00 for each day that elapses after such 30-day period until Landlord and/or Landlord’s designated agent receives the requested certificate. In no event will any acceptance of certificates of insurance by Landlord, or failure of Tenant to provide certificates of insurance as required hereunder, be construed as a waiver or limitation of Tenant’s obligations to maintain insurance coverage pursuant to this Section 12. All insurance required under this Lease shall be issued by an insurance company that has been in business for at least 5 years, is authorized to do business in the State, and is rated “A-/X” or greater by A.M. Best’s Insurance Reports or any successor publication of comparable standing. The limits of any such required insurance shall not in any way limit Tenant’s liability under this Lease or otherwise. If Tenant fails to maintain such insurance, Landlord may, but shall not be required to, procure and maintain the same, at Tenant’s expense, which expense shall be reimbursed by Tenant as Additional Rent within 60 days after written demand. The deductible or self-insured retention amount required under any insurance policy maintained by Tenant shall be the sole responsibility of Tenant and not exceed $25,000, unless otherwise approved by Landlord in writing.

(e) When Alterations are in process, Tenant shall carry, or cause, any contractor, subcontractor, and design professional to carry the insurance specified in Section 9. In addition, Tenant shall require its movers and other vendors to procure insurance in like forms and amounts as required herein and deliver to Landlord and/or Landlord’s designated agent a certificate of insurance naming each Additional Insured as an additional insured, which policies shall be primary and any other insurance that may be available to Landlord and any Additional Insured will be excess and noncontributory.

(f) Landlord shall obtain and maintain, or cause to be obtained or maintained, the following insurance during the Term: (i) replacement cost insurance including “all risk” property insurance on the Building, including without limitation leasehold improvements (exclusive of Tenant’s Property); (ii) commercial general liability insurance (including bodily injury and property damage) covering Landlord’s operations at the Project in amounts reasonably required by Landlord or any Mortgagee (as defined in Section 16); and (iii) such other insurance as reasonably required by Landlord or any Mortgagee.

(g) Landlord and Tenant, shall each include in each of its insurance policies (insuring the Building in case of Landlord, and insuring Tenant’s Property in the case of Tenant, against loss, damage, or destruction by fire or other casualty) a waiver of the insurer’s right of subrogation against the other party during the Term, and consent to a waiver of right of recovery pursuant to the terms of this paragraph. Both Landlord and Tenant agree to immediately give each insurance company which has issued to it policies of insurance written notice of the terms of such mutual waivers and to cause such insurance policies to be properly endorsed, if necessary, to prevent the invalidation thereof by reason of such waivers. If such waivers are unobtainable from the insurance carrier or unenforceable, then the party who was assured the waiver of subrogation shall receive from the other party: (i) an express agreement that such policy shall not be invalidated if the assured party waives the right of recovery against any party responsible for a casualty covered by the policy before the casualty; or (ii) any other form of permission for the release of the other party. Notwithstanding anything to the contrary in this Lease: (I) each party hereby waives, releases, and agrees not to make any claim against or seek to recover from, the other party with respect to any claim (including a claim for negligence) that such party might otherwise have against the other party for loss, damage, or destruction with respect to its property occurring during the Term to the extent to which such party is, or is required to be, insured under a policy or policies containing a waiver of subrogation or permission to release liability; and (II) all waivers of subrogation and rights of recovery required hereunder shall also apply to each of the waiving party’s insurance policies’ deductible(s)/self-insured retention(s). Nothing contained in this Section 12(g) shall be deemed to relieve either party of any duty imposed elsewhere in this Lease to repair, restore, or rebuild, or nullify any abatement of rents provided for elsewhere in this Lease.

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13. INDEMNIFICATION.

(a) Except to the extent the release of liability and waiver of subrogation provided in Section 12 above applies, Tenant shall defend, indemnify, and hold harmless Landlord, Landlord’s property manager, Brandywine Realty Trust, and each of Landlord’s directors, officers, members, partners, trustees, employees, and agents (collectively, “Landlord Indemnitees”) from and against any and all third-party claims, actions, damages, liabilities, and expenses (including all reasonable costs and expenses (including reasonable attorneys’ fees)) to the extent arising out of or from or related to: (i) any breach or default of any of Tenant’s obligations under this Lease, except in any such case to the extent arising from the negligent or willful act or omission of one or more Landlord Indemnitee; (ii) any negligence or willful act or omission of Tenant, any Tenant Indemnitees (as defined below), or any Tenant Agent; and (iii) except in any such case to the extent arising from the negligent or willful act or omission of one or more Landlord Indemnitee, any acts or omissions occurring at, or the condition, use, or operation of, the Premises. If Tenant fails to promptly defend a Landlord Indemnitee following written demand by the Landlord Indemnitee, the Landlord Indemnitee shall defend the same at Tenant’s expense, by retaining or employing counsel reasonably satisfactory to such Landlord Indemnitee.

(b) Except to the extent the release of liability and waiver of subrogation provided in Section 12 above applies, Landlord shall defend, indemnify, and hold harmless Tenant and each of Tenant’s directors, officers, members, partners, trustees, employees, and agents (collectively, “Tenant Indemnitees”) from and against any and all third-party claims, actions, damages, liabilities, and expenses (including all reasonable costs and expenses (including reasonable attorneys’ fees)) to the extent arising out of or from or related to: (i) any breach or default of any of Landlord’s obligations under this Lease, except in any such case to the extent arising from the negligent or willful act or omission of one or more Tenant Indemnitee; and (ii) any negligence or willful misconduct of Landlord, Landlord Indemnitees or Landlord’s agents, employees, or contractors. If Landlord fails to promptly defend a Tenant Indemnitee following written demand by the Tenant Indemnitee, the Tenant Indemnitee shall defend the same at Landlord’s expense, by retaining or employing counsel reasonably satisfactory to such Tenant Indemnitee.

(c) Landlord’s and Tenant’s obligations under this Section shall not be limited by the amount or types of insurance maintained or required to be maintained under this Lease. The provisions of this Section shall survive the Expiration Date.

14. CASUALTY DAMAGE. If there occurs any casualty to the Project and: (i) insurance proceeds are unavailable to Landlord or are insufficient to restore the Project to substantially its pre-casualty condition; or (ii) more than 30% of the total area of the Building is damaged, Landlord shall have the right to terminate this Lease and all the unaccrued obligations of the parties hereto, by sending written notice of such termination to Tenant within 60 days after such casualty. Such notice shall specify a termination date not fewer than 30 nor more than 90 days after such notice is given to Tenant. If there occurs any casualty to the Premises, within twenty (20) days thereafter, Landlord shall notify the Tenant in writing of Landlord’s reasonable estimated timeframe for the completion of the restoration. If there occurs any casualty to the Premises and: (a) in Landlord’s reasonable judgment, the repair and restoration work would require more than 180 consecutive days to complete after the casualty (assuming normal work crews not engaged in overtime); or (b) the casualty occurs during the last 12 months of the Term and will take more than 60 days to repair, Landlord and Tenant shall each have the right to terminate this Lease and all the unaccrued obligations of the parties hereto, by sending written notice of such termination to the other party within 60 days after the date of such casualty. Such notice shall specify a termination date not fewer than 30 nor more than 90 days after such notice is given to the other party, but in no event shall the termination date be after the last day of the Term. If this Lease is not terminated pursuant to this paragraph and Landlord fails to complete the repair or restoration work within 60 days after Landlord’s estimated date for completion of the repair and restoration work (subject to a day for day extension for each day of Tenant Delay and Force Majeure Events), then Tenant shall have the right to terminate this Lease by sending at least 30 days’ prior written notice to Landlord within 30 days after such estimated date of completion, provided this Lease shall remain in full force and effect and Tenant shall no longer have the right to terminate this Lease if Landlord delivers possession of the Premises to Tenant within 30 days after Landlord’s receipt of Tenant’s termination notice. If there occurs any casualty to the Premises and neither party terminates this Lease, then Landlord shall use commercially reasonable efforts to cause the damage to be repaired (exclusive of Tenant’s Property) to a

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condition as nearly as practicable to that existing prior to the damage, with commercially reasonable speed and diligence, subject to delays that may arise by reason of adjustment of the loss under insurance policies, Laws, and Force Majeure Events. Landlord shall not be liable for any inconvenience or annoyance to Tenant or Tenant Indemnitees, injury to Tenant’s business, or pain and suffering resulting in any way from such damage or the repair thereof. Notwithstanding the foregoing, Tenant’s obligation to pay Fixed Rent and Additional Rent shall be equitably adjusted or abated during the period (if any) during which Tenant is not reasonably able to use the Premises or an applicable portion thereof as a result of such casualty. Tenant shall have no right to terminate this Lease as a result of any damage or destruction of the Premises, except as expressly provided in this Section. The provisions of this Lease, including this Section, constitute an express agreement between Landlord and Tenant with respect to any and all damage to, or destruction of, all or any part of the Premises, and any Law with respect to any rights or obligations concerning damage or destruction in the absence of an express agreement between the parties, and any other statute or regulation, now or hereafter in effect, shall have no application to this Lease or any damage or destruction to all or any part of the Premises.

15. CONDEMNATION. If a taking renders the Premises reasonably unsuitable for the Permitted Use or prevents reasonable access to the Premises, this Lease shall, at either party’s option exercised by written notice to the other within 30 days after such taking, terminate as of the date title to condemned real estate vests in the condemner, the Rent herein reserved shall be apportioned and paid in full by Tenant to Landlord to such date of taking, all Rent prepaid for period beyond that date shall forthwith be repaid by Landlord to Tenant, and neither party shall thereafter have any liability for any unaccrued obligations hereunder; provided, however, a condition to the exercise by Tenant of such right to terminate shall be that the portion of the Premises taken shall be of such extent and nature as materially to handicap, impede, or impair Tenant’s use of the balance of the Premises for its normal business operations. If this Lease is not terminated after a condemnation, then notwithstanding anything to the contrary in this Lease, Fixed Rent and Additional Rent shall be equitably reduced in proportion to the area of the Premises that has been taken for the balance of the Term. Tenant shall have the right to make a claim against the condemner for moving expenses and business dislocation damages to the extent that such claim does not reduce the sums otherwise payable by the condemner to Landlord.

16. SUBORDINATION; ESTOPPEL CERTIFICATE.

(a) Provided Tenant’s right of possession of the Premises shall not be disturbed during the Term by the Mortgagee so long as there is no then-existing Event of Default, this Lease shall be subordinate at all times to the lien of any mortgages and deeds of trust now or hereafter placed upon the Premises, Building, and/or Project and land of which they are a part (a “Mortgage”) without the necessity of any further instrument or act on the part of Tenant to effectuate such subordination and non-disturbance. Tenant further agrees to execute and deliver within 20 days after request such further instrument in form reasonably approved by Tenant evidencing such subordination and attornment as shall be reasonably required by any Mortgagee. Landlord shall use commercially reasonable efforts to obtain a subordination, non-disturbance, and attornment agreement from the current and any future Mortgagee on such Mortgagee’s then-current commercially reasonable form with reasonable modifications by Tenant upon Tenant’s written request and at Tenant’s cost. If Landlord shall be or is alleged to be in default of any of its obligations owing to Tenant under this Lease, Tenant shall give to the holder (the “Mortgagee”) of any mortgage or deed of trust now or hereafter placed upon the Premises, Building, and/or Project whose name and address has been furnished to Tenant, notice by overnight mail of any such default that Tenant shall have served upon Landlord. Tenant shall not be entitled to exercise any right or remedy as there may be because of any default by Landlord without having given such notice to the Mortgagee. The Mortgagee shall have thirty (30) days from receipt of Tenant’s notice within which to cure such default or such longer period as may be reasonably necessary to complete the cure provided Mortgagee is proceeding diligently to cure such default. Notwithstanding the foregoing, any Mortgagee may at any time subordinate its mortgage to this Lease, without Tenant’s consent, by notice in writing to Tenant, and thereupon this Lease shall be deemed prior to such Mortgage without regard to their respective dates of execution and delivery, and in that event the Mortgagee shall have the same rights with respect to this Lease as though it had been executed prior to the execution and delivery of the Mortgage.

(b) Tenant shall attorn to any foreclosing mortgagee, purchaser at a foreclosure sale or by power of sale, or purchaser by deed in lieu of foreclosure. If the holder of a superior mortgage shall succeed to the rights of Landlord, then at the request of such party so succeeding to Landlord’s rights (herein sometimes called successor landlord) and upon such successor landlord’s written agreement to accept Tenant’s attornment, Tenant shall

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attorn to and recognize such successor landlord as Tenant’s landlord under this Lease and shall promptly, without payment to Tenant of any consideration therefor, execute and deliver any instrument that such successor landlord may reasonably request, with reasonable modifications by Tenant, to evidence such attornment. Upon such attornment, this Lease shall continue in full force and effect as, or as if it were, a direct lease between the successor landlord and Tenant upon all of the terms, conditions, and covenants as are set forth in this Lease and shall be applicable after such attornment, except that the successor landlord shall not be bound by any modification of this Lease not approved by the mortgagee which materially increases Landlord’s obligations or materially decreases Tenant’s obligations under this Lease, or by any previous prepayment of more than one month’s rent, unless such modification or prepayment shall have been expressly approved in writing by the holder of the superior mortgage through or by reason of which the successor landlord shall have succeeded to the rights of Landlord. With respect to any assignment by Landlord of Landlord’s interest in this Lease, or the rents payable hereunder, conditional in nature or otherwise, which assignment is made to any Mortgagee, Tenant agrees that the execution thereof by Landlord, and the acceptance thereof by the Mortgagee, shall never be deemed an assumption by such Mortgagee of any of the obligations of Landlord hereunder, unless such Mortgagee shall, by written notice sent to Tenant, specifically elect, or unless such Mortgagee shall foreclose the Mortgage and take possession of the Premises. Tenant, upon receipt of written notice from a Mortgagee that such Mortgagee is entitled to collect Rent hereunder may in good faith remit such Rent to Mortgagee without incurring liability to Landlord for the nonpayment of such Rent. The provisions for attornment set forth in this Section 16(b) shall be self-operative and shall not require the execution of any further instrument. However, if Landlord reasonably requests a further instrument confirming such attornment, Tenant shall execute and deliver such instrument, with reasonable modifications by Tenant, within 30 days after receipt of such request.

(c) Tenant shall at any time and from time to time (but not more often than once per 6-month period), within 10 business days after receipt of Landlord’s written request, execute and deliver to Landlord a commercially reasonable estoppel certificate, with reasonable modifications by Tenant, certifying all reasonably requested information pertaining to this Lease.

17. DEFAULT AND REMEDIES.

(a) An “Event of Default” shall be deemed to exist and Tenant shall be in default hereunder if: (i) Tenant fails to pay any Rent when due and such failure continues for more than 5 business days after Landlord has given Tenant written notice of such failure (such notice being in lieu of, and not in addition to, any applicable statutory notice); provided, however, in no event shall Landlord have any obligation to give Tenant more than two (2) such notices in any 12-month period, after which .there shall be an Event of Default if Tenant fails to pay any Rent when due during such 12-month period, regardless of Tenant’s receipt of notice of such nonpayment, and, provided further, there shall be an automatic Event of Default if Tenant fails to pay any Rent when due and the automatic stay of bankruptcy precludes issuance of a default notice; (ii) Tenant receives written notice from Landlord of a mechanic’s or materialmen’s lien that has been filed in connection with work performed by or on behalf of Tenant (exclusive of the Leasehold Improvements) which Tenant fails to bond over or otherwise cause to be removed of record within 15 days, and then Landlord sends a second notice of the lien and Tenant fails to bond over or otherwise cause to be removed of record such lien within 10 days after Landlord’s second notice; (iii) there is any assignment or subletting (regardless of whether the same might be void under this Lease) in violation of the terms of this Lease and Tenant fails to undo or void such Transfer within ten (10) business days after written notice from Landlord; (iv) Tenant fails to deliver any Landlord-requested estoppel certificate or subordination agreement within 10 business days after receipt of notice that such document was not received within the time period required under this Lease, provided (A) such notice states in bold that Tenant’s failure to respond within ten (10) business days shall be an Event of Default and (B) it shall not be an Event of Default if Tenant’s failure to deliver such document is a result of Tenant’s good faith negotiation of the form of such document; (v) there is a filing of a voluntary petition for relief by Tenant or any guarantor, or the filing of a petition against Tenant or any guarantor in a proceeding under the federal bankruptcy or other insolvency laws that is not withdrawn or dismissed within 90 days thereafter, or Tenant’s rejection of this Lease after such a filing, or, under the provisions of any law providing for reorganization or winding up of corporations, the assumption by any court of competent jurisdiction of jurisdiction, custody, or control of Tenant or any substantial part of its property, or of any guarantor, where such jurisdiction, custody, or control remains in force, unrelinquished, unstayed, or unterminated for a period of 90 days, or the commencement of steps or proceedings toward the dissolution, winding up, or other termination of the existence of Tenant, or toward the liquidation of either of their respective assets, or the evidence of the inability of Tenant or any guarantor to pay its debts as they come due, including without limitation an admission in writing of its inability to pay its debts when due, or any judgment docketed against

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any guarantor which is not paid, bonded, or otherwise discharged within 45 days; or (vi) Tenant fails to observe or perform any of Tenant’s other agreements or obligations under this Lease and such failure continues for more than 30 days after Landlord gives Tenant written notice of such failure (not to exceed an additional 150 days), or the expiration of such additional time period as is reasonably necessary to cure such failure, provided Tenant promptly commences and thereafter proceeds with all due diligence and in good faith to cure such failure.

(b) Upon the occurrence of an Event of Default, Landlord, in addition to the other rights or remedies it may have under this Lease, at law, or in equity, and without prejudice to any of the same, shall have the option, without any notice to Tenant and with or without judicial process, to pursue any one or more of the following remedies:

(i) Landlord shall have the right to terminate this Lease, in which event Tenant shall immediately surrender the Premises to Landlord, and Tenant shall pay Landlord upon demand for the direct losses and damages that Landlord suffers or incurs by reason of such termination which shall equal damages in an amount equal to the total of: (A) the costs of repossessing the Premises and all other expenses reasonably incurred by Landlord in connection with Tenant’s default, plus the Administrative Fee; (B) the unpaid Rent earned as of the date of termination; and (C) all Rent for the period that would otherwise have constituted the remainder of the Term less the fair market rental of the Premises for such period (as reasonably determined as of the time of such termination by a third party engaged by Landlord) discounted to present value at a rate of 2% per annum. The “Administrative Fee” means 5% of the costs incurred by Landlord in curing Tenant’s default or performing Tenant’s obligations hereunder.

(ii) Landlord shall have the right to terminate Tenant’s right of possession (but not this Lease) and may repossess the Premises in accordance with applicable Law, without demand or notice of any kind to Tenant and without terminating this Lease. If Tenant receives written notice of a termination of its right to possession, such notice will serve as both a notice to vacate, notice to pay or quit, and a demand for possession of, the Premises, and Landlord may immediately thereafter initiate a forcible detainer action without any further demand or notice of any kind to Tenant.

(iii) Landlord shall have the right to enter and take possession of all or any portion of the Premises in accordance with applicable law without electing to terminate this Lease, in which case Landlord shall have the right to relet all, or any portion of the Premises on such terms as Landlord deems advisable, and such amounts collected by Landlord for such reletting shall offset any damages payable by Tenant hereunder. Landlord will not be required to incur any expenses to relet all or any portion of the Premises, although Landlord may at its option incur customary leasing commissions or other costs for the account of Tenant as Landlord shall deem necessary or appropriate to relet. In no event will the failure of Landlord to relet all or any portion of the Premises reduce Tenant’s liability for Rent or damages.

(iv) Landlord shall have the right to enter the Premises without terminating this Lease and without being liable for prosecution or any claim for damages therefor and maintain the Premises and repair or replace any damage thereto or do anything for which Tenant is responsible hereunder. Tenant shall reimburse Landlord immediately upon demand for any out-of-pocket costs which Landlord incurs in thus effecting Tenant’s compliance under this Lease, and Landlord shall not be liable to Tenant for any damages with respect thereto.

(v) Landlord shall have the right to continue this Lease in full force and effect, whether or not Tenant shall have abandoned the Premises. If Landlord elects to continue this Lease in full force and effect pursuant to this Section, then Landlord shall be entitled to enforce all of its rights and remedies under this Lease, including the right to recover Rent as it becomes due. Landlord’s election not to terminate this Lease pursuant to this Section or pursuant to any other provision of this Lease, at law or in equity, shall not preclude Landlord from showing the Premises to potential tenants, subsequently electing to terminate this Lease, or pursuing any of its other remedies.

(c) Upon the occurrence of an Event of Default, Tenant shall be liable to Landlord for, and Landlord shall be entitled to recover: (i) all Rent accrued and unpaid; (ii) all reasonable costs and expenses incurred by Landlord in recovering possession of the Premises, including reasonable legal fees, and removal and storage of Tenant’s property; (iii) the costs and expenses of restoring the Premises to the condition in which the same were to have been surrendered by Tenant as of the Expiration Date; (iv) the costs of reletting commissions; (v) all legal fees and court costs incurred by Landlord in connection with the Event of Default; and (vi) the unamortized portion (as reasonably determined by Landlord) of brokerage commissions and consulting fees incurred by Landlord, and tenant concessions including free rent given by Landlord, in connection with this Lease.

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(d) Any amount payable by Tenant under this Lease that is not paid when due shall bear interest at the rate of 1% per month until paid by Tenant to Landlord.

(e) Neither any delay or forbearance by Landlord in exercising any right or remedy hereunder nor Landlord’s undertaking or performing any act that Landlord is not expressly required to undertake under this Lease shall be construed to be a waiver of Landlord’s rights or to represent any agreement by Landlord to thereafter undertake or perform such act. Landlord’s waiver of any breach by Tenant of any covenant or condition herein contained (which waiver shall be effective only if so expressed in writing by Landlord) or Landlord’s failure to exercise any right or remedy in respect of any such breach shall not constitute a waiver or relinquishment for the future of Landlord’s right to have any such covenant or condition duly performed or observed by Tenant, or of Landlord’s rights arising because of any subsequent breach of any such covenant or condition, nor bar any right or remedy of Landlord in respect of such breach or any subsequent breach.

(f) If there is a default by Tenant in the performance of any covenant, agreement, term, provision or condition contained in this Lease which results in an emergency situation, or there is an Event of Default, then in either case, Landlord, in addition to any other rights and remedies it has under this Lease and without thereby waiving such default, may perform the same for the account of and at the expense of Tenant (but shall not be obligated to do so), without notice in a case of emergency and in any other case if such default continues after 5 days from the date that Landlord gives written notice to Tenant of its intention to do so. Landlord may invoice Tenant for all amounts paid by Landlord and all losses, costs, and expenses incurred by Landlord in connection with any such performance by Landlord pursuant to this paragraph, plus the Administrative Fee, including, without limitation, all amounts paid and costs and expenses incurred by Landlord for any property, material, labor, or services provided, furnished, or rendered, or caused to be provided, furnished, or rendered, by Landlord to Tenant (together with interest at the rate of 1% per month from the date Landlord pays the amount or incurs the loss, cost, or expense until the date of full repayment by Tenant) monthly or immediately, at Landlord’s option, and shall be due and payable by Tenant to Landlord as Additional Rent within 60 days after Tenant receives the invoice. Any reservation of a right by Landlord to enter upon the Premises and to make or perform any repairs, alterations, or other work in, to, or about the Premises, which, in the first instance, is Tenant’s obligation pursuant to this Lease, shall not be deemed to impose any obligation on Landlord to do so, render Landlord liable to Tenant or any third party for the failure to do so, or relieve Tenant from any obligation to indemnify Landlord as otherwise provided elsewhere in this Lease.

(g) The rights granted to Landlord in this Section shall be cumulative of every other right or remedy provided in this Lease or which Landlord may otherwise have at law or in equity or by statute, and the exercise of one or more rights or remedies shall not prejudice or impair the concurrent or subsequent exercise of other rights or remedies or constitute a forfeiture or waiver of Rent or damages accruing to Landlord by reason of any Event of Default under this Lease. Landlord shall have all rights and remedies now or hereafter existing at law or in equity with respect to the enforcement of Tenant’s obligations hereunder and the recovery of the Premises. No right or remedy herein conferred upon or reserved to Landlord shall be exclusive of any other right or remedy, but shall be cumulative and in addition to all other rights and remedies given hereunder or now or hereafter existing at law or in equity. Landlord shall be entitled to injunctive relief in case of the violation, or attempted or threatened violation, of any covenant, agreement, condition or provision of this Lease, or to a decree compelling performance of any covenant, agreement, condition or provision of this Lease.

(h) No payment by Tenant or receipt by Landlord of a lesser amount than any payment of Fixed Rent or Additional Rent herein stipulated shall be deemed to be other than on account of the earliest stipulated Fixed Rent or Additional Rent due and payable hereunder, nor shall any endorsement or statement or any check or any letter accompanying any check or payment as Rent be deemed an accord and satisfaction. Landlord may accept such check or payment without prejudice to Landlord’s right to recover the balance of such Rent or pursue any other right or remedy provided for in this Lease, at law or in equity, and acceptance of such partial payment shall be deemed subject to Landlord’s reservation of all rights.

(i) Tenant further waives the right to any notices to quit as may be specified in the Landlord and TenantAct of Pennsylvania, Act of April 6, 1951, as amended, or any similar or successor provision of law, and agrees that 5 days’ notice shall be sufficient in any case where a longer period may be statutorily specified.

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(j) In addition to, and not in lieu of any of the foregoing rights granted to Landlord:

(1) WHEN THIS LEASE OR TENANT’S RIGHT OF POSSESSION SHALL BE TERMINATED BY COVENANT OR CONDITION BROKEN, OR FOR ANY OTHER REASON, EITHER DURING THE TERM OF THIS LEASE OR ANY RENEWAL OR EXTENSION THEREOF, AND ALSO WHEN AND AS SOON AS THE TERM HEREBY CREATED OR ANY EXTENSION THEREOF SHALL HAVE EXPIRED, IT SHALL BE LAWFUL FOR ANY ATTORNEY AS ATTORNEY FOR TENANT TO FILE AN AGREEMENT FOR ENTERING IN ANY COMPETENT COURT AN ACTION TO CONFESS JUDGMENT IN EJECTMENT AGAINST TENANT AND ALL PERSONS CLAIMING UNDER TENANT, WHEREUPON, IF LANDLORD SO DESIRES, A WRIT OF EXECUTION OR OF POSSESSION MAY ISSUE FORTHWITH, WITHOUT ANY PRIOR WRIT OF PROCEEDINGS, WHATSOEVER, AND PROVIDED IF FOR ANY REASON AFTER SUCH ACTION SHALL HAVE BEEN COMMENCED THE SAME SHALL BE DETERMINED AND THE POSSESSION OF THE PREMISES HEREBY DEMISED REMAIN IN OR BE RESTORED TO TENANT, LANDLORD SHALL HAVE THE RIGHT UPON ANY SUBSEQUENT DEFAULT OR DEFAULTS, OR UPON THE TERMINATION OF THIS LEASE AS HEREINBEFORE SET FORTH, TO BRING ONE OR MORE ACTION OR ACTIONS AS HEREINBEFORE SET FORTH TO RECOVER POSSESSION OF THE SAID PREMISES.

(2) In any action to confess judgment in ejectment, Landlord shall first cause to be filed in such action an affidavit made by it or someone acting for it setting forth the facts necessary to authorize the entry of judgment, of which facts such affidavit shall be conclusive evidence, and if a true copy of this Lease (and of the truth of the copy such affidavit shall be sufficient evidence) be filed in such action, it shall not be necessary to file the original as a warrant of attorney, any rule of Court, custom or practice to the contrary notwithstanding. Tenant represents to Landlord that it has a gross income of at least $10,000.

TENANT WAIVER. TENANT SPECIFICALLY ACKNOWLEDGES THAT TENANT HAS VOLUNTARILY, KNOWINGLY, AND INTELLIGENTLY WAIVED CERTAIN DUE PROCESS RIGHTS TO A PREJUDGMENT HEARING BY AGREEING TO THE TERMS OF THE FOREGOING PARAGRAPHS REGARDING CONFESSION OF JUDGMENT. TENANT FURTHER SPECIFICALLY AGREES THAT IN THE EVENT OF DEFAULT, LANDLORD MAY PURSUE MULTIPLE REMEDIES INCLUDING OBTAINING POSSESSION PURSUANT TO A JUDGMENT BY CONFESSION AND ALSO OBTAINING A MONEY JUDGMENT FOR PAST DUE AND ACCELERATED AMOUNTS AND EXECUTING UPON SUCH JUDGMENT. IN SUCH EVENT AND SUBJECT TO THE TERMS SET FORTH HEREIN, LANDLORD SHALL PROVIDE FULL CREDIT TO TENANT FOR ANY MONTHLY CONSIDERATION WHICH LANDLORD RECEIVES FOR THE LEASED PREMISES IN MITIGATION OF ANY OBLIGATION OF TENANT TO LANDLORD FOR THAT MONEY. FURTHERMORE, TENANT SPECIFICALLY WAIVES ANY CLAIM AGAINST LANDLORD AND LANDLORD’S COUNSEL FOR VIOLATION OF TENANT’S CONSTITUTIONAL RIGHTS IN THE EVENT THAT JUDGMENT IS CONFESSED PURSUANT TO THIS LEASE.

TENANT: PREIT ASSOCIATES, L.P.
By: Preit Services, LLC, its managing agent
By:	/s/ Lisa M. Most
Name:	Lisa M. Most
Title:	Senior Vice President, General Counsel & Secretary
Date:	11/29/18

(k) If Landlord defaults in the performance of any of its maintenance or repair obligations under this Lease, Tenant may send to Landlord written notice thereof, which notice must identify with reasonable specificity the default and Tenant’s remedies under this paragraph (“Reminder Notice”). If Landlord fails to either: (i) dispute the existence of such default within 5 business days; or (ii) cure such default within Landlord’s Cure Period,

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then a “Landlord Failure” is deemed to exist and Tenant will have all rights and remedies available at law or in equity for a landlord default “Landlord’s Cure Period” means 30 days after Landlord’s receipt of a Reminder Notice, provided if cure cannot be reasonably effected by Landlord within such 30-day period, Landlord’s Cure Period includes such additional time as may be reasonably necessary for Landlord to cure, provided Landlord commences to cure within such 30-day period and diligently prosecutes such cure to completion. If a Landlord Failure results in an imminent, material threat to persons or Tenant’s property at the Premises, the Reminder Notice must so state and if Landlord fails to cure such Landlord Failure, then Tenant may, subject to the terms of this paragraph, perform such cure with respect to the Premises. Except to the extent specifically set forth otherwise in this paragraph, in no event shall Tenant have the right to terminate or cancel this Lease, withhold or abate rent, or setoff any claim for damages against Rent as a result of any default or breach by Landlord of its covenants or obligations or any representations, warranties, or promises hereunder. In effecting such cure, Tenant shall not take or permit to be taken any action or omission that could jeopardize the effectiveness of the roof, HVAC, or other warranties for the Building, or otherwise affect any Building system. All actions taken by Tenant to cure a Landlord Failure pursuant to this paragraph must be in accordance with all Laws. Tenant may use only contractors who are duly licensed in the State, perform such work in comparable buildings in the normal course of their business, charge rates that are reasonable and competitive, and are reasonably approved by Landlord. Upon commencing such work, Tenant’s contractors must complete the cure within a reasonable period of time, and in a good and workmanlike manner. Prior to commencing any such work, Tenant must cause its contractors and subcontractors to provide to Landlord certificates evidencing adequate insurance coverage naming Landlord and any other associated or affiliated entity as addition insureds. Tenant shall indemnify, defend, protect, and hold harmless Landlord from and against any and all loss, cost, damage, or liability incurred by Landlord arising out of or from or related to Tenant’s performance of any such cure, including, without limitation, claims made by other occupants of the Building that Tenant’s performance of such work interfered with their occupancy of space in the Building. Upon Tenant’s cure of the Landlord Failure, Landlord shall reimburse Tenant for Tenant’s reasonable, out-of-pocket, third-party costs incurred in curing the Landlord Failure within 30 days after Landlord’s receipt of an Invoice for such costs (with such back-up documentation as Landlord might reasonably request). An “Invoice” means a detailed notice of the work completed and the materials used, all reasonably requested lien waivers, together with a schedule of all costs expended by Tenant in performing such work. An “Objection” means a written objection by Landlord to the payment of such Invoice setting forth with reasonable particularity Landlord’s reasons for its claim that such action did not have to be taken by Landlord pursuant to this Lease or that the charges set forth on the Invoice(s) are excessive or otherwise not complete. If Landlord delivers an Objection to Tenant and if such parties are not able to resolve any dispute regarding Tenant’s Invoice or Landlord’s Objection within 30 days after Tenant receives such Objection, then Tenant may pay amounts due to Landlord under this Lease into an escrow account until such Invoice and any Objection thereto are satisfactorily resolved by the parties or by a court of competent jurisdiction.

(l) If there is an Event of Default, Landlord shall use commercially reasonable efforts to mitigate its damages. However, Landlord shall not be required to give any special preference or priority to reletting the Premises over other vacant space in the Building, Landlord shall be deemed to have used commercially reasonable efforts if it uses the same efforts in marketing the Premises as used in marketing other vacant space at the Building. Any damages to which Landlord is entitled pursuant to this Section 17 shall be reduced by any Transfer Profit paid by Tenant to Landlord.

18. SURRENDER: HOLDOVER.

(a) By no later than the Expiration Date or earlier termination of Tenant’s right to possession of the Premises (such earlier date, the “Surrender Date”). Tenant shall vacate and surrender the Premises to Landlord in good order and condition, free of all Transferees, vacant, broom clean, and in conformity with the applicable provisions of this Lease, including without limitation Sections 9 and 11. Tenant shall have no right to hold over beyond the Surrender Date, and if Tenant does not vacate as required such failure shall be deemed an Event of Default and Tenant’s occupancy shall not be construed to effect or constitute anything other than a tenancy at sufferance. During any period of occupancy beyond the Surrender Date, the amount of Fixed Rent owed by Tenant to Landlord will be the Holdover Percentage of the Fixed Rent for the month immediately prior to the Expiration Date, without prorating for any partial month of holdover in excess of five (5) days, and except that any provisions in this Lease that limit the amount or defer the payment of Additional Rent are null and void (and Tenant shall remain liable for 100% of all Additional Rent). The “Holdover Percentage” equals: (i) 150% for the first two (2) months of holdover; and (ii) 200% for any period of holdover beyond two (2) months. The acceptance of Rent by Landlord or the failure or delay of

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Landlord in notifying or evicting Tenant following the Surrender Date shall not create any tenancy rights in Tenant and any such payments by Tenant may be applied by Landlord against its costs and expenses, including reasonable attorneys’ fees, incurred by Landlord as a result of such holdover. The provisions of this Section shall not constitute a waiver by Landlord of any right of reentry as set forth in this Lease; nor shall receipt of any Rent or any other act in apparent affirmance of the tenancy operate as a waiver of Landlord’s right to terminate this Lease for a breach of any of the terms, covenants, or obligations herein on Tenant’s part to be performed. No option to extend this Lease shall have been deemed to have occurred by Tenant’s holdover, and any and all options to extend this Lease or expand the Premises shall be deemed terminated and of no further effect as of the first date that Tenant holds over. In addition, if Tenant fails to vacate and surrender the Premises as herein required by the Surrender Date, Tenant shall indemnify, defend, and hold harmless Landlord from and against any and all costs, losses, expenses, or liabilities incurred, as a result of or related to such failure, including without limitation, claims made by any succeeding tenant and real estate brokers’ claims and reasonable attorneys’ fees; provided, however, Tenant’s indemnification obligation under this sentence shall not include indirect or consequential damages unless and until Tenant holds over for 60 or more days. Tenant’s obligation to pay Rent and to perform all other Lease obligations for the period up to and including the Surrender Date, and the provisions of this Section, shall survive the Expiration Date. In no way shall the remedies to Landlord set forth above be construed to constitute liquidated damages for Landlord’s losses resulting from Tenant’s holdover.

(b) Prior to the Surrender Date, Tenant, at Tenant’s expense, shall remove from the Premises Tenant’s Property (but excluding communication equipment system, wiring, and cabling), and restore in a good and workmanlike manner any damage to the Premises and/or the Building caused by such removal or replace the damaged component of the Premises and/or the Building if such component cannot be restored as aforesaid as reasonably determined by Landlord. Notwithstanding the foregoing, Tenant shall not be required to remove a Specialty Alteration if at the time Tenant requests Landlord’s consent to such Specialty Alteration, Tenant provides Landlord with written notification that Tenant desires to not be required to remove such Specialty Alteration and Landlord consents in writing to Tenant’s non-removal request. A “Specialty Alteration” means an Alteration that: (i) Landlord required to be removed in connection with Landlord’s consent to making such Alteration; or (ii) is not Building standard, including without limitation kitchens (other than a pantry installed for the use of Tenant’s employees only), executive restrooms, computer room installations, supplemental HVAC equipment and components, safes, vaults, libraries or file rooms requiring reinforcement of floors, internal staircases, slab penetrations, non-Building standard life safety systems, security systems, specialty door locksets (such as cipher locks) or lighting, and any demising improvements done by or on behalf of Tenant after the Commencement Date. For the avoidance of doubt, Tenant shall not be required to remove the internal staircase which is being constructed as part of the Leasehold Improvements unless Tenant downsizes pursuant to Section 29 or otherwise, nor any Alterations other than Specialty Alterations (if required by this Section 18(b)). If Tenant fails to remove any of Tenant’s Property as and when required herein, the same shall be deemed abandoned and Landlord, at Tenant’s expense, may remove and dispose of same and repair and restore any damage caused thereby, or, at Landlord’s election, such Tenant’s Property shall become Landlord’s property.

19. RULES AND REGULATIONS. Tenant covenants that Tenant and Tenant Agents shall comply with the rules and regulations set forth on Exhibit E attached hereto. Landlord shall have the right to rescind and/or augment any of the rules and regulations and to make such other and further written rules and regulations as in the reasonable judgment of Landlord shall from time to time be needed for the safety, protection, care, and cleanliness of the Project, the operation thereof, the preservation of good order therein, and the protection and comfort of its tenants, their agents, employees, and invitees, so long as any rescinding or augmentation of the rules and regulations does not materially increase Tenant’s obligations or materially decrease Tenant’s rights under this Lease, or materially and adversely change the character of the Building or the Project, which when delivered to Tenant shall be binding upon Tenant in a like manner as if originally prescribed. In the event of an inconsistency between the rules and regulations and this Lease, the provisions of this Lease shall control. Landlord shall not have any liability to Tenant for any failure of any other tenants to comply with any of the rules and regulations. Notwithstanding the foregoing, Landlord shall use commercially reasonable efforts to apply the rules and regulations to, and enforce the rules and regulations against, all tenants of the Building in a nondiscriminatory manner, subject to the terms of applicable leases.

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20. GOVERNMENTAL REGULATIONS.

(a) Landlord represents to Tenant that, as of the date of this Lease, to Landlord’s actual knowledge without independent investigation: (i) the Premises are, and as of the Commencement Date the Premises will be, in material compliance with all Laws; and (ii) there are no hazardous substances on the Premises in violation of environmental Laws, nor will there be as of the Commencement Date. Tenant shall not use, generate, manufacture, refine, transport, treat, store, handle, dispose, bring, or otherwise cause to be brought or permit any Tenant Agent to bring, in, on, or about any part of the Project, any hazardous waste, solid waste, hazardous substance, toxic substance, petroleum product or derivative, asbestos, polychlorinated biphenyl, hazardous material, pollutant, contaminant, or similar material or substance as defined by the Comprehensive Environmental Response Compensation and Liability Act, 42 U.S.C. Sections 9601 et seq., as the same may from time to time be amended, and the regulations promulgated pursuant thereto (CERCLA), or now or hereafter defined or regulated as such by any other Law (“Hazardous Material”). Notwithstanding the foregoing, Tenant shall be permitted to bring onto the Premises office cleaning supplies and products normally found in modern offices provided Tenant only brings a reasonable quantity of such supplies and products onto the Premises and Tenant shall at all times comply with all Laws pertaining to the storage, handling, use, disposal, and application of such supplies and products, and all Laws pertaining to the communication to employees and other third parties of any hazards associated with such supplies and products. Tenant shall not cause or permit to exist any release, spillage, emission, or discharge of any Hazardous Material on or about the Premises (“Release”). In the event of a Release in the Premises, Tenant shall immediately notify Landlord in writing, report such Release to the relevant government agencies as, and if, required by applicable Law, and promptly remove the Hazardous Material and otherwise investigate and remediate the Release in accordance with applicable Law and to the reasonable satisfaction of Landlord. Landlord shall have the right, but not the obligation, to enter upon the Premises to investigate and/or remediate the Release in lieu of Tenant, and Tenant shall reimburse Landlord as Additional Rent for the actual reasonable costs of such remediation and investigation. Tenant shall promptly notify Landlord if Tenant acquires knowledge of the presence of any Hazardous Material on or about the Premises, except as Tenant is permitted to bring onto the Premises under this Lease. Landlord shall have the right to inspect and assess the Premises for the purpose of determining whether Tenant is handling any Hazardous Material in violation of this Lease or applicable Law, or to ascertain the presence of any Release. This subsection shall survive the Expiration Date.

(b) Tenant shall, and shall cause Tenant Agents to, use the Premises in compliance with all applicable Laws. Tenant shall, at its sole cost and expense, promptly comply with each and all of such Laws, except in the case of required structural changes not triggered by Tenant’s particular use or manner of use or change in use of the Premises, or Tenant’s Alterations. Without limiting the generality of the foregoing, Tenant shall: (i) obtain, at Tenant’s expense, before engaging in Tenant’s business or profession within the Premises, all necessary licenses and permits including, but not limited to, state and local business licenses, and permits; and (ii) remain in compliance with and keep in full force and effect at all times all licenses, consents, and permits necessary for the lawful conduct of Tenant’s business or profession at the Premises. Tenant shall pay all personal property taxes, income taxes, gross receipts taxes, and other taxes, assessments, duties, impositions, and similar charges that are or may be assessed, levied, or imposed upon Tenant or Tenant’s Property. Tenant shall also comply with all applicable Laws that do not relate to the physical condition of the Premises and with which only the occupant can comply, such as laws governing maximum occupancy, workplace smoking, VDT regulations, and illegal business operations, such as gambling. The judgment of any court of competent jurisdiction or the admission of Tenant in any judicial, governmental or regulatory action, regardless of whether Landlord is a party thereto, that Tenant has violated any of such Laws shall be conclusive of that fact as between Landlord and Tenant.

(c) Notwithstanding anything to the contrary in this Lease, if the requirement of any public authority obligates either Landlord or Tenant to expend money in order to bring the Premises and/or any area of the Project into compliance with Laws as a result of: (i) Tenant’s particular use (other than general office use) or Alteration of the Premises; (ii) Tenant’s change in the use of the Premises; (iii) the manner of conduct of Tenant’s business (other than general office use) or operation of its installations, equipment, or other property therein; or (iv) breach of any of Tenant’s obligations hereunder, then Tenant shall bear all costs of bringing the Premises and/or Project into compliance with Laws, whether such costs are related to structural or nonstructural elements of the Premises or Project.

(d) Except to the extent Tenant shall comply as set forth above in this Section 21, during the Term Landlord shall comply with all applicable Laws regarding the Project (including the Premises), including without limitation compliance with Title III of the Americans with Disabilities Act of 1990,42 U.S.C. §12181 et seq. and its regulations as to the design and construction of the Common Areas.

(e) Each party hereto hereby acknowledges and agrees that it will not knowingly violate any applicable Laws regarding bribery, corruption, and/or prohibited business practices as they concern each such party’s respective activities under or in connection with this Lease, and each such party will be solely responsible for and will hold harmless the other party from and against any claims or liabilities in connection with any of such responsible party’s own violations of any such Laws.

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21. NOTICES. Wherever in this Lease it is required or permitted that notice or demand be given or served by either party to this Lease to or on the other party, such notice or demand will be duly given or served if in writing and either: (i) personally served; (ii) delivered by prepaid nationally recognized courier service (e.g., Federal Express, UPS, and USPS) with evidence of receipt required for delivery; (iii) delivered by registered or certified mail, return receipt requested, postage prepaid; or (iv) if an email address is provided by the recipient, emailed with confirmation of receipt by the recipient; in all such cases addressed to the parties at the addresses set forth below. Each such notice will be deemed to have been given to or served upon the party to which addressed on the date the same is delivered or delivery is refused. Each party has the right to change its address for notices (provided such new address is in the continental United States) by a writing sent to the other party in accordance with this Section, and each party will, if requested, within 10 days confirm to the other its notice address. Notices from Landlord may be given by either an agent or attorney acting on behalf of Landlord.

Tenant: Prior to the Commencement Date:

PREIT Associates, L.P.

Attn: General Counsel

200 S. Broad St., 3^rd Floor

Philadelphia, PA 19102

Email: generalcounsel@preit.com

From and after the Commencement Date:

PREIT Associates, L.P.

Attn: General Counsel

2005 Market St., Suite 1000

Philadelphia, PA 19103

Email: generalcounsel@preit.com

Landlord:        Commerce Square Partners - Philadelphia Plaza, L.P.	With a copy to:
c/o Brandywine Realty Trust	Email: Legal.Notices@bdnreit.com

Attn: Jeff DeVuono, Executive Vice President & Senior

Managing Director, RE: Building #181

FMC Tower at Cira Centre South

2929 Walnut St., Suite 1700

Philadelphia, PA 19104

Phone No. 610-325-5600

Email: jeff.devuono@bdnreit.com

Notwithstanding anything to the contrary in this Lease, billing statements and the like may be sent by regular mail or electronic means (such as email) to Tenant’s billing contact without copies.

Tenant’s billing contact:

Prior to the Commencement Date:

PREIT Associates, L.P.

Attn: Robert McCadden

200 S. Broad St., 3^rd Floor

Philadelphia, PA 19102

Phone: 215-454-1295

Email: Bob.McCadden@preit.com

From and after the Commencement Date:

PREIT Associates, L.P.

Attn: Robert McCadden

2005 Market St., Suite 1000

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Philadelphia, PA 19103

Phone: 215-454-1295

Email: Bob.McCadden@preit.com

22. BROKERS. Landlord and Tenant each represents and warrants to the other that such representing party has had no dealings, negotiations, or consultations with respect to the Premises or this transaction with any broker or finder other than a Landlord affiliate and Broker. Each party shall indemnify, defend, and hold harmless the other from and against any and all liability, cost, and expense (including reasonable attorneys’ fees and court costs), arising out of or from or related to its misrepresentation or breach of warranty under this Section. Landlord shall pay Broker a commission in connection with this Lease pursuant to the terms of a separate written agreement between Landlord and Broker. This Section shall survive the Expiration Date.

23. LANDLORD’S LIABILITY. Landlord’s obligations hereunder shall be binding upon Landlord only for the period of time that Landlord is in ownership of the Building, and upon termination of that ownership, Tenant, except as to any obligations that are then due and owing, shall look solely to Landlord’s successor-in-interest in ownership of the Building for the satisfaction of each and every obligation of Landlord hereunder. Upon request and without charge, Tenant shall attorn to any successor to Landlord’s interest in this Lease. Landlord may transfer its interest in the Building without the consent of Tenant, and such transfer or subsequent transfer shall not be deemed a violation on Landlord’s part of any of the terms of this Lease. Landlord shall have no personal liability under any of the terms, conditions, or covenants of this Lease. Tenant and Tenant Agents shall look solely to the equity of Landlord in the Building and/or the rents and/or net proceeds actually received therefrom for the satisfaction of any claim, remedy, or cause of action of any kind whatsoever arising from the relationship between the parties or any rights and obligations they may have relating to the Project, this Lease, or anything related to either, including without limitation as a result of the breach of any Section of this Lease by Landlord. In addition, no recourse shall be had for an obligation of Landlord hereunder, or for any claim based thereon or otherwise in respect thereof or the relationship between the parties, against any past, present, or future Landlord Indemnitee (other than Landlord), whether by virtue of any statute or rule of law, or by the enforcement of any assessment or penalty or otherwise, all such other liability being expressly waived and released by Tenant with respect to the Landlord Indemnitees (other than Landlord).

24. RELOCATION. [INTENTIONALLY DELETED]

25. GENERAL PROVISIONS.

(a) Provided Tenant has performed all of the terms and conditions of this Lease to be performed by Tenant, including the payment of Rent, Tenant shall peaceably and quietly hold and enjoy the Premises for the Term, without hindrance from Landlord or anyone lawfully or equitably claiming by, through, or under Landlord, under and subject to the terms and conditions of this Lease and of any deeds of trust now or hereafter affecting all or any portion of the Premises.

(b) Subject to the terms and provisions of Section 10, the respective rights and obligations provided in this Lease shall bind and inure to the benefit of the parties hereto, their successors and assigns.

(c) This Lease shall be governed in accordance with the Laws of the State, without regard to choice of law principles. Landlord and Tenant hereby consent to the exclusive jurisdiction of the state and federal courts located in the jurisdiction in which the Project is located.

(d) In connection with any litigation or arbitration arising out of this Lease, Landlord or Tenant, whichever is the prevailing party as determined by the trier of fact in such litigation, shall be entitled to recover from the other party all reasonable costs and expenses incurred by the prevailing party in connection with such litigation, including reasonable attorneys’ fees. If, in the context of a bankruptcy case, Landlord is compelled at any time to incur any expense, including attorneys’ fees, in enforcing or attempting to enforce the terms of this Lease or to enforce or attempt to enforce any actions required under the Bankruptcy Code to be taken by the trustee or by Tenant, as debtor-in-possession, then the sum so paid by Landlord shall be awarded to Landlord by the Bankruptcy Court and shall be immediately due and payable by the trustee or by Tenant’s bankruptcy estate to Landlord in accordance with the terms of the order of the Bankruptcy Court.

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(e) This Lease, which by this reference incorporates all exhibits, riders, schedules, and other attachments hereto, supersedes all prior discussions, proposals, negotiations and discussions between the parties and this Lease contains all of the agreements, conditions, understandings, representations, and warranties made between the parties hereto with respect to the subject matter hereof, and may not be modified orally or in any manner other than by an agreement in writing signed by both parties hereto or their respective successors-in-interest. Whenever placed before one or more items, the words “include”, “includes”, and “including” shall mean considered as part of a larger group, and not limited to the item(s) recited. Except to the extent expressly set forth otherwise in this Lease, neither Landlord, nor anyone acting on Landlord’s behalf, has made any representation, warranty, estimation, or promise of any kind or nature whatsoever relating to the physical condition of the Building or the land under the Building or suitability, including without limitation, the fitness of the Premises for Tenant’s intended use. If any provisions of this Lease are held to be invalid, void, or unenforceable, the remaining provisions hereof shall in no way be affected or impaired and such remaining provisions shall remain in full force and effect.

(f) TIME IS OF THE ESSENCE UNDER ALL PROVISIONS OF THIS LEASE, INCLUDING ALL NOTICE PROVISIONS.

(g) If Landlord or Tenant is in any way delayed or prevented from performing any obligation (except for payment of any amount due by a party hereunder and the giving of notice with respect to the exercise of a Lease option) due to fire or other casualty (or reasonable delays in the adjustment of insurance claims), acts of terrorism, war or other emergency (including severe weather emergency), governmental delay beyond what is commercially reasonable (provided the party claiming the delay provides reasonable evidence to the other party that the party claiming the delay is diligently pursuing the approval or permit that is the subject to the governmental delay), inability to obtain any materials or services (exclusive of delays in connection with long-lead items requested by Tenant for the Leasehold Improvements, which are covered under Exhibit C, Section 8), acts of God, strike, lockout or other labor dispute, orders or regulations of any federal, state, county or municipal authority, embargoes, or any other cause beyond such party’s reasonable control (whether similar or dissimilar to the foregoing events) (each, a “Force Majeure Event”), then the time for performance of such obligation shall be excused for the period of such delay or prevention (and such party shall not be deemed in default with respect to the performance of its obligations) and extended for a period equal to the period of such delay or prevention. Financial disability or hardship shall never constitute a Force Majeure Event. No such inability or delay due to a Force Majeure Event shall constitute an actual or constructive eviction, in whole or in part, or entitle Tenant to any abatement or diminution of Rent (except as otherwise expressly set forth herein), or relieve the other party from any of its obligations under this Lease, or impose any liability upon such party or its agents, by reason of inconvenience or annoyance to the other party, or injury to or interruption of the other party’s business, or otherwise.

(h) Excepting payments of Fixed Rent, Operating Expenses, and utilities (which are to be paid as set forth in Sections 4, 5, and 6) and unless a specific time is otherwise set forth in this Lease for any Tenant payments, all amounts due from Tenant to Landlord shall be paid by Tenant to Landlord as Additional Rent within 60 days after receipt of an invoice therefor.

(i) Unless Tenant’s financials are publicly available online at no cost to Landlord, within 10 business days after written request by Landlord (but not more than once during any 12-month period unless a default has occurred under this Lease or Landlord has a reasonable basis to suspect that Tenant has suffered a material adverse change in its financial position, or in the event of a sale, financing, or refinancing by Landlord of all or any portion of the Project), Tenant shall furnish to Landlord, Mortgagee, or Landlord’s prospective mortgagee or purchaser, reasonably requested financial information. In connection therewith and upon Tenant’s request, Landlord and Tenant shall execute a mutually acceptable confidentiality agreement on Landlord’s form therefor.

(j) Tenant represents and warrants to Landlord that: (i) Tenant was duly organized and is validly existing and in good standing under the Laws of the jurisdiction set forth for Tenant in the first sentence of this Lease; (ii) Tenant is legally authorized to do business in the State; (iii) the person(s) executing this Lease on behalf of Tenant is(are) duly authorized to do so; and (iv) Tenant has the full corporate or partnership power and authority to enter into this Lease and has taken all corporate or partnership action, as the case may be, necessary to carry out the transaction contemplated herein, so that when executed, this Lease constitutes a valid and binding obligation enforceable in accordance with its terms. From time to time upon Landlord’s request, Tenant will provide Landlord with corporate resolutions or other proof in a form acceptable to Landlord authorizing the execution of this Lease at

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the time of such execution. Landlord represents and warrants to Tenant that: (i) Landlord was duly organized and is validly existing and in good standing under the Laws of the jurisdiction set forth for Landlord in the first sentence of this Lease; (ii) Landlord is legally authorized to do business in the State; (iii) the person(s) executing this Lease on behalf of Landlord is(are) duly authorized to do so; and (iv) Landlord has the full corporate or partnership power and authority to enter into this Lease and has taken all corporate or partnership action, as the case may be, necessary to carry out the transaction contemplated herein, so that when executed, this Lease constitutes a valid and binding obligation enforceable in accordance with its terms.

(k) Each party hereto represents and warrants to the other that such party is not a party with whom the other is prohibited from doing business pursuant to the regulations of the Office of Foreign Assets Control (“OFAC”) of the U.S. Department of the Treasury, including those parties named on OFAC’s Specially Designated Nationals and Blocked Persons List. Each party hereto is currently in compliance with, and shall at all times during the Term remain in compliance with, the regulations of OFAC and any other governmental requirement relating thereto. Each party hereto shall defend, indemnify, and hold harmless the other from and against any and all claims, damages, losses, risks, liabilities, and expenses (including reasonable attorneys’ fees and costs) incurred by the other to the extent arising from or related to any breach of the foregoing certifications. The foregoing indemnity obligations shall survive the Expiration Date.

(l) Landlord shall have the right, to the extent required to be disclosed by Landlord or Landlord’s affiliates in connection with filings required by applicable Laws, including without limitation the Securities and Exchange Commission (“SEC”), without notice to Tenant to include in such securities filings general information relating to this Lease, including, without limitation, Tenant’s name, the Building, and the square footage of the Premises. Except as set forth in the preceding sentence, neither Tenant nor Landlord shall issue, or permit any broker, representative, or agent representing either party in connection with this Lease to issue: (i) any press release; or (ii) any other public disclosure regarding the specific terms of this Lease (or any amendments or modifications hereof), without the prior written approval of the other party. The parties acknowledge that the transaction described in this Lease and the terms thereof (but not the existence thereof) are of a confidential nature and shall not be disclosed except to such party’s employees, attorneys, accountants, consultants, advisors, affiliates, and actual and prospective purchasers, lenders, investors, subtenants and assignees (collectively, “Permitted Parties”), and except as, in the good faith judgment of Landlord or Tenant, may be required to enable Landlord or Tenant to comply with its obligations under Law or under laws and regulations of the SEC. Neither party may make any public disclosure of the specific terms of this Lease, except as required by Law, including without limitation SEC laws and regulations, or as otherwise provided in this paragraph. In connection with the negotiation of this Lease and the preparation for the consummation of the transactions contemplated hereby, each party acknowledges that it will have had access to confidential information relating to the other party. Each party shall treat such information and shall cause its Permitted Parties to treat such confidential information as confidential, and shall preserve the confidentiality thereof, and not duplicate or use such information, except by Permitted Parties.

(m) Neither Tenant, nor anyone acting through, under, or on behalf of Tenant, shall have the right to record this Lease, nor any memorandum, notice, affidavit, or other writing with respect thereto.

(n) Whenever Tenant is required to obtain Landlord’s consent pursuant to this Lease or the exhibits hereto, Landlord’s consent shall not be unreasonably conditioned, withheld, or delayed.

(o) Tenant shall not claim any money damages by way of setoff, counterclaim, or defense, based on any claim that Landlord unreasonably withheld its consent, in which case Tenant’s sole and exclusive remedy shall be an action for specific performance, injunction, or declaratory judgment. Notwithstanding the foregoing, if a court determines that Landlord acted maliciously or in bad faith in unreasonably withholding, conditioning, or delaying its consent or approval in an instance where Landlord was obligated not to unreasonably withheld, condition, or delay its consent or approval, then the limitation on damages and remedies provided for in this paragraph shall have no further application.

(p) All requests made to Landlord to perform repairs or furnish services, supplies, utilities, or freight elevator usage (if applicable), shall be made online to the extent available (currently such requests shall be made via http://etenants.com/, as the same may be modified by Landlord from time to time) otherwise via email or written communication to Landlord’s property manager for the Building. Whenever Tenant requests Landlord to take

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any action not required of Landlord under this Lease or give any consent required or permitted to be given by Landlord under this Lease (for example, a request for a Transfer consent, a consent to an Alteration, or a subordination of Landlord’s lien, but other than a request for services, supplies, or utilities which is governed by Section 7(b)), Tenant shall pay to Landlord for Landlord’s administrative and/or professional costs in connection with each such action or consent Landlord’s reasonable costs incurred by Landlord in reviewing and taking the proposed action or consent, including reasonable attorneys’, engineers’ and/or architects’ fees (as applicable). Provided Landlord’s standard forms are used in connection with the request (to the extent applicable) without material modifications or protracted negotiations, Landlord’s costs shall not exceed $2,500 per request for the Initial Term. The foregoing amount shall be paid by Tenant to Landlord within 60 days after Landlord’s delivery to Tenant of an invoice for such amount. Tenant shall pay such amount without regard to whether Landlord takes the requested action or gives the requested consent.

(q) Tenant acknowledges and agrees that Landlord shall not be considered a “business associate” for any purpose under the Health Insurance Portability and Accountability Act of 1996 and all related implementing regulations and guidance.

(r) Tenant shall cause any work performed on behalf of Tenant to be performed by contractors who work in harmony, and shall not interfere, with any labor employed by Landlord or Landlord’s contractors. If at any time any of the contractors performing work on behalf of Tenant does not work in harmony or interferes with any labor employed by Landlord, other tenants, or their respective mechanics or contractors, then the permission granted by Landlord to Tenant to do or cause any work to be done in or about the Premises may be withdrawn by Landlord with 48 hours’ written notice to Tenant.

(s) This Lease may be executed in any number of counterparts, each of which when taken together shall be deemed to be one and the same instrument. The submission of this Lease by Landlord to Tenant for examination does not constitute a reservation of or option for the Premises or of any other space within the Building or in other buildings owned or managed by Landlord or its affiliates. This Lease shall not be binding nor shall either party have any obligations or liabilities or any rights with respect hereto, or with respect to the Premises, unless and until both parties have executed and delivered this Lease. The parties acknowledge and agree that notwithstanding any law or presumption to the contrary, the exchange of copies of this Lease and signature pages by electronic transmission shall constitute effective, execution and delivery of this Lease for all purposes, and signatures of the parties hereto transmitted and/or produced electronically shall be deemed to be their original signature for all purposes.

(t) Landlord and persons authorized by Landlord may enter the Premises for any commercially reasonable purpose at all reasonable times upon reasonable advance notice or, in the case of an emergency, at any time without notice. Notwithstanding the foregoing, Landlord shall not show the Premises to prospective tenants prior to the last 12 months of the Term, and Tenant shall have the right to have a Tenant employee accompany Landlord’s representative. Landlord shall not be liable for inconvenience to or disturbance of Tenant by reason of any such entry; provided, however, in the case of repairs or work, such shall be done, so far as practicable, so as to not unreasonably interfere with Tenant’s use of the Premises.

(u) If more than one person executes this Lease as Tenant, each of them is jointly and severally liable for the keeping, observing, and performing of all of the terms, covenants, conditions, provisions, and agreements of this Lease to be kept, observed, and performed by Tenant.

(v) TO THE EXTENT PERMITTED BY APPLICABLE LAW, LANDLORD AND TENANT HEREBY WAIVE TRIAL BY JURY IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM BROUGHT BY EITHER AGAINST THE OTHER ON ANY MATTER ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS LEASE, THE RELATIONSHIP OF LANDLORD AND TENANT, OR TENANT’S USE OR OCCUPANCY OF THE BUILDING, ANY CLAIM OR INJURY OR DAMAGE, OR ANY EMERGENCY OR OTHER STATUTORY REMEDY WITH RESPECT THERETO. TENANT CONSENTS TO SERVICE OF PROCESS AND ANY PLEADING RELATING TO ANY SUCH ACTION AT THE PREMISES; PROVIDED, HOWEVER, NOTHING HEREIN SHALL BE CONSTRUED AS REQUIRING SUCH SERVICE AT THE PREMISES. TENANT WAIVES ANY RIGHT TO RAISE ANY NONCOMPULSORY COUNTERCLAIM IN ANY SUMMARY OR EXPEDITED ACTION OR PROCEEDING INSTITUTED BY LANDLORD. LANDLORD, TENANT, ALL GUARANTORS, AND ALL GENERAL PARTNERS EACH WAIVES ANY OBJECTION TO THE VENUE OF ANY ACTION FILED IN ANY COURT SITUATED IN THE JURISDICTION IN WHICH THE BUILDING IS LOCATED, AND WAIVES ANY RIGHT, CLAIM, OR POWER UNDER THE DOCTRINE OF FORUM NON CONVENIENS OR OTHERWISE TO TRANSFER ANY SUCH ACTION TO ANY OTHER COURT.

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(w) Except in connection with a Tenant holdover beyond 60 days or Section 17(b)(i), and notwithstanding anything to the contrary in this Lease, each party waives, and the other shall not be liable to the waiving party for, any claim against the other party or the other party’s agents, invitees, employees, or contractors, for loss of business opportunity, loss of profits, loss of income, economic loss, consequential damages, or punitive damages; the foregoing waiver shall survive the expiration or sooner termination of this Lease.

26. EXTENSION OPTIONS.

(a) Provided: (i) no Event of Default exists; and (ii) this Lease is in full force and effect, Tenant shall have the right to extend the Term (“Extension Option”) with respect to the Extension Premises for up to 2 consecutive terms of 60 months each beyond the end of the Initial Term (each an “Extension Term”) by delivering Tenant’s written extension election notice to Landlord no later than 12 months prior to the expiration of the Initial Term or the then-current Extension Term (“Extension Deadline”) but no earlier than 15 months prior to the expiration of the Initial Term or the then-current Extension Term, as applicable. The “Extension Premises” means, as designated by Tenant in its notice of extension, either all of the Premises or that portion of the Premises containing at least 1 full floor of the Building, provided Tenant and Landlord shall mutually agree on the location of such portion to the extent any portion consists of less than an entire floor. Notwithstanding the foregoing, if Tenant’s notice of extension is silent as to the designation of the Extension Premises, then Tenant shall be deemed to have designated all of the Premises to be the Extension Premises. The terms and conditions of this Lease during each Extension Term shall remain unchanged except Tenant shall only be entitled to the 2 Extension Terms provided above, the annual Fixed Rent for the applicable Extension Term shall be the Extension Rent (as defined below), the Expiration Date shall be the last day of the Extension Term (or such earlier date of termination of this Lease pursuant to the terms hereof), and, except to the extent reflected in the Extension Rent, Landlord shall have no obligation to perform any tenant improvements to the Extension Premises or provide any tenant improvement allowance to Tenant. Upon Tenant’s delivery of its written extension election notice, Tenant may not thereafter revoke its exercise of the Extension Option. Notwithstanding anything to the contrary in this Lease, Tenant shall have no right to extend the Term other than or beyond the 2, 60-month Extension Terms described in this paragraph.

(b) “Extension Rent” means ninety-five percent (95%) of the fair market extension term base rent for space comparable to the Extension Premises in comparable buildings in the market in which the Project is located. In determining the Extension Rent, Landlord, Tenant and any broker shall take into account all relevant factors including, without limitation, prevailing market allowances and concessions for renewing tenants, space measurement methods and loss factors, the lease term, the size of the space, the location of the building(s), the amenities offered at the building(s), the age of the building(s), and whether Project Expenses and other pass-through expenses are on a triple net, base year, expense stop or other basis. In lieu of directly providing any prevailing market allowances and/or concessions, Landlord may elect to reduce the Extension Rent by the economic equivalent thereof to reflect the fact that such allowances and concessions were not provided directly to Tenant. During the Extension Term, Tenant shall not be entitled to any tenant improvement allowances, free rent periods or other economic concessions (if any) that Tenant was entitled to during the prior Term, except to the extent such items are factored into the Extension Rent as set forth in this Section. When the Extension Rent is being determined for the first year of the Extension Term, the Extension Rent for the second and all subsequent years of the Extension Term shall also be determined in accordance with the same procedures as are set forth herein and based upon the then prevailing annual rent escalation factor in the applicable leasing market.

(c) If Tenant timely exercises an Extension Option and Landlord and Tenant do not agree upon the Extension Rent in writing by the date that is the later of 20 days after Landlord’s receipt of Tenant’s extension notice or 3 months prior to the Extension Deadline, then within 15 days after either party notifies the other in writing that such notifying party desires to determine the Extension Rent in accordance with the procedures set forth in this Section, Landlord and Tenant shall each deliver to the other party a written statement of such delivering party’s determination of the Extension Rent, together with such supporting documentation as the delivering party desires to deliver. Within 10 days after such 15-day period, Landlord and Tenant shall appoint a real estate broker having a minimum of 10 years’ experience in the market in which the Project is located who shall select either Landlord’s

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determination or Tenant’s determination, whichever the broker finds more accurately reflects the Extension Rent. The broker shall be instructed to notify Landlord and Tenant of such selection within 10 days after such broker’s appointment. The broker shall have no power or authority to select any Extension Rent other than the Extension Rent submitted by Landlord or Tenant nor shall the broker have any power or authority to modify any of the provisions of this Lease, and the decision of the broker shall be final and binding upon Landlord and Tenant. If Landlord and Tenant do not timely agree in writing upon the appointment of the broker, Landlord and Tenant shall each select a broker, who together will select a third qualified broker with a minimum of 10 years’ experience in the market in which the Project is located, who will determine the Extension Rent. If either party fails to timely notify the other party of its selection, the party that did not fail to notify of its election shall have the right to unilaterally appoint the broker. The fee and expenses of the broker shall be shared equally by Landlord and Tenant.

(d) Upon Tenant’s timely and proper exercise of an Extension Option pursuant to the terms above and satisfaction of the above conditions: (i) the “Term” shall include the Extension Term; (ii) the “Premises” for each Extension Term shall be the applicable Extension Premises; and (iii) upon Landlord’s request, Tenant shall execute prior to the expiration of the then-expiring Term, an appropriate amendment to this Lease, in form and content reasonably satisfactory to both Landlord and Tenant, memorializing the extension of the Term for the ensuing Extension Term (provided either party’s failure to execute such amendment shall not negate the effectiveness of Tenant’s exercise of the Extension Option).

27. TERMINATION OPTION. Provided: (i) no Event of Default exists; (ii) this Lease is in full force and effect; and (iii) Tenant is the originally named Tenant or a Permitted Transferee, Tenant has the right to terminate this Lease effective at 11:59 p.m. on the Termination Date, in accordance with and subject to each of the following terms and conditions (“Termination Option”). The “Termination Date” means the last day of the 60^th or 84^th full calendar month after the Fixed Rent Start Date, as elected by Tenant in its Termination Notice. If Tenant desires to exercise the Termination Option, Tenant must give to Landlord irrevocable written notice of Tenant’s exercise of the Termination Option (“Termination Notice”), together with the Termination Payment (as defined below). The Termination Notice and the Termination Payment must be received by Landlord no later than the date that is 24 months prior to the applicable Termination Date (“Termination Notice/Payment Due Date”), failing which the Termination Option is deemed waived (provided Landlord reserves the right to waive in writing the requirement that Tenant fully and/or timely pay the Termination Payment). The “Termination Payment” means the sum of the unamortized (amortized on a straight-line basis with interest at 7%) amount as of the Termination Date of the following in connection with this Lease and any amendment to this Lease: (i) brokerage commissions and attorneys’ fees paid by Landlord; and (ii) any and all allowances to Tenant, including without limitation the Improvement Allowance (as defined in Exhibit C). Tenant’s payment of the Termination Payment is a condition precedent to the termination of this Lease on the Termination Date, and such obligation survives the Expiration Date. Tenant acknowledges and agrees that the Termination Payment is not a penalty and is fair and reasonable compensation to Landlord for the loss of expected rentals from Tenant. The Termination Payment is payable only by wire transfer or cashier’s check. Time is of the essence with respect to the dates and deadlines set forth herein. As of the date Tenant delivers the Termination Notice, any and all unexercised rights or options of Tenant to extend the Term or expand the Premises (whether expansion options, rights of first refusal, rights of first offer, or otherwise), and any and all outstanding tenant improvement allowance not properly claimed by Tenant in accordance with this Lease shall immediately terminate and are automatically, without further action required by any party, null and void and of no force or effect. If Tenant timely and properly exercises the Termination Option in accordance with this paragraph, this Lease and the Term shall come to an end on the Termination Date with the same force and effect as if the Term were fixed to expire on such date, the Expiration Date shall be the Termination Date, and the terms and provisions of Section 18 shall apply. Upon Tenant’s request after the Commencement Date, Landlord shall notify Tenant of its calculation of the Termination Payment. If Tenant requests in writing Landlord’s calculation of the Termination Payment at least 30 days prior to the applicable Termination Notice/Payment Due Date, and Landlord fails to provide the calculation of the Termination Payment on or prior to the date which is five (5) business days prior to applicable Termination Notice/Payment Due Date, then Tenant shall have until the date that is five (5) business days after Landlord provides the calculation of the Termination Payment to deliver the Termination Notice and Termination Payment to Landlord.

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28. RIGHT OF FIRST OFFER.

(a) Provided: (i) no Event of Default exists; and (ii) this Lease is in full force and effect, Landlord shall notify Tenant in writing (“Landlord’s ROFO Notice”) when any rentable space located on the 9^th or 11^th floor of the Building (“Potential RQFO Space”) becomes available for lease (as defined below) from Landlord or Landlord reasonably anticipates that such space will become available for lease from Landlord prior to the last 24 months of the Term (as the same may have been extended). Landlord’s ROFO Notice shall identify the portion of the Potential ROFO Space that is available to lease (such identified space, “ROFO Space”), and include the anticipated availability date and basic economic terms for the lease of the ROFO Space (which terms shall reflect that the term for the ROFO Space will be coterminous with the Term for the Premises) and, subject to the terms and provisions of this Section, Tenant shall have the one-time right (“ROFO”) to lease all (but not less than all) of the ROFO Space by delivering Tenant’s written notice of such election to Landlord (“Tenant’s ROFO Notice”) within 10 days after Tenant’s receipt of Landlord’s ROFO Notice.

(b) Upon Tenant’s delivery of Tenant’s ROFO Notice, Tenant may not thereafter revoke Tenant’s exercise of the ROFO. If an Event of Default exists at any time after Landlord receives Tenant’s ROFO Notice but before the first day that Tenant commences to lease the ROFO Space, Landlord, at Landlord’s option, shall have the right to nullify Tenant’s exercise of the ROFO with respect to the ROFO Space. If Tenant notifies Landlord that Tenant elects not to lease the ROFO Space or if Tenant fails to timely deliver Tenant’s ROFO Notice to Landlord with respect thereto, then Landlord shall have the right to enter into a lease agreement(s) for the ROFO Space under one or more leases containing such terms as Landlord deems acceptable in Landlord’s reasonable discretion, and the ROFO shall be void and have no further force or effect with respect to such space; provided, however: (i) the ROFO shall survive with respect to the balance of the Potential ROFO Space such that following receipt of a subsequent written request from Tenant, Landlord shall send a Landlord’s ROFO Notice when Potential ROFO Space becomes available for lease or Landlord reasonably anticipates that such space will become available for lease from Landlord prior to the last 24 months of the Term (as the same may have been extended); and (ii) if Landlord either fails to enter into a lease for the ROFO Space within 6 months after Tenant’s waiver or deemed waiver of the ROFO, or desires to enter into a lease for the ROFO Space on economic terms that are 10% (or more) more favorable in the aggregate than those terms that were set forth in Landlord’s ROFO Notice, then Landlord shall be required to submit a new Landlord’s ROFO Notice to Tenant prior to leasing the ROFO Space to any third party.

(c) The ROFO shall be subject, subordinate, and in all respects inferior to the rights of any third-party tenant leasing space at the Building as of the date of this Lease that have existing rights in their existing leases to the ROFO Space; those tenants are: Ernst & Young U.S. LLP, Gallagher Benefit Services, Inc., Macquarie Holdings (U.S.A.), Inc., Marks Paneth LLP, and Pennsylvania Lumbermens Mutual Insurance Company. Space is “available to lease” if and when the lease for any tenant of all or a portion of the space expires or is otherwise terminated, provided space shall not be deemed to be or become available if the space is assigned or subleased by the tenant of the space, or relet by the tenant or subtenant of the space by renewal, extension, or new lease.

(d) Except to the extent expressly set forth in Landlord’s ROFO Notice to the contrary, if Tenant elects to lease the ROFO Space, such space shall become subject to this Lease upon the same terms and conditions as are then applicable to the original Premises, except that Tenant shall take the ROFO Space in “AS IS” condition and Landlord shall have no obligation to make any improvements or alterations to the ROFO Space, and the term of Tenant’s lease of the ROFO Space shall be coterminous with the Term. Landlord shall determine the exact location of any demising walls (if any) for the ROFO Space. Tenant shall not be entitled to any tenant improvement allowances, free rent periods, or other special concessions granted to Tenant with respect to the original Premises. Upon Tenant’s leasing of the ROFO Space, the “Premises” shall include the ROFO Space and, except as otherwise set forth in this Section, all computations made under this Lease based upon or affected by the rentable area of the Premises shall be recomputed to include the ROFO Space.

(e) If Tenant timely exercises its right to lease the ROFO Space: (i) Tenant’s lease of the ROFO Space shall commence upon the later of: (A) the date of availability specified in Landlord’s ROFO Notice; or (B) 180 days following the date Landlord tenders possession of the ROFO Space in vacant condition; and (ii) upon Landlord’s request, Tenant shall execute an appropriate new lease or amendment, in form and content reasonably satisfactory to both Landlord and Tenant, memorializing the expansion of the Premises as set forth in this Section (provided Landlord or Tenant’s failure to execute such lease or amendment shall not negate the effectiveness of Tenant’s exercise of the ROFO).

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29. CONTRACTION OPTION. Provided, as of the date on which the Contract Notice is delivered: (i) there is no Event of Default and (ii) this Lease is in full force and effect, Tenant has the right to terminate this Lease with respect to the Contraction Premises effective at 11:59 p.m. on the Contraction Date, in accordance with and subject to each of the following terms and conditions (“Contraction Option”). The “Contraction Date” means the date designated as such by Tenant in its Contraction Notice, provided such date is either the last day of the 36^th, 72^nd, or 108^th full calendar month after the Fixed Rent Start Date. The “Contraction Premises” means, as designated by Tenant in its Contraction Notice, either all of Suite 1100 or a portion of Suite 1100 mutually agreed to by Landlord and Tenant. Notwithstanding the foregoing, if the Contraction Notice is silent as to the designation of the Contraction Premises, then Tenant shall be deemed to have designated all of Suite 1100 to be the Contraction Premises. If Tenant desires to exercise the Contraction Option, Tenant must give to Landlord irrevocable written notice of Tenant’s exercise of the Contraction Option (“Contraction Notice”), and pay Landlord the Contraction Payment (as defined below) as and when required below. The Contraction Notice and the Contraction Payment must be received by Landlord no later than the date that is 12 months prior to the Contraction Date (“Contraction Notice/Payment Due Date”), failing which the Contraction Option is deemed waived (provided Landlord reserves the right to waive in writing the requirement that Tenant fully and/or timely pay the Contraction Payment). The “Contraction Payment” means the sum of the unamortized (amortized on a straight-line basis with interest at 7% per annum) amount as of the Contraction Date of the following with respect to the Contraction Premises in connection with this Lease and any amendment to this Lease: (i) brokerage commissions paid by Landlord; and (ii) any and all allowances paid to Tenant, including without limitation the Improvement Allowance (as defined in Exhibit C). Tenant’s payment of the Contraction Payment is a condition precedent to the termination of this Lease with respect to the Contraction Premises on the Contraction Date, and such obligation survives the Expiration Date. Tenant acknowledges and agrees that the Contraction Payment is not a penalty and is fair and reasonable compensation to Landlord for the loss of expected rentals from Tenant. The Contraction Payment is payable only by wire transfer or cashier’s check. Notwithstanding anything to the contrary herein, if Tenant exercises the Contraction Option and the internal staircase between Suite 1000 and Suite 1100 is located within the Contraction Premises, then Tenant shall be solely responsible for removing such staircase at Tenant’s sole cost and expense by no later than the Contraction Date. Time is of the essence with respect to the dates and deadlines set forth herein. If Tenant timely and properly exercises the Contraction Option in accordance with this paragraph, this Lease and the Term shall come to an end on the Contraction Date with respect to the Contraction Premises only, with the same force and effect as if the Term with respect to the Contraction Premises were fixed to expire on such date, the Expiration Date with respect to the Contraction Premises shall be the Contraction Date, and the terms and provisions of Section 18 shall apply to the Contraction Premises. Upon Tenant’s request after the Commencement Date, Landlord shall notify Tenant of its calculation of the Contraction Payment. If Tenant requests in writing Landlord’s calculation of the Contraction Payment at least 30 days prior to the applicable Contraction Notice/Payment Due Date, and Landlord fails to provide the calculation of the Contraction Payment on or prior to the date which is five (5) business days prior to applicable Contraction Notice/Payment Due Date, then Tenant shall have until the date that is five (5) business days after Landlord provides the calculation of the Contraction Payment to deliver the Contraction Notice and Contraction Payment to Landlord.

[SIGNATURES ON FOLLOWING PAGE]

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TENANT CONFESSION CERTIFICATION: Tenant acknowledges and agrees that any failure of Tenant to execute Section 17 of this Lease shall be an absolute bar from Tenant (or Tenant’s successors or assigns) claiming, alleging or petitioning, including, but not limited to, in any petition to open said confession, that such Section is invalid and not binding upon Tenant (or Tenant’s successors or assigns).

IN WITNESS WHEREOF, the parties hereto have executed this Lease under seal as of the day and year first-above stated.

LANDLORD:		TENANT:
COMMERCE SQUARE PARTNERS -		PREIT ASSOCIATES, L.P.
PHILADELPHIA PLAZA, L.P.
By: Brandywine Commerce Sub I LLC, its general partner		By: PREIT Services, LLC, its managing agent
By:	/s/ George Johnstone
Name:	George Johnstone	By:	/s/ Lisa M. Most
Title:	EVP Operations	Name:	Lisa M. Most
Date:	12/3/2018	Title:	Senior Vice President, General Counsel & Secretary
		Date:	11/29/2018

Exhibits:
Exhibit A:	Location Plan of Premises
Exhibit B:	Form of COLT
Exhibit C:	Leasehold Improvements
Exhibit D:	Cleaning Specifications
Exhibit E:	Rules and Regulations

[Signature Page]

EXHIBIT A

LOCATION PLAN OF PREMISES (NOT TO SCALE)

ONE COMMERCE SQUARE

10th Floor

A-1

ONE COMMERCE SQUARE

11TH FLOOR

PHILADELPHIA. PA

A-2

EXHIBIT B

FORM OF COLT

CONFIRMATION OF LEASE TERM

THIS CONFIRMATION OF LEASE TERM (“COLT”) is made as of                                 between                                     (“Landlord”) and                                  (“Tenant”).

1. Landlord and Tenant are parties to that certain lease dated                      (“Lease Document”), with respect to the premises described in the Lease Document, known as Suite                  consisting of approximately                      rentable square feet (“Premises”), located at                              ..

2. All capitalized terms, if not defined in this COLT, have the meaning give such terms in the Lease Document.

3. Tenant has accepted possession of the Premises in their “AS IS” “WHERE IS” condition and all improvements required to be made by Landlord per the Lease Document have been completed.

4. The Lease Document provides for the commencement and expiration of the Term of the lease of the Premises, which Term commences and expires as follows:

a. Commencement of the Term of the Premises:                     

b. Expiration of the Term of the Premises:                             

5. The required amount of the Security Deposit and/or Letter of Credit per the Lease Document is $                         .. Tenant has delivered the Security Deposit and/or Letter of Credit per the Lease Document in the amount of $                         ..

6. The Building Number is                         and the Lease Number is                    . This information must accompany every payment of Rent made by Tenant to Landlord per the Lease Document.

TENANT:	LANDLORD:
	By:
By:
	Name:
Name:
	Title:
Title:

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EXHIBIT C

LEASEHOLD IMPROVEMENTS

This Exhibit C-Leasehold Improvements (“Exhibit”) is a part of the Lease to which this Exhibit is attached. Capitalized terms not defined in this Exhibit shall have the meanings set forth for such terms in the Lease.

1. Process.

(a) Proposed CD’s. By no later than March 1, 2019, Tenant must deliver to Landlord, in hard copy and .pdf format, proposed construction drawings and specifications prepared by the Architect for the Leasehold Improvements stamped for permit filing, together with any underlying detailed information Landlord may require for its review (“Proposed CD’s”), for Landlord’s approval in accordance with Section 1(b) below (once approved, the “CD’s”). The CD’s may include construction working drawings, mechanical, electrical, plumbing, and other technical specifications, and the finishing details, including wall finishes and colors, and technical and mechanical equipment installation, if any, detailing installation of the Leasehold Improvements. The design of the Leasehold Improvements must be consistent with sound architectural and construction practices in first-class office buildings comparable in size and market to the Building. “Architect” means the licensed architect engaged by Tenant, subject to Landlord’s reasonable approval, to prepare the CD’s. “Leasehold Improvements” means the improvements, alterations, and other physical additions to be made or provided to, constructed, delivered, or installed at, or otherwise acquired for, the Premises in accordance with the CD’s, or otherwise approved in writing by Landlord or paid for in whole or in part from the Improvement Allowance (as defined in Section 10 below), including without limitation all necessary demising walls and associated work. Any provision of this Exhibit to the contrary notwithstanding, the Leasehold Improvements shall not include any telephone, telephone switching, telephone, data, and security cabling and systems, furniture, computers, servers, Tenant’s trade fixtures and equipment, and other personal property installed (or to be installed) by or on behalf of Tenant in the Premises or any of the associated permits for any of the foregoing (“Tenant’s Equipment”).

(b) Landlord’s Approval of CD’s. Within 10 business days after Landlord’s receipt of the Proposed CD’s, Landlord shall notify Tenant in writing as to whether Landlord approves or disapproves such Proposed CD’s, which approval shall not be unreasonably withheld, and may contain conditions. If Landlord disapproves of the Proposed CD’s, or approves the Proposed CD’s subject to modifications, Landlord shall state in its written notice to Tenant the reasons therefor, and Tenant, upon receipt of such written notice, shall revise and resubmit the Proposed CD’s to Landlord for review within 7 business days thereafter and Landlord’s reasonable approval, which approval shall not be unreasonably withheld. This process shall continue until the Proposed CD’s are approved by Landlord. All design, construction, and installation in connection with the Leasehold Improvements shall conform to the requirements of applicable building, plumbing, and electrical codes and the requirements of any authority having jurisdiction over, or with respect to, such Leasehold Improvements. Landlord’s approval of the CD’s is not a representation that: (i) such CD’s are in compliance with all applicable Laws; or (ii) the CD’s or design is sufficient for the intended purposes. Tenant shall be responsible for all elements of the design of the Leasehold Improvements and the CD’s (including, without limitation, compliance with Laws, functionality of design, the structural integrity of the design, the configuration of the Premises, and the placement of Tenant’s furniture, appliances, and equipment), and Landlord’s approval of the Leasehold Improvements or the CD’s shall in no event relieve Tenant of the responsibility for such design, or create responsibility or liability on Landlord’s part for their completeness, design sufficiency, or compliance with Laws.

(c) TEA for Construction Costs. After Landlord’s approval of the CD’s, Landlord shall submit the CD’s to Landlord’s selected general contractors for bidding. Tenant shall have the right to participate in the selection of the general contractor for the Leasehold Improvements. Landlord shall competitively bid the Leasehold Improvements with a minimum of three qualified contractors, and Landlord shall select the contractor in consultation with Tenant. Tenant may submit 2 contractors of its choice to be included in the bid process, provided such contractors are union, reasonably approved by Landlord, meet Landlord’s insurance requirements, and comply with all contractor rules and regulations. Landlord shall then prepare a TEA for the Construction Costs, and deliver such TEA to Tenant for approval in accordance with Section 1(d) below. “TEA” means a Tenant expenditure authorization, which may be in the form of a written document and/or an email sent via electronic transmittal to Tenant’s Representative (as defined in Section 1(g)). “Construction Costs” means all costs in the permitting, demolition, construction, acquisition, and installation of the Leasehold Improvements, including, without limitation, contractor fees, overhead, and profit, and the cost of all labor and materials supplied by the general contractor engaged by Landlord (“Contractor”), suppliers, independent contractors, and subcontractors arising in connection with the Leasehold Improvements.

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(d) Tenant’s Approval Process. Within 7 business days after Tenant’s receipt of a TEA from Landlord, Tenant shall notify Landlord in writing as to whether Tenant approves or disapproves of such TEA, which approval shall not be unreasonably withheld, conditioned, or delayed. If Tenant disapproves of a TEA: (i) Tenant shall provide Landlord with a reasonably detailed written statement setting forth the reason(s) for such disapproval; (ii) Landlord and Tenant shall work together in good faith to promptly resolve any open issues; (iii) Landlord shall promptly have the TEA revised and resubmitted to Tenant for Tenant’s approval; and (iv) this process shall continue until Tenant approval is given, except that Tenant shall approve or disapprove any revisions within 2 business days after Tenant’s receipt thereof. Tenant’s disapproval of a TEA shall be deemed unreasonable if the TEA is substantially based on the CD’s. If Tenant fails to timely deliver to Landlord Tenant’s written, reasonable disapproval, Tenant shall be deemed to have given its approval, and Landlord shall be authorized (but not required) to proceed thereon.

(e) Change Orders. Tenant shall have the right to make changes to the CD’s provided: (i) such changes are approved in writing by Landlord (“Approved Changes”); and (ii) the net increase in costs arising from such approved Changes shall be included in the total Construction Costs. It shall be deemed reasonable for Landlord to deny consent to a requested change to the CD’s if Landlord determines that Substantial Completion will be delayed by more than 5 business days. Landlord shall have the right to issue a TEA for Additional Costs, which shall be included in the total Construction Costs.

(f) Tenant’s and Landlord’s Representative. “Tenant’s Representative” means Lynn Blahusch of CB Development Services, Inc., whose email address is lblahusch@cbdsi.com. “Landlord’s Representative” means Joe Traynor, whose email address is Joseph.Traynor@bdnreit.com. Each party shall have the right to designate a substitute individual as Tenant’s Representative or Landlord’s Representative, as applicable, from time to time by written notice to the other. All correspondence and information to be delivered to Tenant with respect to this Exhibit shall be delivered to Tenant’s Representative, and all correspondence and information to be delivered to Landlord with respect to this Exhibit shall be delivered to Landlord’s Representative. Notwithstanding anything to the contrary in the Lease, communications between Landlord’s Representative and Tenant’s Representative in connection with this Exhibit may be given via electronic means such as email without copies. Tenant’s Representative shall have authority to grant any consents or approvals by Tenant under this Exhibit, and for authorizing and executing any and all change orders or other documents in connection with this Exhibit, and Landlord shall have the right to rely thereon. Tenant hereby ratifies all actions and decisions with regard to the Leasehold Improvements that Tenant’s Representative may have taken or made prior to the execution of the Lease. Landlord shall not be obligated to respond to or act upon any plan, drawing, change order, approval, or other matter relating to the Leasehold Improvements until it has been executed by Tenant’s Representative or a senior officer of Tenant.

2. Completion of Leasehold Improvements.

(a) Allocation. Except to the extent that the CD’s, the Approved Changes, and/or this Exhibit provide that Tenant shall complete a portion of the Leasehold Improvements, Landlord shall cause the Leasehold Improvements to be made, constructed, or installed in a good and workmanlike manner substantially in accordance with the CD’s and Approved Changes.

(b) Building Standards. Except as expressly set forth otherwise in the CD’s and/or the Approved Changes, Landlord shall cause the Leasehold Improvements to be constructed or installed to Building Standards; provided, however, Landlord, subject to Tenant’s approval, which approval shall not be unreasonably conditioned, withheld or delayed, shall have the right to substitute comparable non-Building Standard materials, fixtures, finishes, and items to the extent Building Standard items are not readily available. “Building Standard” means the quality and quantity of materials, finishes, ways and means, and workmanship specified from time to time by Landlord as being standard for leasehold improvements at the Building or for other areas at the Building, as applicable.

3. Central Systems. Neither Tenant nor any of its agents or contractors shall alter, modify, or in any manner disturb any of the Building systems or components within the Building core servicing the tenants of the Building or Building operations generally (such as base building plumbing, electrical, heating, ventilation and air conditioning, fire protection and fire alert systems, elevators, structural systems, building maintenance systems, or anything located within the core of the Building or central to the operation of the Building).

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4. Tenant’s Equipment. Tenant shall be solely responsible for the procuring, ordering, delivery, and installation of Tenant’s Equipment in compliance with all Laws. Tenant shall coordinate the installation of Tenant’s Equipment (including cabling) at the Premises with Contractor’s completion of the Leasehold Improvements.

5. Cooperation. Tenant and Tenant’s Representative shall cooperate with Landlord, Architect, and the Contractor to promote the efficient and expeditious completion of the Leasehold Improvements.

6. Substantial Completion. “Substantial Completion” means the later of the date on which: (i) the Leasehold Improvements have been completed in accordance with the CD’s (and any Approved Changes) except for Punch List work; and (ii) Landlord has obtained a final inspection approval, or temporary or permanent certificate of occupancy from the applicable local governing authority. If issuance of such approval or certificate is conditioned upon Tenant’s installation of its equipment, racking, cabling, or furniture, or completion of any other work or activity in the Premises for which Tenant is responsible, and the governmental authority will not issue the approval or certificate, or schedule an inspection of the Leasehold Improvements due to Tenant’s failure to complete any work, installation, or activity (including the installation of the Tenant’s Equipment), then Substantial Completion shall be deemed to have occurred without Landlord having obtained the approval or temporary or permanent certificate of occupancy and correspondingly, the Commencement Date shall be established. “Punch List” means the list of items of Leasehold Improvements, if any, that require correction, repair, or replacement, do not materially affect Tenant’s ability to use the Premises for the Permitted Use, and are listed in a writing prepared in accordance with Section 7 below.

7. Punch List. Prior to Substantial Completion, Landlord or the Architect shall prepare a preliminary Punch List in writing for Landlord’s and Tenant’s review. Landlord shall schedule a walkthrough of the Premises with Tenant’s Representative to occur on Substantial Completion, from which Landlord and Tenant shall generate a final Punch List. Landlord shall diligently pursue completion of any Punch List work, and make commercially reasonable efforts to complete all Punch List work within 30 days after Substantial Completion. Landlord shall obtain from Contractor a commercially customary one-year warranty for the Leasehold Improvements, and Landlord shall use commercially reasonable efforts to make a claim under such warranties on behalf of Tenant to the extent necessary. The taking of possession of the Premises by Tenant shall constitute an acknowledgment by Tenant that the Premises are in good condition and that all work and materials provided by Landlord are satisfactory except as to (i) any latent defects discovered within the first 12 months of the Term; (ii) items contained in the Punch List; and (iii) items covered by the one-year warranty.

8. Tenant Delay. In the event of Tenant Delay, Substantial Completion shall be deemed to be the date Substantial Completion would have occurred but for Tenant Delays. Landlord shall have no obligation to expend any funds, employ any additional labor, contract for overtime work, or otherwise take any action to compensate for any Tenant Delay. Tenant shall reimburse Landlord for any incremental costs in labor, materials, and supplies incurred due to Tenant Delay. “Tenant Delay” means any actual delay in Substantial Completion as a result of any of the following: (i) Tenant fails to fully and timely comply with the terms of this Exhibit, including without limitation Tenant’s failure to comply with any of the deadlines specified in this Exhibit; (ii) Tenant changes the CD’s, including any Approved Changes, notwithstanding Landlord’s approval of such changes (provided Landlord notified Tenant in writing of the anticipated period of Tenant Delay and Tenant thereafter elects to proceed with such Approved Changes); (iii) delays caused by any governmental or quasi-governmental authorities arising from the Leasehold Improvements being designed to include items or improvements not typically found in office space of other comparable buildings in the market in which the Building is located; (iv) Tenant or any Tenant Agent interferes with the work of Landlord or Contractor including, without limitation, during any pre-commencement entry period or in connection with Tenant’s installation of Tenant’s Equipment; or (v) any other delay to the extent caused solely by Tenant or any Tenant Agent.

9. Early Access. Subject to the terms herein and Tenant’s compliance with all applicable Laws, Tenant shall have reasonable access to the Premises (“Early Access”) during completion of the Leasehold Improvements to coordinate installation of Tenant’s cabling and wiring and during the 30-day period immediately prior to Substantial Completion to install its furniture, fixtures, and equipment; provided in any such case Tenant’s Early Access does not unreasonably interfere with, or unreasonably delay completion of the Leasehold Improvements, and Tenant first provides Landlord with a certificate of insurance as required under the Lease. Tenant shall be fully responsible for all costs related to Early Access. All insurance, waiver, indemnity, and alteration provisions of the Lease shall be in full force and effect

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during Early Access. Tenant shall ensure that its phone/data, security, and other vendors comply with all applicable Laws and pull their permits and perform their work in conjunction with the Leasehold Improvements so as not to delay completion of the Leasehold Improvements and any and all inspections therefor. Tenant and its contractors shall coordinate all activities with Landlord in advance and in writing, and shall comply with Landlord’s instructions and directions so that Tenant’s early entry does not interfere with or delay any work to be performed by Landlord. Any delay resulting from Early Access, including without limitation due to a Tenant vendor’s work delaying Landlord’s ability to obtain its permits, shall be deemed a Tenant Delay.

10. Costs.

(a) Improvement Allowance. Landlord shall provide the Improvement Allowance to Tenant in accordance with this Exhibit. “Improvement Allowance” means an amount equal to the product of $100.00 multiplied by the total rentable square footage of the Premises, which product equals $4,405,700.00. The Improvement Allowance shall be applied solely towards payment of the Improvement Costs, but specifically excluding costs for Tenant’s Equipment, cabling, moving, utilities, and movable furniture, fixtures, or equipment that has no permanent connection to the structure of the Building. Notwithstanding the foregoing, if, after payment in full of the Improvement Costs, there are unused Improvement Allowance dollars and no Event of Default, then by written notice to Landlord received no later than the 12-month anniversary of the Commencement Date, Tenant may apply up to $440,570.00 of the Improvement Allowance towards the actual and reasonable, out-of-pocket, documented costs incurred by Tenant for moving to the Premises, furniture fixtures and equipment, and voice and data cabling expenses (“Reimbursable Costs”). Subject to the preceding sentence, Landlord shall reimburse Tenant up to the total Reimbursable Costs within 60 days after Landlord’s receipt of an invoice therefor (no more frequently than once per month) together with reasonable supporting documentation, evidence of payment in full by Tenant, and unconditional lien waivers (on Landlord’s form therefor). Any portion of the Reimbursable Costs for which Tenant has not submitted an invoice for reimbursement on or before the 12-month anniversary of the Commencement Date shall be deemed waived by Tenant and will not be paid to Tenant or credited against Rent. Tenant shall mark and tag all cabling installed by it or on its behalf by no later than Substantial Completion, and notwithstanding anything to the contrary in this Lease, shall surrender such cabling with the Premises by no later than the Surrender Date. “Improvement Costs” means the sum of: (i) the Planning Costs; (ii) the Construction Costs; and (iii) Construction Management Fee (as defined in Section 10(b) below). “Planning Costs” means all actual, reasonable, documented, third-party costs incurred by Tenant and directly related to the design of the Leasehold Improvements including, without limitation, the professional fees of any engineers, consultants, architects, and/or space planners and other professionals preparing and/or reviewing the CD’s. If, as of the 12-month anniversary of the Commencement Date, any portion of the Improvement Allowance remains unused, the Improvement Allowance shall be deemed reduced by such unused amount, and Landlord shall retain such undisbursed portion of the Improvement Allowance which shall be deemed waived by Tenant and shall not be paid to Tenant, credited against Rent, or applied to Tenant’s moving costs or prior lease obligations.

(b) Construction Management Fee. Tenant must pay the Construction Management Fee to Landlord as compensation for Landlord’s construction management services under this Exhibit. “Construction Management Fee” means a fixed fee in the amount of Forty-Four Thousand Fifty-Seven and 00/100 Dollars ($44,057.00). Landlord may deduct all or a portion of Construction Management Fee from the Improvement Allowance, and/or invoice Tenant therefor if the entirety of the Improvement Allowance has been expended, payable to Landlord within 60 days after the date of such invoice.

(c) Excess Costs. Tenant shall be solely responsible for all Improvement Costs in excess of the Improvement Allowance (“Excess Costs”). Landlord may issue a TEA for Excess Costs, after the Improvement Allowance is exhausted. Tenant shall pay Excess Costs to Landlord within 60 days after receipt of an invoice therefor from time to time, provided Landlord shall have the right to invoice Tenant with respect to particular components of the Leasehold Improvements and the applicable amount of Excess Costs (as reasonably determined by Landlord) upon substantial completion of such component. Notwithstanding anything to the contrary herein, if the requirement of any public authority obligates either Landlord or Tenant to expend money in order to bring the Premises and/or any area of the Project into compliance with Laws solely as a result of the Leasehold Improvements (as opposed to a pre-existing violation), then Tenant shall bear all costs of bringing the Premises and/or Project into compliance with Laws, whether such costs are related to structural or nonstructural elements of the Premises or Project.

C-4

(d) Rent. If Tenant fails to make any payment when due under this Exhibit, such failure shall be deemed a failure to make a Rent payment under the Lease. Landlord shall have no obligation to make a disbursement from the Improvement Allowance if, at the time such disbursement is to be made, there exists an uncured monetary default under the Lease.

C-5

EXHIBIT D

CLEANING SPECIFICATIONS

These specifications are subject to change without notice. The cost for any cleaning over and above the standard cleaning specifications are to be paid by tenant.

D-1

EXHIBIT E

RULES AND REGULATIONS

RULES AND REGULATIONS

1.	Sidewalks, entrances, passages, elevators, vestibules, stairways, corridors, halls, lobby, and any other part of the Building shall not be obstructed or encumbered by Tenant or used for any purpose other than ingress or egress to and from the Premises. Landlord shall have the right to control and operate the common portions of the Building and exterior facilities furnished for common use of the Building’s tenants (such as the eating, smoking, and parking areas) in such a manner as Landlord deems appropriate.
2.	No awnings or other projections may be attached to the outside walls of the Building without the prior written consent of Landlord. All drapes and window blinds shall be of a quality, type, design, and color, and attached in a manner approved in writing by Landlord.
3.	No showcases, display cases, or other articles may be put in front of or affixed to any part of the exterior of the Building, or placed in hallways or vestibules without the prior written consent of Landlord. All supplies shall be kept in designated storage areas. Tenant shall not use or permit the use of any portion of the Project for outdoor storage. No mats, trash, or other objects may be placed in the public corridors, hallways, stairs, or other common areas of the Building.
4.	Restrooms and other plumbing fixtures shall not be used for any purposes other than those for which they were constructed, and no debris, rubbish, rags, or other substances may be thrown therein. Only standard toilet tissue may be flushed in commodes. All damage resulting from any misuse of these fixtures shall be the responsibility of the tenant who, or whose employees, agents, visitors, clients, or licensees, caused such damage. Bathing and changing of clothes is permitted only in designated shower/locker facilities, and is not permitted in restrooms.
5.	Tenant shall not, without the prior written consent of Landlord, mark, paint, drill into, bore, cut, string wires, or in any way deface any part of the Premises or the Building except for the reasonable hanging of decorative or instructional materials on the walls of the Premises. Tenant shall remove seasonal decorations that are visible outside of the Premises within 30 days after the end of the applicable season.
6.	Tenant shall not construct, install, maintain, use, or operate in any part of the Project any electrical device, wiring, or other apparatus in connection with a loud speaker system or other sound/communication system that may be heard outside the Premises.
7.	No bicycles, mopeds, skateboards, scooters, or other vehicles may be brought into, used, or kept in or about the Building or in the common areas of the Project other than in locations specifically designated thereof. No animals or pets of any kind (other than a service animal performing a specified task), including without limitation fish, rodents, and birds, may be brought into, used, or kept in or about the Building. Rollerblading and roller skating is not permitted in the Building or in the common areas of the Project.
8.	Tenant shall not cause or permit any unusual or objectionable odors to be produced upon or permeate from the Premises.
9.	No space in the Project may be used for the manufacture of goods for sale in the ordinary course of business, or for sale at auction of merchandise, goods, or property of any kind.
10.	Tenant shall not make any unseemly or disturbing noises, or disturb or interfere with the occupants of the Building or neighboring buildings or residences by voice, musical instrument, radio, talking machines, whistling, singing, lewd behavior, or in any other way. All passage through the Building’s hallways, elevators, and main lobby shall be conducted in a quiet, businesslike manner. Tenant shall not commit or suffer any waste upon the Premises, the Building, or the Project, or any nuisance, or do any other act or thing that may disturb the quiet enjoyment of any other tenant in the Building or Project.
11.	Tenant shall not throw anything out of the doors, windows, or down corridors or stairs of the Building.
12.	Tenant shall not place, install, or operate in the Premises or in any part of the Project, any engine, stove, machinery, or electrical equipment not directly related to its business, including without limitation space

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	heaters, coffee cup warmers, and small refrigerators, conduct mechanical operations, cook thereon or therein, or place or use in or about the Premises or the Project any explosives, gasoline, kerosene oil, acids, caustics, canned heat, charcoal, or any other flammable, explosive or hazardous material, without the prior written consent of Landlord. Notwithstanding the foregoing, Tenant shall have the right to install and use a coffee machine, microwave oven, toaster, ice maker, refrigerator, and/or vending machine in compliance with all applicable Laws in a kitchen or break room designated as such by Landlord, provided Tenant shall use only stainless steel braided hoses. All supply waterlines shall be of copper (not plastic) tubing.
13.	No smoking (including without limitation of cigarettes, cigars, and e-cigarettes) is permitted anywhere in the Premises, the Building, or the Project, including but not limited to restrooms, hallways, elevators, stairs, lobby, exit and entrance vestibules, sidewalks, and parking lot areas, provided smoking shall be permitted in any Landlord-designated exterior smoking area. All cigarette ashes and butts shall be deposited in the containers provided for such disposal, and shall not be disposed of on sidewalks, parking lot areas, or toilets.
14.	Tenant shall not install any additional locks or bolts of any kind upon any door or window of the Building without the prior written consent of Landlord. Tenant shall, upon the termination of its tenancy, return to Landlord all keys for the Premises, either furnished to or otherwise procured by Tenant, and all security access cards to the Building.
15.	Tenant shall keep all doors to hallways and corridors closed during Business Hours except as they may be used for ingress or egress.
16.	Tenant shall not use the name of the Building, Project, Landlord, or Landlord’s agents or affiliates in any way in connection with its business except as the address thereof. Landlord shall also have the right to prohibit any advertising by Tenant that, in Landlord’s sole opinion, tends to impair the reputation of the Building or its desirability as a building for offices, and upon written notice from Landlord, Tenant shall refrain from or discontinue such advertising.
17.	Tenant shall be responsible for all security access cards issued to it, and shall secure the return of all security cards from all employees terminating employment with them. Lost cards shall cost $35.00 per card to replace. No person/company other than Building tenants and/or their employees may have security access cards unless Landlord grants prior written approval.
18.	All deliveries to the Building that involve the use of a hand cart, hand truck, or other heavy equipment or device shall be made via the freight elevator, if such freight elevator exists in the Building. Tenant shall be responsible to Landlord for any loss or damage resulting from any deliveries made by or for Tenant to the Building. Tenant shall procure and deliver to Landlord a certificate of insurance from its movers, which certificate shall name Landlord as an additional insured.
19.	Landlord reserves the right to inspect all freight to be brought into the Building, and to exclude from the Building all freight or other material that violates any of these rules and regulations.
20.	Tenant shall refer all contractors, contractor’s representatives, and installation technicians rendering any service on or to the Premises, to Landlord for Landlord’s approval and supervision before performance of any contractual service or access to Building. This provision shall apply to all work performed in the Building including installation of telephones, telegraph equipment, electrical devices and attachments, and installations of any nature affecting floors, walls, woodwork, trim, windows, ceilings, equipment, or any other physical portion of the Building. Landlord reserves the right to require that all agents of contractors and vendors sign in and out of the Building.
21.	If Tenant desires to introduce electrical, signaling, telegraphic, telephonic, protective alarm or other wires, apparatus or devices, Landlord shall direct where and how the same are to be placed, and except as so directed, no installation boring or cutting shall be permitted, without Landlord’s consent, not to be unreasonably withheld, conditioned, or delayed. Landlord shall have the right to prevent and to cut off the transmission of excessive or dangerous current of electricity or annoyances into or through the Building or the Premises and to require the changing of wiring connections or layout at Tenant’s expense, to the extent that Landlord may reasonably deem necessary, and further to require compliance with such reasonable and

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	uniformly applied rules as Landlord may establish relating thereto, and in the event of non-compliance with the requirements or rules, Landlord shall have the right immediately to cut wiring or to do what it reasonably considers necessary to remove the danger, annoyance, or electrical interference with apparatus in any part of the Building. All wires installed by Tenant must be clearly tagged at the distributing boards and junction boxes and elsewhere where required by Landlord, with the suite number of the office to which such wires lead, and the purpose for which the wires respectively are used, together with the name of the concern, if any, operating such wires.
22.	Landlord reserves the right to exclude from the Building at all times any person who is not known or does not properly identify himself or herself to Landlord’s management or security personnel.
23.	Landlord may require, at its sole option, all persons entering the Building outside of Business Hours to register at the time they enter and at the time they leave the Building.
24.	No space within the Building, or in the common areas such as the parking lot, may be used at any time for the purpose of lodging, sleeping, or for any immoral or illegal purposes.
25.	Tenant shall not use the hallways, stairs, lobby, or other common areas of the Building as lounging areas during breaks or during lunch periods.
26.	No canvassing, soliciting, or peddling is permitted in the Building or its common areas.
27.	Tenant shall comply with all Laws regarding the collection, sorting, separation, and recycling of garbage, trash, rubbish and other refuse, and Landlord’s recycling policy for the Building.
28.	Landlord does not maintain suite finishes that are non-standard, such as kitchens, bathrooms, wallpaper, special lights, etc. However, should the need arise for repair of items not maintained by Landlord, Landlord at its sole option, may arrange for the work to be done at tenant’s expense.
29.	Tenant shall clean at least once a year, at its expense, drapes in the Premises that are visible from the exterior of the Building.
30.	No pictures, signage, advertising, decals, banners, etc. may be placed in or on windows in such a manner as they are visible from the exterior, without the prior written consent of Landlord.
31.	Tenant is prohibited at all times from eating or drinking in hallways, elevators, restrooms, lobbies, or lobby vestibules outside of the Premises. Food storage shall be limited to a Landlord-approved kitchen or break room.
32.	Tenant shall be responsible to Landlord for any acts of vandalism performed in the Building by its employees, invitees, agents, contractors, licensees, subtenants, and assignees.
33.	Tenant shall not permit the visit to the Premises of persons in such numbers or under such conditions as to interfere with the use and enjoyment by other tenants of the entrances, hallways, elevators, lobby, exterior common areas, or other public portions or facilities of the Building.
34.	Landlord’s employees shall not perform any work or do anything outside of their regular duties unless under special instructions from Landlord. Requests for such requirements shall be submitted in writing to Landlord.
35.	Tenant is prohibited from interfering in any manner with the installation and/or maintenance of the heating, air conditioning and ventilation facilities and equipment at the Project.
36.	Landlord shall not be responsible for lost or stolen personal property, equipment, money, or jewelry regardless of whether such loss occurs when an area is locked against entry or not.
37.	Landlord shall not permit entrance to the Premises by use of pass key controlled by Landlord, to any person at any time without written permission of Tenant, except employees, contractors or service personnel supervised or employed by Landlord.

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38.	Tenant shall observe and comply with the driving and parking signs and markers on the Project grounds and surrounding areas. Tenant shall comply with all reasonable and uniformly applied parking regulations promulgated by Landlord from time to time for the orderly use of vehicle parking areas. Parked vehicles shall not be used for vending or any other business or other activity while parked in the parking areas. Vehicles shall be parked only in striped parking spaces, except for loading and unloading, which shall occur solely in zones marked for such purpose, and be so conducted as to not unreasonably interfere with traffic flow or with loading and unloading areas of other tenants. Tractor trailers shall be parked in areas designated for tractor trailer parking. Employee and tenant vehicles shall not be parked in spaces marked for visitor parking or other specific use. All vehicles entering or parking in the parking areas shall do so at owner’s sole risk and Landlord assumes no responsibility for any damage, destruction, vandalism, or theft. Tenant shall cooperate with Landlord in any reasonable and uniformly applied measures implemented by Landlord to control abuse of the parking areas, including without limitation access control programs, tenant and guest vehicle identification programs, and validated parking programs, provided no such validated parking program shall result in Tenant being charged for spaces to which it has a right to free use under the Lease. Each vehicle owner shall promptly respond to any sounding vehicle alarm or horn, and failure to do so may result in temporary or permanent exclusion of such vehicle from the parking areas. Any vehicle that violates the parking regulations may be cited, towed at the expense of the owner, temporarily or permanently excluded from the parking areas, or subject to other lawful consequence.
39.	Tenant shall not enter other separate tenants’ hallways, restrooms, or premises except with prior written approval from Landlord’s management.
40.	Tenant shall not place weights anywhere beyond the load-per-square-foot carrying capacity of the Building.
41.	Tenant shall comply with all laws, regulations, or other governmental requirements with respect to energy savings, not permit any waste of any utility services provided Landlord, and cooperate with Landlord fully to ensure the most effective and efficient operation of the Building.
42.	The finishes, including floor and wall coverings, and the furnishings and fixtures in any areas of the Premises that are visible from the common areas of the Building are subject to Landlord’s approval in its sole discretion. Selections for these areas shall be pre-approved in writing by Landlord.
43.	Power strips and extension cords shall not be combined (also known as daisy chaining).
44.	Candles and open flames are prohibited in the Building.
45.	Guns, firearms, and other dangerous weapons (concealed or otherwise) are not allowed at the Project, subject to applicable Law (if any) requiring Landlord to so permit at the Project.

Landlord reserves the right to rescind any of these rules and make such other and further rules and regulations as in the judgment of Landlord shall from time to time be needed for the safety, protection, care, and cleanliness of the Project, the operations thereof, the preservation of good order therein, and the protection and comfort of its tenants, their agents, employees, and invitees, which rules when made and notice thereof given to Tenant shall be binding upon Tenant in a like manner as if originally prescribed. As used in these rules and regulations, capitalized terms shall have the respective meanings given to them in the Lease to which these rules and regulations are attached, provided Tenant shall be responsible for compliance herewith by everyone under Tenant’s reasonable control, including without limitation its employees, invitees, agents, contractors, licensees, subtenants and assignees, and a violation of these rules and regulations by any of the foregoing is deemed a violation by Tenant.

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EX-10.52

Exhibit 10.52

Tenant: PREIT Associates, L.P.

Premises: One Commerce Square, Suites 1000 & 1120

FIRST AMENDMENT TO LEASE

THIS FIRST AMENDMENT TO LEASE (this “Amendment”) is entered into as of this 27 day of September, 2019 (the “Effective Date”), between COMMERCE SQUARE PARTNERS - PHILADELPHIA PLAZA, L.P., a Delaware limited partnership (“Landlord”), and PREIT ASSOCIATES, L.P., a Delaware limited partnership (“Tenant”).

RECITALS

WHEREAS, Landlord and Tenant are parties to that certain Lease dated as of December 3, 2018 (the “Lease”), with respect to the Premises containing 44,057 rentable square feet located on the 10^th and 11^th floors of the building known as One Commerce Square located at 2005 Market Street, Philadelphia, Pennsylvania, as more particularly described in the Lease;

WHEREAS, the Lease provides that Landlord would use commercially reasonable efforts to obtain Substantial Completion by September 1, 2019 and further provides for abatement of Fixed Rent for each date that elapses after the Outside Completion Date until the Substantial Completion of the Lease Improvements, as more particularly set forth in the Lease; and

WHEREAS, Landlord has informed Tenant that Landlord is unable to achieve Substantial Completion by the Outside Completion Date; and

WHEREAS, Landlord and Tenant have reviewed revised construction schedules for the Substantial Completion of the Lease Improvements and Tenant has requested Landlord to proceed with that certain construction schedule set forth on Exhibit A attached hereto (the “Revised Construction Schedule”); and

WHEREAS, Landlord and Tenant desire to amend the Lease as set forth in this Amendment.

NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Landlord and Tenant, intending to be legally bound, agree to amend the Lease as follows:

1. Recitals; Definitions. The parties acknowledge the accuracy of the foregoing recitals, which are incorporated by reference herein and are made a part of this Amendment. All capitalized terms used but not defined herein shall have the meanings ascribed to such terms in the Lease.

2. Construction Schedule. Landlord shall substantially complete the Leasehold Improvements in substantial conformance with the Revised Construction Schedule by no later than December 20, 2019.

3. Rent Abatement. Notwithstanding anything set forth in Section 3(b) of the Lease to the contrary, if the Substantial Completion of the Lease Improvements occurs on or prior to December 20, 2019 (the “Fixed Abatement Date”), then the rent abatement provided for in Section 3(b) of the Lease for Landlord’s failure to deliver the Premises by the Outside Completion Date shall be equal to seventy-six (76) days (“Fixed Abatement”), which Fixed Abatement shall be in addition to the Abatement Period. For the avoidance of doubt, if the Substantial Completion occurs after the Fixed Abatement Date, then the Fixed Abatement shall not apply and Tenant shall be entitled to an abatement of Fixed Rent calculated in accordance with Section 3(b) of the Lease (in additional to the Abatement Period).

4. Remaining Provisions Unmodified. Except as otherwise expressly modified by this Amendment, all of the terms and provisions of the Lease shall remain in full force and effect and shall continue to apply during the Lease Term (as the same has been extended pursuant to the terms of this Amendment).

5. Miscellaneous.

(a) This Amendment shall be binding upon and inure to the benefit of the parties and their respective successors and permitted assigns.

(b) Except as expressly modified by this Amendment, the Lease and all of the terms and provisions thereof shall remain unmodified and in full force and effect. The Lease, as modified hereby, is hereby ratified and confirmed in all respects.

(c) In the event of any conflict or inconsistency between the provisions of the Lease and the provisions of this Amendment, the provisions of this Amendment shall control.

(d) This Amendment may be executed by PDF or other electronic format and in any number of counterparts, which counterparts, taken together, shall constitute one and the same instrument. Tenant acknowledges that this Amendment shall not be binding on Landlord until Landlord shall have executed this Amendment and a counterpart thereof shall have been delivered to Tenant.

(e) This Amendment shall be governed by the laws of the Commonwealth of Pennsylvania.

[REMAINDER OF THE PAGE INTENTIONALLY BLANK]

2

IN WITNESS WHEREOF, the undersigned have executed this Amendment as of the day and year first above written.

LANDLORD:		TENANT:
COMMERCE SQUARE PARTNERS -		PREIT ASSOCIATES, L.P.
PHILADELPHIA PLAZA, L.P.
By: Brandywine Commerce Sub I LLC, its		By:	/s/ Lisa M. Most
general partner		Name:	Lisa M. Most
		Title:	Senior Vice President
By:	/s/ George Johnstone	Date:	9/27/19
Name:	George Johnstone
Title:	EVP Operations
Date:	10/8/2019

3

EXHIBIT A

Revised Construction Schedule

A-1

A-2

A-3

A-4

EX-21

Exhibit 21

Limited Partnerships	Jurisdiction of Organization
801 Developers, LP	Pennsylvania
Bala Cynwyd Associates, LP	Pennsylvania
Cumberland Mall Associates	New Jersey
Plymouth Ground Associates, LP	Pennsylvania
PR 8-10 Market LP	Delaware
PR 907 MARKET MEZZ LP	Delaware
PR AEKI Plymouth, LP	Delaware
PR BOS LP	Pennsylvania
PR Capital City Limited Partnership	Pennsylvania
PR CC Limited Partnership	Pennsylvania
PR Exton Limited Partnership	Pennsylvania
PR Exton Outparcel Holdings, LP	Pennsylvania
PR Exton Outparcel Limited Partnership	Pennsylvania
PR Exton Square Property L.P.	Delaware
PR Financing Limited Partnership	Delaware
PR Gainesville Limited Partnership	Delaware
PR Gallery II Limited Partnership	Pennsylvania
PR GV LP	Delaware
PR Holding Sub Limited Partnership	Pennsylvania
PR Jacksonville Limited Partnership	Pennsylvania
PR Monroe Old Trail Holdings LP	Pennsylvania
PR Monroe Old Trail Limited Partnership	Pennsylvania
PR Monroe Unit One Holdings, L.P.	Pennsylvania
PR Monroe Unit One Limited Partnership	Pennsylvania
PR Moorestown Limited Partnership	Pennsylvania
PR New Castle Associates	Pennsylvania
PR New Garden/Chesco Holdings Limited Partnership	Pennsylvania
PR Outdoor, L.P.	Pennsylvania
PR Outdoor 2, L.P.	Pennsylvania
PR Plymouth Anchor-M, L.P.	Delaware
PR Plymouth Meeting Associates PC LP	Delaware
PR Plymouth Meeting Limited Partnership	Pennsylvania
PR PM PC Associates LP	Delaware
PR Springfield/Delco Holdings, LP	Pennsylvania
PR Springfield/Delco Limited Partnership	Pennsylvania
PR TP LP	Delaware
PR Valley Anchor-M Limited Partnership	Pennsylvania
PR Valley Limited Partnership	Pennsylvania
PR Valley View Anchor-M Limited Partnership	Pennsylvania
PR Valley View Limited Partnership	Pennsylvania
PR Viewmont Limited Partnership	Pennsylvania
PR Woodland Limited Partnership	Delaware
PR Wyoming Valley Limited Partnership	Pennsylvania
PREIT Associates, L.P.	Delaware
WG Holdings, LP	Pennsylvania
WG Park – Anchor B, LP	Delaware

Limited Partnerships	Jurisdiction of Organization
WG Park General, LP	Pennsylvania
WG Park Limited, LP	Pennsylvania
WG Park, LP	Pennsylvania

General Partnership	Jurisdiction of Organization
None.

Limited Liability Companies	Jurisdiction of Organization
801 Developers GP, LLC	Pennsylvania
Beverage Two, LLC	New Jersey
Cherry Hill Center Manager, LLC	Delaware
Cherry Hill Center, LLC	Maryland
Cumberland Mall Retail Condominium Association, LLC	New Jersey
Echelon Beverage LLC	New Jersey
Moorestown Beverage I, LLC	New Jersey
Moorestown Beverage II, LLC	New Jersey
Moorestown Mall LLC	Delaware
Plymouth Ground Associates LLC	Pennsylvania
Plymouth License III, LLC	Pennsylvania
Plymouth License IV, LLC	Pennsylvania
PR 8-10 Market GP LLC	Delaware
PR 8-10 Market Mezz LLC	Delaware
PR 907 Market Mezz GP LLC	Delaware
PR Acquisition Sub LLC	Delaware
PR AEKI Plymouth LLC	Delaware
PR BOS GP, LLC	Delaware
PR BVM LLC	Pennsylvania
PR Capital City LLC	Delaware
PR CC I LLC	Delaware
PR CC II LLC	Delaware
PR Cherry Hill Office GP, LLC	Delaware
PR Cherry Hill STW LLC	Delaware
PR Chestnut Mezzco, LLC	Pennsylvania
PR Crossroads I, LLC	Pennsylvania
PR Crossroads II, LLC	Pennsylvania
PR Cumberland GP, LLC	Delaware
PR Cumberland LP, LLC	Delaware
PR Cumberland Outparcel LLC	New Jersey
PR Dartmouth Solar LLC	Delaware
PR Exton LLC	Pennsylvania
PR Exton Outparcel GP, LLC	Delaware
PR Fin Delaware, LLC	Delaware
PR Financing I LLC	Delaware
PR Financing II LLC	Delaware
PR Francis Scott Key LLC	Delaware
PR Francis Scott Key Solar LLC	Delaware
PR Gainesville LLC	Delaware
PR Gallery II, LLC	Delaware
PR Gloucester LLC	Delaware
PR GV LLC	Delaware
PR Hagerstown LLC	Delaware
PR Holding Sub LLC	Pennsylvania
PR Hyattsville LLC	Delaware
PR Jacksonville LLC	Delaware
PR JK LLC	Delaware

Limited Liability Companies	Jurisdiction of Organization
PR Lehigh Valley LLC	Pennsylvania
PR Magnolia LLC	Delaware
PR Metroplex West, LLC	Delaware
PR Monroe Old Trail Holdings LLC	Delaware
PR Monroe Old Trail LLC	Delaware
PR Monroe Unit One GP, LLC	Delaware
PR Moorestown Anchor-L&T, LLC	New Jersey
PR Moorestown Anchor-M, LLC	New Jersey
PR Moorestown LLC	Pennsylvania
PR New Castle LLC	Pennsylvania
PR New Garden LLC	Pennsylvania
PR New Garden Residential LLC	Delaware
PR New Garden/Chesco Holdings LLC	Delaware
PR New Garden/Chesco LLC	Delaware
PR North Dartmouth LLC	Delaware
PR Outdoor, LLC	Delaware
PR Outdoor 2, LLC	Delaware
PR Oxford Valley General, LLC	Delaware
PR Patrick Henry LLC	Delaware
PR Plymouth Anchor-M, LLC	Delaware
PR Plymouth Meeting LLC	Pennsylvania
PR PM PC Associates LLC	Delaware
PR Prince George's Plaza LLC	Delaware
PR Red Rose LLC	Delaware
PR Springfield Town Center LLC	Delaware
PR Springfield/Delco Holdings, LLC	Delaware
PR Springfield/Delco LLC	Delaware
PR Sunrise Outparcel 2, LLC	New Jersey
PR Swedes Square, LLC	Delaware
PR TP LLC	Delaware
PR Valley Anchor-M, LLC	Delaware
PR Valley Anchor-S, LLC	Maryland
PR Valley LLC	Delaware
PR Valley Solar LLC	Delaware
PR Valley View Anchor-M, LLC	Delaware
PR Valley View LLC	Delaware
PR Valley View OP-DSG/CEC, LLC	Delaware
PR Valley View OP-TXRD, LLC	Delaware
PR Viewmont LLC	Delaware
PR VV LLC	Delaware
PR Walnut Mezzco, LLC	Pennsylvania
PR Walnut Street Abstract LLC	Delaware
PR  WG Park General GP, LLC	Delaware
PR Wiregrass Commons LLC	Delaware
PR Woodland Anchor-S, LLC	Delaware
PR Woodland General LLC	Delaware
PR Woodland Outparcel LLC	Delaware
PR WV LLC	Delaware
PR Wyoming Valley LLC	Delaware

Limited Liability Companies	Jurisdiction of Organization
PREIT Gallery TRS Sub LLC	Pennsylvania
PREIT Services, LLC	Delaware
PRWGP General, LLC	Delaware
WG Holdings of Pennsylvania, LLC	Pennsylvania
WG Park-Anchor B, LLC	Delaware
XGP LLC	Delaware

Corporations	Jurisdiction of Organization
1150 Plymouth Associates Inc	Maryland
Capital City Beverage Enterprises, Inc	Maryland
Cherry Hill Beverage, Inc	Maryland
Exton License, Inc	Maryland
PR GC Inc	Maryland
PREIT TRS, Inc	Delaware
PREIT-RUBIN OP, Inc	Pennsylvania
PREIT-RUBIN, INC.	Pennsylvania

Trusts	Jurisdiction of Organization
PREIT Charitable Fund	Pennsylvania
PREIT Protective Trust	Pennsylvania

Unincorporated Associations	Jurisdiction of Organization
Eighth & Market Condominium Association	Pennsylvania

Unconsolidated Affiliates	Jurisdiction of Organization
801 4-6 Fee Owner GP LLC	Delaware
801 4-6 Mezz GP LLC	Delaware
801 C-3 Fee Owner LP	Delaware
801 C-3 Fee Owner GP LLC	Delaware
801 C-3 Mezz LP	Delaware
801 C-3 Mezz GP LLC	Delaware
801-Gallery C-3 Associates, L.P. (fka 801 Market Venture LP)	Delaware
801-Gallery C-3 MT, L.P.	Pennsylvania
801-Gallery GP, LLC	Pennsylvania
801-Gallery Associates, L.P.	Pennsylvania
801-Tenant C-3 Manager, LLC	Pennsylvania
801 Market Venture GP LLC	Delaware
907-937 Market Street Condominium Association, Inc.	Pennsylvania
1010-1016 Market Street Realty, LP	Pennsylvania
1018 Market Street Realty, LP	Pennsylvania
1020-1024 Market Street Realty, LP	Pennsylvania
Court at Oxford Valley Condominium Association	Pennsylvania
Gallery Neighborhood Improvement District Corporation	Pennsylvania
GPM GP LLC	Delaware
Keystone Philadelphia Properties, LP	Pennsylvania
Lehigh BOS Acquisition, L.P.	Delaware
Lehigh Valley Associates (limited partnership)	Pennsylvania
Lehigh Valley Mall GP, LLC	Delaware
Lehigh Valley Mall, LLC	Delaware
Mall at Lehigh Valley, L.P.	Delaware
Mall Maintenance Corporation II	Pennsylvania
Mall Corners Ltd. (limited partnership)	Georgia
Mall Corners II, Ltd. (limited partnership)	Georgia
Metroplex General, Inc.	Pennsylvania
Metroplex West Associates, L.P.	Pennsylvania
Monroe Marketplace Unit Owners Association, Inc.	Pennsylvania
Oxford Valley Road Associates (limited partnership)	Pennsylvania
Pavilion East Associates, L.P.	Pennsylvania
PEI MSR GP I LLC	Pennsylvania
PEI MSR I LP	Pennsylvania
PEI MSR GP II LLC	Pennsylvania
PEI MSR II LP	Pennsylvania
PEI MSR GP III LLC	Pennsylvania
PEI MSR III LP	Pennsylvania
PEI MSR LP LLC	Pennsylvania

Unconsolidated Affiliates	Jurisdiction of Organization
801 4-6 Fee Owner GP LLC	Delaware
801 4-6 Mezz GP LLC	Delaware
801 C-3 Fee Owner LP	Delaware
801 C-3 Fee Owner GP LLC	Delaware
801 C-3 Mezz LP	Delaware
801 C-3 Mezz GP LLC	Delaware
801-Gallery C-3 Associates, L.P. (fka 801 Market Venture LP)	Delaware
801-Gallery C-3 MT, L.P.	Pennsylvania
801-Gallery GP, LLC	Pennsylvania
801-Gallery Associates, L.P.	Pennsylvania
801-Tenant C-3 Manager, LLC	Pennsylvania
801 Market Venture GP LLC	Delaware
907-937 Market Street Condominium Association, Inc.	Pennsylvania
1010-1016 Market Street Realty, LP	Pennsylvania
1018 Market Street Realty, LP	Pennsylvania
1020-1024 Market Street Realty, LP	Pennsylvania
Court at Oxford Valley Condominium Association	Pennsylvania
Gallery Neighborhood Improvement District Corporation	Pennsylvania
GPM GP LLC	Delaware
Keystone Philadelphia Properties, LP	Pennsylvania
Lehigh BOS Acquisition, L.P.	Delaware
Lehigh Valley Associates (limited partnership)	Pennsylvania
Lehigh Valley Mall GP, LLC	Delaware
Lehigh Valley Mall, LLC	Delaware
Mall at Lehigh Valley, L.P.	Delaware
PM Gallery Finance LLC	New Jersey
PM Gallery LP	Delaware
PM Management Associates, LLC	Pennsylvania
PM 833 Market Mezz LP	Delaware
PM 833 Market Mezz GP LLC	Delaware
PR 907 MARKET LP	Delaware
PR Gallery I Limited Partnership	Pennsylvania
Red Rose Commons Associates, L.P	Pennsylvania
Red Rose Commons Condominium Association	Pennsylvania
Simon/PREIT Gloucester Development, LLC	Delaware
Unit 1 801 Market Street Subcondominium Association, Inc.	Pennsylvania
Walnut Street Abstract, L.P. Walnut Street Title, LLC	New Jersey New Jersey

EX-23.1

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

The Board of Directors
Pennsylvania Real Estate Investment Trust:

We consent to the incorporation by reference in the registration statements (File No. 333-235646, File No. 333-235644, File No. 333-169488, as amended, File No. 333-144607, File No. 333-144606, File No. 333-121962, as amended, File No. 333-110926, File No. 333-109849, File No. 333-109848, File No. 333-97337, File No. 333-36626, File No. 333-74693, File No. 333-74695, File No. 333-70157, as amended, File No. 333-48917, as amended) on Form S-3 and in the registration statements (File No. 333-225342, File No. 333-225341, File No. 333-183480, File No. 333-169487, File No. 333-148237, File No. 333-103116, File No. 333-97677, File No. 333-69877, File No. 33-59767, File No. 33-59771, File No. 33-59773) on Form S-8 of Pennsylvania Real Estate Investment Trust of our reports dated March 13, 2020, with respect to the consolidated balance sheets of Pennsylvania Real Estate Investment Trust and subsidiaries (the Company) as of December 31, 2019 and 2018, the related consolidated statements of operations, comprehensive income (loss), equity, and cash flows for each of the years in the three-year period ended December 31, 2019, and the related notes and financial statement schedule III (collectively, the consolidated financial statements), and the effectiveness of internal control over financial reporting as of December 31, 2019, which reports appear in the December 31, 2019 annual report on Form 10‑K of Pennsylvania Real Estate Investment Trust.

Our report dated March 13, 2020, on the consolidated financial statements, contains an explanatory paragraph that states that in the event the Company does not meet certain covenants applicable under its credit agreements during 2020 the Company’s liquidity would not be sufficient to meet its obligations within one year of the date of issuance of the financial statements, which raises substantial doubt about the Company’s ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Our report on the consolidated financial statements refers to a change in the method of accounting for leases.

/s/ KPMG LLP

Philadelphia, Pennsylvania
March 13, 2020

EX-23.2

Exhibit 23.2

Consent of Independent Auditors

We consent to the incorporation by reference in the following Registration Statements:

(1) Registration Statement (Form S-3 No. 333-235644) of Pennsylvania Real Estate Investment Trust;

(2) Registration Statement (Form S-3 No. 333-235646) of Pennsylvania Real Estate Investment Trust;

(3) Registration Statement (Form S-3 No. 333-169488, as amended) of Pennsylvania Real Estate Investment Trust;  

(4) Registration Statement (Form S-3 No. 333-144607) of Pennsylvania Real Estate Investment Trust;  

(5) Registration Statement (Form S-3 No. 333-144606) of Pennsylvania Real Estate Investment Trust;

(6) Registration Statement (Form S-3 No. 333-121962, as amended) of Pennsylvania Real Estate Investment Trust;

(7) Registration Statement (Form S-3 No. 333-110926) of Pennsylvania Real Estate Investment Trust;

(8) Registration Statement (Form S-3 No. 333-109849) of Pennsylvania Real Estate Investment Trust;

(9) Registration Statement (Form S-3 No. 333-109848) of Pennsylvania Real Estate Investment Trust;

(10) Registration Statement (Form S-3 No. 333-97337) of Pennsylvania Real Estate Investment Trust;

(11) Registration Statement (Form S-3 No. 333-36626) of Pennsylvania Real Estate Investment Trust;

(12) Registration Statement (Form S-3 No. 333-74693) of Pennsylvania Real Estate Investment Trust;

(13) Registration Statement (Form S-3 No. 333-74695) of Pennsylvania Real Estate Investment Trust;

(14) Registration Statement (Form S-3 No. 333-70157, as amended) of Pennsylvania Real Estate Investment Trust;

(15) Registration Statement (Form S-3 No. 333-48917, as amended) of Pennsylvania Real Estate Investment Trust;

(16) Registration Statement (Form S-8 No. 333-225342) of Pennsylvania Real Estate Investment Trust;

(17) Registration Statement (Form S-8 No. 333-225341) of Pennsylvania Real Estate Investment Trust;

(18) Registration Statement (Form S-8 No. 333-183480) of Pennsylvania Real Estate Investment Trust;

(19) Registration Statement (Form S-8 No. 333-169487) of Pennsylvania Real Estate Investment Trust;

(20) Registration Statement (Form S-8 No. 333-148237) of Pennsylvania Real Estate Investment Trust;

(21) Registration Statement (Form S-8 No. 333-103116) of Pennsylvania Real Estate Investment Trust;

(22) Registration Statement (Form S-8 No. 333-97677) of Pennsylvania Real Estate Investment Trust;

(23) Registration Statement (Form S-8 No. 333-69877) of Pennsylvania Real Estate Investment Trust;

(24) Registration Statement (Form S-8 No. 33-59767) of Pennsylvania Real Estate Investment Trust;

(25) Registration Statement (Form S-8 No. 33-59771) of Pennsylvania Real Estate Investment Trust; and,

(26) Registration Statement (Form S-8 No. 33-59773) of Pennsylvania Real Estate Investment Trust;

of our report dated March 12, 2020, with respect to the consolidated financial statements of Lehigh Valley Associates and Subsidiary, included in this Form 10-K of Pennsylvania Real Estate Investment Trust for the year ended December 31, 2019.

/s/ Ernst & Young LLP

Indianapolis, Indiana  

March 12, 2020

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Joseph F. Coradino, certify that:

1 I have reviewed this Annual Report on Form 10-K of Pennsylvania Real Estate Investment Trust;

2 Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3 Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4 The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5 The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Trustees (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated:	March 13, 2020		/s/ Joseph F. Coradino
		Name:	Joseph F. Coradino
		Title:	Chairman and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Mario C. Ventresca, Jr., certify that:

1 I have reviewed this Annual Report on Form 10-K of Pennsylvania Real Estate Investment Trust;

2 Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3 Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4 The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5 The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Trustees (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated:	March 13, 2020		/s/ Mario C. Ventresca, Jr.
		Name:	Mario C. Ventresca, Jr.
		Title:	Chief Financial Officer

EX-32.1

Exhibit 32.1

Certification of Chief Executive Officer

Pursuant to Section 906 of Sarbanes-Oxley Act of 2002

I, Joseph F. Coradino, the Chief Executive Officer of Pennsylvania Real Estate Investment Trust (the “Company”), hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

(1) the Form 10-K of the Company for the year ended December 31, 2019 as filed with the Securities and Exchange Commission on the date hereof (the “Form 10-K”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) the information contained in the Form 10-K fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated:	March 13, 2020		/s/ Joseph F. Coradino
		Name:	Joseph F. Coradino
		Title:	Chairman and Chief Executive Officer

EX-32.2

Exhibit 32.2

Certification of Chief Financial Officer

Pursuant to Section 906 of Sarbanes-Oxley Act of 2002

I, Mario C. Ventresca, Jr., the Chief Financial Officer of Pennsylvania Real Estate Investment Trust (the “Company”), hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge.

(1) the Form 10-K of the Company for the year ended December 31, 2019 as filed with the Securities and Exchange Commission on the date hereof (the “Form 10-K”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) the information contained in the Form 10-K fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated:	March 13, 2020		/s/ Mario C. Ventresca, Jr.
		Name:	Mario C. Ventresca, Jr.
		Title:	Chief Financial Officer

EX-99.1

Exhibit 99.1

Audited Consolidated Financial Statements

Lehigh Valley Associates and Subsidiary

As of December 31, 2019

With Report of Independent Auditors

Lehigh Valley Associates and Subsidiary

Audited Consolidated Financial Statements

As of December 31, 2019

Contents

Report of Independent Auditors	1
Audited Consolidated Financial Statements
Consolidated Balance Sheet	3
Consolidated Statement of Operations	4
Consolidated Statement of Partners’ Capital	5
Consolidated Statement of Cash Flows	6
Notes to Consolidated Financial Statements	7

Report of Independent Auditors

To the Partners of

Lehigh Valley Associates and Subsidiary:

We have audited the accompanying consolidated financial statements of Lehigh Valley Associates, a Pennsylvania limited partnership, and Subsidiary (the Partnership), which comprise the consolidated balance sheet as of December 31, 2019, the related consolidated statements of operations, partners’ capital, and cash flows for the year then ended, and the related notes to the consolidated financial statements.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in conformity with U.S. generally accepted accounting principles; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free of material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

1

Opinion

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Lehigh Valley Associates and Subsidiary at December 31, 2019, and the consolidated results of their operations and their cash flows for the year then ended, in conformity with U.S. generally accepted accounting principles.

/s/ ERNST & YOUNG LLP

March 12, 2020

2

Lehigh Valley Associates and Subsidiary

Consolidated Balance Sheet

December 31, 2019

Assets
Investment property, at cost	$	101,586,732
Less accumulated depreciation		55,885,485
		45,701,247
Cash and cash equivalents		10,135,688
Restricted cash		575,135
Tenant receivables, net		581,655
Accrued straight-line rent		3,002,077
Deferred costs, net		1,302,286
Other assets		1,206,217
Total assets	$	62,504,305
Liabilities and partners’ capital
Mortgage note payable, net	$	191,997,791
Accounts payable and accrued expenses		4,167,371
Capital expenditures payable		6,144,655
Total liabilities		202,309,817
Partners’ capital		(139,805,512	)
Total liabilities and partners’ capital	$	62,504,305
The accompanying notes are an integral part of this consolidated statement.

The accompanying notes are an integral part of this consolidated statement.

3

Lehigh Valley Associates and Subsidiary

Consolidated Statement of Operations

For the Year Ended December 31, 2019

Revenue:
Lease income	$	32,697,333
Other income		520,852
Total revenue		33,218,185
Expenses:
Property operating		3,544,630
Depreciation and amortization		3,239,292
Real estate taxes		3,286,913
Repairs and maintenance		920,970
Advertising and promotion		675,056
Other		333,054
Total expenses		11,999,915
Operating income		21,218,270
Interest expense		8,055,803
Net income	$	13,162,467

The accompanying notes are an integral part of this consolidated statement.

4

Lehigh Valley Associates and Subsidiary

Consolidated Statement of Partners’ Capital

For the Year Ended December 31, 2019

	PREIT			Kravco Simon
	Associates, L.P			Investments, L.P.
	and Affiliate			and Affiliate
	(General Partner			(General Partner
	and Limited			and Limited
	Partner)			Partner)			Total
Partners’ percentage equity interest		50.0	%		50.0	%		100.0	%
Partners’ capital at December 31, 2018	$	(75,398,984	)	$	(75,398,995	)	$	(150,797,979	)
Distributions		(1,085,000	)		(1,085,000	)		(2,170,000	)
Net income		6,581,233			6,581,234			13,162,467
Partners’ capital at December 31, 2019	$	(69,902,751	)	$	(69,902,761	)	$	(139,805,512	)
The accompanying notes are an integral part of this    consolidated statement.

The accompanying notes are an integral part of this consolidated statement.

5

Lehigh Valley Associates and Subsidiary

Consolidated Statement of Cash Flows

For the Year Ended December 31, 2019

Cash flows from operating activities
Net income	$	13,162,467
Adjustments to reconcile net income to net
cash from operating activities:
Straight-line rent		(259,352	)
Depreciation and amortization		3,342,859
Amortization of tenant inducements		122,899
Changes in assets and liabilities:
Tenant receivables, net		146,281
Deferred costs and other assets		(451,442	)
Accounts payable and accrued expenses		(643,137	)
Net cash from operating activities		15,420,575
Cash flows from investing activities
Capital expenditures		(9,967,080	)
Change in capital expenditures payable		2,835,341
Net cash from investing activities		(7,131,739	)
Cash flows from financing activities
Mortgage principal payments		(3,528,195	)
Distributions to partners		(2,170,000	)
Net cash from financing activities		(5,698,195	)
Change in cash and cash equivalents and restricted cash		2,590,641
Cash and cash equivalents and restricted cash, beginning of year		8,120,182
Cash and cash equivalents and restricted cash, end of year	$	10,710,823
The accompanying notes are an integral part of this consolidated statement.

The accompanying notes are an integral part of this consolidated statement.

6

Lehigh Valley Associates and Subsidiary

Notes to Consolidated Financial Statements

For the Year Ended December 31, 2019

1. General

Lehigh Valley Associates (the Partnership) is a Pennsylvania limited partnership. On June 2, 2006, the Partnership formed Mall at Lehigh Valley, L.P. (the Mall), a Delaware limited partnership. The Partnership transferred all the assets and liabilities related to its regional shopping center and an office building (the Property), located in Whitehall, Pennsylvania, to the Mall in exchange for 100% ownership therein. The Partnership also entered into a lease agreement for the Property with its wholly owned subsidiary. The intercompany lease is eliminated in the accompanying financial statements. The Property leases space to retailers (national and international chains and locally owned stores) in the ordinary course of business.

The Partnership will terminate on December 31, 2073, unless terminated earlier as provided for in the agreement. Income, losses, and distributions are allocated to the partners in proportion to their respective ownership interests.

The Partnership is owned 50% by PREIT Associates, L.P. and its wholly owned subsidiary (general and limited partner), 49.5% by Kravco Simon Investments, L.P. (KSI, limited partner), and 0.5% by Delta Ventures, Inc. (DV, general partner). DV is a wholly owned subsidiary of KSI. KSI is owned by Simon Property Group, L.P. (SPG, L.P.).

Simon Property Group, Inc. (SPG), a publicly traded real estate investment trust (REIT), owned a controlling 86.8% of SPG, L.P. at December 31, 2019.

2. Summary of Significant Accounting Policies

Consolidation

The accompanying financial statements include the accounts of the Partnership and its wholly owned subsidiary, the Mall. All significant intercompany balances and transactions have been eliminated. Hereafter, references to the Partnership include Lehigh Valley Associates and its wholly owned subsidiary, Mall at Lehigh Valley, L.P.

Use of Estimates

The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States (GAAP). GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, and revenues and expenses during the reported periods. Actual results could differ from these estimates.

1910-3281723 7

Lehigh Valley Associates and Subsidiary

Notes to Consolidated Financial Statements (continued)

2. Summary of Significant Accounting Policies (continued)

Investment Property

Investment property is recorded at cost. Investment property includes costs of acquisition, development, predevelopment and construction, tenant allowances and improvements, and interest and real estate taxes incurred during construction. Certain improvements and replacements from repairs and maintenance are capitalized when they extend the useful life, increase capacity, or improve the efficiency of the asset. All other repair and maintenance items are expensed as incurred. Depreciation on building and improvements is provided utilizing the straight-line method over an estimated original useful life, which is generally 10 to 35 years. Depreciation on tenant allowances and improvements is provided utilizing the straight-line method over the term of the related lease or occupancy term of the tenant, if shorter. Depreciation on equipment and fixtures is provided utilizing the straight-line method over five to seven years.

Investment property is reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of investment property may not be recoverable. These circumstances include, but are not limited to, declines in cash flows, ending occupancy, and comparable sales per square foot. Impairment of investment property is measured when estimated undiscounted operating income before depreciation and amortization plus its residual value is less than the carrying value of the property. To the extent that impairment has occurred, the excess of carrying value of the property over its estimated fair value is charged to expense.

Deferred Costs, Net

Deferred costs consist primarily of leasing commissions and related costs, and tenant inducements. Deferred leasing costs are amortized on a straight-line basis over the terms of the related leases. Tenant inducements represent payments to tenants that do not qualify as tenant allowances or improvements. Tenant inducements are amortized as a reduction to minimum rent on a straight-line basis over the term of the related lease.

8

Lehigh Valley Associates and Subsidiary

Notes to Consolidated Financial Statements (continued)

2. Summary of Significant Accounting Policies (continued)

Deferred costs, net, consist of the following at December 31:

	2019
Leasing costs and other	$	2,134,553
Tenant inducements		1,492,955
		3,627,508
Less accumulated amortization		2,325,222
	$	1,302,286

Depreciation and amortization in the accompanying statement of operations includes amortization of deferred leasing costs of $302,952 for the year ended December 31, 2019. Minimum rent in the accompanying statement of operations is reduced by amortization of tenant inducements of $122,899 for the year ended December 31, 2019.

Revenue Recognition

The Partnership, as a lessor, has retained substantially all of the risks and benefits of ownership of the property and accounts for its leases as operating leases. Fixed lease income is accrued on a straight-line basis over the terms of the leases. Substantially all retail tenants are also required to pay overage rents based on sales over a stated base amount during the lease year. The Partnership recognizes this variable lease consideration only when each tenant’s sales exceed the applicable sales threshold.

Leases are typically structured to allow the Partnership to recover a significant portion of property operating and repairs and maintenance (referred to herein as CAM), as well as other expenses such as real estate taxes and advertising and promotion expenses from the tenants. A substantial portion of the Partnership’s leases, other than those for anchor stores, require the tenant to reimburse the Partnership for a substantial portion of its operating expenses, including CAM, real estate taxes and insurance. Such property operating expenses typically include utility, insurance, security, janitorial, landscaping, food court, and other administrative expenses. This significantly reduces the Partnership’s exposure to increases in costs and operating expenses resulting from inflation or otherwise.

9

Lehigh Valley Associates and Subsidiary

Notes to Consolidated Financial Statements (continued)

2. Summary of Significant Accounting Policies (continued)

For substantially all leases, the Partnership receives a fixed payment from the tenant for the CAM component, which is recognized as lease income on a straight-line basis over the term of the lease beginning with the adoption of ASC 842, Leases (ASC 842). When not reimbursed by the fixed CAM component, CAM expense reimbursements are based on the tenant’s proportionate share of the allocable operating expenses and CAM capital expenditures for the property. The Partnership accrues all variable reimbursements from tenants for recoverable portions of all these expenses as variable lease consideration in the period the applicable expenditures are incurred.

The Partnership receives payments for these reimbursements from substantially all tenants throughout the year. This reduces the risk of loss on uncollectible accounts once the Partnership performs the final year-end billings for recoverable expenditures. Differences between estimated recoveries and the final billed amounts are recognized in the subsequent year. Advertising and promotional costs are expensed as incurred. Provisions for credit losses for lease receivables that are not probable of collection are recognized as a reduction of lease income.

Fixed lease income under the Partnership’s operating leases includes fixed minimum lease consideration and fixed CAM reimbursements which are accrued on a straight-line basis. Variable lease income includes consideration based on sales, as well as reimbursements for real estate taxes, utilities, advertising and promotion, and certain other items.

	2019
Fixed lease income	$	26,650,308
Variable lease income		6,047,025
Total lease income	$	32,697,333

10

Lehigh Valley Associates and Subsidiary

Notes to Consolidated Financial Statements (continued)

2. Summary of Significant Accounting Policies (continued)

Minimum fixed lease consideration under non-cancelable operating leases for each of the next five years ending December 31, and thereafter, excluding variable lease consideration, is as follows:

2020	$	21,807,607
2021		19,943,894
2022		16,571,177
2023		11,087,568
2024		7,921,258
Thereafter		10,827,377
	$	88,158,881

Income Taxes

As a partnership, the allocated share of the operating results for each period is includable in the income tax returns of the partners; accordingly, income taxes are not reflected in the Partnership’s financial statements. Management evaluates the potential that the Partnership may be subject to income taxes in the future. As of December 31, 2019, there were no uncertain tax positions that had a material impact on the Partnership’s financial statements.

New Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board (FASB) issued ASU 2016-02, Leases, codified as ASC 842, which results in lessees recognizing most leased assets and corresponding lease liabilities on the balance sheet. Certain refinements were made to lessor accounting to conform the standard with the recently issued revenue recognition guidance in ASU 2014-09, Revenue From Contracts With Customers, specifically related to the allocation and recognition of contract consideration earned from lease and non-lease revenue components.

Substantially all of the Partnership’s revenues are earned from arrangements that are within the scope of ASC 842. On July 30, 2018, the FASB issued ASU 2018-11, Leases: Targeted Improvements, also codified as ASC 842, which created a practical expedient that provides lessors an option not to separate lease and non-lease components when certain criteria are met and instead account for those components as a single lease component. The Partnership determined that its lease arrangements meet the criteria under the practical expedient to account for lease and non-lease components as a single lease component, which alleviates the requirement upon adoption of

11

Lehigh Valley Associates and Subsidiary

Notes to Consolidated Financial Statements (continued)

2. Summary of Significant Accounting Policies (continued)

ASC 842 that the Partnership reallocate or separately present consideration from lease and non-lease components. On January 1, 2019, the Partnership began recognizing consideration received from fixed common area maintenance arrangements on a straight-line basis as this consideration is attributed to the lease component.

In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows – Restricted Cash, which requires the statement of cash flows to reflect the change during the period in total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. The ASU also requires disclosures regarding the nature of the restrictions. The Partnership adopted ASU 2016-18 on January 1, 2019, using a retrospective approach.

Fair Value Measurements

Level 1 fair value inputs are quoted prices for identical items in active, liquid, and visible markets, such as stock exchanges. Level 2 fair value inputs are observable information for similar items in active or inactive markets and appropriately consider counterparty creditworthiness in the valuations. Level 3 fair value inputs reflect the Partnership’s best estimate of inputs and assumptions market participants would use in pricing an asset or liability at the measurement date. The inputs are unobservable in the market and significant to the valuation estimate. The Partnership has no investments for which fair value is measured on a recurring basis using Level 3 inputs.

Cash and Cash Equivalents

All highly liquid investments purchased with an original maturity of 90 days or less are considered cash and cash equivalents. Cash equivalents are carried at cost, which approximates market value. However, at certain times, such cash and cash equivalents may be in excess of Federal Deposit Insurance Corporation and Securities Investor Protection Corporation insurance limits.

Cash paid for interest by the Partnership was $8,007,391 during 2019.

12

Lehigh Valley Associates and Subsidiary

Notes to Consolidated Financial Statements (continued)

2. Summary of Significant Accounting Policies (continued)

Restricted Cash

The Partnership’s mortgage lender requires a fixed monthly rollover reserve escrow deposit until a reserve cap of $2,994,258 is met for purposes of paying out tenant allowances as incurred. The escrow balance as of December 31, 2019, was $575,135 and is included in restricted cash on the balance sheet.

Subsequent Events

Subsequent events have been evaluated by the Partnership through March 12, 2020, the date the financial statements were available to be issued.

3. Investment Property

Investment property consists of the following at December 31:

	2019
Land	$	5,738,037
Building and improvements		93,206,731
Total land, building, and improvements		98,944,768
Furniture, fixtures, and equipment		2,641,964
Investment property, at cost		101,586,732
Less accumulated depreciation		55,885,485
Investment property, at cost, net	$	45,701,247

Investment property includes $9,306,281 of work-in-progress at December 31, 2019.

13

Lehigh Valley Associates and Subsidiary

Notes to Consolidated Financial Statements (continued)

4. Mortgage Note Payable, Net

The Partnership has a $200,000,000 mortgage note that bears interest at a fixed rate of 4.056% and requires monthly principal and interest payments of $961,299 through its maturity date of November 1, 2027. As of December 31, 2019, the principal amount outstanding on the mortgage note was $192,800,221.

The mortgage note is secured by the investment property and related rents and leases of the Partnership. As described in Note 2, the mortgage note also requires a monthly rollover reserve escrow deposit until a reserve cap of $2,994,258 is met. The escrow balance as of December 31, 2019, was $575,135.

If a trigger event occurs (debt service coverage ratio, as defined, falls below 1.5 to 1 for two consecutive quarters based upon the trailing four quarters), the Partnership will be required to establish a cash management account under the sole dominion and control of the lender. As of December 31, 2019, no such triggering event has occurred.

As of December 31, 2019, scheduled principal repayments on the mortgage note, over the next five years and thereafter, are as follows:

2020	$	3,653,715
2021		3,829,169
2022		3,989,640
2023		4,156,835
2024		4,310,528
Thereafter		172,860,334
Mortgage note payable		192,800,221
Deferred financing costs, net		(802,430	)
Mortgage note payable, net	$	191,997,791

Financing fees incurred to obtain long-term financing are recorded as a reduction to the related debt obligation. These deferred financing costs are amortized to interest expense in the accompanying statement of operations on a straight-line basis over the term of the respective debt agreement. As of December 31, 2019, the balance of the mortgage note payable is net of unamortized deferred financing costs of $802,430.

14

Lehigh Valley Associates and Subsidiary

Notes to Consolidated Financial Statements (continued)

4. Mortgage Note Payable, Net (continued)

Based on the borrowing rates currently available to the Partnership for loans with similar terms and maturities, the fair value of the mortgage note at December 31, 2019, was approximately $195,700,000 and the estimated discount rate was 3.83%.

5. Commitments and Contingencies

Litigation

The Partnership currently is not subject to any material litigation nor to management’s knowledge is any material litigation currently threatened against the Partnership other than routine litigation, claims, and administrative proceedings arising in the ordinary course of business. Management believes that such routine litigation, claims, and administrative proceedings will not have a material adverse impact on the Partnership’s financial position or results of operations.

6. Related-Party Transactions

The Partnership has a management agreement with an affiliate of SPG, L.P. A management fee based on rental income, as defined by the agreement, is charged for management services and is included in property operating expenses in the accompanying statement of operations. In addition, the affiliate is compensated for other services provided beyond the scope of the management fees, including leasing, consulting, legal, technical, and other services, which are also included in property operating expenses in the accompanying statement of operations, unless capitalized. Certain commercial general liability and property damage insurance is provided to the Partnership by affiliates of SPG, L.P. Insurance premiums charged to the Partnership are included in property operating expenses in the accompanying statement of operations. Also, certain national advertising and promotion programs are provided to the Partnership by affiliates of SPG, L.P., and these charges are included in advertising and promotion expense in the accompanying statement of operations.

15

Lehigh Valley Associates and Subsidiary

Notes to Consolidated Financial Statements (continued)

6. Related-Party Transactions (continued)

A summary of the transactions described above and charged by affiliates is as follows:

Related-Party Activity	2019
Management fees	$	935,976
Insurance		272,402
Advertising and promotion		251,753
Other services		645,156
Total fees and compensation expense		2,105,287
Capitalized leasing and other fees		420,158
Total fees and compensation	$	2,525,445
Revenue from affiliates	$	327,336

During 2019, the Partnership was charged $235,276 for electricity usage by an affiliate of SPG, L.P. These charges are included in property operating expenses in the accompanying statement of operations.

At December 31, 2019, $448,825 was payable to SPG, L.P. and its affiliates. The amount owed is included in accounts payable and accrued expenses in the accompanying balance sheet.

16

EX-99.2

Exhibit 99.2

Unaudited Consolidated Financial Statements

Lehigh Valley Associates and Subsidiary

As of December 31, 2018 and 2017, and for the Two Years Ended

December 31, 2018

1

Lehigh Valley Associates and Subsidiary

Unaudited Consolidated Financial Statements

As of December 31, 2018 and 2017, and for the Two Years Ended December 31, 2018

Contents

Consolidated Balance Sheets	3
Consolidated Statements of Operations	4
Consolidated Statements of Partners’ Deficit	5
Consolidated Statements of Cash Flows	6
Notes to Consolidated Financial Statements	7

2

Lehigh Valley Associates and Subsidiary

Unaudited Consolidated Balance Sheets

	December 31 2018			December 31 2017
Assets
Investment property, at cost	$	92,216,066		$	89,159,958
Less accumulated depreciation		53,545,558			53,392,594
		38,670,508			35,767,364
Cash and cash equivalents		7,056,753			2,711,025
Tenant receivables, net of allowance for credit losses of $198,208 and $176,248, respectively		727,936			498,265
Accrued straight-line rent		2,742,725			2,554,277
Deferred costs, net		1,296,708			1,025,918
Other assets		2,249,632			1,823,741
Total assets	$	52,744,262		$	44,380,590
Liabilities and partners’ deficit
Mortgage notes payable, net	$	195,422,419		$	198,441,376
Accounts payable and accrued expenses		4,810,508			3,802,309
Capital expenditures payable		3,309,314			1,453,524
Total liabilities		203,542,241			203,697,209
Partners’ deficit		(150,797,979	)		(159,316,619	)
Total liabilities and partners’ deficit	$	52,744,262		$	44,380,590

The accompanying notes are an integral part of these unaudited consolidated statements.

3

Lehigh Valley Associates and Subsidiary

Unaudited Consolidated Statements of Operations

	For the Years Ended
	December 31
	2018		2017
Revenue:
Minimum rent	$	22,119,638	$	21,674,741
Overage rent		356,643		213,035
Tenant reimbursements		12,104,441		12,585,144
Other income		1,081,513		320,482
Total revenue		35,662,235		34,793,402
Expenses:
Property operating		3,764,747		3,777,334
Depreciation and amortization		2,820,964		3,611,259
Real estate taxes		3,284,457		3,259,024
Repairs and maintenance		873,773		974,013
Advertising and promotion		694,919		814,961
Provision for credit losses		41,986		(269,468	)
Other		354,440		321,689
Total expenses		11,835,286		12,488,812
Operating income		23,826,949		22,304,590
Prepayment penalty for early payoff of debt		—		3,114,407
Interest expense		8,222,309		7,792,506
Net income	$	15,604,640	$	11,397,677

The accompanying notes are an integral part of these unaudited consolidated statements.

4

Lehigh Valley Associates and Subsidiary

Unaudited Consolidated Statements of Partners’ Deficit

For the Years Ended December 31, 2018 and 2017

	PREIT			Kravco Simon
	Associates, L.P.			Investments, L.P.
	and Affiliate			and Affiliate
	(General Partner			(General Partner
	and Limited Partner)			and Limited Partner)			Total
Partners’ percentage equity interest		50.0	%		50.0	%		100.0	%
Partners’ deficit at January 1, 2017	$	(41,654,041	)	$	(41,654,053	)	$	(83,308,094	)
Distributions		(43,703,101	)		(43,703,101	)		(87,406,202	)
Net income		5,698,838			5,698,839			11,397,677
Partners’ deficit at December 31, 2017	$	(79,658,304	)	$	(79,658,315	)	$	(159,316,619	)
Distributions		(3,543,000	)		(3,543,000	)		(7,086,000	)
Net income		7,802,320			7,802,320			15,604,640
Partners’ deficit at December 31, 2018	$	(75,398,984	)	$	(75,398,995	)	$	(150,797,979	)

The accompanying notes are an integral part of these unaudited consolidated statements.

5

Lehigh Valley Associates and Subsidiary

Unaudited Consolidated Statements of Cash Flows

	For the Years Ended December 31
	2018			2017
Cash flows from operating activities	$	15,604,640		$	11,397,677
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
Straight-line rent		(188,448	)		194,851
Depreciation and amortization		2,924,531			3,817,535
Amortization of tenant inducements		123,381			127,017
Provision for credit losses		41,986			(269,468	)
Prepayment penalty		—			3,114,407
Changes in assets and liabilities:
Tenant receivables		(271,657	)		229,452
Deferred costs and other assets		(643,951	)		(309,231	)
Accounts payable and accrued expenses		1,008,199			(1,548,130	)
Net cash provided by operating activities		18,598,681			16,754,110
Cash flows from investing activities
Capital expenditures		(5,526,992	)		(1,805,636	)
Change in capital escrow reserves		(373,228	)		(690,201	)
Change in capital expenditures payable		1,855,790			751,709
Net cash used in investing activities		(4,044,430	)		(1,744,128	)
Cash flows from financing activities
Proceeds from new mortgage, net of deferred financing costs of $1,035,668		—			198,964,332
Repayment of previous mortgage note payable		—			(124,576,276	)
Prepayment penalty		—			(3,114,407	)
Mortgage principal payments		(3,122,523	)		(2,673,163	)
Distributions to partners		(7,086,000	)		(87,406,202	)
Net cash used in financing activities		(10,208,523	)		(18,805,716	)
Increase (Decrease) in cash and cash equivalents		4,345,728			(3,795,734	)
Cash and cash equivalents, beginning of year		2,711,025			6,506,759
Cash and cash equivalents, end of year	$	7,056,753		$	2,711,025

6

Lehigh Valley Associates and Subsidiary

Notes to Unaudited Consolidated Financial Statements

As of December 31, 2018 and 2017, and for the Two Years Ended December 31, 2018

1. General

Lehigh Valley Associates (the Partnership) is a Pennsylvania limited partnership. On June 2, 2006, the Partnership formed Mall at Lehigh Valley, L.P. (the Mall), a Delaware limited partnership. The Partnership transferred all the assets and liabilities related to its regional shopping center and an office building (the Property), located in Whitehall, Pennsylvania, to the Mall in exchange for 100% ownership therein. The Partnership also entered into a lease agreement for the Property with its wholly owned subsidiary. The intercompany lease is eliminated in the accompanying consolidated financial statements. The Property leases space to retailers (national and international chains and locally owned stores) in the ordinary course of business.

The Partnership will terminate on December 31, 2073, unless terminated earlier as provided for in the agreement. Income, losses, and distributions are allocated to the partners in proportion to their respective ownership interests.

The Partnership is owned 50% by PREIT Associates, L.P. and its wholly owned subsidiary (general and limited partner), 49.5% by Kravco Simon Investments, L.P. (KSI, limited partner), and 0.5% by Delta Ventures, Inc. (DV, general partner). DV is a wholly owned subsidiary of KSI. KSI is owned by Simon Property Group, L.P. (SPG, L.P.).

Simon Property Group, Inc. (SPG), a publicly traded real estate investment trust (REIT), owned a controlling 86.8% and 86.9% of SPG, L.P. at December 31, 2018 and 2017, respectively.

2. Summary of Significant Accounting Policies

Consolidation

The accompanying consolidated financial statements include the accounts of the Partnership and its wholly owned subsidiary, the Mall. All significant intercompany balances and transactions have been eliminated. Hereafter, references to the Partnership include Lehigh Valley Associates and its wholly owned subsidiary, Mall at Lehigh Valley, L.P.

Use of Estimates

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (GAAP). GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and revenues and expenses during the reported periods. Actual results could differ from these estimates.

7

Lehigh Valley Associates and Subsidiary

Notes to Unaudited Consolidated Financial Statements

As of December 31, 2018 and 2017, and for the Two Years Ended December 31, 2018

2. Summary of Significant Accounting Policies (continued)

Investment Property

Investment property is recorded at cost. Investment property includes costs of acquisition, development, predevelopment and construction, tenant allowances and improvements, and interest and real estate taxes incurred during construction. Certain improvements and replacements from repairs and maintenance are capitalized when they extend the useful life, increase capacity, or improve the efficiency of the asset. All other repair and maintenance items are expensed as incurred. Depreciation on building and improvements is provided utilizing the straight-line method over an estimated original useful life, which is generally 10 to 35 years. Depreciation on tenant allowances and improvements is provided utilizing the straight-line method over the term of the related lease or occupancy term of the tenant, if shorter. Depreciation on equipment and fixtures is provided utilizing the straight-line method over five to ten years.

Investment property is reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of investment property may not be recoverable. These circumstances include, but are not limited to, declines in cash flows, ending occupancy, and comparable sales per square foot. Impairment of investment property is measured when estimated undiscounted operating income before depreciation and amortization plus its residual value is less than the carrying value of the property. To the extent that impairment has occurred, the excess of carrying value of the property over its estimated fair value is charged to expense.

Deferred Costs, Net

Deferred costs consist primarily of leasing commissions and related costs, and tenant inducements. Deferred leasing costs are amortized on a straight-line basis over the terms of the related leases. Tenant inducements represent payments to tenants that do not qualify as tenant allowances or improvements. Tenant inducements are amortized as a reduction to minimum rent on a straight-line basis over the term of the related lease.

8

Lehigh Valley Associates and Subsidiary

Notes to Unaudited Consolidated Financial Statements

As of December 31, 2018 and 2017, and for the Two Years Ended December 31, 2018

2. Summary of Significant Accounting Policies (continued)

Deferred costs, net, consist of the following at December 31:

	2018		2017
Leasing costs and other	$	2,005,941	$	1,428,140
Tenant inducements		1,486,841		1,526,841
	3,492,782		2,954,981
Less accumulated amortization		2,196,074		1,929,063
	$1,296,708		$1,025,918

Depreciation and amortization in the accompanying Consolidated Statements of Operations includes amortization of deferred leasing costs of $249,780 and $227,479 for the years ended December 31, 2018 and 2017, respectively. Minimum rent in the accompanying Consolidated Statements of Operations is reduced by amortization of tenant inducements of $123,381 and $127,017 for the years ended December 31, 2018 and 2017, respectively.

Revenue Recognition

The Partnership, as a lessor, has retained substantially all of the risks and benefits of ownership of the Property and accounts for its leases as operating leases. Minimum rents are accrued on a straight-line basis over the terms of their respective leases. Substantially all of the retail tenants are also required to pay overage rents based on sales over a stated base amount during the lease year. The Partnership recognizes overage rents only when each tenant’s sales exceed its sales threshold.

Leases are typically structured to allow the Partnership to recover a significant portion of property operating and repairs and maintenance expenses (referred to herein as CAM), as well as other expenses such as real estate taxes and advertising and promotion expenses from the tenants. Such property operating expenses typically include utility, insurance, security, janitorial, landscaping, food court, and other administrative expenses. The Partnership accrues reimbursements from tenants for recoverable portions of all of these expenses as revenue in the period the applicable expenditures are incurred. The Partnership receives a fixed payment from most tenants for the CAM component, which is recorded as revenue when earned.

9

Lehigh Valley Associates and Subsidiary

Notes to Unaudited Consolidated Financial Statements

As of December 31, 2018 and 2017, and for the Two Years Ended December 31, 2018

2. Summary of Significant Accounting Policies (continued)

The Partnership receives payments for these reimbursements from substantially all tenants throughout the year. This reduces the risk of loss on uncollectible accounts once the Partnership performs the final year-end billings for recoverable expenditures. Differences between actual and estimated tenant reimbursements are recognized in the subsequent year. Advertising and promotion costs are expensed as incurred.

Allowance for Credit Losses

A provision for credit losses is recorded based on management’s judgment of tenant creditworthiness, ability to pay, and probability of collection. Accounts are written off when they are deemed to be no longer collectible. In addition, the retail sector in which the tenant operates and the historical collection experience in cases of bankruptcy are considered, if applicable.

Income Taxes

As a partnership, the allocated share of the operating results for each period is includable in the income tax returns of the partners; accordingly, income taxes are not reflected in the Partnership’s consolidated financial statements. Management evaluates the potential that the Partnership may be subject to income taxes in the future. As of December 31, 2018 and 2017, there were no uncertain tax positions that had a material impact on the Partnership’s consolidated financial statements.

Fair Value Measurements

Level 1 fair value inputs are quoted prices for identical items in active, liquid, and visible markets, such as stock exchanges. Level 2 fair value inputs are observable information for similar items in active or inactive markets and appropriately consider counterparty creditworthiness in the valuations. Level 3 fair value inputs reflect the Partnership’s best estimate of inputs and assumptions market participants would use in pricing an asset or liability at the measurement date. The inputs are unobservable in the market and significant to the valuation estimate. The Partnership has no investments for which fair value is measured on a recurring basis using Level 3 inputs.

10

Lehigh Valley Associates and Subsidiary

Notes to Unaudited Consolidated Financial Statements

As of December 31, 2018 and 2017, and for the Two Years Ended December 31, 2018

2. Summary of Significant Accounting Policies (continued)

Cash and Cash Equivalents

All highly liquid investments purchased with an original maturity of 90 days or less are considered cash and cash equivalents. Cash equivalents are carried at cost, which approximates market value. However, at certain times, such cash and cash equivalents may be in excess of Federal Deposit Insurance Corporation and Securities Investor Protection Corporation insurance limits.

Cash paid for interest by the Partnership was $7,451,764 and $8,126,352 during 2018 and 2017, respectively.

New Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2014-09, Revenue From Contracts With Customers. ASU 2014-09 amends the existing accounting standards for revenue recognition. The new standard provides accounting guidance for all revenue arising from contracts with customers and affects all entities that enter into contracts to provide goods or services to their customers. The guidance also provides a model for the measurement and recognition of gains and losses on the sale of certain nonfinancial assets, such as property, including real estate.

The Partnership’s revenues impacted by this standard primarily include other ancillary income earned. Upon adoption of the new guidance, the amount and timing of revenue recognition will be consistent with the prior treatment. The Partnership adopted the standard using the modified retrospective approach on January 1, 2018, and there was no cumulative effect adjustment to recognize.

In February 2016, the FASB issued ASU 2016-02, Leases, which will result in lessees recognizing most leased assets and corresponding lease liabilities on the balance sheet. Lessor accounting will remain substantially similar to the current accounting; however, certain refinements were made to conform the standard with the recently issued revenue recognition guidance in ASU 2014-09, specifically related to the allocation and recognition of contract consideration earned from lease and non-lease revenue components.

11

Lehigh Valley Associates and Subsidiary

Notes to Unaudited Consolidated Financial Statements

As of December 31, 2018 and 2017, and for the Two Years Ended December 31, 2018

2. Summary of Significant Accounting Policies (continued)

Substantially all of the Partnership’s revenues are earned from arrangements that are within the scope of ASU 2016-02. Upon adoption of ASU 2016-02, consideration related to non-lease components identified in the Partnership’s lease arrangements will be accounted for using the guidance in ASU 2014-09, which would (i) necessitate that management reallocate consideration received under many of the lease arrangements between the lease and non-lease component, (ii) result in recognizing revenue allocated to the primary non-lease component (consideration received from fixed common area maintenance arrangements) on a straight-line basis, and (iii) require separate presentation of revenue recognized from lease and non-lease components on the statement of operations. However, on July 30, 2018, the FASB issued ASU 2018-11, which created a practical expedient that provides lessors an option not to separate lease and non-lease components when certain criteria are met and instead account for those components as a single lease component. The Partnership determined that its lease arrangements will meet the criteria under the practical expedient to account for lease and non-lease components as a single lease component, which alleviates the requirement upon adoption of ASU 2016-02 that the Partnership reallocate or separately present lease and non-lease components. As a result, the Partnership will recognize consideration received from fixed common area maintenance arrangements on a straight-line basis as this consideration is attributed to the lease component. The Partnership adopted ASU 2016-02 and any subsequent amendments beginning in 2019.

Subsequent Events

Subsequent events have been evaluated by the Partnership through March 28, 2019, the date the consolidated financial statements were available to be issued.

3. Investment Property

Investment property consists of the following at December 31:

	2018		2017
Land	$	5,738,037	$	5,738,037
Building and improvements		84,058,066		81,221,937
Total land, building, and improvements		89,796,103		86,959,974
Furniture, fixtures, and equipment		2,419,963		2,199,984
Investment property, at cost		92,216,066		89,159,958
Less accumulated depreciation		53,545,558		53,392,594
Investment property, at cost, net	$	38,670,508	$	35,767,364

12

Lehigh Valley Associates and Subsidiary

Notes to Unaudited Consolidated Financial Statements

As of December 31, 2018 and 2017, and for the Two Years Ended December 31, 2018

3. Investment Property (continued)

Investment property includes $580,622 and $1,777,503 of work-in-progress at December 31, 2018 and 2017, respectively.

4. Mortgage Notes Payable, Net

The Partnership, through its subsidiary the Mall, had a mortgage note payable with an original principal balance of $140,000,000 (the Old Note), which bore interest at a fixed rate of 5.88% and required monthly principal and interest payments of $828,600 through its maturity date of July 5, 2020.

On October 13, 2017, the Mall refinanced the loan for a $200,000,000 mortgage note (the New Note), which bears interest at a fixed rate of 4.056% and requires monthly principal and interest payments of $961,299 through its maturity date of November 1, 2027. The majority of the proceeds from the New Note were used to pay down the outstanding balance of the Old Note and accrued interest, including a prepayment penalty of $3,114,407, which is reflected in the 2017 Consolidated Statement of Operations. The remaining proceeds were distributed to the partners. As of December 31, 2018 and 2017, the principal amount outstanding on the New Note was $196,328,416 and $199,450,939, respectively.

13

Lehigh Valley Associates and Subsidiary

Notes to Unaudited Consolidated Financial Statements

As of December 31, 2018 and 2017, and for the Two Years Ended December 31, 2018

4. Mortgage Notes Payable, Net (continued)

The New Note is secured by the investment property and related rents and leases of the Partnership. The New Note also requires a monthly rollover reserve escrow deposit until a reserve cap of $2,994,258 is met. The escrow balance as of December 31, 2018 and 2017, was $1,063,429 and $690,201, respectively.

If a trigger event occurs (debt service coverage ratio, as defined, falls below 1.5 to 1 for two consecutive quarters based upon the trailing four quarters), the Partnership will be required to establish a cash management account under the sole dominion and control of the lender. As of December 31, 2018, no such triggering event has occurred.

As of December 31, 2018, scheduled principal repayments on the mortgage note, over the next five years and thereafter, are as follows:

2019	$	3,528,195
2020		3,653,715
2021		3,829,169
2022		3,989,640
2023		4,156,835
Thereafter		177,170,862
Mortgage note payable		196,328,416
Deferred financing costs, net		(905,997	)
Mortgage note payable, net	$	195,422,419

Financing fees incurred to obtain long-term financing are recorded as a reduction to the related debt obligation. These deferred financing costs are amortized to interest expense in the accompanying Consolidated Statements of Operations on a straight-line basis over the term of the respective debt agreement. As of December 31, 2018 and 2017, the balance of the mortgage note payable is net of unamortized deferred financing costs of $905,997 and $1,009,564, respectively.

14

Lehigh Valley Associates and Subsidiary

Notes to Unaudited Consolidated Financial Statements

As of December 31, 2018 and 2017, and for the Two Years Ended December 31, 2018

4. Mortgage Notes Payable, Net (continued)

During the years ended December 31, 2018 and 2017, amortization of deferred financing costs totaled $103,567 and $206,276, respectively.

Based on the borrowing rates currently available to the Partnership for loans with similar terms and maturities, the fair value of the mortgage note at December 31, 2018 and 2017, was approximately $188,300,000 and $197,700,000, respectively, and the estimated discount rate was 4.69% and 4.41%, respectively.

5. Rentals Under Operating Leases

The Partnership receives rental income from the leasing of retail space under operating leases. The leases also provide for the tenants to pay electricity charges to an affiliate of KSI. Future minimum rentals to be received under noncancelable operating leases for each of the next five years and thereafter, excluding tenant reimbursements of operating expenses and percentage rent based on tenant sales volume, as of December 31, 2018, are as follows:

2019	$	16,691,236
2020		15,168,493
2021		13,536,390
2022		11,188,743
2023		6,782,402
Thereafter		11,264,712
	$	74,631,976

6. Commitments and Contingencies

Litigation

The Partnership currently is not subject to any material litigation nor to management’s knowledge is any material litigation currently threatened against the Partnership other than routine litigation, claims, and administrative proceedings arising in the ordinary course of business. Management believes that such routine litigation, claims, and administrative proceedings will not have a material adverse impact on the Partnership’s consolidated financial position or results of operations.

15

Lehigh Valley Associates and Subsidiary

Notes to Unaudited Consolidated Financial Statements

As of December 31, 2018 and 2017, and for the Two Years Ended December 31, 2018

7. Related-Party Transactions

The Partnership has a management agreement with an affiliate of SPG, L.P. A management fee based on rental income, as defined by the agreement, is charged for management services and is included in property operating expenses in the accompanying Consolidated Statements of Operations. In addition, the affiliate is compensated for other services provided beyond the scope of the management fees, including leasing, consulting, legal, technical, and other services, which are also included in property operating expenses in the accompanying Consolidated Statements of Operations, unless capitalized. Certain commercial general liability and property damage insurance is provided to the Partnership by affiliates of SPG, L.P. Insurance premiums charged to the Partnership are included in property operating expenses in the accompanying Consolidated Statements of Operations. Also, certain national advertising and promotion programs are provided to the Partnership by affiliates of SPG, L.P., and these charges are included in advertising and promotion expense in the accompanying Consolidated Statements of Operations.

A summary of the transactions described above and charged by affiliates is as follows:

Related-Party Activity	2018		2017
Management fees	$	1,010,650	$	986,159
Insurance		279,223		294,455
Advertising and promotion		313,075		362,763
Other services		316,134		226,941
Total fees and compensation expense		1,919,082		1,870,318
Capitalized leasing and other fees		423,135		287,168
Total fees and compensation	$	2,342,217	$	2,157,486

During 2018 and 2017, the Partnership was charged $297,737 and $253,390, respectively, for electricity usage by an affiliate of SPG, L.P. These charges are included in property operating expenses in the accompanying Consolidated Statements of Operations.

At December 31, 2018 and 2017, $403,083 and $289,003, respectively, were payable to SPG, L.P. and its affiliates. The amounts owed are included in accounts payable and accrued expenses in the accompanying Consolidated Balance Sheets.

16

XML

Leases - Future Minimum Lease Payments Under Agreements (Detail) $ in Thousands	Dec. 31, 2018 USD ($)
Finance leases
2019	$ 925
2020	925
2021	925
2022	925
2023	925
Thereafter	3,923
Total	8,548
Operating leases
2019	3,264
2020	2,237
2021	2,730
2022	2,538
2023	2,485
Thereafter	49,226
Total	62,480
Total
2019	4,189
2020	3,162
2021	3,655
2022	3,463
2023	3,410
Thereafter	53,149
Total	$ 71,028

XML

Investments in Partnerships - Dispositions (Details) - USD ($) $ in Thousands	1 Months Ended			3 Months Ended					12 Months Ended
	Mar. 31, 2019	Feb. 28, 2019	Sep. 30, 2017	Dec. 31, 2019	Sep. 30, 2019	Jun. 30, 2019	Dec. 31, 2018	Jun. 30, 2018	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Income Statement Balance Sheet And Additional Disclosures By Disposal Groups Including Discontinued Operations [Line Items]
Gains (losses) on sales of investment real estate				$ 100	$ 1,200	$ 1,500	$ 800	$ 700	$ 2,744	$ 1,722	$ (27)
Partnership Interest
Income Statement Balance Sheet And Additional Disclosures By Disposal Groups Including Discontinued Operations [Line Items]
Ownership percentage	25.00%
Undeveloped Land Parcel Adjacent To Gloucester Premium Outlets
Income Statement Balance Sheet And Additional Disclosures By Disposal Groups Including Discontinued Operations [Line Items]
Gains (losses) on sales of investment real estate	$ 600
Undeveloped Land Parcel Adjacent To Gloucester Premium Outlets | Partnership Interest
Income Statement Balance Sheet And Additional Disclosures By Disposal Groups Including Discontinued Operations [Line Items]
Proceeds from real estate and real estate joint ventures	3,800
Gains (losses) on sales of investment real estate	$ 2,300
Condominium Interest in 907 Market Street, Philadelphia, Pennsylvania
Income Statement Balance Sheet And Additional Disclosures By Disposal Groups Including Discontinued Operations [Line Items]
Gains (losses) on sales of investment real estate		$ 2,800
Condominium Interest in 907 Market Street, Philadelphia, Pennsylvania | Partnership Interest
Income Statement Balance Sheet And Additional Disclosures By Disposal Groups Including Discontinued Operations [Line Items]
Ownership percentage		50.00%
Proceeds from real estate and real estate joint ventures		$ 41,800
Gains (losses) on sales of investment real estate		5,500
Proceeds from sale of real estate		$ 19,700
Condominium Interest in 801 Market Street, Philadelphia, Pennsylvania
Income Statement Balance Sheet And Additional Disclosures By Disposal Groups Including Discontinued Operations [Line Items]
Gains (losses) on sales of investment real estate			$ 6,500
Condominium Interest in 801 Market Street, Philadelphia, Pennsylvania | Partnership Interest
Income Statement Balance Sheet And Additional Disclosures By Disposal Groups Including Discontinued Operations [Line Items]
Ownership percentage			50.00%
Proceeds from real estate and real estate joint ventures			$ 61,500
Gains (losses) on sales of investment real estate			13,100
Proceeds from sale of real estate			$ 30,300

XML

Investments in Partnerships - Summary of Mortgage Loans Secured by Our Unconsolidated Properties (Details) - USD ($) $ in Thousands	1 Months Ended
	Mar. 31, 2018	Feb. 28, 2018	Oct. 31, 2017	Dec. 31, 2019	Dec. 31, 2018
Partnership Mortgage Loan Activity [Line Items]
Mortgage loans payable, net				$ 899,753	$ 1,047,906
Pavilion at Market East
Partnership Mortgage Loan Activity [Line Items]
Mortgage loans payable, net		$ 8,300
Debt instrument, maturity month and year		2021-02
Pavilion at Market East | LIBOR
Partnership Mortgage Loan Activity [Line Items]
Stated Interest Rate		2.85%
Gloucester Premium Outlets
Partnership Mortgage Loan Activity [Line Items]
Mortgage loans payable, net	$ 86,000
Debt instrument, maturity month and year	2022-03
Gloucester Premium Outlets | LIBOR
Partnership Mortgage Loan Activity [Line Items]
Stated Interest Rate	1.50%
Lehigh Valley Associates, LP
Partnership Mortgage Loan Activity [Line Items]
Mortgage loans payable, net			$ 200,000
Fixed interest rate			4.06%
Debt instrument, maturity month and year			2027-11

XML

Commitments and Contingencies - Employment Agreements (Details) $ in Millions	12 Months Ended
	Dec. 31, 2019 USD ($) Officer
Other Commitments [Line Items]
Number of officer in employment agreements | Officer	1
Aggregate base compensation | $	$ 0.9
Officer
Other Commitments [Line Items]
Renewal of agreements term	1 year

XML

Historic Tax Credits - Additional Information (Details) - USD ($) $ in Millions	3 Months Ended		12 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Dec. 31, 2018	Dec. 31, 2017
Historic Tax Credits [Abstract]
Historic Tax Credit put option received			$ 1.0
Amount paid in cash			0.9
Priority Return Expense	$ 0.2	$ 0.2	0.1
Tax Credit Amortization Income	$ 1.0	$ 1.9
Interest and Other Income			$ 0.8	$ 1.8

XML

Financing Activity - Applicable Credit Spread Over Libor at Various Leverage Levels (Details)	12 Months Ended
	Dec. 31, 2019
Less than 0.450 to 1.00
Debt Instrument [Line Items]
Total liabilities to gross asset value, ratio	0.450
Equal to or greater than 0.450 to 1.00 but less than 0.500 to 1.00 | Minimum
Debt Instrument [Line Items]
Total liabilities to gross asset value, ratio	0.450
Equal to or greater than 0.450 to 1.00 but less than 0.500 to 1.00 | Maximum
Debt Instrument [Line Items]
Total liabilities to gross asset value, ratio	0.500
Equal to or greater than 0.500 to 1.00 but less than 0.550 to 1.00 | Minimum
Debt Instrument [Line Items]
Total liabilities to gross asset value, ratio	0.500
Equal to or greater than 0.500 to 1.00 but less than 0.550 to 1.00 | Maximum
Debt Instrument [Line Items]
Total liabilities to gross asset value, ratio	0.550
Equal to or greater than 0.550 to 1.00
Debt Instrument [Line Items]
Total liabilities to gross asset value, ratio	0.550
LIBOR | Less than 0.450 to 1.00 | Revolving Credit Facility
Debt Instrument [Line Items]
Stated Interest Rate	1.20%
LIBOR | Less than 0.450 to 1.00 | Term Loans
Debt Instrument [Line Items]
Stated Interest Rate	1.35%
LIBOR | Equal to or greater than 0.450 to 1.00 but less than 0.500 to 1.00 | Revolving Credit Facility
Debt Instrument [Line Items]
Stated Interest Rate	1.25%
LIBOR | Equal to or greater than 0.450 to 1.00 but less than 0.500 to 1.00 | Term Loans
Debt Instrument [Line Items]
Stated Interest Rate	1.45%
LIBOR | Equal to or greater than 0.500 to 1.00 but less than 0.550 to 1.00 | Revolving Credit Facility
Debt Instrument [Line Items]
Stated Interest Rate	1.30%
LIBOR | Equal to or greater than 0.500 to 1.00 but less than 0.550 to 1.00 | Term Loans
Debt Instrument [Line Items]
Stated Interest Rate	1.60%
LIBOR | Equal to or greater than 0.550 to 1.00 | Revolving Credit Facility
Debt Instrument [Line Items]
Stated Interest Rate	1.55%
LIBOR | Equal to or greater than 0.550 to 1.00 | Term Loans
Debt Instrument [Line Items]
Stated Interest Rate	1.90%
Base Rate | Less than 0.450 to 1.00 | Revolving Credit Facility
Debt Instrument [Line Items]
Stated Interest Rate	0.20%
Base Rate | Less than 0.450 to 1.00 | Term Loans
Debt Instrument [Line Items]
Stated Interest Rate	0.35%
Base Rate | Equal to or greater than 0.450 to 1.00 but less than 0.500 to 1.00 | Revolving Credit Facility
Debt Instrument [Line Items]
Stated Interest Rate	0.25%
Base Rate | Equal to or greater than 0.450 to 1.00 but less than 0.500 to 1.00 | Term Loans
Debt Instrument [Line Items]
Stated Interest Rate	0.45%
Base Rate | Equal to or greater than 0.500 to 1.00 but less than 0.550 to 1.00 | Revolving Credit Facility
Debt Instrument [Line Items]
Stated Interest Rate	0.30%
Base Rate | Equal to or greater than 0.500 to 1.00 but less than 0.550 to 1.00 | Term Loans
Debt Instrument [Line Items]
Stated Interest Rate	0.60%
Base Rate | Equal to or greater than 0.550 to 1.00 | Revolving Credit Facility
Debt Instrument [Line Items]
Stated Interest Rate	0.55%
Base Rate | Equal to or greater than 0.550 to 1.00 | Term Loans
Debt Instrument [Line Items]
Stated Interest Rate	0.90%

XML

Organization and Summary of Significant Accounting Policies - Schedule of Capitalized Salaries, Commissions and Benefits, Real Estate Taxes and Interest (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Accounting Policies [Abstract]
Salaries and benefits	$ 1,332	$ 1,380	$ 1,296
Real estate taxes	1,057	1,198	1,035
Interest	7,725	6,395	7,620
Salaries, commissions and benefits	$ 568	$ 7,022	$ 6,066

XML

Organization and Summary of Significant Accounting Policies - Schedule of Carrying Amount of Goodwill (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Goodwill [Roll Forward]
Basis, Balance, beginning of period	$ 6,322	$ 6,322	$ 6,322
Basis, Changes in Goodwill	0	0	0
Basis, Balance, end of period	6,322	6,322	6,322
Accumulated Amortization, Balance, beginning of period	(1,073)	(1,073)	(1,073)
Accumulated Amortization, Changes in Goodwill	0	0	0
Accumulated Amortization, Balance, end of period	(1,073)	(1,073)	(1,073)
Goodwill	5,249	5,249	5,249
Changes in Goodwill	0	0	0
Goodwill	$ 5,249	$ 5,249	$ 5,249

XML

SCHEDULE III INVESTMENTS IN REAL ESTATE

12 Months Ended

Dec. 31, 2019

Real Estate And Accumulated Depreciation Disclosure [Abstract]

SCHEDULE III INVESTMENTS IN REAL ESTATE

(in thousands of dollars)	Initial Cost of Land		Initial Cost of Building & Improvements		Cost of Improvements Net of Retirements and Impairment Charges			Balance of Land and Land Held for Develop- ment		Balance of Building & Improvements and Construction in Progress		Accumulated Depreciation Balance		Current Encumbrance (1)		Date of Acquisition/ Construction	Life of Depre- ciation
Capital City Mall	$	11,380	$	65,575	$	59,801		$	11,321	$	125,435	$	51,408	$	—	2003		40
Cherry Hill Mall		29,938		185,611		265,297			48,608		432,238		261,070		268,753	2003		40
Cumberland Mall		8,711		43,889		31,394			9,842		74,152		31,239		42,247	2005		40
Dartmouth Mall		7,015		28,328		52,872			7,021		81,194		44,318		58,288	1998		40
Exton Square Mall		19,976		103,955		(74,961	)		23,714		25,256		11,470		—	2003		40
Francis Scott Key Mall		9,786		47,526		40,644			9,440		88,516		43,141		68,469	2003		40
Jacksonville Mall		9,913		47,139		36,515			9,913		83,654		40,110		—	2003		40
Magnolia Mall		8,149		42,302		56,657			14,511		92,597		49,356		—	1998		40
Monroe Land		1,177		—		—			1,177		—		—		—	2006		10
Moorestown Mall		10,934		62,995		112,615			23,060		163,484		72,684		—	2003		40
Patrick Henry Mall		16,075		86,643		53,740			16,397		140,061		73,125		88,910	2003		40
Plymouth Meeting Mall		29,265		58,388		153,745			31,738		209,660		99,496		—	2003		40
The Mall at Prince Georges		13,065		57,686		74,504			13,066		132,189		63,944		—	1998		40
Springfield Town Center		119,912		353,551		22,736			119,912		376,287		67,344		—	2015		40
Sunrise Plaza land		395		—		(29	)		366		—		—		—	2005	N/A
Swedes Square land		189		—		36			225		—		—		—	2004	N/A
Valley Mall		11,956		57,931		75,356			23,761		121,482		48,093		—	2003		40
Valley View Mall		9,402		45,351		(18,564	)		4,204		31,986		12,600		27,429	2003		40
Viewmont Mall		12,505		61,519		47,962			12,606		109,380		49,593		67,185	2003		40
Willow Grove Park		26,748		131,189		102,878			36,412		224,403		105,214		156,444	2003		40
Woodland Mall		31,835		121,965		127,859			40,593		241,065		78,517		123,840	2005		40
Investment In Real Estate	$	388,326	$	1,601,543	$	1,221,057		$	457,887	$	2,753,039	$	1,202,722	$	901,565

⁽¹⁾ Represents mortgage principal balances outstanding as of December 31, 2019 and does not include unamortized debt costs with an aggregate balance of $1.8 million.

The aggregate cost basis and depreciated basis for federal income tax purposes of our investment in real estate was $3,132.2 million and $2,225.4 million at December 31, 2019, respectively, and $3,302.7 million and $2,353.4 million at December 31, 2018, respectively. The changes in total real estate and accumulated depreciation for the years ended December 31, 2019, 2018 and 2017 are as follows:

(in thousands of dollars)	For the Year Ended December 31,
Total Real Estate Assets:	2019			2018			2017
Balance, beginning of year	$	3,184,594		$	3,299,702		$	3,300,014
Improvements and development		137,593			125,616			502,077
Acquisitions		—			21,250			2,613
Impairment of assets		(3,989	)		(201,818	)		(89,101	)
Dispositions		(81,118	)		(4,856	)		(402,783	)
Write-off of fully depreciated assets		(12,031	)		(32,993	)		(13,118	)
Reclassification to held for sale		(14,123	)		(22,307	)		—
Balance, end of year	$	3,210,926		$	3,184,594		$	3,299,702
Balance, end of year – held for sale	$	15,653		$	22,307		$	—

S-1

(in thousands of dollars)	For the Year Ended December 31,
Accumulated Depreciation:	2019			2018			2017
Balance, beginning of year	$	1,118,582		$	1,111,007		$	1,060,845
Depreciation expense		125,495			120,718			118,485
Impairment of assets		(484	)		(75,586	)		(39,264	)
Dispositions		(25,693	)		(4,564	)		(15,941	)
Write-off of fully depreciated assets		(12,031	)		(32,993	)		(13,118	)
Reclassification to held for sale		(3,147	)		—			—
Balance, end of year	$	1,202,722		$	1,118,582		$	1,111,007
Balance, end of year – held for sale	$	3,147		$	—		$	—

XML

Investments in Partnerships (Tables)

12 Months Ended

Dec. 31, 2019

Equity Method Investments And Joint Ventures [Abstract]

Summary of Equity Investments

The following table presents summarized financial information of our equity investments in unconsolidated partnerships as of December 31, 2019 and 2018:

	December 31,
(in thousands of dollars)	2019			2018
ASSETS:
Investments in real estate, at cost:
Operating properties	$	883,530		$	575,149
Construction in progress		251,029			420,771
Total investments in real estate		1,134,559			995,920
Accumulated depreciation		(229,877	)		(212,574	)
Net investments in real estate		904,682			783,346
Cash and cash equivalents		34,766			20,446
Deferred costs and other assets, net		43,476			30,549
Total assets		982,924			834,341
LIABILITIES AND PARTNERS’ INVESTMENT:
Mortgage loans payable, net		499,057			507,090
FDP Term Loan, net		299,091			247,901
Other liabilities		79,166			34,463
Total liabilities		877,314			789,454
Net investment		105,610			44,887
Partners’ share		50,997			21,583
PREIT’s share		54,613			23,304
Excess investment (1)		17,464			15,763
Net investments and advances	$	72,077		$	39,067
Investment in partnerships, at equity	$	159,993		$	131,124
Distributions in excess of partnership investments		(87,916	)		(92,057	)
Net investments and advances	$	72,077		$	39,067

(1) Excess investment represents the unamortized difference between our investment and our share of the equity in the underlying net investment in the unconsolidated partnerships. The excess investment is amortized over the life of the properties, and the amortization is included in “Equity in income of partnerships.”

Summary of Share of Equity in Income of Partnerships

The following table summarizes our share of equity in income of partnerships for the years ended December 31, 2019, 2018 and 2017:

	For the Year Ended December 31,
(in thousands of dollars)	2019			2018			2017
Real estate revenue	$	99,580		$	98,781		$	115,118
Expenses:
Property operating and other expenses		(34,955	)		(30,839	)		(33,273	)
Interest expense		(23,272	)		(23,373	)		(25,251	)
Depreciation and amortization		(21,942	)		(19,393	)		(24,872	)
Total expenses		(80,169	)		(73,605	)		(83,396	)
Net income		19,411			25,176			31,722
Less: Partners’ share		(10,768	)		(13,719	)		(17,607	)
PREIT’s share		8,643			11,457			14,115
Amortization of excess investment		(354	)		(82	)		252
Equity in income of partnerships	$	8,289		$	11,375		$	14,367

Schedule of Principal Payments Based On Respective Partnership Interest

Our proportionate share, based on our respective partnership interest, of principal payments due in the next five years and thereafter is as follows:

	Company’s Proportionate Share
(in thousands of dollars) For the Year Ending December 31,	Principal Amortization		Balloon Payments		Total		Property Total
2020	$	4,378	$	—	$	4,378	$	8,801
2021		4,049		41,170		45,219		91,945
2022		3,738		21,500		25,238		93,476
2023		3,620		33,502		37,122		74,244
2024		2,886		—		2,886		5,772
2025 and thereafter		7,213		106,087		113,300		226,601
Total principal payments	$	25,884	$	202,259	$	228,143		500,839
Less: Unamortized debt issuance costs								1,782
Carrying value of mortgage notes payable							$	499,057

Summary of Mortgage Loans Secured by Our Unconsolidated Properties

The following table presents the mortgage loans secured by the unconsolidated properties entered into since January 1, 2017:

Financing Date	Property	Amount Financed or Extended (in millions of dollars)		Stated Interest Rate	Maturity
2018 Activity:
February	Pavilion at Market East (1)	$	8.3	LIBOR plus 2.85%	February 2021
March	Gloucester Premium Outlets (2)	$	86.0	LIBOR plus 1.50%	March 2022
2017 Activity:
October	Lehigh Valley Mall (3)(4)	$	200.0	Fixed 4.06%	November 2027

(1) We own a 40% partnership interest in Pavilion at Market East and our share of this mortgage loan is $3.1 million.

(2) We own a 25% partnership interest in Gloucester Premium Outlets and our share of this mortgage loan is $21.5 million.

(3) The proceeds were used to repay the existing $124.6 million mortgage loan plus accrued interest. We own a 50% partnership interest in Lehigh Valley Mall and our share of this mortgage loan is $96.4 million.

(4) We received $35.3 million of proceeds as a distribution in connection with the financing. In connection with this new mortgage loan financing, the unconsolidated entity recorded $3.1 million of prepayment penalty and accelerated the amortization of $0.1 million of unamortized financing costs in the fourth quarter of 2017.

Summarized Balance Sheet And Statement Of Operations For Subsidiary

Summarized balance sheet information as of December 31, 2019, 2018 and 2017, and summarized statement of operations information for the years ended December 31, 2019, 2018 and 2017 for these entities, which are accounted for using the equity method, are as follows:

LVA

	As of or for the year ended December 31,
(in thousands of dollars)	2019		2018		2017
Total assets	$	62,504	$	52,255	$	43,850
Mortgage payable		191,998		196,328		199,451
Revenue		32,906		35,662		34,945
Property operating expenses		8,448		9,014		9,038
Interest expense		8,055		8,222		10,907
Net income		13,162		15,605		11,389
PREIT’s share of equity in income of partnership		6,581		7,803		5,695

FDP

	As of or for the year ended December 31,
(in thousands of dollars)	2019			2018			2017
Total assets	$	641,377		$	497,419		$	428,827
FDP Term Loan, net		299,091			250,000			—
Revenue		8,028			4,053			18,708
Property operating expenses		6,995			3,630			6,909
Interest expense		178			126			126
Net income		(7,352	)		(4,990	)		2,436
PREIT’s share of equity in income of partnership		(3,676	)		(2,495	)		1,218

XML

Organization and Summary of Significant Accounting Policies - Statements of Cash Flows (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Accounting Policies [Abstract]
Liquid short-term investments maturity	3 months
Cash and cash equivalents and restricted cash	$ 19,628	$ 32,445	$ 33,953	$ 29,865
Tenant security deposits	1,800	2,300
Cash paid for interest including interest of discontinued operations	59,400	58,400	55,400
Net of capitalized interest	$ 7,700	$ 6,400	$ 7,600

XML

Summary of Quarterly Results (Unaudited) (Tables)

12 Months Ended

Dec. 31, 2019

Quarterly Financial Information Disclosure [Abstract]

Summary of Unaudited Quarterly Financial Information

The following presents a summary of the unaudited quarterly financial information for the years ended December 31, 2019 and 2018:

(in thousands of dollars, except per share amounts) For the Year Ended December 31, 2019	1st Quarter			2nd Quarter			3rd Quarter		4th Quarter (1)			Total
Total revenue	$	85,305		$	81,392		$	81,374	$	88,721		$	336,792
Net income (loss) (2)(3)		(16,223	)		(6,080	)		24,716		(15,413	)		(13,000	)
Net income (loss) attributable to PREIT (2)(3)(4)		(14,535	)		(5,751	)		24,262		(14,848	)		(10,872	)
Basic and diluted earnings (loss) per share (4)	$	(0.30	)	$	(0.17	)	$	0.22	$	(0.29	)		(0.52	)

(in thousands of dollars, except per share amounts) For the Year Ended December 31, 2018	1st Quarter			2nd Quarter			3rd Quarter			4th Quarter (1)			Total
Total revenue	$	86,282		$	91,973		$	88,103		$	96,042		$	362,400
Net loss (2)(3)		(3,712	)		(32,321	)		(1,636	)		(88,834	)		(126,503	)
Net loss attributable to PREIT (2)(3)(4)		(2,601	)		(28,201	)		(745	)		(78,782	)		(110,329	)
Basic and diluted loss per share (4)		(0.14	)		(0.50	)		(0.11	)		(1.23	)		(1.98	)

⁽¹⁾ Fourth Quarter revenue includes a significant portion of annual percentage rent as most percentage rent minimum sales levels are met in the fourth quarter.

^{(2) Includes impairment losses of $1.5 million (1st Quarter 2019), $3.5 million (4th Quarter 2019), $34.2 million (2nd Quarter 2018), and $103.2 million (4th Quarter 2018).}

⁽³⁾ Includes gain on sales of real estate by equity method investee of $0.6 million (1^st Quarter 2019) and $2.8 million (1^st Quarter 2018), gain on sales of real estate $1.5 million (2^nd Quarter 2019), $1.2 million (3^rd Quarter 2019), $0.1 million (4^th Quarter 2019), $0.7 million (2^nd Quarter 2018) and $0.8 million (4^th Quarter 2018) and gain on sales of interests in non operating real estate of $2.7 million (4^th Quarter 2019) and $8.1 million (4^th Quarter 2018).

⁽⁴⁾ Certain prior period amounts for net income (loss) attributable to PREIT common shareholders, basic and diluted earnings per share, noncontrolling interest, total equity - PREIT and cash flow amounts were adjusted to reflect immaterial financial statement error corrections and new accounting rules as discussed in Note 1 to our consolidated financial statements.

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Summary of Quarterly Results - Summary of Unaudited Quarterly Financial Information (Parenthetical) (Details) - USD ($) $ in Thousands	3 Months Ended							12 Months Ended
	Dec. 31, 2019	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Quarterly Financial Information Disclosure [Abstract]
Impairment losses	$ 3,500			$ 1,500	$ 103,200	$ 34,200		$ 1,455	$ 137,487	$ 55,793
Gain on sales of real estate by equity method investee				$ 600			$ 2,800	553	2,772	6,567
Gain on sales of real estate	100	$ 1,200	$ 1,500		800	$ 700		2,744	1,722	(27)
Gain on sales of interest in non operating real estate	$ 2,700				$ 8,100			$ 2,718	$ 8,126	$ 1,270

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Real Estate Activities

12 Months Ended

Dec. 31, 2019

Real Estate [Abstract]

Real Estate Activities

2. REAL ESTATE ACTIVITIES

Investments in real estate as of December 31, 2019 and 2018 were comprised of the following:

	December 31,
(in thousands of dollars)	2019			2018
Buildings, improvements and construction in progress	$	2,753,039		$	2,719,400
Land, including land held for development		457,887			465,194
Total investments in real estate		3,210,926			3,184,594
Accumulated depreciation		(1,202,722	)		(1,118,582	)
Net investments in real estate	$	2,008,204		$	2,066,012

Impairment of Assets

During the years ended December 31, 2019, 2018, and 2017, we recorded asset impairment losses of $5.0 million, $137.5 million, and $55.8 million, respectively. Such impairment losses are recorded in “Impairment of assets” for the years ended 2019, 2018 and 2017. The assets that incurred impairment losses and the amount of such losses are as follows:

	For the Year Ended December 31,
(in thousands of dollars)	2019		2018		2017
Gainesville land		1,464		2,089		1,275
Woodland Mall		2,098		—		—
Exton Square Mall		—		73,218		—
Wyoming Valley Mall		—		32,177		—
Valley View Mall		1,408		14,294		15,521
Wiregrass Mall mortgage loan receivable		—		8,122		—
New Garden Township land		—		7,567		—
Logan Valley Mall		—		—		38,720
Sunrise Plaza land		—		—		226
Other		47		20		51
Total Impairment of Assets	$	5,017	$	137,487	$	55,793

Multiple outparcels and land parcels

In November 2019, we entered into an agreement to sell 14 tenant occupied parcels across five properties — Magnolia Mall, Capital City Mall, Woodland Mall, Jacksonville Mall and Valley Mall — for total consideration of $29.9 million. As of December 31, 2019, we completed the dispositions on three outparcels at Capital City Mall and Magnolia Mall for total consideration of $5.2 million. In connection with these sales, we recorded a gain of $2.7 million. Of the remaining outparcels, impairment of assets was recorded for one at Woodland Mall, located in Grand Rapids, Michigan, for $1.5 million. In January 2020, the sale of the outparcel at Woodland Mall was complete.

We also entered into two agreements in December 2019 to sell two land parcels at Moorestown Mall, located in Moorestown, New Jersey, and Woodland Mall in 2020. An impairment of $0.6 million was recorded in 2019 for the land value of the parcel at Woodland Mall.

Gainesville development land parcel

We had an undeveloped land parcel in Gainesville, Florida. In 2018 and 2017, we recorded losses on impairment of assets on the land parcel located in Gainesville, Florida of $2.1 million and $1.3 million, respectively, in connection with negotiations with a potential buyer. In connection with these negotiations, we determined that the estimated undiscounted cash flows, net of capital expenditures for the property, were less than the carrying value of the property, and recorded losses on impairment of assets. In March 2019, we entered into an agreement of sale with a buyer to sell the undeveloped land parcel in Gainesville, Florida for total consideration of $15.0 million and the sale transaction was split into four parcels. The first parcel was sold in March 2019 for $5.0 million. In connection with this transaction, we recorded losses on impairment of assets of $1.5 million in the first quarter of 2019. Subsequently, we closed on the sale of two parcels in November 2019 and the final parcel closed in December 2019 for aggregate consideration for the three parcels of $10.0 million. The net gain from the sale of this undeveloped land parcel was less than $0.1 million. 

Exton Square Mall

In connection with the preparation of our annual financial statements for the year ended December 31, 2018, we recorded a loss on impairment of assets on Exton Square Mall in Exton, Pennsylvania of $73.2 million. In conjunction with the preparation of our annual business plan, we anticipated decreases in occupancy and net operating income at this property as a result, which led us to conduct an analysis of possible impairment at this property. Based upon our estimates, we determined that the estimated undiscounted cash flows, net of capital expenditures for the property, were less than the carrying value of the property, and recorded a loss on impairment of assets. Our fair value analysis was based on discounted estimated future cash flows for the mall parcel, using a discount rate of 10.5% and a terminal capitalization rate of 10.0% for the mall parcel, and a direct capitalization rate of 5.5% for a parcel adjacent to the mall. The discount and capitalization rates were determined using management’s assessment of property operating performance and general market conditions and were classified in Level 3 of the fair value hierarchy.

Wyoming Valley Mall

In connection with the preparation of our financial statements as of and for the quarter ended June 30, 2018, we recorded a loss on impairment of assets on Wyoming Valley Mall in Wilkes-Barre, Pennsylvania of $32.2 million as we determined that the pending closure of two anchor stores at the property (as further discussed in Note 4) was a triggering event, leading us to conduct an analysis of possible impairment at this property. Based upon our estimates, we determined that the estimated undiscounted cash flows, net of capital expenditures for the property, were less than the carrying value of the property, and recorded a loss on impairment of assets. Our fair value analysis was based on discounted estimated future cash flows at the property, using a discount rate of 10.5% and a terminal capitalization rate of 9.0%, which was determined using management’s assessment of property operating performance and general market conditions and were classified in Level 3 of the fair value hierarchy.

Valley View Mall

In connection with the preparation of our annual financial statements for the year ended December 31, 2019, we recorded a loss on impairment of assets on Valley View Mall in La Crosse, Wisconsin of $1.4 million. We noted a triggering event as a result of our determination to decrease the holding period of the property to one year. This led to us conduct an analysis of possible impairment at the property. Our fair value analysis was based on a direct capitalization rate of 13.2% for Valley View Mall, which was determined using management’s assessment of property operating performance and general market conditions. The capitalization rate was determined using management’s assessment of property operating performance and general market conditions and were classified in Level 3 of the fair value hierarchy.

In connection with the preparation of our annual financial statements for the year ended December 31, 2018, we recorded a loss on impairment of assets on Valley View Mall in La Crosse, Wisconsin of $14.3 million. In the fourth quarter of 2018, Sears ceased operations at this mall. In conjunction with the preparation of our annual business plan, we anticipated decreases in occupancy and net operating income at this property resulting from lower co-tenancy rents from other tenants in 2019 and beyond, which led us to conduct an analysis of possible impairment at this property. Based upon our estimates, we determined that the estimated undiscounted cash flows, net of capital expenditures for the property, based on a probability-weighted assessment were less than the carrying value of the property, and recorded a loss on impairment of assets. Our fair value analysis was based on a direct capitalization rate of 12.0% on stabilized NOI of the property. The capitalization rate was determined using management’s assessment of property operating performance and general market conditions and were classified in Level 3 of the fair value hierarchy.

We previously recorded a loss on impairment of assets on Valley View Mall in La Crosse, Wisconsin of $15.5 million in 2017 in connection with our decision to market the property for sale. In connection with this decision, we determined that the holding period of the property was less than previously estimated, which we concluded was a triggering event, leading us to conduct an analysis of possible impairment at this property. Based upon our estimates, we determined that the estimated undiscounted cash flows, net of capital expenditures for the property, were less than the carrying value of the property, and recorded a loss on impairment of assets. Our fair value analysis was based on an estimated capitalization rate of approximately 12.0% for Valley View Mall, which was determined using management’s assessment of property operating performance and general market conditions.

Wiregrass Mortgage loan receivable

In connection with the sale of three malls in 2016, we received a $17.0 million mortgage note secured by Wiregrass Commons Mall in Dothan, Alabama. The note has a fixed interest rate of 6.0% and we recorded $0.2 million, $1.0 million, and $1.0 million of interest income in the years ended December 31, 2019, 2018 and 2017, respectively. During 2018, the original buyer sold Wiregrass Commons Mall to an unrelated party and the mortgage note was assumed by this new buyer as part of that sale transaction. In the fourth quarter of 2018, we reclassified the mortgage note receivable from held-to-maturity to held-for-sale. In connection with this reclassification, we recorded an impairment loss of $8.1 million to reduce the $16.1 million carrying value of the mortgage note receivable to its estimated fair value of $8.0 million based on negotiations with a buyer. This mortgage note receivable was sold in February 2019 for $8.0 million.

New Garden Township development land parcel

In 2018, we recorded a loss on impairment of assets on a land parcel located in New Garden Township, Pennsylvania of $7.6 million in connection with negotiations with a potential buyer of the property. In connection with these negotiations, we determined that the estimated proceeds from the sale of the property would be less than the carrying value of the property, and recorded a loss on impairment of assets. As of December 31, 2018, this land parcel was classified as held-for-sale in our consolidated balance sheet.

Logan Valley Mall

In 2017, we recorded an aggregate loss on impairment of assets on Logan Valley Mall in Altoona, Pennsylvania of $38.7 million in connection with negotiations with the buyer of the property. In connection with these negotiations, we determined that the holding period of the property was less than previously estimated, which we concluded was a triggering event, leading us to conduct an analysis of possible impairment at this property. Based upon the negotiations, we determined that the estimated undiscounted cash flows, net of capital expenditures for the property, were less than the carrying value of the property, and recorded a loss on impairment of assets. We sold Logan Valley Mall in August 2017.

Sunrise Plaza land

In 2017, we recorded a loss on impairment of assets on a land parcel located at Sunrise Plaza in Forked River, New Jersey of $0.2 million in connection with negotiations with the buyer of the property. In connection with these negotiations, we determined that the holding period of the property was less than previously estimated, which we concluded was a triggering event, leading us to conduct an analysis of possible impairment at this property. Based upon the negotiations, we determined that the estimated undiscounted cash flows, net of capital expenditures for the property, were less than the carrying value of the property, and recorded a loss on impairment of assets.

Acquisitions

In 2018, we purchased certain real estate and related improvements at Moorestown Mall and Valley Mall for a total of $17.6 million.

In 2017, we purchased vacant anchor stores from Macy’s located at Moorestown Mall, Valley View Mall and Valley Mall for an aggregate of $13.9 million. We executed a lease with a replacement tenant for the Valley View Mall location and this tenant opened in September 2017 and subsequently closed in the third quarter of 2018. We also have replacement tenants for the Moorestown Mall and Valley Mall former anchors and currently have redevelopment activities at these locations.

In connection with the March 2015 acquisition of Springfield Town Center, the previous owner of the property was potentially entitled to receive consideration (the “Earnout”) under the terms of the Contribution Agreement which was to be calculated as of March 31, 2018. The estimated value of the Earnout was zero and no amounts were paid out at or after March 31, 2018.

Dispositions

The table below presents our dispositions in 2017. There were no dispositions of our mall properties in 2019 and 2018. Proceeds from property sales were used for general corporate purposes, repayment of mortgage loans that secured the properties (if applicable) and repayment of then-outstanding amounts on our Credit Agreements (see note 4), unless otherwise noted.

Sale Date	Property and Location	Description of Real Estate Sold	Capitalization Rate	Sale Price		Gain/ (Loss)
				(in millions of dollars)
2017 Activity:
January	Beaver Valley Mall, Monaca, Pennsylvania	Mall	15.6%	$	24.2	$	—
	Crossroads Mall, Beckley, West Virginia	Mall	15.5%		24.8		—
August	Logan Valley Mall, Altoona, Pennsylvania	Mall	16.5%		33.2		—

Dispositions – Other Activity

In 2020, we entered into an agreement of sale for the sale and leaseback of five properties for an estimated total consideration of $153.6 million. Additionally, we entered into agreements of sale for land parcels for anticipated multifamily development for an estimated total consideration of $125.3 million.  These agreements are subject to certain conditions and final closing of these sales transactions cannot be assured.

In 2019, we entered into an agreement of sale with a buyer to sell an undeveloped land parcel located in Gainesville, Florida for total consideration of $15.0 million and the sale transaction was split into four parcels. The first parcel was sold in March 2019 for $5.0 million. As a result of executing the agreement of sale, we recorded losses on impairment of assets of $1.5 million in the first quarter of 2019. Subsequently, we closed on two parcels in November 2019 and the final parcel closed in December 2019 for an aggregate consideration of $10.0 million.

In 2019, we sold an undeveloped land parcel located in New Garden Township, Pennsylvania, for total consideration of $11.0 million, consisting of $8.25 million in cash and $2.75 million of preferred stock. We ascribed no value for accounting purposes to the preferred shares as they are not tradeable, cannot be transferred or sold and have no redemption feature. Up to $1.25 million of the cash consideration received is subject to claw-back if the buyer does not receive entitlements for a stipulated number of housing units, which has been recorded as a liability in our consolidated balance sheet. In connection with this sale, we recorded a gain of $0.2 million.

In 2019, we sold an outparcel adjacent to Exton Square Mall where a Whole Foods store is located for total consideration of $22.1 million. In connection with this sale, we recorded a gain of $1.3 million.

In 2019, we sold an outparcel located at Valley View Mall in La Crosse, Wisconsin for total consideration of $1.4 million. In connection with this sale, we recorded a gain of $1.2 million.

In 2019, we conveyed Wyoming Valley Mall to the lender of the mortgage loan secured by the property. The loan had a balance of approximately $72.8 million as of the conveyance on September 26, 2019. As a result of the transfer, having previously recognized an asset impairment loss of approximately $32.2 million on the value of the property, we wrote off the remaining carrying value of the property of $43.2 million and recorded a net gain on extinguishment of debt of $29.6 million in 2019.  

In 2018, we sold a parcel located adjacent to Exton Square Mall in Exton, Pennsylvania for $10.3 million. We recorded a gain of $8.1 million on this sale in the fourth quarter of 2018.

In 2018, we sold an outparcel on which two operating restaurants are located at Valley Mall in Hagerstown, Maryland. for $2.4 million. We recorded a gain of $1.0 million on this sale in the fourth quarter of 2018.

In 2018, we sold an outparcel on which an operating restaurant is located at Magnolia Mall in Florence, South Carolina for $ 1.7 million. We recorded a gain of $0.7 million on this sale in the second quarter of 2018.

In 2017, we sold three non operating parcels located at Beaver Valley Mall, Exton Square Mall and Valley Mall for an aggregate of $6.4 million and recorded aggregate gains of $1.3 million on these parcels.

Development Activities

As of December 31, 2019 and 2018, we had capitalized amounts related to construction and development activities. The following table summarizes certain capitalized construction and development information for our consolidated properties as of December 31, 2019 and 2018:

	December 31,
(in thousands of dollars)	2019		2018
Construction in progress	$	106,011	$	115,182
Land held for development		5,881		5,881
Deferred costs and other assets		7,274		6,487
Total capitalized construction and development activities	$	119,166	$	127,550

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Schedule III- Summary of Changes in Total Real Estate and Accumulated Depreciation (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
SEC Schedule, 12-28, Real Estate Companies, Investment in Real Estate [Roll Forward]
Balance, beginning of year	$ 3,184,594	$ 3,299,702	$ 3,300,014
Improvements and development	137,593	125,616	502,077
Acquisitions	0	21,250	2,613
Impairment of assets	(3,989)	(201,818)	(89,101)
Dispositions	(81,118)	(4,856)	(402,783)
Write-off of fully depreciated assets	(12,031)	(32,993)	(13,118)
Reclassification to held for sale	(14,123)	(22,307)	0
Balance, end of year	3,210,926	3,184,594	3,299,702
Balance, end of year – held for sale	15,653	22,307	0
SEC Schedule, 12-28, Real Estate Companies, Investment in Real Estate, Accumulated Depreciation [Roll Forward]
Balance, beginning of year	1,118,582	1,111,007	1,060,845
Depreciation expense	125,495	120,718	118,485
Impairment of assets	(484)	(75,586)	(39,264)
Dispositions	(25,693)	(4,564)	(15,941)
Write-off of fully depreciated assets	(12,031)	(32,993)	(13,118)
Reclassification to held for sale	(3,147)	0	0
Balance, end of year	1,202,722	1,118,582	1,111,007
Balance, end of year – held for sale	$ 3,147	$ 0	$ 0

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Derivatives

12 Months Ended

Dec. 31, 2019

Derivative Instruments And Hedging Activities Disclosure [Abstract]

Derivatives

6. DERIVATIVES

In the normal course of business, we are exposed to financial market risks, including interest rate risk on our interest bearing liabilities. We attempt to limit these risks by following established risk management policies, procedures and strategies, including the use of financial instruments such as derivatives. We do not use financial instruments for trading or speculative purposes.

Cash Flow Hedges of Interest Rate Risk

For derivatives that have been designated and that qualify as cash flow hedges of interest rate risk, the gain or loss on the derivative is recorded in “Accumulated other comprehensive income” and subsequently reclassified into “Interest expense, net” in the same periods during which the hedged transaction affects earnings. As of December 31, 2019, all of our outstanding derivatives were designated as cash flow hedges. We recognize all derivatives at fair value as either assets or liabilities in the accompanying consolidated balance sheets. Our derivative assets are recorded in “Deferred costs and other assets” and our derivative liabilities are recorded in “Fair value of derivative instruments.”

During 2020, we estimate that $2.7 million will be reclassified as an increase to interest expense in connection with derivatives. The recognition of these amounts could be accelerated in the event that we repay amounts outstanding on the debt instruments and do not replace them with new borrowings.

Interest Rate Swaps

As of December 31, 2019, we had interest rate swap agreements outstanding with a weighted average base interest rate of 1.86% on a notional amount of $795.6 million, maturing on various dates through May 2023, and forward starting interest rate swap agreements with a weighted average base interest rate of 2.75% on a notional amount of $100.0 million, with effective dates in June 2020, and maturity dates in May 2023. We entered into these interest rate swap agreements in order to hedge the interest payments associated with our issuances of variable interest rate long term debt. The interest rate swap agreements are net settled monthly.

The following table summarizes the terms and estimated fair values of our interest rate swap derivative instruments designated as cash flow hedges of interest rate risk at December 31, 2019 and 2018 based on the year they mature. The notional values provide an indication of the extent of our involvement in these instruments, but do not represent exposure to credit, interest rate or market risks.

Maturity Date	Aggregate Notional Value at December 31, 2019 (in millions of dollars)		Aggregate Fair Value at December 31, 2019 (1) (in millions of dollars)			Aggregate Fair Value at December 31, 2018 (1) (in millions of dollars)			Weighted Average Interest Rate
Interest Rate Swaps
2020	$	100.0	$	0.2		$	1.9			1.23	%
2021		495.6		(1.4	)		8.1			1.66	%
2022		—		—			—			—
2023		200.0		(7.3	)		(0.4	)		2.67	%
Forward Starting Swaps
2023		100.0		(3.4	)		(2.6	)		2.75	%
Total	$	895.6	$	(11.9	)	$	7.0			1.96	%

(1) As of December 31, 2019 and 2018, derivative valuations in their entirety were classified in Level 2 of the fair value hierarchy and we did not have any significant recurring fair value measurements related to derivative instruments using significant unobservable inputs (Level 3).

The tables below present the effect of derivative financial instruments on accumulated other comprehensive income and on our consolidated statements of operations for the years ended December 31, 2019 and 2018:

	Year Ended December 31,
	Amount of Gain or (Loss) Recognized in Other Comprehensive Income on Derivative Instruments								Amount of Gain or (Loss) Reclassified from Accumulated Other Comprehensive Income into Interest Expense
(in millions of dollars)	2019			2018			2017		2019			2018		2017
Derivatives in Cash Flow Hedging Relationships
Interest rate products	$	(15.8	)	$	(0.4	)	$	4.0	$	(3.1	)	$	2.4	$	2.3

	Year Ended December 31,
(in millions of dollars)	2019			2018			2017
Total interest expense presented in the consolidated statements of operations in which the effects of cash flow hedges are recorded	$	(64.0	)	$	(61.4	)	$	(58.4	)
Amount of gain (loss) reclassified from accumulated other comprehensive income into interest expense	$	(3.1	)	$	2.4		$	2.3

Credit-Risk-Related Contingent Features

We have agreements with some of our derivative counterparties that contain a provision pursuant to which, if our entity that originated such derivative instruments defaults on any of its indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, then we could also be declared to be in default on our derivative obligations. As of December 31, 2019, we were not in default on any of our derivative obligations.

We have an agreement with a derivative counterparty that incorporates the loan covenant provisions of our loan agreement with a lender affiliated with the derivative counterparty. Failure to comply with the loan covenant provisions would result in our being in default on any derivative instrument obligations covered by the agreement.

As of December 31, 2019, the fair value of derivatives in a liability position, which excludes accrued interest but includes any adjustment for nonperformance risk related to these agreements, was $13.1 million. If we had breached any of the default provisions in these agreements as of December 31, 2019, we might have been required to settle our obligations under the agreements at their termination value (including accrued interest) of $12.4 million. We had not breached any of these provisions as of December 31, 2019.

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Related Party Transactions

12 Months Ended

Dec. 31, 2019

Related Party Transactions [Abstract]

Related Party Transactions

10. RELATED PARTY TRANSACTIONS

Office Leases

During 2019, we leased our principal executive offices from Bellevue Associates, an entity that is owned by Ronald Rubin, one of our former trustees, collectively with members of his immediate family and affiliated entities. Total rent expense under this lease was $1.7 million, $1.3 million, and $1.3 million for the years ended December 31, 2019, 2018 and 2017, respectively. This lease terminated in December 2019.

In December 2018, we entered into a lease for new office space at One Commerce Square, which is located at 2005 Market Street, Philadelphia, Pennsylvania, with Brandywine Realty Trust. Our lead independent trustee is also a Trustee of Brandywine Realty Trust. The lease commenced in December 2019 and we moved into our new offices at One Commerce Square in January 2020.

Employee Health Insurance

We purchase healthcare benefits for our employees through Independence Blue Cross (“IBX”). Our lead independent trustee became chairman of the board of directors of IBX during 2018. We paid total insurance healthcare premiums of $2.5 million to IBX during 2019 and $2.7 million during 2018.

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Equity Offerings - Preferred Share Redemption (Details) - USD ($) $ / shares in Units, $ in Thousands		12 Months Ended
	Oct. 12, 2017	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017	Oct. 13, 2017
Class Of Stock [Line Items]
Preferred Shares redeemed				$ (115,000)
Redemption price per share					$ 25.00
Premium on redemption		$ 0	$ 0	$ 4,103
Series A Preferred Stock
Class Of Stock [Line Items]
Redemption of shares	4,600,000
Preferred Shares redeemed	$ 115,000
Redemption price per share	$ 25.00
Accrued and unpaid dividend	$ 700,000
Premium on redemption	$ 4,100

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Leases - Lease Costs (Details) $ in Thousands	12 Months Ended
	Dec. 31, 2019 USD ($)
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Amortization of right-of-use assets	$ 750
Interest on lease liabilities	294
Operating lease costs	3,515
Variable lease costs	622
Total lease costs	5,181
Solar Panel Leases
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Amortization of right-of-use assets	750
Interest on lease liabilities	294
Total lease costs	1,044
Ground Leases
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Operating lease costs	1,583
Variable lease costs	165
Total lease costs	1,748
Office, equipment, and vehicle leases
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Operating lease costs	1,932
Variable lease costs	457
Total lease costs	$ 2,389

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Share Based Compensation - Summary of Status of Unvested Restricted Shares and Changes (Details) - Restricted Stock - $ / shares	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unvested Shares, Beginning Balance	621,398	449,422	386,412
Unvested, Shares granted	798,370	461,395	336,296
Unvested, Shares vested	(349,533)	(260,178)	(238,859)
Unvested, Shares forfeited	(131,971)	(29,241)	(34,427)
Unvested Shares, Ending Balance	938,264	621,398	449,422
Weighted Average Grant Date Fair Value, Beginning Balance	$ 13.29	$ 16.85	$ 21.88
Weighted Average Grant Date Fair Value, Shares granted	7.04	11.02	14.95
Weighted Average Grant Date Fair Value, Shares vested	13.14	16.58	19.56
Weighted Average Grant Date Fair Value, Shares forfeited	8.75	14.17	18.00
Weighted Average Grant Date Fair Value, Ending Balance	$ 8.67	$ 13.29	$ 16.85

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Financing Activity - Mortgage Loan Activity (Details) - USD ($) $ in Millions		1 Months Ended	12 Months Ended
	Jan. 19, 2018	Mar. 31, 2016	Dec. 31, 2018
Francis Scott Key Mall
Mortgage Loan Activity [Line Items]
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate, New Mortgage Loan	$ 68.5
Debt Instrument, Maturity Date	Jan. 31, 2022
Francis Scott Key Mall | LIBOR
Mortgage Loan Activity [Line Items]
Stated Interest Rate	2.60%
Viewmont Mall
Mortgage Loan Activity [Line Items]
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate, New Mortgage Loan		$ 10.2	$ 67.2
Debt Instrument, Maturity Date		Mar. 31, 2021
Viewmont Mall | LIBOR
Mortgage Loan Activity [Line Items]
Stated Interest Rate		2.35%

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Financing Activity - Consolidated Mortgage Loan Activity (Details) - Mortgage Loans on Real Estate [Member]	12 Months Ended
	Dec. 31, 2019 Mortgage Loan
Debt Instrument [Line Items]
Real Estate Properties Used As Collateral On Credit Facility | Mortgage	10
Weighted average interest rate	4.04%
Fixed Rate Mortgages
Debt Instrument [Line Items]
Number of loans with fixed interest rates	7
Weighted average interest rate	4.08%
Fixed Rate Mortgages | Minimum
Debt Instrument [Line Items]
Debt instrument, interest rate during period	3.88%
Fixed Rate Mortgages | Maximum
Debt Instrument [Line Items]
Debt instrument, interest rate during period	5.95%
Variable Rate Mortgages
Debt Instrument [Line Items]
Weighted average interest rate	3.94%
Number of loans with variable interest rates	3

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Derivatives - Fair Value of Derivative Instruments (Details) - USD ($) $ in Millions	Dec. 31, 2019	Dec. 31, 2018
Derivative Instruments, Gain (Loss) [Line Items]
Aggregate Notional Value	$ 895.6
Aggregate Fair Value	$ (11.9)	$ 7.0
Weighted Average Interest Rate	1.96%
Interest Rate Swaps 2020 Maturity
Derivative Instruments, Gain (Loss) [Line Items]
Aggregate Notional Value	$ 100.0
Aggregate Fair Value	$ 0.2	1.9
Weighted Average Interest Rate	1.23%
Interest Rate Swaps 2021 Maturity
Derivative Instruments, Gain (Loss) [Line Items]
Aggregate Notional Value	$ 495.6
Aggregate Fair Value	$ (1.4)	8.1
Weighted Average Interest Rate	1.66%
Interest Rate Swaps 2023 Maturity
Derivative Instruments, Gain (Loss) [Line Items]
Aggregate Notional Value	$ 200.0
Aggregate Fair Value	$ (7.3)	(0.4)
Weighted Average Interest Rate	2.67%
Interest Rate Forward Starting Swaps 2023 Maturity
Derivative Instruments, Gain (Loss) [Line Items]
Aggregate Notional Value	$ 100.0
Aggregate Fair Value	$ (3.4)	$ (2.6)
Weighted Average Interest Rate	2.75%

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Comprehensive loss:
Net loss	$ (13,000)	$ (126,503)	$ (32,848)
Unrealized (loss) gain on derivatives	(18,937)	(2,755)	5,415
Amortization of losses on settled swaps, net of gains	85	721	859
Total comprehensive loss	(31,852)	(128,537)	(26,574)
Less: Comprehensive loss attributable to noncontrolling interest	3,016	16,390	6,225
Comprehensive loss attributable to PREIT	$ (28,836)	$ (112,147)	$ (20,349)

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CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
INVESTMENTS IN REAL ESTATE, at cost:
Operating properties	$ 3,099,034	$ 3,063,531
Construction in progress	106,011	115,182
Land held for development	5,881	5,881
Total investments in real estate	3,210,926	3,184,594
Accumulated depreciation	(1,202,722)	(1,118,582)
Net investments in real estate	2,008,204	2,066,012
INVESTMENTS IN PARTNERSHIPS, at equity:	159,993	131,124
OTHER ASSETS:
Cash and cash equivalents	12,211	18,084
Tenant and other receivables (net of allowance for doubtful accounts of $2,845 and $6,597 at December 31, 2019 and 2018, respectively)	41,261	38,914
Intangible assets (net of accumulated amortization of $18,248 and $15,543 at December 31, 2019 and 2018, respectively)	13,404	17,868
Deferred costs and other assets, net	103,688	110,805
Assets held for sale	12,506	22,307
Total assets	2,351,267	2,405,114
LIABILITIES:
Mortgage loans payable, net	899,753	1,047,906
Term Loans, net	548,025	547,289
Revolving Facilities	255,000	65,000
Tenants’ deposits and deferred rent	13,006	15,400
Distributions in excess of partnership investments	87,916	92,057
Fair value of derivative instruments	13,126	3,010
Accrued expenses and other liabilities	107,016	87,901
Total liabilities	1,923,842	1,858,563
COMMITMENTS AND CONTINGENCIES (Note 11)
EQUITY:
Shares of beneficial interest, $1.00 par value per share; 200,000 shares authorized; 77,550 shares issued and outstanding at December 31, 2019 and 70,495 shares issued and outstanding at December 31, 2018	77,550	70,495
Capital contributed in excess of par	1,766,883	1,671,042
Accumulated other comprehensive (loss)/income	(12,556)	5,408
Distributions in excess of net income	(1,408,352)	(1,306,318)
Total equity – Pennsylvania Real Estate Investment Trust	423,679	440,781
Noncontrolling interest	3,746	105,770
Total equity	427,425	546,551
Total liabilities and equity	2,351,267	2,405,114
Series B Preferred Shares, $.01 par value per share; 25,000 shares authorized; 3,450 shares issued and outstanding at December 31, 2019 and 2018; liquidation preference of $86,250
EQUITY:
Preferred Shares	35	35
Series C Preferred Shares, $.01 par value per share; 25,000 shares authorized; 6,900 shares issued and outstanding at December 31, 2019 and 2018; liquidation preference of $172,500
EQUITY:
Preferred Shares	69	69
Series D Preferred Shares, $.01 par value per share; 25,000 shares authorized; 5,000 shares issued and outstanding at December 31, 2019 and 2018; liquidation preference of $125,000
EQUITY:
Preferred Shares	$ 50	$ 50

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Real Estate Activities - Impairments (Detail) $ in Thousands	1 Months Ended			3 Months Ended						12 Months Ended
	Dec. 31, 2019 USD ($)	Nov. 30, 2019 USD ($) Property	Feb. 28, 2019 USD ($)	Dec. 31, 2019 USD ($)	Sep. 30, 2019 USD ($)	Jun. 30, 2019 USD ($)	Mar. 31, 2019 USD ($)	Dec. 31, 2018 USD ($)	Jun. 30, 2018 USD ($)	Dec. 31, 2019 USD ($) Property	Dec. 31, 2018 USD ($)	Dec. 31, 2017 USD ($)	Mar. 31, 2016 USD ($)
Real Estate Properties [Line Items]
Impairment of asset										$ 5,017	$ 137,487	$ 55,793
Number of real estate properties sold | Property		14								3
Sale of properties		$ 29,900
Gains (losses) on sales of investment real estate				$ 100	$ 1,200	$ 1,500		$ 800	$ 700	$ 2,744	1,722	(27)
Cash proceeds from sale of mortgage										8,000
Woodland Mall
Real Estate Properties [Line Items]
Impairment of asset	$ 600									2,098
Woodland Mall | Grand Rapids, Michigan
Real Estate Properties [Line Items]
Impairment of asset		$ 1,500
Gainesville Land
Real Estate Properties [Line Items]
Impairment of asset							$ 1,500			1,464	2,089	1,275
Sale of properties	10,000						5,000
Gainesville Land | Maximum
Real Estate Properties [Line Items]
Gain (Loss) on sale of properties	100
Gainesville Land | Florida
Real Estate Properties [Line Items]
Impairment of asset											2,100	1,300
Sale of properties							$ 15,000
Exton Square Mall
Real Estate Properties [Line Items]
Impairment of asset											$ 73,218
Terminal capitalization rate											10.00%
Capitalization rate											5.50%
Exton Square Mall | Discounted Estimated Future Cash Flows
Real Estate Properties [Line Items]
Fair value input discount rate											10.50%
Exton Square Mall | Pennsylvania
Real Estate Properties [Line Items]
Impairment of asset											$ 73,200
Wyoming Valley Mall
Real Estate Properties [Line Items]
Impairment of asset											32,177
Terminal capitalization rate									9.00%
Wyoming Valley Mall | Discounted Estimated Future Cash Flows
Real Estate Properties [Line Items]
Fair value input discount rate									10.50%
Wyoming Valley Mall | Pennsylvania
Real Estate Properties [Line Items]
Impairment of asset									$ 32,200
Valley View Mall
Real Estate Properties [Line Items]
Impairment of asset										$ 1,408	$ 14,294	$ 15,521
Capitalization rate										13.20%	12.00%	12.00%
Valley View Mall | Wisconsin
Real Estate Properties [Line Items]
Impairment of asset										$ 1,400	$ 14,300	$ 15,500
Real estate properties impairment holding period										1 year
Wiregrass Loan Receivable
Real Estate Properties [Line Items]
Impairment of asset								8,100			8,122
Mortgage note received								16,100			16,100		$ 17,000
Fixed interest rate													6.00%
Interest income on mortgage note received										$ 200	1,000	1,000
Fair value of mortgage note received								$ 8,000			8,000
Cash proceeds from sale of mortgage			$ 8,000
New Garden Township Land
Real Estate Properties [Line Items]
Impairment of asset											7,567
New Garden Township Land | Pennsylvania
Real Estate Properties [Line Items]
Impairment of asset											$ 7,600
Logan Valley Mall
Real Estate Properties [Line Items]
Impairment of asset												38,720
Logan Valley Mall | Pennsylvania
Real Estate Properties [Line Items]
Impairment of asset												38,700
Sunrise Plaza Land
Real Estate Properties [Line Items]
Impairment of asset												226
Sunrise Plaza Land | Pennsylvania
Real Estate Properties [Line Items]
Impairment of asset												$ 200
Capital City Mall and Magnolia Mall
Real Estate Properties [Line Items]
Disposal group, consideration	$ 5,200			$ 5,200						5,200
Gains (losses) on sales of investment real estate										$ 2,700

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Real Estate Activities - Dispositions (Details) $ in Thousands		1 Months Ended	3 Months Ended						12 Months Ended
	Sep. 26, 2019 USD ($)	Nov. 30, 2019 Property	Dec. 31, 2019 USD ($)	Sep. 30, 2019 USD ($)	Jun. 30, 2019 USD ($)	Mar. 31, 2019 USD ($)	Dec. 31, 2018 USD ($)	Jun. 30, 2018 USD ($)	Dec. 31, 2020 USD ($) Property	Dec. 31, 2019 USD ($) Property	Dec. 31, 2018 USD ($)	Dec. 31, 2017 USD ($)
Income Statement Balance Sheet And Additional Disclosures By Disposal Groups Including Discontinued Operations [Line Items]
Number of real estate properties sold | Property		14								3
Gains (losses) on sales of investment real estate			$ 100	$ 1,200	$ 1,500		$ 800	$ 700		$ 2,744	$ 1,722	$ (27)
Total Impairment of Assets										5,017	137,487	55,793
Gain on debt extinguishment, net										24,859	0	0
Wyoming Valley Mall
Income Statement Balance Sheet And Additional Disclosures By Disposal Groups Including Discontinued Operations [Line Items]
Total Impairment of Assets											32,177
Wyoming Valley Mall | Pennsylvania
Income Statement Balance Sheet And Additional Disclosures By Disposal Groups Including Discontinued Operations [Line Items]
Total Impairment of Assets								32,200
Wyoming Valley Mall | Commercial Real Estate | Mortgage Loan
Income Statement Balance Sheet And Additional Disclosures By Disposal Groups Including Discontinued Operations [Line Items]
Debt default, amount	$ 72,800
Total Impairment of Assets										32,200
Written off remaining carrying value of property										43,200
Gain on debt extinguishment, net	$ 29,600									29,600
Undeveloped Land Parcel, Gainesville, Florida
Income Statement Balance Sheet And Additional Disclosures By Disposal Groups Including Discontinued Operations [Line Items]
Disposal group, consideration			10,000			$ 15,000				10,000
Proceeds from sale of real estate						5,000
Gains (losses) on sales of investment real estate						$ (1,500)
Undeveloped Land Parcel, New Garden township, Pennsylvania
Income Statement Balance Sheet And Additional Disclosures By Disposal Groups Including Discontinued Operations [Line Items]
Disposal group, consideration			11,000							11,000
Proceeds from sale of real estate										8,250
Gains (losses) on sales of investment real estate										200
Contingent liability			1,250							1,250
Undeveloped Land Parcel, New Garden township, Pennsylvania | Preferred Stock
Income Statement Balance Sheet And Additional Disclosures By Disposal Groups Including Discontinued Operations [Line Items]
Disposal group, consideration transferred, equity instruments										2,750
Whole Foods Store Adjacent To Exton Square Mall
Income Statement Balance Sheet And Additional Disclosures By Disposal Groups Including Discontinued Operations [Line Items]
Disposal group, consideration			22,100							22,100
Gains (losses) on sales of investment real estate										1,300
Valley View Mall In La Crosse Wisconsin
Income Statement Balance Sheet And Additional Disclosures By Disposal Groups Including Discontinued Operations [Line Items]
Disposal group, consideration			$ 1,400							1,400
Gains (losses) on sales of investment real estate										$ 1,200
Exton Square Mall in Exton | Pennsylvania
Income Statement Balance Sheet And Additional Disclosures By Disposal Groups Including Discontinued Operations [Line Items]
Disposal group, consideration							10,300				10,300
Gains (losses) on sales of investment real estate							8,100
Valley Mall in Hagerstown | Maryland
Income Statement Balance Sheet And Additional Disclosures By Disposal Groups Including Discontinued Operations [Line Items]
Disposal group, consideration							2,400				2,400
Gains (losses) on sales of investment real estate							1,000
Magnolia Mall in Florence | South Carolina
Income Statement Balance Sheet And Additional Disclosures By Disposal Groups Including Discontinued Operations [Line Items]
Disposal group, consideration							$ 1,700				$ 1,700
Gains (losses) on sales of investment real estate								$ 700
Beaver Valley Mall, Exton Square Mall and Valley Mall
Income Statement Balance Sheet And Additional Disclosures By Disposal Groups Including Discontinued Operations [Line Items]
Disposal group, consideration												6,400
Gains (losses) on sales of investment real estate												$ 1,300
Scenario Forecast | Properties Under Sale-leaseback Transaction
Income Statement Balance Sheet And Additional Disclosures By Disposal Groups Including Discontinued Operations [Line Items]
Number of real estate properties sold | Property									5
Disposal group, consideration									$ 153,600
Scenario Forecast | Land Parcels | Multifamily Development
Income Statement Balance Sheet And Additional Disclosures By Disposal Groups Including Discontinued Operations [Line Items]
Disposal group, consideration									$ 125,300

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Organization and Summary of Significant Accounting Policies - Cash and Restricted Cash (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Cash And Cash Equivalents [Abstract]
Cash and cash equivalents	$ 12,211	$ 18,084	$ 15,348
Restricted cash included in other assets	7,417	14,361	18,605
Total cash, cash equivalents, and restricted cash shown in the statement of cash flows	$ 19,628	$ 32,445	$ 33,953	$ 29,865
Additional cash and cash equivalent related text	Our restricted cash consists of cash held in escrow by banks for real estate taxes and other purposes.

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Organization and Summary of Significant Accounting Policies - Nature of Operations (Details) $ / shares in Units, $ in Millions	12 Months Ended
	Dec. 31, 2019 USD ($) Property State subsidiary Segment $ / shares shares
Real Estate Properties [Line Items]
Number of real estate properties	26
Number of states in which entity operates | State	9
Common stock, conversion ratio	1
Period of conversion	1 year
Redeemable noncontrolling interest, equity, other, fair value | $	$ 10.8
Share price (in dollars per share) | $ / shares	$ 5.33
Limited partners' capital account, units outstanding (in shares) | shares	2,022,635
Number of subsidiaries | subsidiary	2
Number of reportable segments | Segment	1
Percentage of consolidated revenue having no single tenant	10.00%
PREIT Associates, L.P. - Operating Partnership
Real Estate Properties [Line Items]
Interest in the Operating Partnership	97.50%
Mall
Real Estate Properties [Line Items]
Number of real estate properties	21
Other Retail Properties
Real Estate Properties [Line Items]
Number of real estate properties	4
Development Properties
Real Estate Properties [Line Items]
Number of real estate properties	1

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Leases

12 Months Ended

Dec. 31, 2019

Leases [Abstract]

Leases

9. LEASES

As discussed in Note 1, we adopted ASC 842, the new lease accounting standard, effective January 1, 2019.

As Lessee

We have entered into ground leases for portions of the land at Springfield Town Center and Plymouth Meeting Mall. We have also entered into an office lease for our headquarters location, as well as vehicle, solar panel and equipment leases as a lessee. The initial terms of these agreements generally range from three to 40 years, with certain agreements containing extension options for up to an additional 60 years. As of December 31, 2019, we included only those renewal options we were reasonably certain of exercising. Upon lease execution, the Company measures a liability for the present value of future lease payments over the noncancellable period of the lease and any renewal option period we are reasonably certain of exercising. Certain agreements require that we pay a portion of reimbursable expenses such as CAM, utilities, insurance and real estate taxes. These payments are not included in the calculation of the lease liability and are presented as variable lease costs.

We applied judgments related to the determination of the discount rates used to calculate the lease liability upon adoption at January 1, 2019. In order to calculate our incremental borrowing rate under ASC 842, we utilized judgments and estimates regarding our implied credit rating using market data and made other adjustments to determine an appropriate incremental borrowing rate as of January 1, 2019.

The following table presents additional information pertaining to the Company’s leases:

	For the Year Ended December 31, 2019
(in thousands of dollars)	Solar Panel Leases		Ground Leases		Office, equipment, and vehicle leases		Total
Finance lease cost:
Amortization of right-of-use assets	$	750	$	—	$	—	$	750
Interest on lease liabilities		294		—		—		294
Operating lease costs		—		1,583		1,932		3,515
Variable lease costs		—		165		457		622
Total lease costs	$	1,044	$	1,748	$	2,389	$	5,181

Other information related to leases as of and for the year ended December 31, 2019 is as follows:

(in thousands of dollars)
Cash paid for the amounts included in the measurement of lease liabilities
Operating cash flows used for finance leases	$	294
Operating cash flows used for operating leases	$	2,205
Financing cash flows used for finance leases	$	632
Weighted average remaining lease term-finance leases (months)		99
Weighted average remaining lease term-operating leases (months)		306
Weighted average discount rate-finance leases		4.42	%
Weighted average discount rate-operating leases		6.42	%

Future payments against lease liabilities as of December 31, 2019 are as follows:

(in thousands of dollars)	Finance leases			Operating leases			Total
2020	$	925		$	2,237		$	3,162
2021		925			2,730			3,655
2022		925			2,538			3,463
2023		925			2,485			3,410
2024		925			2,373			3,298
Thereafter		2,999			46,853			49,852
Total undiscounted lease payments		7,624			59,216			66,840
Less imputed interest		(1,242	)		(28,965	)		(30,207	)
Total lease liabilities	$	6,382		$	30,251		$	36,633

Future minimum lease payments under these agreements as of December 31, 2018 were as follows:

(in thousands of dollars)	Finance leases		Operating leases		Total
Year ending December 31,
2019	$	925	$	3,264	$	4,189
2020		925		2,237		3,162
2021		925		2,730		3,655
2022		925		2,538		3,463
2023		925		2,485		3,410
Thereafter		3,923		49,226		53,149
	$	8,548	$	62,480	$	71,028

As Lessor

As of December 31, 2019, the fixed contractual lease payments, including minimum rents and fixed CAM amounts, to be received over the next five years pursuant to the terms of noncancellable operating leases with initial terms greater than one year are included in the table below. The amounts presented assume that no leases are renewed and no renewal options are exercised. Additionally, the table does not include variable lease payments that may be received under certain leases for percentage rents or the reimbursement of operating costs, such as common area expenses, utilities, insurance and real estate taxes. These variable lease payments are recognized in the period when the applicable expenditures are incurred or, in the case of percentage rents, when the sales data is made available.

(in thousands of dollars)
For the Year Ending December 31,
2020	$	205,574
2021		187,241
2022		168,671
2023		149,296
2024		127,355
2025 and thereafter		386,280
	$	1,224,417

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Summary of Quarterly Results - Summary of Unaudited Quarterly Financial Information (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2019	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Quarterly Financial Information Disclosure [Abstract]
Total revenue	$ 88,721	$ 81,374	$ 81,392	$ 85,305	$ 96,042	$ 88,103	$ 91,973	$ 86,282	$ 336,792	$ 362,400	$ 367,490
Net income (loss)	(15,413)	24,716	(6,080)	(16,223)	(88,834)	(1,636)	(32,321)	(3,712)	(13,000)	(126,503)	(32,848)
Net income (loss) attributable to PREIT	$ (14,848)	$ 24,262	$ (5,751)	$ (14,535)	$ (78,782)	$ (745)	$ (28,201)	$ (2,601)	$ (10,872)	$ (110,329)	$ (25,953)
Basic and diluted earnings (loss) per share	$ (0.29)	$ 0.22	$ (0.17)	$ (0.30)	$ (1.23)	$ (0.11)	$ (0.50)	$ (0.14)	$ (0.52)	$ (1.98)	$ (0.84)

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Organization and Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 2019

Accounting Policies [Abstract]

Organization and Summary of Significant Accounting Policies

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations

Pennsylvania Real Estate Investment Trust (“PREIT”), a Pennsylvania business trust founded in 1960 and one of the first equity real estate investment trusts (“REITs”) in the United States, has a primary investment focus on retail shopping malls located in the eastern half of the United States, primarily in the Mid-Atlantic region. As of December 31, 2019, our portfolio consists of a total of 26 properties operating in nine states, including 21 shopping malls, four other retail properties and one development property. The property in our portfolio that is classified as under development does not currently have any activity occurring.

We hold our interest in our portfolio of properties through our operating partnership, PREIT Associates, L.P. (“PREIT Associates” or the “Operating Partnership”). We are the sole general partner of the Operating Partnership and, as of December 31, 2019, held a 97.5% controlling interest in the Operating Partnership, and consolidated it for reporting purposes. The presentation of consolidated financial statements does not itself imply that the assets of any consolidated entity (including any special-purpose entity formed for a particular project) are available to pay the liabilities of any other consolidated entity, or that the liabilities of any consolidated entity (including any special-purpose entity formed for a particular project) are obligations of any other consolidated entity.

Pursuant to the terms of the Operating Partnership’s partnership agreement, each of its limited partners has the right to redeem such partner’s units of limited partnership interest in the Operating Partnership (“OP Units”) for cash or, at our election, we may acquire such OP Units in exchange for our common shares on a one-for-one basis, in some cases beginning one year following the respective issue date of the OP Units, and in other cases immediately. If all of the outstanding OP Units held by limited partners had been redeemed for cash as of December 31, 2019, the total amount that would have been distributed would have been $10.8 million, which is calculated using our December 31, 2019 closing share price on the New York Stock Exchange of $5.33 multiplied by the number of outstanding OP Units held by limited partners, which was 2,022,635 as of December 31, 2019.

We provide management, leasing and real estate development services through two of our subsidiaries: PREIT Services, LLC (“PREIT Services”), which generally develops and manages properties that we consolidate for financial reporting purposes, and PREIT-RUBIN, Inc. (“PRI”), which generally develops and manages properties that we do not consolidate for financial reporting purposes, including properties owned by partnerships in which we own an interest, and properties that are owned by third parties in which we do not have an interest. PREIT Services and PRI are consolidated. PRI is a taxable REIT subsidiary, as defined by federal tax laws, which means that it is able to offer additional services to tenants without jeopardizing our continuing qualification as a REIT under federal tax law.

We evaluate operating results and allocate resources on a property-by-property basis, and do not distinguish or evaluate our consolidated operations on a geographic basis. Due to the nature of our operating properties, which involve retail shopping, we have concluded that our individual properties have similar economic characteristics and meet all other aggregation criteria. Accordingly, we have aggregated our individual properties into one reportable segment. In addition, no single tenant accounts for 10% or more of our consolidated revenue, and none of our properties are located outside the United States.

Consolidation

We consolidate our accounts and the accounts of the Operating Partnership and other controlled subsidiaries, and we reflect the remaining interest in such entities as noncontrolling interest. All significant intercompany accounts and transactions have been eliminated in consolidation.

The operating partnership meets the criteria as a variable interest entity. The Company’s significant asset is its investment in the Operating Partnership, and consequently, substantially all of the Company’s assets and liabilities represent those assets and liabilities of the Operating Partnership. All of the Company’s debt is also an obligation of the Operating Partnership.

Going Concern Considerations

Under the accounting guidance related to the presentation of financial statements, when preparing financial statements for each annual and interim reporting period, management has the responsibility to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the financial statements are issued.  The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.  The financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern. As a result of the considerations articulated below, we believe there is substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the financial statements are issued.

In applying the accounting guidance, management considered our current financial condition and liquidity sources, including current funds available, forecasted future cash flows and our conditional and unconditional obligations due over the next twelve months. Management specifically considered the following: i) our senior unsecured facility, which includes a revolving facility maturing in 2022 with a balance of $255.0 million as of December 31, 2019 and term loans maturing in 2021 with a balance of $550.0 million as of December 31, 2019; ii) our mortgage loans with varying maturities through 2025 with a principal balance of $901.6 million as of December 31, 2019; iii) the financial covenant compliance requirements of our credit agreements; and (iv) recurring costs of operating our business.

The Company anticipates not meeting certain financial covenants applicable under the credit agreements during 2020. The Company plans to continue to work with the lender group to obtain temporary debt covenant relief through September 2020 and then pursue a longer term financing solution prior to the expiration of the initial modification. In addition, the Company plans to execute the sale-leaseback of certain properties, sell certain real estate assets and control certain operational costs. Due to the inherent risks, unknown results and significant uncertainties associated with each of these matters and the direct correlation between these matters and our ability to satisfy our financial obligations that may arise over the applicable twelve month period, we are unable to conclude that it is probable that we will be able to meet our obligations arising within twelve months of the date of issuance of these financial statements under the parameters set forth in this accounting guidance.

As a result, management evaluated whether this was mitigated by our approved plans and expectations for the applicable period under the second step of this accounting standard.

Our ability to satisfy obligations under our senior unsecured credit facility and mortgage loans, maintain compliance with our debt covenants and fund recurring costs of operations depends primarily on management’s ability to obtain relief from the lender group in regards to debt covenants, execute the sale-leaseback of certain properties, complete the sale of certain real estate assets which will provide cash from those sales, and continue to control operational costs. While controlling operational costs are within management’s control to some extent, executing the sale-leaseback transactions, selling real estate assets, and obtaining relief from the lender group through modified debt covenant requirements involve performance by third parties and therefore cannot be considered probable of occurring.

Partnership Investments

We account for our investments in partnerships that we do not control using the equity method of accounting. These investments, each of which represents a 25% to 50% noncontrolling ownership interest at December 31, 2019, are recorded initially at our cost, and subsequently adjusted for our share of net equity in income and cash contributions and distributions. We do not control any of these equity method investees for the following reasons:

• Except for two properties that we co-manage with our partner, the other entities are managed on a day-to-day basis by one of our other partners as the managing general partner in each of the respective partnerships. In the case of the co-managed properties, all decisions in the ordinary course of business are made jointly.

• The managing general partner is responsible for establishing the operating and capital decisions of the partnership, including budgets, in the ordinary course of business.

• All major decisions of each partnership, such as the sale, refinancing, expansion or rehabilitation of the property, require the approval of all partners.

• Voting rights and the sharing of profits and losses are in proportion to the ownership percentages of each partner.

We do not have a direct legal claim to the assets, liabilities, revenues or expenses of the unconsolidated partnerships beyond our rights as an equity owner, in the event of any liquidation of such entity, and our rights as a tenant in common owner of certain unconsolidated properties.

We record the earnings from the unconsolidated partnerships using the equity method of accounting in the consolidated statements of operations in the caption entitled “Equity in income of partnerships,” rather than consolidating the results of the unconsolidated partnerships with our results. Changes in our investments in these entities are recorded in the consolidated balance sheet caption entitled “Investment in partnerships, at equity.” In the case of deficit investment balances, such amounts are recorded in “Distributions in excess of partnership investments.”

We hold legal title to a property owned by one of our unconsolidated partnerships through a tenancy in common arrangement. For this property, such legal title is held by us and another entity, and each has an undivided interest in title to the property. With respect to this property, under the applicable agreement between us and the other entity with an ownership interest, we and such other entity have joint control because decisions regarding matters such as the sale, refinancing, expansion or rehabilitation of the property require the approval of both us and the other entity owning an interest in the property. Hence, we account for this property like our other unconsolidated partnerships using the equity method of accounting. The balance sheet items arising from the properties appear under the caption “Investments in partnerships, at equity.”

For further information regarding our unconsolidated partnerships, see note 3.

Statements of Cash Flows

We consider all highly liquid short-term investments with a maturity of three months or less at purchase or acquisition to be cash equivalents. At December 31, 2019 and 2018, cash and cash equivalents and restricted cash totaled $19.6 million and $32.4 million, respectively, and included tenant security deposits of $1.8 million and $2.3 million, respectively. Cash paid for interest was $59.4 million, $58.4 million and $55.4 million for the years ended December 31, 2019, 2018 and 2017, respectively, net of amounts capitalized of $7.7 million, $6.4 million and $7.6 million, respectively.

The following table provides a summary of cash, cash equivalents, and restricted cash reported within the statement of cash flows as of December 31, 2019, 2018 and 2017.

	December 31,
(in thousands of dollars)	2019		2018		2017
Cash and cash equivalents	$	12,211	$	18,084	$	15,348
Restricted cash included in other assets		7,417		14,361		18,605
Total cash, cash equivalents, and restricted cash shown in the statement of cash flows	$	19,628	$	32,445	$	33,953

Our restricted cash consists of cash held in escrow by banks for real estate taxes and other purposes.

Significant Non-Cash Transactions

In the third quarter of 2019, we conveyed Wyoming Valley Mall to the lender of the mortgage loan secured by the property. The loan had a balance of approximately $72.8 million as of the conveyance on September 26, 2019. The conveyance was a non-cash transaction with the exception of $7.5 million of cash and escrow balances which were transferred to the lender.

During the second quarter of 2018, we received the building and improvements formerly occupied by one of our tenants as part of the consideration for the termination of that tenant’s lease. We recorded non-cash lease termination income of $4.2 million in connection with this transaction, which we determined was the fair value of the building and improvements.

Paydowns of the 2014 5-Year Term Loan and the 2015 5-Year Term Loan of $150.0 million each were made in the year ended December 31, 2018, which were directly paid from the 2018 Term Loan Facility borrowing and are considered to be non-cash transactions.

During 2017, a $150.0 million paydown of the 2013 Revolving Facility was made, which was directly paid from an additional borrowing from our 2014 7-Year Term Loan, and is considered to be a non-cash transaction.

In our statement of cash flows, we report cash flows on our revolving facilities on a net basis. Aggregate borrowings on our revolving facilities were $229.0 million, $65.0 million and $309.0 million, and aggregate repayments were $39.0 million, $53.0 million and $403.0 million for the years ended December 31, 2019, 2018 and 2017, respectively.

Accrued construction costs decreased by $8.5 million in the year ended December 31, 2019, increased by $15.7 million in the year ended December 31, 2018 and decreased by $8.3 million in the year ended December 31, 2017, representing non-cash changes in construction in progress.

Accounting Policies

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires our management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenue and expense during the reporting periods. Actual results could differ from those estimates. We believe that our most significant and subjective accounting estimates and assumptions are those relating to asset impairment and fair value.

Our management makes complex or subjective assumptions and judgments in applying its critical accounting policies. In making these judgments and assumptions, our management considers, among other factors, events and changes in property, market and economic conditions, estimated future cash flows from property operations, and the risk of loss on specific accounts or amounts.

Revenue Recognition

We derive over 95% of our revenue from tenant rent and other tenant-related activities. Tenant rent includes base rent, percentage rent, expense reimbursements (such as reimbursements of costs of common area maintenance (“CAM”), real estate taxes and utilities), and the amortization of above-market and below-market lease intangibles (as described below under “Intangible Assets”).

On January 1, 2018, we adopted ASC 606, Revenue from Contracts with Customers. ASC 606 provides a single comprehensive model to use in accounting for revenue arising from contracts with customers, and gains and losses arising from transfers of non-financial assets including sales of property and equipment, real estate, and intangible assets. The majority of our revenues are derived from leases and are not subject to ASC 606; rather, they were governed by ASC 840 through December 31, 2018 and are subject to ASC 842 effective January 1, 2019. See Lease accounting related under New Accounting Developments for our adoption impact from ASC 842 on January 1, 2019.

We record base rent on a straight-line basis, which means that the monthly base rent revenue according to the terms of our leases with our tenants is adjusted so that an average monthly rent is recorded for each tenant over the term of its lease. When tenants vacate prior to the end of their lease, we accelerate amortization of any related unamortized straight-line rent balances, and unamortized above-market and below-market intangible balances are amortized as a decrease or increase to real estate revenue, respectively. The straight-line rent adjustment increased revenue by $1.6 million, $2.0 million, and $2.7 million in the years ended December 31, 2019, 2018 and 2017, respectively. The straight-line rent receivable balances included in tenant and other receivables on the accompanying consolidated balance sheet as of December 31, 2019 and 2018 were $30.4 million and $27.2 million, respectively.

Percentage rent represents rental revenue that the tenant pays based on a percentage of its sales, either as a percentage of its total sales or as a percentage of sales over a certain threshold. In the latter case, we do not record percentage rent until the sales threshold has been reached.

Revenue for rent received from tenants prior to their due dates is deferred until the period to which the rent applies.

In addition to base rent, certain lease agreements contain provisions that require tenants to reimburse a fixed or pro rata share of certain CAM costs, real estate taxes and utilities. Tenants generally make monthly expense reimbursement payments based on a budgeted amount determined at the beginning of the year. Effective January 1, 2019, we recognize fixed CAM revenue prospectively on a straight-line basis. Prior to that, during the year, our income increased or decreased based on actual expense levels and changes in other factors that influenced the reimbursement amounts, such as occupancy levels. As of December 31, 2018, our tenant accounts receivable included accrued income of $1.9 million because actual reimbursable expense amounts eligible to be billed to tenants under applicable contracts exceeded amounts actually billed. Prior to the adoption of ASC 842, we recorded reimbursement revenue from tenants whose leases include fixed CAM provisions in accordance with the contractual terms of the respective leases.

Certain lease agreements contain co-tenancy clauses that can change the amount of rent or the type of rent that tenants are required to pay, or, in some cases, can allow the tenant to terminate their lease, in the event that certain events take place, such as a decline in property occupancy levels below certain defined levels or the vacating of an anchor store. Co-tenancy clauses do not generally have any retroactive effect when they are triggered. The effect of co-tenancy clauses is applied on a prospective basis to recognize the new rent that is in effect.

Payments made to tenants as inducements to enter into a lease are treated as deferred costs that are amortized as a reduction of rental revenue over the term of the related lease.

Lease termination fee revenue is recognized in the period when a termination agreement is signed, collectibility is assured, and the tenant has vacated the space. In the event that a tenant is in bankruptcy when the termination agreement is signed, termination fee income is deferred and recognized when it is received.

We also generate revenue by providing management services to third parties, including property management, brokerage, leasing and development. Management fees generally are a percentage of managed property revenue or cash receipts. Leasing fees are earned upon the consummation of new leases. Development fees are earned over the time period of the development activity and are recognized on the percentage of completion method. These activities are collectively included in “Other income” in the consolidated statements of operations.

Revenue from the reimbursement of marketing expenses is generated through tenant leases that require tenants to reimburse a defined amount of property marketing expenses. Our contractual performance obligations are fulfilled as marketing expenditures are made. Tenant payments are received monthly as required by the respective lease terms. We defer income recognition if the reimbursements exceed the aggregate marketing expenditures made through that date. Deferred marketing reimbursement revenue is recorded in tenants’ deposits and deferred rent on the consolidated balance sheet, and was $0.2 million and $0.2 million as of December 31, 2019 and 2018, respectively. The marketing reimbursements are recognized as revenue at the time that the marketing expenditures occur. Marketing revenue, included in other real estate revenues in the consolidated statements of operations, was $4.1 million, $3.9 million, and $4.4 million and for the years ended December 31, 2019, 2018 and 2017, respectively.

Property management revenue from management and development activities is generated through contracts with third party owners of real estate properties or with certain of our joint ventures, and is recorded in other income in the consolidated statement of operations. In the case of management fees, our performance obligations are fulfilled over time as the management services are performed and the associated revenues are recognized on a monthly basis when the customer is billed. In the case of development fees, our performance obligations are fulfilled over time as we perform certain stipulated development activities as set forth in the respective development agreements and the associated revenues are recognized on a monthly basis when the customer is billed. Property management fee revenue was $0.5 million, $0.7 million, and $0.9 million for the years ended December 31, 2019, 2018 and 2017, respectively. Development fee revenue was $0.7 million, $0.8 million, and $0.9 million for the years ended December 31, 2019, 2018 and 2017, respectively.

Fair Value

Fair value accounting applies to reported balances that are required or permitted to be measured at fair value under relevant accounting authority.

Fair value measurements are determined based on the assumptions that market participants would use in pricing the asset or liability. As a basis for considering market participant assumptions in fair value measurements, these accounting requirements establish a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within Levels 1 and 2 of the hierarchy) and the reporting entity’s own assumptions about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy).

Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities that we have the ability to access.

Level 2 inputs are inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs might include quoted prices for similar assets and liabilities in active markets, as well as inputs that are observable for the asset or liability (other than quoted prices), such as interest rates, foreign exchange rates and yield curves that are observable at commonly quoted intervals.

Level 3 inputs are unobservable inputs for the asset or liability and are typically based on an entity’s own assumptions, as there is little, if any, related market activity.

In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability. We utilize the fair value hierarchy in our accounting for derivatives (Level 2) and financial instruments (Level 2) and in our reviews for impairment of real estate assets (Level 3) and goodwill (Level 3).

Financial Instruments

Carrying amounts reported on the consolidated balance sheet for cash and cash equivalents, tenant and other receivables, accrued expenses, other liabilities and the 2018 Revolving Facility approximate fair value due to the short-term nature of these instruments. Most of our variable rate debt is subject to interest rate derivative instruments that have effectively fixed the interest rates on the underlying debt. The estimated fair value for fixed rate debt, which is calculated for disclosure purposes, is based on the borrowing rates available to us for fixed rate mortgage loans with similar terms and maturities.

Impairment of Assets

Real estate investments and related intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the property might not be recoverable, which is referred to as a “triggering event.” In connection with our review of our long-lived assets for impairment, we utilize qualitative and quantitative factors in order to estimate fair value. The significant qualitative factors that we use include age and condition of the property, market conditions in the property’s trade area, competition with other shopping centers within the property’s trade area and the creditworthiness and performance of the property’s tenants. The significant quantitative factors that we use include historical and forecasted financial and operating information relating to the property, such as net operating income, occupancy statistics, vacancy projections and tenants’ sales levels. Our fair value assumptions relating to real estate assets are within Level 3 of the fair value hierarchy.

If there is a triggering event in relation to a property to be held and used, we will estimate the aggregate future cash flows, net of estimated capital expenditures, to be generated by the property, undiscounted and without interest charges. In addition, this estimate may consider a probability weighted cash flow estimation approach when alternative courses of action to recover the carrying amount of a long-lived asset are under consideration or when a range of possible values is estimated.

The determination of undiscounted cash flows requires significant estimates by our management, including the expected course of action at the balance sheet date that would lead to such cash flows. Subsequent changes in estimated undiscounted cash flows arising from changes in the anticipated action to be taken with respect to the property could affect the determination of whether an impairment exists, and the effects of such changes could materially affect our net income. If the estimated undiscounted cash flows are less than the carrying value of the property, the carrying value is written down to its fair value.

Assessment of our ability to recover certain lease related costs must be made when we have a reason to believe that a tenant might not be able to perform under the terms of the lease as originally expected. This requires us to make estimates as to the recoverability of such costs.

An other-than-temporary impairment of an investment in an unconsolidated joint venture is recognized when the carrying value of the investment is not considered recoverable based on evaluation of the severity and duration of the decline in value. To the extent impairment has occurred, the excess carrying value of the asset over its estimated fair value is recorded as a reduction to income.

Real Estate

Land, buildings, fixtures and tenant improvements are recorded at cost and stated at cost less accumulated depreciation. Expenditures for maintenance and repairs are charged to operations as incurred. Renovations or replacements, which improve or extend the life of an asset, are capitalized and depreciated over their estimated useful lives. For financial reporting purposes, properties are depreciated using the straight-line method over the estimated useful lives of the assets. The estimated useful lives are as follows:

Buildings	20-40 years
Land improvements	15 years
Furniture/fixtures	3-10 years
Tenant improvements	Lease term

We are required to make subjective assessments as to the useful lives of our real estate assets for purposes of determining the amount of depreciation to reflect on an annual basis with respect to those assets based on various factors, including industry standards, historical experience and the condition of the asset at the time of acquisition. These assessments affect our annual net income. If we were to determine that a different estimated useful life was appropriate for a particular asset, it would be depreciated over the newly estimated useful life, and, other things being equal, result in changes in annual depreciation expense and annual net income.

We recognize gains from sales of real estate properties and interests in partnerships when an enforceable contract is in place, control of the asset transfers to a buyer and it is probable that we will collect the consideration due in exchange for transferring the asset.

Real Estate Acquisitions

We account for our property acquisitions by allocating the purchase price of a property to the property’s assets based on management’s estimates of their fair value. Debt assumed in connection with property acquisitions is recorded at fair value at the acquisition date, and any resulting premium or discount is amortized through interest expense over the remaining term of the debt, resulting in a non-cash decrease (in the case of a premium) or increase (in the case of a discount) in interest expense. The determination of the fair value of intangible assets requires significant estimates by management and considers many factors, including our expectations about the underlying property, the general market conditions in which the property operates and conditions in the economy. The judgment and subjectivity inherent in such assumptions can have a significant effect on the magnitude of the intangible assets or the changes to such assets that we record.

Intangible Assets

Our intangible assets on the accompanying consolidated balance sheets as of December 31, 2019 and 2018 each included $5.2 million (in each case, net of $1.1 million of amortization expense recognized prior to January 1, 2002) of goodwill recognized in connection with the acquisition of The Rubin Organization in 1997. Approximately $1.5 million of this goodwill balance is allocated to three equity method investees with negative investment balances.

Changes in the carrying amount of goodwill for the three years ended December 31, 2019 were as follows:

			Accumulated
(in thousands of dollars)	Basis		Amortization			Total
Balance, January 1, 2017	$	6,322	$	(1,073	)	$	5,249
Goodwill divested		—		—			—
Balance, December 31, 2017		6,322		(1,073	)		5,249
Goodwill divested		—		—			—
Balance, December 31, 2018		6,322		(1,073	)		5,249
Goodwill divested		—		—			—
Balance, December 31, 2019	$	6,322	$	(1,073	)	$	5,249

We allocate a portion of the purchase price of a property to intangible assets. Our methodology for this allocation includes estimating an “as-if vacant” fair value of the physical property, which is allocated to land, building and improvements. The difference between the purchase price and the “as-if vacant” fair value is allocated to intangible assets. There are three categories of intangible assets to be considered: (i) value of leases, (ii) above- and below-market value of in-place leases and (iii) customer relationship value, including operating covenants.

The value of in-place leases is estimated based on the value associated with the costs avoided in originating leases comparable to the acquired in-place leases, as well as the value associated with lost rental revenue during the assumed lease-up period. The value of in-place leases is amortized as real estate amortization over the remaining lease term.

Above-market and below-market in-place lease values for acquired properties are recorded based on the present value of the difference between (i) the contractual amounts to be paid pursuant to the in-place leases and (ii) management’s estimates of fair market lease rates for comparable in-place leases, based on factors such as historical experience, recently executed transactions and specific property issues, measured over a period equal to the remaining non-cancelable term of the lease. Above-market lease values are amortized as a reduction of rental income over the remaining terms of the respective leases. Below-market lease values are amortized as an increase to rental income over the remaining terms of the respective leases, including any below-market optional renewal periods, and are included in “Accrued expenses and other liabilities” in the consolidated balance sheets.

We allocate purchase price to customer relationship intangibles based on management’s assessment of the fair value of such relationships.

The following table presents our intangible assets and liabilities, net of accumulated amortization, as of December 31, 2019 and 2018:

	December 31,
(in thousands of dollars)	2019		2018
Intangible Assets:
Value of lease intangibles, net	$	8,155	$	12,594
Above-market lease intangibles, net		—		25
Subtotal		8,155		12,619
Goodwill, net		5,249		5,249
Total intangible assets	$	13,404	$	17,868
Intangible Liabilities
Below-market lease intangibles, net	$	215	$	403
Above-market ground lease	$	—	$	5,484
Total intangible liabilities	$	215	$	5,887

Intangible liabilities are included in “Accrued expenses and other liabilities” in the consolidated balance sheets.  Amortization of lease intangibles was $3.3 million, $2.4 million, and $2.0 million for the years ended December 31, 2019, 2018 and 2017, respectively.

Net amortization of above-market and below-market lease intangibles increased revenue by $0.1 million, $0.2 million and $0.1 million for the years ended December 31, 2019, 2018 and 2017, respectively. Amortization of above-market ground lease intangibles increased expenses by $0.1 million for each of the years ended December 31, 2018 and 2017, respectively. In the normal course of business, our intangible assets will amortize in the next five years and thereafter as follows:

(in thousands of dollars)	Value of Lease		Customer		Below Market
For the Year Ending December 31,	Intangibles		Relationship Value		Leases, net
2020	$	1,518	$	77	$	(67	)
2021		1,429		—		(42	)
2022		1,299		—		(10	)
2023		1,296		—		(10	)
2024		1,251		—		(10	)
2025 and thereafter		1,285		—		(76	)
Total	$	8,078	$	77	$	(215	)

Assets Classified as Held for Sale

The determination to classify an asset as held for sale requires significant estimates by us about the property and the expected market for the property, which are based on factors including recent sales of comparable properties, recent expressions of interest in the property, financial metrics of the property and the physical condition of the property. We must also determine if it will be possible under those market conditions to sell the property for an acceptable price within one year. When assets are identified by our management as held for sale, we discontinue depreciating the assets and estimate the sales price, net of selling costs, of such assets. We generally consider operating properties to be held for sale when they meet criteria such as whether the sale transaction has been approved by the appropriate level of management and there are no known material contingencies relating to the sale such that the sale is probable and is expected to qualify for recognition as a completed sale within one year. If the expected net sales price of the asset that has been identified as held for sale is less than the net book value of the asset, the asset is written down to fair value less the cost to sell. Assets and liabilities related to assets classified as held for sale are presented separately in the consolidated balance sheet. If we determine that a property no longer meets the held-for-sale criteria, we reclassify the property’s assets and liabilities to their original locations on the consolidated balance sheet and record depreciation and amortization expense for the period that the property was in held-for-sale status.

In June 2018, we determined that the land parcel in Gainesville, Florida met the criteria to classify it as held for sale. This determination was made because the property was under contract, and we believed that we will likely complete a sale of the property within one year. We completed the sale of the land parcel in multiple transactions in 2019. Additionally, in December 2018, we determined that the land parcel in New Garden Township, Pennsylvania met the criteria to classify it as held for sale. This determination was made because we were in advanced negotiations with a buyer and believed that the sale would likely be complete within one year. In April 2019, we completed the sale of the New Garden Township land parcel.

As of December 31, 2019, we determined that 13 land parcels and outparcels met the criteria to be classified as held for sale. The determination was made because we entered into agreements to sell multiple outparcels to a buyer and two separate land parcels in separate transactions. We also believe that we would likely complete the sale transactions within one year. The outparcels were part of an agreement executed in November 2019 with one buyer to sell 14 outparcels across five properties, of which three were sold as of December 31, 2019. In January 2020, an additional outparcel under this arrangement was sold.

We also have two separate agreements to sell land parcels at Woodland Mall and Moorestown Mall.

Capitalization of Costs

Costs incurred in relation to development and redevelopment projects for interest, property taxes and insurance are capitalized only during periods in which activities necessary to prepare the property for its intended use are in progress. Costs incurred for such items after the property is substantially complete and ready for its intended use are charged to expense as incurred. Capitalized costs, as well as tenant inducement amounts and internal and external commissions, are recorded in construction in progress. We capitalize a portion of development department employees’ compensation and benefits related to time spent involved in development and redevelopment projects. We also capitalize interest on equity method investments while the investee is engaged in activities necessary to commence its planned principal activities.

We capitalize payments made to obtain options to acquire real property. Other related costs that are incurred before acquisition that are expected to have ongoing value to the project are capitalized if the acquisition of the property is probable. If the property is acquired, other expenses related to the acquisition are recorded to project costs and other expenses. When it is probable that the property will not be acquired, capitalized pre-acquisition costs are charged to expense.

For leases under which we are a lessor, certain internal leasing and legal costs such as salaries, commissions and benefits related to time spent by leasing and legal department personnel involved in originating leases with third-party tenants were previously capitalized under ASC 840. However, they are now being recorded as period costs in accordance with ASC 842. We will continue to amortize previously capitalized initial direct costs over the remaining terms of the associated leases.

The following table summarizes our capitalized salaries, commissions and benefits, real estate taxes and interest for the years ended December 31, 2019, 2018 and 2017:

	For the Year Ended December 31,
(in thousands of dollars)	2019		2018		2017
Development/Redevelopment:
Salaries and benefits	$	1,332	$	1,380	$	1,296
Real estate taxes	$	1,057	$	1,198	$	1,035
Interest	$	7,725	$	6,395	$	7,620
Leasing:
Salaries, commissions and benefits	$	568	$	7,022	$	6,066

Receivables

We review the collectibility of our tenant receivables related to tenant rent including base rent, straight-line rent, expense reimbursements and other revenue or income. We specifically analyze billed and unbilled revenues, including straight-line rent receivable, historical collection issues, customer creditworthiness and current economic and industry trends. The receivables analysis places particular emphasis on past-due accounts and considers the nature and age of the receivables, the payment history and financial condition of the payor, the basis for any disputes or negotiations with the payor, and other information that could affect collectibility. If deemed uncollectible, we record an offset for credit losses directly to lease revenue.

Income Taxes

We have elected to qualify as a real estate investment trust, or REIT, under Sections 856-860 of the Internal Revenue Code of 1986, as amended, and intend to remain so qualified.

In some instances, we follow methods of accounting for income tax purposes that differ from generally accepted accounting principles. Earnings and profits, which determine the taxability of distributions to shareholders, will differ from net income or loss reported for financial reporting purposes due to differences in cost basis, differences in the estimated useful lives used to compute depreciation, and differences between the allocation of our net income or loss for financial reporting purposes and for tax reporting purposes.

We could be subject to a federal excise tax computed on a calendar year basis if we were not in compliance with the distribution provisions of the Internal Revenue Code. We have, in the past, distributed a substantial portion of our taxable income in the subsequent fiscal year and might also follow this policy in the future. No provision for excise tax was made for the years ended December 31, 2019, 2018 and 2017, as no excise tax was due in those years.

The per share distributions paid to common shareholders had the following components for the years ended December 31, 2019, 2018 and 2017:

	For the Year Ended December 31,
	2019		2018		2017
Ordinary income	$	—	$	0.25	$	—
Non-dividend distribution		0.84		0.59		0.84
Per-share distributions	$	0.84	$	0.84	$	0.84

The per share distributions paid to Series A, Series B, Series C and Series D preferred shareholders had the following components for the years ended December 31, 2019, 2018 and 2017:

	For the Year Ended December 31,
	2019		2018		2017
Series A Preferred Share Dividends (1)
Ordinary income					$	—
Non-dividend distributions						1.70
					$	1.70
Series B Preferred Share Dividends
Ordinary income	$	—	$	1.84	$	—
Non-dividend distributions		1.84		—		1.84
	$	—	$	1.84	$	1.84
Series C Preferred Share Dividends
Ordinary income	$	—	$	1.80	$	—
Non-dividend distributions		1.80		—		1.59
	$	—	$	1.80	$	1.59
Series D Preferred Share Dividends
Ordinary income	$	—	$	1.72	$	—
Non-dividend distributions		1.72		—		0.45
	$	—	$	1.72	$	0.45

⁽¹⁾ The Series A Preferred Shares were redeemed in 2017.

We follow accounting requirements that prescribe a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken in a tax return. We must determine whether it is “more likely than not” that a tax position will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. Once it is determined that a position meets the “more likely than not” recognition threshold, the position is measured at the largest amount of benefit that is greater than 50% likely to be realized upon settlement to determine the amount of benefit to recognize in the consolidated financial statements.

PRI is subject to federal, state and local income taxes. We had no federal or state income tax provision or benefit in the year ended December 31, 2019, but had a nominal provision in the year ended December 31, 2018 and a nominal benefit in the year ended December 31, 2017. We had net deferred tax assets of $14.3 million and $16.7 million for the years ended December 31, 2019 and 2018, respectively. The deferred tax assets are primarily the result of net operating losses. A valuation allowance has been established for the full amount of the net deferred tax assets, because we have determined that it is more likely than not that these assets will not be realized based on recent earnings history for our taxable REIT subsidiaries. The deferred tax assets were remeasured for the year ended December 31, 2017 to account for the tax provisions in H.R. 1 (the Tax Cuts and Jobs Act), which was signed into law on December 22, 2017.

Deferred Financing Costs

Deferred financing costs include fees and costs incurred to obtain financing. Such costs are amortized to interest expense over the terms of the related indebtedness. Interest expense is determined in a manner that approximates the effective interest method in the case of costs associated with mortgage loans, or on a straight line basis in the case of costs associated with our 2018 Revolving Facility (and in prior years, our 2013 Revolving Facility) and Term Loans (see note 4).

Derivatives

In the normal course of business, we are exposed to financial market risks, including interest rate risk on our interest-bearing liabilities. We attempt to limit these risks by following established risk management policies, procedures and strategies, including the use of derivative financial instruments. We do not use derivative financial instruments for trading or speculative purposes.

Currently, we use interest rate swaps to manage our interest rate risk. The valuation of these instruments is determined using widely accepted valuation techniques, including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs.

Derivative financial instruments are recorded on the consolidated balance sheet as assets or liabilities based on the fair value of the instrument. Changes in the fair value of derivative financial instruments are recognized currently in earnings, unless the derivative financial instrument meets the criteria for hedge accounting. If the derivative financial instruments meet the criteria for a cash flow hedge, the gains and losses in the fair value of the instrument are deferred in other comprehensive income. Gains and losses on a cash flow hedge are reclassified into earnings when the forecasted transaction affects earnings. A contract that is designated as a hedge of an anticipated transaction that is no longer likely to occur is immediately recognized in earnings.

The anticipated transaction to be hedged must expose us to interest rate risk, and the hedging instrument must reduce the exposure and meet the requirements for hedge accounting. We must formally designate the instrument as a hedge and document and assess the effectiveness of the hedge at inception and on a quarterly basis. Interest rate hedges that are designated as cash flow hedges are designed to mitigate the risks associated with future cash outflows on debt.

We incorporate credit valuation adjustments to appropriately reflect both our own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of our derivative contracts for the effect of nonperformance risk, we have considered the impact of netting and any applicable credit enhancements. Although we have determined that the majority of the inputs used to value our derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with our derivatives utilize Level 3 inputs, such as estimates of current credit spreads, to evaluate the likelihood of default by us and our counterparties. As of December 31, 2019, we have assessed the significance of the effect of the credit valuation adjustments on the overall valuation of our derivative positions and have determined that the credit valuation adjustments are not significant to the overall valuation of our derivatives. As a result, we have determined that our derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy.

Operating Partnership Unit Redemptions

Shares issued upon redemption of OP Units are recorded at the book value of the OP Units surrendered.

Share-Based Compensation Expense

Share based payments to employees and non-employee trustees, including grants of restricted shares and share options, are valued at fair value on the date of grant, and are expensed over the applicable vesting period.

Earnings Per Share

The difference between basic weighted average shares outstanding and diluted weighted average shares outstanding is the dilutive effect of common share equivalents. Common share equivalents consist primarily of shares that are issued under employee share compensation programs and outstanding share options whose exercise price is less than the average market price of our common shares during these periods.

New Accounting Developments

Lease accounting related

Effective January 1, 2019, we adopted Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842) (“ASC 842”) and related guidance using the optional transition method and elected to apply the provisions of the standard as of the adoption date rather than the earliest date presented. Prior period amounts were not restated. We implemented the standard using the following practical expedients:

• We have elected the package of practical expedients that allows us to not reassess (i) whether any expired or existing contracts are or contain leases, (ii) the lease classification for any expired or existing leases, and (iii) initial direct costs for any existing leases.

• For leases under which we are the lessor, we also have elected to not separate non-lease components such as common area maintenance (“CAM”) and real estate reimbursements from the associated lease component (minimum rent). Instead, we account for the lease and non-lease components as a single component because such non-lease components would otherwise be accounted for under the new revenue guidance (ASC 606) and both (1) the timing and pattern of transfer are the same for the non-lease components and associated lease component, and (2) the lease component, if accounted for separately, would be classified as an operating lease. Utility reimbursements are presented separately and not in the single component as the pattern of transfer is not aligned with the use of the property and therefore the criteria for use of the practical expedient are not met.

The adoption of this standard had the following effects on our financial statements as of December 31, 2019 and for the year ended December 31, 2019:

As of January 1, 2019, for leases under which the Company is a lessee, we recorded a right-of-use (“ROU”) asset of $24.6 million and corresponding lease liability for all leases previously accounted for as operating leases under ASC 840. The Company also derecognized an unfavorable ground lease liability of $5.5 million and reduced the corresponding ROU asset by the same amount. As of December 31, 2019, the ROU asset was $24.1 million and is included in deferred costs and other assets, net and the lease liability was $30.3 million and is included in accrued expenses and other liabilities in the accompanying consolidated balance sheet.

Effective January 1, 2019, we changed our fixed CAM revenue recognition to be recognized prospectively on a straight-line basis. In the year ended December 31, 2019, $2.7 million, of such revenues were recognized and are included within lease revenue in the accompanying consolidated statements of operations; previously, such amounts were recognized as billed in accordance with the terms of the respective leases.

We review the collectability of both billed and unbilled lease revenues each reporting period, taking into consideration the tenant’s payment history, credit profile and other factors, including its operating performance. For any tenant receivable balances deemed to be uncollectible, under ASC 842 we record an offset for credit losses directly to Lease revenue in the consolidated statement of operations. Previously, under ASC 840, uncollectible tenants’ receivables were reported in Other property operating expenses in the consolidated statement of operations. We recorded offsets for credit losses of $2.8 million for the year ended December 31, 2019.

For leases under which the Company is a lessor, certain internal leasing and legal costs that were previously capitalized under ASC 840 are now recorded as period costs under ASC 842. For the year ended December 31, 2018, we capitalized $5.2 million of internal leasing and legal salaries and benefits, respectively. No such costs were capitalized for the year ended December 31, 2019. We will continue to amortize previously capitalized initial direct costs over the remaining terms of the associated leases.

Other accounting

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. ASU 2016-15 is intended to reduce diversity in the practice of how certain transactions are classified in the statement of cash flows, including classification guidance for distributions received from equity method investments. We adopted this new standard effective January 1, 2018 using the retrospective transition method. The statement of cash flows for the year ended December 31, 2017 has been restated to reflect the adoption of ASU 2016-15. Upon adoption, we changed the prior period presentation of the statement of cash flows for the year ended December 31, 2017 for $5.7 million of cash distributions from partnerships that was previously presented within net cash used in investing activities to now be reflected within net cash provided by operating activities for the year ended December 31, 2017 using the nature of the distribution approach.

In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230), which provides guidance on the presentation of restricted cash or restricted cash equivalents within the statement of cash flows. Accordingly, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. We adopted this standard effective January 1, 2018. The adoption of ASU No. 2016-18 changed our presentation of the statement of cash flows to provide additional details regarding changes in restricted cash and we utilized a retrospective transition method for each period presented within financial statements. In applying the retrospective transition method, net cash used in investing activities for the year ended December 31, 2017 increased by $1.5 million and net cash provided by investing activities for the year ended December 31, 2017 increased by $0.5 million, as the change in escrow accounts is now included directly in net change in cash, cash equivalents and restricted cash. See note 1 for details regarding cash and restricted cash as presented within the consolidated statement of cash flows.

In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business.  The update adds further guidance that assists preparers in evaluating whether a transaction will be accounted for as an acquisition of an asset or a business. We expect that future property acquisitions will generally qualify as asset acquisitions under the standard, which requires the capitalization of acquisition costs to the underlying assets. We adopted this new guidance effective January 1, 2017. This new guidance did not have a significant impact on our financial statements.

In October 2018, the FASB issued ASU 2018-16, Derivatives and Hedging (Topic 815): Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) as a Benchmark Interest Rate for Hedge Accounting.  This ASU adds the OIS rate based on SOFR as a U.S. benchmark interest rate to facilitate the LIBOR to SOFR transition and provide sufficient lead time for entities to prepare for changes to interest rate hedging strategies for both risk management and hedge accounting purposes. Because we adopted ASU 2017-12, this guidance became effective January 1, 2019. This new guidance did not have a material impact on our consolidated financial statements.

In January 2017, the FASB issued ASU 2017-04,  Intangibles—Goodwill and Other (Topic 350)—Simplifying the Test for Goodwill Impairment. ASU 2017-04 simplifies the accounting for goodwill impairments by eliminating the requirement to compare the implied fair value of goodwill with its carrying amount as part of step two of the goodwill impairment test referenced in ASC 350,  Intangibles—Goodwill and Other. As a result, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value. However, the impairment loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. In January 2018, we elected to early adopt ASU 2017-04 effective January 1, 2018. This new guidance did not have any impact on our consolidated financial statements.

In February 2017, the FASB issued ASU 2017-05, Other Income- Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance. ASU 2017-05 focuses on recognizing gains and losses from the transfer of nonfinancial assets with noncustomers. It provides guidance as to the definition of an “in substance nonfinancial asset,” and provides guidance for sales of real estate, including partial sales. We adopted this new guidance effective January 1, 2018. This new guidance did not have a significant impact on our consolidated financial statements.

In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging: Targeted Improvements to Accounting for Hedging Activities (ASU 2017-12). The purpose of this updated guidance is to better align a company’s financial reporting for hedging activities with the economic objectives of those activities. We early adopted ASU 2017-12 on January 1, 2018. ASU 2017-12 requires a modified retrospective transition method in which we will recognize the cumulative effect of the change on the opening balance of each affected component of equity in the statement of financial position as of the date of adoption. The adoption of this standard did not have a material impact on our consolidated financial statements.

In October 2018, the Financial Accounting Standards Board (“FASB”) issued ASU 2018-16, Derivatives and Hedging (Topic 815): Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) as a Benchmark Interest Rate for Hedge Accounting. This ASU adds the OIS rate based on SOFR as a U.S. benchmark interest rate to facilitate the LIBOR to SOFR transition and provide sufficient lead time for entities to prepare for changes to interest rate hedging strategies for both risk management and hedge accounting purposes. Because we adopted ASU 2017-12, this guidance became effective January 1, 2019. The adoption of this guidance did not have a material impact on our consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses, and subsequently issued amendments to the initial and transitional guidance within ASU 2018-19, ASU 2019-04 and ASU 2019-05 between November 2018 and May 2019. ASU 2016-13 introduced new guidance for an approach based on expected losses to estimate credit losses on certain types of financial instruments, and will affect our accounting for trade receivables and notes receivable. We adopted this new standard on January 1, 2020. Our receivables primarily relate to leases under ASC 842, which are not within the scope of ASU 2016-13. The adoption of this new standard is not expected to have a material impact on our consolidated financial statements.

Immaterial error correction

The Consolidated Statements of Operations and the Consolidated Statements of Comprehensive Income for the year ended December 31, 2017 includes the impact of correcting the reporting of net loss (income) attributable to noncontrolling interest and common shareholders. Specifically, the correction adjusts for a computational error by reducing net income (and comprehensive income) or by increasing the net loss (and comprehensive loss) attributable to noncontrolling interest by $3.4 million for the year ended December 31, 2017. The 2018 and 2017 quarterly results were also adjusted by increasing the net loss (and comprehensive loss) attributable to noncontrolling interest in the amount of $0.7 million for each of the three months ended March 31, 2018 and 2017; $0.7 million and $0.8 million for the three months ended June 30, 2018 and 2017, respectively; $0.8 million for the three months ended September 30, 2017; and $1.2 million for the three months ended December 31, 2017. The adjustments also increased the amount of net income (and comprehensive income) or decreased the amount of net loss (and comprehensive loss) attributable to PREIT and PREIT common shareholders by the corresponding amounts. The adjustments also increased the amount of basic and diluted earnings per share or decreased the amount of basic and diluted loss per share by $0.05 for the year ended December 31, 2017. The 2018 and 2017 quarterly results were also adjusted by increasing the amount of basic and diluted earnings per share or decreased the amount of basic and diluted loss per share by $0.01 for each of the three months ended March 31, 2018 and 2017; June 30, 2018 and 2017; and September 30, 2017; and, by $0.02 for the three months ended December 31, 2017.

The Consolidated Statement of Equity for the years ended December 31, 2018 and 2017 included the cumulative impact of $9.3 million and $7.8 million, respectively, which corrected the reporting of noncontrolling interest by decreasing noncontrolling interest and increasing Total Equity - Pennsylvania Real Investment Trust by the corresponding amount.

These corrections had no impact on the previously reported amounts of net income (loss), total equity, and consolidated cash flows from operating, investing or financing activities.

We evaluated these corrections and determined, based on quantitative and qualitative factors, that the changes were not material to the consolidated financial statements taken as a whole for any previously filed consolidated financial statements.

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Schedule III - Additional Information (Details) - USD ($) $ in Millions	Dec. 31, 2019	Dec. 31, 2018
Real Estate And Accumulated Depreciation Disclosure [Abstract]
Real estate, federal income tax cost basis	$ 3,132.2	$ 3,302.7
Real estate, federal income tax depreciated basis	$ 2,225.4	$ 2,353.4

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Equity Offerings

12 Months Ended

Dec. 31, 2019

Equity [Abstract]

Equity Offerings

5. EQUITY OFFERINGS

Preferred Share Offerings

In January 2017, we issued 6,900,000 7.20% Series C Cumulative Redeemable Perpetual Preferred Shares (the “Series C Preferred Shares”) in a public offering at $25.00 per share. We received net proceeds from the offering of approximately $166.3 million after deducting payment of the underwriting discount of $5.4 million ($0.7875 per Series C Preferred Share) and offering expenses of $0.8 million. We used a portion of the net proceeds from this offering to repay all $117.0 million of then-outstanding borrowings under the 2013 Revolving Facility.

In September and October 2017, we issued an aggregate of 5,000,000 6.875% Series D Cumulative Redeemable Perpetual Preferred Shares (the “Series D Preferred Shares”) in a public offering at $25.00 per share, including 200,000 shares that were issued pursuant to the underwriter’s exercise of an overallotment option. We received aggregate net proceeds from the offering of approximately $120.5 million after deducting payment of the underwriting discount of $4.0 million ($0.7875 per Series D Preferred Share) and offering expenses of $0.5 million. We used the net proceeds from the offering of our Series D Preferred Shares to redeem all of our then outstanding 8.25% Series A Cumulative Redeemable Perpetual Preferred Shares (the “Series A Preferred Shares”) and for general corporate purposes.

We may not redeem the Series C Preferred Shares and the Series D Preferred Shares before January 27, 2022 and September 15, 2022, respectively, except to preserve our status as a REIT or upon the occurrence of a Change of Control, as defined in the Trust Agreement addendums designating the Series C Preferred Shares and Series D Preferred Shares. On and after January 27, 2022 for the Series C Preferred Shares and September 15, 2022 for the Series D Preferred Shares, we may redeem any or all of the Series C Preferred Shares or Series D Preferred Shares at $25.00 per share plus any accrued and unpaid dividends. In addition, upon the occurrence of a Change of Control, we may redeem any or all of the Series C Preferred Shares or Series D Preferred Shares for cash within 120 days after the first date on which such Change of Control occurred, at $25.00 per share plus any accrued and unpaid dividends. The Series C Preferred Shares and Series D Preferred Shares have no stated maturity, are not subject to any sinking fund or mandatory redemption provisions, and will remain outstanding indefinitely unless we redeem or otherwise repurchase them or they are converted.

Preferred Share Redemption

On October 12, 2017 (the “Redemption Date”), we redeemed all 4,600,000 of its Series A Preferred Shares remaining issued and outstanding as of the Redemption Date, for $115.0 million (the redemption price of $25.00 per share) plus accrued and unpaid dividends of $0.7 million (the amount equal to all accrued and unpaid dividends on the Series A Preferred Shares (whether or not declared) from September 15, 2017 up to but excluding the Redemption Date). The Series A Preferred Shares were initially issued in April 2012. As a result of this redemption, the $4.1 million excess of the redemption price over the carrying amount of the Series A Preferred Shares was deducted from Net income (loss) attributed to PREIT common shareholders in the fourth quarter of 2017.

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Share Based Compensation - Summary of Future Compensation Expense (Details) - Time Based Restricted Stock Awards $ in Thousands	Dec. 31, 2019 USD ($)
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
2020	$ 2,811
2021	1,352
2022	150
Total	4,313
Employees
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
2020	2,527
2021	1,352
2022	150
Total	4,029
Non-Employee Trustees
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
2020	284
Total	$ 284

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Financing Activity - Mortgage Loan Activity (Parenthetical) (Details) - USD ($) $ in Millions		1 Months Ended	12 Months Ended
	Jan. 19, 2018	Mar. 31, 2016	Dec. 31, 2018
Francis Scott Key Mall
Mortgage Loan Activity [Line Items]
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate, New Mortgage Loan	$ 68.5
Viewmont Mall
Mortgage Loan Activity [Line Items]
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate, New Mortgage Loan		$ 10.2	$ 67.2

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Financing Activity - Timing of Principal Payments and Terms of Mortgage Loans (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
Total
Carrying value of mortgage notes payable	$ 899,753	$ 1,047,906
Mortgage Loan
Total
Less: Unamortized debt issuance costs	1,800	$ 3,100
Mortgage Loan | Consolidated Properties
Principal Amortization
2020	16,266
2021	17,862
2022	13,463
2023	6,584
2024	6,405
2025 and thereafter	4,406
Total principal payments	64,986
Balloon Payments
2020	27,161
2021	188,785
2022	355,988
2023	53,299
2024	0
2025 and thereafter	211,346
Total principal payments	836,579
Total
2020	43,427
2021	206,647
2022	369,451
2023	59,883
2024	6,405
2025 and thereafter	215,752
Total principal payments	901,565
Less: Unamortized debt issuance costs	1,812
Carrying value of mortgage notes payable	$ 899,753

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Derivatives - Effect of Our Derivative Financial Instruments on Our Consolidated Statements of Operations (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Derivative Instruments And Hedging Activities Disclosure [Abstract]
Amount of Gain or (Loss) Recognized in Other Comprehensive Income on Derivative Instruments	$ (15,800)	$ (400)	$ 4,000
Amount of Gain or (Loss) Reclassified from Accumulated Other Comprehensive Income into Interest Expense	(3,100)	2,400	2,300
Interest Expense	$ (63,987)	$ (61,355)	$ (58,430)

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Derivatives - Additional Information (Details) $ in Millions	Dec. 31, 2019 USD ($)
Derivative Instruments [Line Items]
Estimate increase to interest expense	$ 2.7
Weighted average interest rate	1.96%
Derivative, notional amount	$ 895.6
Interest rate derivative liabilities, at fair value	13.1
Derivative asset, fair value, gross liability	$ 12.4
Interest Rate Swap
Derivative Instruments [Line Items]
Weighted average interest rate	1.86%
Derivative, notional amount	$ 795.6
Interest Rate Forward Starting Swaps 2023 Maturity
Derivative Instruments [Line Items]
Weighted average interest rate	2.75%
Derivative, notional amount	$ 100.0

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Leases - Supplemental Cash Flows and Terms (Details) $ in Thousands	12 Months Ended
	Dec. 31, 2019 USD ($)
Leases [Abstract]
Operating cash flows used for finance leases	$ 294
Operating cash flows used for operating leases	2,205
Financing cash flows used for finance leases	$ 632
Weighted average remaining lease term-finance leases (months)	99 months
Weighted average remaining lease term-operating leases (months)	306 months
Weighted average discount rate-finance leases	4.42%
Weighted average discount rate-operating leases	6.42%

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Real Estate Activities - Investments in Real Estate (Detail) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
Real Estate [Abstract]
Buildings, improvements and construction in progress	$ 2,753,039	$ 2,719,400
Land, including land held for development	457,887	465,194
Total investments in real estate	3,210,926	3,184,594
Accumulated depreciation	(1,202,722)	(1,118,582)
Net investments in real estate	$ 2,008,204	$ 2,066,012

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Real Estate Activities - Dispositions of Assets (Detail) - Mall - USD ($)	1 Months Ended
	Aug. 31, 2017	Jan. 31, 2017
Beaver Valley Mall
Disposals [Line Items]
Capitalization rate		15.60%
Sale Price		$ 24,200
Crossroads Mall
Disposals [Line Items]
Capitalization rate		15.50%
Sale Price		$ 24,800
Logan Valley Mall
Disposals [Line Items]
Capitalization rate	16.50%
Sale Price	$ 33,200

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CONSOLIDATED STATEMENTS OF EQUITY - USD ($) $ in Thousands	Total	Shares of Beneficial Interest, $1.00 Par	Capital Contributed in Excess of Par	Accumulated Other Comprehensive Income (Loss)	Distributions in Excess of Net Income	Non- controlling interest	Series A Preferred Stock	Series A Preferred Stock Preferred Shares $.01 par	Series A Preferred Stock Distributions in Excess of Net Income	Series B Preferred Stock	Series B Preferred Stock Preferred Shares $.01 par	Series B Preferred Stock Distributions in Excess of Net Income	Series C Preferred Stock	Series C Preferred Stock Preferred Shares $.01 par	Series C Preferred Stock Distributions in Excess of Net Income	Series D Preferred Stock	Series D Preferred Stock Preferred Shares $.01 par	Series D Preferred Stock Distributions in Excess of Net Income
Beginning balance at Dec. 31, 2016	$ 702,406	$ 69,553	$ 1,481,787	$ 1,622	$ (993,359)	$ 142,722		$ 46			$ 35
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net loss	(32,848)				(25,953)	(6,895)
Other comprehensive income	6,274			5,604		670
Preferred shares issued in Series C and D preferred share offerings, net	286,848		286,729											$ 69			$ 50
Preferred Shares redeemed	(115,000)		(110,851)		(4,103)			$ (46)
Amortization of deferred compensation	5,709		5,709
Shares issued upon redemption of Operating Partnership Units		39	375			(414)
Shares issued under employee compensation plan, net of shares retired	608	391	217
Dividends paid to preferred shareholders							$ (7,827)		$ (7,827)	$ (6,361)		$ (6,361)	$ (10,971)		$ (10,971)	$ (2,244)		$ (2,244)
Dividends paid to common shareholders ($0.84 per share)	(58,651)				(58,651)
Noncontrolling interests:
Distributions paid to Operating Partnership unit holders ($0.84 per unit)	(6,970)					(6,970)
Other contributions from noncontrolling interest, net	18					18
Ending Balance at Dec. 31, 2017	760,991	69,983	1,663,966	7,226	(1,109,469)	129,131					35			69			50
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net loss	(126,503)				(110,329)	(16,174)
Other comprehensive income	(2,034)			(1,818)		(216)
Amortization of deferred compensation	6,925		6,925
Shares issued under employee compensation plan, net of shares retired	663	512	151
Dividends paid to preferred shareholders										(6,361)		(6,361)	(12,420)		(12,420)	(8,594)		(8,594)
Dividends paid to common shareholders ($0.84 per share)	(59,145)				(59,145)
Noncontrolling interests:
Distributions paid to Operating Partnership unit holders ($0.84 per unit)	(6,949)					(6,949)
Other contributions from noncontrolling interest, net	(22)					(22)
Ending Balance at Dec. 31, 2018	546,551	70,495	1,671,042	5,408	(1,306,318)	105,770					35			69			50
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net loss	(13,000)				(10,872)	(2,128)
Other comprehensive income	(18,852)			(17,964)		(888)
Amortization of deferred compensation	6,212		6,212
Shares issued upon redemption of Operating Partnership Units		6,250	89,736			(95,986)
Shares issued under employee compensation plan, net of shares retired	698	805	(107)
Dividends paid to preferred shareholders										$ (6,364)		$ (6,364)	$ (12,419)		$ (12,419)	$ (8,592)		$ (8,592)
Dividends paid to common shareholders ($0.84 per share)	(63,787)				(63,787)
Noncontrolling interests:
Distributions paid to Operating Partnership unit holders ($0.84 per unit)	(3,004)					(3,004)
Other contributions from noncontrolling interest, net	(18)					(18)
Ending Balance at Dec. 31, 2019	$ 427,425	$ 77,550	$ 1,766,883	$ (12,556)	$ (1,408,352)	$ 3,746					$ 35			$ 69			$ 50

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CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($)	Dec. 31, 2019	Dec. 31, 2018
Tenant and other receivables, allowance for doubtful accounts	$ 2,845,000	$ 6,597,000
Intangible assets, accumulated amortization	$ 18,248,000	$ 15,543,000
Preferred shares, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, par value (in dollars per share)	$ 1.00	$ 1.00
Common stock, shares authorized (in shares)	200,000,000	200,000,000
Common stock, shares issued (in shares)	77,550,000	70,495,000
Common stock, shares outstanding (in shares)	77,550,000	70,495,000
Series B Preferred Stock
Preferred shares, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred shares, authorized (in shares)	25,000,000	25,000,000
Preferred stock, shares issued (in shares)	3,450,000	3,450,000
Preferred shares, outstanding (in shares)	3,450,000	3,450,000
Liquidation preference	$ 86,250,000	$ 86,250,000
Series C Preferred Stock
Preferred shares, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred shares, authorized (in shares)	25,000,000	25,000,000
Preferred stock, shares issued (in shares)	6,900,000	6,900,000
Preferred shares, outstanding (in shares)	6,900,000	6,900,000
Liquidation preference	$ 172,500,000	$ 172,500,000
Series D Preferred Stock
Preferred shares, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred shares, authorized (in shares)	25,000,000	25,000,000
Preferred stock, shares issued (in shares)	5,000,000	5,000,000
Preferred shares, outstanding (in shares)	5,000,000	5,000,000
Liquidation preference	$ 125,000,000	$ 125,000,000

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Commitments and Contingencies - Environmental (Details) $ in Millions	12 Months Ended
	Dec. 31, 2019 USD ($)
Commitments And Contingencies Disclosure [Abstract]
Environmental insurance coverage claims per occurrence	$ 25.0
Environmental insurance coverage claims aggregate	$ 25.0

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Financing Activity - Interest Expense and Deferred Financing Amortization (Details) - Credit Agreements - USD ($) $ in Thousands		12 Months Ended
	May 24, 2018	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Debt Instrument [Line Items]
Deferred financing amortization	$ 400
2018 Revolving Facility
Debt Instrument [Line Items]
Interest expense		$ 7,526	$ 1,807	$ 2,463
Deferred financing amortization		1,097	1,052	796
Term Loans
Debt Instrument [Line Items]
Interest expense		20,922	17,585	14,935
Deferred financing amortization		$ 760	763	$ 759
Accelerated financing fee			$ 363

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Leases - Future Payments Against Lease Liabilities Maturity (Details) $ in Thousands	Dec. 31, 2019 USD ($)
Finance leases
2020	$ 925
2021	925
2022	925
2023	925
2024	925
Thereafter	2,999
Total undiscounted lease payments	7,624
Less imputed interest	(1,242)
Total lease liabilities	6,382
Operating leases
2020	2,237
2021	2,730
2022	2,538
2023	2,485
2024	2,373
Thereafter	46,853
Total undiscounted lease payments	59,216
Less imputed interest	(28,965)
Total lease liabilities	30,251
Total
2020	3,162
2021	3,655
2022	3,463
2023	3,410
2024	3,298
Thereafter	49,852
Total undiscounted lease payments	66,840
Less imputed interest	(30,207)
Total lease liabilities	$ 36,633

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Investments in Partnerships - Summary of Share of Equity in Income of Partnerships (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Schedule of Equity Method Investments [Line Items]
Real estate revenue	$ 99,580	$ 98,781	$ 115,118
Expenses:
Property operating and other expenses	(34,955)	(30,839)	(33,273)
Interest expense	(23,272)	(23,373)	(25,251)
Depreciation and amortization	(21,942)	(19,393)	(24,872)
Total expenses	(80,169)	(73,605)	(83,396)
Net income	19,411	25,176	31,722
Less: Partners’ share	(10,768)	(13,719)	(17,607)
PREIT’s share	8,643	11,457	14,115
Amortization of excess investment	(354)	(82)	252
Equity in income of partnerships	8,289	11,375	14,367
Total assets	982,924	834,341
FDP Term Loan, net	299,091	247,901
Lehigh Valley Associates, LP
Expenses:
Total assets	62,504	52,255	43,850
Mortgage payable	191,998	196,328	199,451
Revenue	32,906	35,662	34,945
Property operating expenses	8,448	9,014	9,038
Interest expense	8,055	8,222	10,907
Net income	13,162	15,605	11,389
PREIT’s share of equity in income of partnership	6,581	7,803	5,695
Fashion District Philadelphia
Expenses:
Total assets	641,377	497,419	428,827
Revenue	8,028	4,053	18,708
Property operating expenses	6,995	3,630	6,909
Interest expense	178	126	126
Net income	(7,352)	(4,990)	2,436
PREIT’s share of equity in income of partnership	(3,676)	(2,495)	$ 1,218
FDP Term Loan, net	$ 299,091	$ 250,000
Lehigh Valley Associates, LP | Lehigh Valley Associates, LP
Expenses:
Ownership percentage	50.00%
Fashion District Philadelphia | Fashion District Philadelphia
Expenses:
Ownership percentage	50.00%

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Investments in Partnerships - Schedule of Principal Payments Based On Respective Partnership Interest (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
Mortgage Loans On Real Estate [Line Items]
Principal Amortization	$ 25,884
Balloon Payments	202,259
Total	228,143
Property Total	500,839
Less: Unamortized debt issuance costs	1,782
Carrying value of mortgage notes payable	499,057	$ 507,090
2020 [Member]
Mortgage Loans On Real Estate [Line Items]
Principal Amortization	4,378
Balloon Payments	0
Total	4,378
Property Total	8,801
2021 [Member]
Mortgage Loans On Real Estate [Line Items]
Principal Amortization	4,049
Balloon Payments	41,170
Total	45,219
Property Total	91,945
2022 [Member]
Mortgage Loans On Real Estate [Line Items]
Principal Amortization	3,738
Balloon Payments	21,500
Total	25,238
Property Total	93,476
2023 [Member]
Mortgage Loans On Real Estate [Line Items]
Principal Amortization	3,620
Balloon Payments	33,502
Total	37,122
Property Total	74,244
2024 [Member]
Mortgage Loans On Real Estate [Line Items]
Principal Amortization	2,886
Balloon Payments	0
Total	2,886
Property Total	5,772
2025 and Thereafter [Member]
Mortgage Loans On Real Estate [Line Items]
Principal Amortization	7,213
Balloon Payments	106,087
Total	113,300
Property Total	$ 226,601

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Commitments and Contingencies - Contractual Obligations (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2019	Jan. 31, 2018
Fashion District Philadelphia
Other Commitments [Line Items]
Unaccrued contractual obligation and other commitments	$ 33.1
Ownership percentage	50.00%	50.00%
Percentage of contractual obligation	100.00%
Fashion District Philadelphia | Macerich | Corporate Joint Venture
Other Commitments [Line Items]
Unaccrued contractual obligation and other commitments	$ 300.0
Contractual obligation, period after commencement	48 months
Construction in Progress
Other Commitments [Line Items]
Unaccrued contractual obligation and other commitments	$ 75.2

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Organization and Summary of Significant Accounting Policies - Schedule of Distributions Paid to Shareholders (Details) - $ / shares	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Component Of Operating Cost And Expense [Line Items]
Ordinary income		$ 0.25
Non-dividend distributions	$ 0.84	0.59	$ 0.84
Per-share distributions	0.84	0.84	0.84
Series A Preferred Stock
Component Of Operating Cost And Expense [Line Items]
Non-dividend distributions			1.70
Per-share distributions			1.70
Series B Preferred Stock
Component Of Operating Cost And Expense [Line Items]
Ordinary income		1.84
Non-dividend distributions	1.84		1.84
Per-share distributions		1.84	1.84
Series C Preferred Stock
Component Of Operating Cost And Expense [Line Items]
Ordinary income		1.80
Non-dividend distributions	1.80		1.59
Per-share distributions		1.80	1.59
Series D Preferred Stock
Component Of Operating Cost And Expense [Line Items]
Ordinary income		1.72
Non-dividend distributions	$ 1.72		0.45
Per-share distributions		$ 1.72	$ 0.45

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Organization and Summary of Significant Accounting Policies - Summary of Intangible Assets and Liabilities, Net of Accumulated Amortization (Detail) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Goodwill And Intangible Assets [Line Items]
Subtotal	$ 8,155	$ 12,619
Goodwill	5,249	5,249	$ 5,249	$ 5,249
Total intangible assets	13,404	17,868
Below-market lease intangibles, net	215	403
Above-market ground lease		5,484
Total intangible liabilities	215	5,887
Value of in-place lease intangibles
Goodwill And Intangible Assets [Line Items]
Subtotal	$ 8,155	12,594
Above-market lease intangibles
Goodwill And Intangible Assets [Line Items]
Subtotal		$ 25

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Summary of Quarterly Results (Unaudited)

12 Months Ended

Dec. 31, 2019

Quarterly Financial Information Disclosure [Abstract]

Summary of Quarterly Results (Unaudited)

13. SUMMARY OF QUARTERLY RESULTS (UNAUDITED)

The following presents a summary of the unaudited quarterly financial information for the years ended December 31, 2019 and 2018:

(in thousands of dollars, except per share amounts) For the Year Ended December 31, 2019	1st Quarter			2nd Quarter			3rd Quarter		4th Quarter (1)			Total
Total revenue	$	85,305		$	81,392		$	81,374	$	88,721		$	336,792
Net income (loss) (2)(3)		(16,223	)		(6,080	)		24,716		(15,413	)		(13,000	)
Net income (loss) attributable to PREIT (2)(3)(4)		(14,535	)		(5,751	)		24,262		(14,848	)		(10,872	)
Basic and diluted earnings (loss) per share (4)	$	(0.30	)	$	(0.17	)	$	0.22	$	(0.29	)		(0.52	)

(in thousands of dollars, except per share amounts) For the Year Ended December 31, 2018	1st Quarter			2nd Quarter			3rd Quarter			4th Quarter (1)			Total
Total revenue	$	86,282		$	91,973		$	88,103		$	96,042		$	362,400
Net loss (2)(3)		(3,712	)		(32,321	)		(1,636	)		(88,834	)		(126,503	)
Net loss attributable to PREIT (2)(3)(4)		(2,601	)		(28,201	)		(745	)		(78,782	)		(110,329	)
Basic and diluted loss per share (4)		(0.14	)		(0.50	)		(0.11	)		(1.23	)		(1.98	)

⁽¹⁾ Fourth Quarter revenue includes a significant portion of annual percentage rent as most percentage rent minimum sales levels are met in the fourth quarter.

^{(2) Includes impairment losses of $1.5 million (1st Quarter 2019), $3.5 million (4th Quarter 2019), $34.2 million (2nd Quarter 2018), and $103.2 million (4th Quarter 2018).}

⁽³⁾ Includes gain on sales of real estate by equity method investee of $0.6 million (1^st Quarter 2019) and $2.8 million (1^st Quarter 2018), gain on sales of real estate $1.5 million (2^nd Quarter 2019), $1.2 million (3^rd Quarter 2019), $0.1 million (4^th Quarter 2019), $0.7 million (2^nd Quarter 2018) and $0.8 million (4^th Quarter 2018) and gain on sales of interests in non operating real estate of $2.7 million (4^th Quarter 2019) and $8.1 million (4^th Quarter 2018).

⁽⁴⁾ Certain prior period amounts for net income (loss) attributable to PREIT common shareholders, basic and diluted earnings per share, noncontrolling interest, total equity - PREIT and cash flow amounts were adjusted to reflect immaterial financial statement error corrections and new accounting rules as discussed in Note 1 to our consolidated financial statements.

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Real Estate Activities (Tables)

12 Months Ended

Dec. 31, 2019

Real Estate [Abstract]

Investments in Real Estate

Investments in real estate as of December 31, 2019 and 2018 were comprised of the following:

	December 31,
(in thousands of dollars)	2019			2018
Buildings, improvements and construction in progress	$	2,753,039		$	2,719,400
Land, including land held for development		457,887			465,194
Total investments in real estate		3,210,926			3,184,594
Accumulated depreciation		(1,202,722	)		(1,118,582	)
Net investments in real estate	$	2,008,204		$	2,066,012

Impairment of Assets

During the years ended December 31, 2019, 2018, and 2017, we recorded asset impairment losses of $5.0 million, $137.5 million, and $55.8 million, respectively. Such impairment losses are recorded in “Impairment of assets” for the years ended 2019, 2018 and 2017. The assets that incurred impairment losses and the amount of such losses are as follows:

	For the Year Ended December 31,
(in thousands of dollars)	2019		2018		2017
Gainesville land		1,464		2,089		1,275
Woodland Mall		2,098		—		—
Exton Square Mall		—		73,218		—
Wyoming Valley Mall		—		32,177		—
Valley View Mall		1,408		14,294		15,521
Wiregrass Mall mortgage loan receivable		—		8,122		—
New Garden Township land		—		7,567		—
Logan Valley Mall		—		—		38,720
Sunrise Plaza land		—		—		226
Other		47		20		51
Total Impairment of Assets	$	5,017	$	137,487	$	55,793

Dispositions of Assets

The table below presents our dispositions in 2017. There were no dispositions of our mall properties in 2019 and 2018. Proceeds from property sales were used for general corporate purposes, repayment of mortgage loans that secured the properties (if applicable) and repayment of then-outstanding amounts on our Credit Agreements (see note 4), unless otherwise noted.

Sale Date	Property and Location	Description of Real Estate Sold	Capitalization Rate	Sale Price		Gain/ (Loss)
				(in millions of dollars)
2017 Activity:
January	Beaver Valley Mall, Monaca, Pennsylvania	Mall	15.6%	$	24.2	$	—
	Crossroads Mall, Beckley, West Virginia	Mall	15.5%		24.8		—
August	Logan Valley Mall, Altoona, Pennsylvania	Mall	16.5%		33.2		—

Summary of Capitalized Construction and Development Information

The following table summarizes certain capitalized construction and development information for our consolidated properties as of December 31, 2019 and 2018:

	December 31,
(in thousands of dollars)	2019		2018
Construction in progress	$	106,011	$	115,182
Land held for development		5,881		5,881
Deferred costs and other assets		7,274		6,487
Total capitalized construction and development activities	$	119,166	$	127,550

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Investments in Partnerships

12 Months Ended

Dec. 31, 2019

Equity Method Investments And Joint Ventures [Abstract]

Investments in Partnerships

3. INVESTMENTS IN PARTNERSHIPS

The following table presents summarized financial information of our equity investments in unconsolidated partnerships as of December 31, 2019 and 2018:

	December 31,
(in thousands of dollars)	2019			2018
ASSETS:
Investments in real estate, at cost:
Operating properties	$	883,530		$	575,149
Construction in progress		251,029			420,771
Total investments in real estate		1,134,559			995,920
Accumulated depreciation		(229,877	)		(212,574	)
Net investments in real estate		904,682			783,346
Cash and cash equivalents		34,766			20,446
Deferred costs and other assets, net		43,476			30,549
Total assets		982,924			834,341
LIABILITIES AND PARTNERS’ INVESTMENT:
Mortgage loans payable, net		499,057			507,090
FDP Term Loan, net		299,091			247,901
Other liabilities		79,166			34,463
Total liabilities		877,314			789,454
Net investment		105,610			44,887
Partners’ share		50,997			21,583
PREIT’s share		54,613			23,304
Excess investment (1)		17,464			15,763
Net investments and advances	$	72,077		$	39,067
Investment in partnerships, at equity	$	159,993		$	131,124
Distributions in excess of partnership investments		(87,916	)		(92,057	)
Net investments and advances	$	72,077		$	39,067

(1) Excess investment represents the unamortized difference between our investment and our share of the equity in the underlying net investment in the unconsolidated partnerships. The excess investment is amortized over the life of the properties, and the amortization is included in “Equity in income of partnerships.”

We present distributions from our equity investments using the nature of the distributions approach in the accompanying consolidated statement of cash flows.

The following table summarizes our share of equity in income of partnerships for the years ended December 31, 2019, 2018 and 2017:

	For the Year Ended December 31,
(in thousands of dollars)	2019			2018			2017
Real estate revenue	$	99,580		$	98,781		$	115,118
Expenses:
Property operating and other expenses		(34,955	)		(30,839	)		(33,273	)
Interest expense		(23,272	)		(23,373	)		(25,251	)
Depreciation and amortization		(21,942	)		(19,393	)		(24,872	)
Total expenses		(80,169	)		(73,605	)		(83,396	)
Net income		19,411			25,176			31,722
Less: Partners’ share		(10,768	)		(13,719	)		(17,607	)
PREIT’s share		8,643			11,457			14,115
Amortization of excess investment		(354	)		(82	)		252
Equity in income of partnerships	$	8,289		$	11,375		$	14,367

Dispositions

In March 2019, a partnership in which we hold a 25% interest sold an undeveloped land parcel adjacent to Gloucester Premium Outlets for $3.8 million. The partnership recorded a gain on sale of $2.3 million, of which our share was $0.6 million, which is recorded in gain on sale of real estate by equity method investee in the accompanying consolidated statement of operations.

In February 2018, a partnership in which we hold a 50% ownership share sold its office condominium interest in 907 Market Street in Philadelphia, Pennsylvania for $41.8 million. The partnership recorded a gain on sale of $5.5 million, of which our share was $2.8 million, which is recorded in gain on sale of real estate by equity method investee in the accompanying consolidated statement of operations. The partnership distributed to us proceeds of $19.7 million in connection with this transaction.

In September 2017, a partnership in which we hold a 50% ownership share sold its condominium interest in 801 Market Street in Philadelphia, Pennsylvania for $61.5 million. The partnership recorded a gain on sale of $13.1 million, of which our share was $6.5 million. The partnership distributed to us proceeds of $30.3 million in connection with this transaction in September 2017, which is recorded in gain on sale of real estate by equity method investee in the accompanying consolidated statement of operations.

Term Loan

In January 2018, our Fashion District Philadelphia redevelopment project joint venture entity entered into a $250.0 million term loan (the “FDP Term Loan”). We and our partner in the project, The Macerich Company (“Macerich”), each own a 50% partnership interest in Fashion District Philadelphia. The FDP Term Loan matures in January 2023, and bears interest at a variable rate of LIBOR plus 2.00%. PREIT and Macerich secured the FDP Term Loan by pledging their respective equity interests in the entities that own Fashion District Philadelphia. The entire $250.0 million available under the FDP Term Loan was drawn during the first quarter of 2018, and we received an aggregate $123.0 million as a distribution of our share of the draws in 2018. In July 2019, the FDP Term Loan was modified to increase the total potential borrowings from $250.0 million to $350.0 million. A total of $51.0 million was drawn during the third quarter of 2019 and we received aggregate distributions of $25.0 million as our share of the draws.

Mortgage Loans of Unconsolidated Properties

Mortgage loans, which are secured by seven of the unconsolidated properties (including one property under development), are due in installments over various terms extending to the year 2027. Five of the mortgage loans bear interest at a fixed interest rate and two of the mortgage loans bear interest at a variable interest rate. The balances of the fixed interest rate mortgage loans have interest rates that range from 4.06% to 5.56% and had a weighted average interest rate of 4.55% at December 31, 2019. The balances of the variable interest rate mortgage loans have interest rates that range from 3.19% to 4.60% and had a weighted average interest rate of 3.37% at December 31, 2019. The weighted average interest rate of all unconsolidated mortgage loans was 4.43% at December 31, 2019. The liability under each mortgage loan is limited to the unconsolidated partnership that owns the particular property. Our proportionate share, based on our respective partnership interest, of principal payments due in the next five years and thereafter is as follows:

	Company’s Proportionate Share
(in thousands of dollars) For the Year Ending December 31,	Principal Amortization		Balloon Payments		Total		Property Total
2020	$	4,378	$	—	$	4,378	$	8,801
2021		4,049		41,170		45,219		91,945
2022		3,738		21,500		25,238		93,476
2023		3,620		33,502		37,122		74,244
2024		2,886		—		2,886		5,772
2025 and thereafter		7,213		106,087		113,300		226,601
Total principal payments	$	25,884	$	202,259	$	228,143		500,839
Less: Unamortized debt issuance costs								1,782
Carrying value of mortgage notes payable							$	499,057

The following table presents the mortgage loans secured by the unconsolidated properties entered into since January 1, 2017:

Financing Date	Property	Amount Financed or Extended (in millions of dollars)		Stated Interest Rate	Maturity
2018 Activity:
February	Pavilion at Market East (1)	$	8.3	LIBOR plus 2.85%	February 2021
March	Gloucester Premium Outlets (2)	$	86.0	LIBOR plus 1.50%	March 2022
2017 Activity:
October	Lehigh Valley Mall (3)(4)	$	200.0	Fixed 4.06%	November 2027

(1) We own a 40% partnership interest in Pavilion at Market East and our share of this mortgage loan is $3.1 million.

(2) We own a 25% partnership interest in Gloucester Premium Outlets and our share of this mortgage loan is $21.5 million.

(3) The proceeds were used to repay the existing $124.6 million mortgage loan plus accrued interest. We own a 50% partnership interest in Lehigh Valley Mall and our share of this mortgage loan is $96.4 million.

(4) We received $35.3 million of proceeds as a distribution in connection with the financing. In connection with this new mortgage loan financing, the unconsolidated entity recorded $3.1 million of prepayment penalty and accelerated the amortization of $0.1 million of unamortized financing costs in the fourth quarter of 2017.

Significant Unconsolidated Subsidiary

We have a 50% ownership interest in each of Lehigh Valley Associates L.P. (“LVA”) and Fashion District Philadelphia (“FDP”). The financial information of LVA and FDP are included in the amounts above. Summarized balance sheet information as of December 31, 2019, 2018 and 2017, and summarized statement of operations information for the years ended December 31, 2019, 2018 and 2017 for these entities, which are accounted for using the equity method, are as follows:

LVA

	As of or for the year ended December 31,
(in thousands of dollars)	2019		2018		2017
Total assets	$	62,504	$	52,255	$	43,850
Mortgage payable		191,998		196,328		199,451
Revenue		32,906		35,662		34,945
Property operating expenses		8,448		9,014		9,038
Interest expense		8,055		8,222		10,907
Net income		13,162		15,605		11,389
PREIT’s share of equity in income of partnership		6,581		7,803		5,695

FDP

	As of or for the year ended December 31,
(in thousands of dollars)	2019			2018			2017
Total assets	$	641,377		$	497,419		$	428,827
FDP Term Loan, net		299,091			250,000			—
Revenue		8,028			4,053			18,708
Property operating expenses		6,995			3,630			6,909
Interest expense		178			126			126
Net income		(7,352	)		(4,990	)		2,436
PREIT’s share of equity in income of partnership		(3,676	)		(2,495	)		1,218

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Schedule III - Summary of Real Estate and Accumulated Depreciation (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Real Estate and Accumulated Depreciation [Line Items]
Initial Cost of Land	$ 388,326
Initial Cost of Building & Improvements	1,601,543
Cost of Improvements Net of Retirements and Impairment Charges	1,221,057
Balance of Land and Land Held for Development	457,887
Balance of Building & Improvements and Construction in Progress	2,753,039
Accumulated Depreciation Balance	1,202,722	$ 1,118,582	$ 1,111,007	$ 1,060,845
Current Encumbrance	901,565
Capital City Mall
Real Estate and Accumulated Depreciation [Line Items]
Initial Cost of Land	11,380
Initial Cost of Building & Improvements	65,575
Cost of Improvements Net of Retirements and Impairment Charges	59,801
Balance of Land and Land Held for Development	11,321
Balance of Building & Improvements and Construction in Progress	125,435
Accumulated Depreciation Balance	$ 51,408
Date of Acquisition/ Construction	2003
Life of Depre- ciation	40 years
Cherry Hill Mall
Real Estate and Accumulated Depreciation [Line Items]
Initial Cost of Land	$ 29,938
Initial Cost of Building & Improvements	185,611
Cost of Improvements Net of Retirements and Impairment Charges	265,297
Balance of Land and Land Held for Development	48,608
Balance of Building & Improvements and Construction in Progress	432,238
Accumulated Depreciation Balance	261,070
Current Encumbrance	$ 268,753
Date of Acquisition/ Construction	2003
Life of Depre- ciation	40 years
Cumberland Mall
Real Estate and Accumulated Depreciation [Line Items]
Initial Cost of Land	$ 8,711
Initial Cost of Building & Improvements	43,889
Cost of Improvements Net of Retirements and Impairment Charges	31,394
Balance of Land and Land Held for Development	9,842
Balance of Building & Improvements and Construction in Progress	74,152
Accumulated Depreciation Balance	31,239
Current Encumbrance	$ 42,247
Date of Acquisition/ Construction	2005
Life of Depre- ciation	40 years
Dartmouth Mall
Real Estate and Accumulated Depreciation [Line Items]
Initial Cost of Land	$ 7,015
Initial Cost of Building & Improvements	28,328
Cost of Improvements Net of Retirements and Impairment Charges	52,872
Balance of Land and Land Held for Development	7,021
Balance of Building & Improvements and Construction in Progress	81,194
Accumulated Depreciation Balance	44,318
Current Encumbrance	$ 58,288
Date of Acquisition/ Construction	1998
Life of Depre- ciation	40 years
Exton Square Mall
Real Estate and Accumulated Depreciation [Line Items]
Initial Cost of Land	$ 19,976
Initial Cost of Building & Improvements	103,955
Cost of Improvements Net of Retirements and Impairment Charges	(74,961)
Balance of Land and Land Held for Development	23,714
Balance of Building & Improvements and Construction in Progress	25,256
Accumulated Depreciation Balance	$ 11,470
Date of Acquisition/ Construction	2003
Life of Depre- ciation	40 years
Francis Scott Key Mall
Real Estate and Accumulated Depreciation [Line Items]
Initial Cost of Land	$ 9,786
Initial Cost of Building & Improvements	47,526
Cost of Improvements Net of Retirements and Impairment Charges	40,644
Balance of Land and Land Held for Development	9,440
Balance of Building & Improvements and Construction in Progress	88,516
Accumulated Depreciation Balance	43,141
Current Encumbrance	$ 68,469
Date of Acquisition/ Construction	2003
Life of Depre- ciation	40 years
Jacksonville Mall
Real Estate and Accumulated Depreciation [Line Items]
Initial Cost of Land	$ 9,913
Initial Cost of Building & Improvements	47,139
Cost of Improvements Net of Retirements and Impairment Charges	36,515
Balance of Land and Land Held for Development	9,913
Balance of Building & Improvements and Construction in Progress	83,654
Accumulated Depreciation Balance	$ 40,110
Date of Acquisition/ Construction	2003
Life of Depre- ciation	40 years
Magnolia Mall
Real Estate and Accumulated Depreciation [Line Items]
Initial Cost of Land	$ 8,149
Initial Cost of Building & Improvements	42,302
Cost of Improvements Net of Retirements and Impairment Charges	56,657
Balance of Land and Land Held for Development	14,511
Balance of Building & Improvements and Construction in Progress	92,597
Accumulated Depreciation Balance	$ 49,356
Date of Acquisition/ Construction	1998
Life of Depre- ciation	40 years
Monroe Land
Real Estate and Accumulated Depreciation [Line Items]
Initial Cost of Land	$ 1,177
Balance of Land and Land Held for Development	$ 1,177
Date of Acquisition/ Construction	2006
Life of Depre- ciation	10 years
Moorestown Mall
Real Estate and Accumulated Depreciation [Line Items]
Initial Cost of Land	$ 10,934
Initial Cost of Building & Improvements	62,995
Cost of Improvements Net of Retirements and Impairment Charges	112,615
Balance of Land and Land Held for Development	23,060
Balance of Building & Improvements and Construction in Progress	163,484
Accumulated Depreciation Balance	$ 72,684
Date of Acquisition/ Construction	2003
Life of Depre- ciation	40 years
Patrick Henry Mall
Real Estate and Accumulated Depreciation [Line Items]
Initial Cost of Land	$ 16,075
Initial Cost of Building & Improvements	86,643
Cost of Improvements Net of Retirements and Impairment Charges	53,740
Balance of Land and Land Held for Development	16,397
Balance of Building & Improvements and Construction in Progress	140,061
Accumulated Depreciation Balance	73,125
Current Encumbrance	$ 88,910
Date of Acquisition/ Construction	2003
Life of Depre- ciation	40 years
Plymouth Meeting Mall
Real Estate and Accumulated Depreciation [Line Items]
Initial Cost of Land	$ 29,265
Initial Cost of Building & Improvements	58,388
Cost of Improvements Net of Retirements and Impairment Charges	153,745
Balance of Land and Land Held for Development	31,738
Balance of Building & Improvements and Construction in Progress	209,660
Accumulated Depreciation Balance	$ 99,496
Date of Acquisition/ Construction	2003
Life of Depre- ciation	40 years
The Mall at Prince Georges
Real Estate and Accumulated Depreciation [Line Items]
Initial Cost of Land	$ 13,065
Initial Cost of Building & Improvements	57,686
Cost of Improvements Net of Retirements and Impairment Charges	74,504
Balance of Land and Land Held for Development	13,066
Balance of Building & Improvements and Construction in Progress	132,189
Accumulated Depreciation Balance	$ 63,944
Date of Acquisition/ Construction	1998
Life of Depre- ciation	40 years
Springfield Town Center
Real Estate and Accumulated Depreciation [Line Items]
Initial Cost of Land	$ 119,912
Initial Cost of Building & Improvements	353,551
Cost of Improvements Net of Retirements and Impairment Charges	22,736
Balance of Land and Land Held for Development	119,912
Balance of Building & Improvements and Construction in Progress	376,287
Accumulated Depreciation Balance	$ 67,344
Date of Acquisition/ Construction	2015
Life of Depre- ciation	40 years
Sunrise Plaza Land
Real Estate and Accumulated Depreciation [Line Items]
Initial Cost of Land	$ 395
Cost of Improvements Net of Retirements and Impairment Charges	(29)
Balance of Land and Land Held for Development	$ 366
Date of Acquisition/ Construction	2005
Life of Depre- ciation	0 years
Swedes Square Land
Real Estate and Accumulated Depreciation [Line Items]
Initial Cost of Land	$ 189
Cost of Improvements Net of Retirements and Impairment Charges	36
Balance of Land and Land Held for Development	$ 225
Date of Acquisition/ Construction	2004
Life of Depre- ciation	0 years
Valley Mall
Real Estate and Accumulated Depreciation [Line Items]
Initial Cost of Land	$ 11,956
Initial Cost of Building & Improvements	57,931
Cost of Improvements Net of Retirements and Impairment Charges	75,356
Balance of Land and Land Held for Development	23,761
Balance of Building & Improvements and Construction in Progress	121,482
Accumulated Depreciation Balance	$ 48,093
Date of Acquisition/ Construction	2003
Life of Depre- ciation	40 years
Valley View Mall
Real Estate and Accumulated Depreciation [Line Items]
Initial Cost of Land	$ 9,402
Initial Cost of Building & Improvements	45,351
Cost of Improvements Net of Retirements and Impairment Charges	(18,564)
Balance of Land and Land Held for Development	4,204
Balance of Building & Improvements and Construction in Progress	31,986
Accumulated Depreciation Balance	12,600
Current Encumbrance	$ 27,429
Date of Acquisition/ Construction	2003
Life of Depre- ciation	40 years
Viewmont Mall
Real Estate and Accumulated Depreciation [Line Items]
Initial Cost of Land	$ 12,505
Initial Cost of Building & Improvements	61,519
Cost of Improvements Net of Retirements and Impairment Charges	47,962
Balance of Land and Land Held for Development	12,606
Balance of Building & Improvements and Construction in Progress	109,380
Accumulated Depreciation Balance	49,593
Current Encumbrance	$ 67,185
Date of Acquisition/ Construction	2003
Life of Depre- ciation	40 years
Willow Grove Park
Real Estate and Accumulated Depreciation [Line Items]
Initial Cost of Land	$ 26,748
Initial Cost of Building & Improvements	131,189
Cost of Improvements Net of Retirements and Impairment Charges	102,878
Balance of Land and Land Held for Development	36,412
Balance of Building & Improvements and Construction in Progress	224,403
Accumulated Depreciation Balance	105,214
Current Encumbrance	$ 156,444
Date of Acquisition/ Construction	2003
Life of Depre- ciation	40 years
Woodland Mall
Real Estate and Accumulated Depreciation [Line Items]
Initial Cost of Land	$ 31,835
Initial Cost of Building & Improvements	121,965
Cost of Improvements Net of Retirements and Impairment Charges	127,859
Balance of Land and Land Held for Development	40,593
Balance of Building & Improvements and Construction in Progress	241,065
Accumulated Depreciation Balance	78,517
Current Encumbrance	$ 123,840
Date of Acquisition/ Construction	2005
Life of Depre- ciation	40 years

XML

Benefit Plans

12 Months Ended

Dec. 31, 2019

Compensation And Retirement Disclosure [Abstract]

Benefit Plans

7. BENEFIT PLANS

401(k) Plan

We maintain a 401(k) Plan (the “401(k) Plan”) in which substantially all of our employees are eligible to participate. The 401(k) Plan permits eligible participants, as defined in the 401(k) Plan agreement, to defer up to 30% of their compensation, and we, at our discretion, may match a specified percentage of the employees’ contributions. Our and our employees’ contributions are fully vested, as defined in the 401(k) Plan agreement. Our contributions to the 401(k) Plan were $0.9 million, $0.9 million, and $0.9 million for the years ended December 31, 2019, 2018 and 2017, respectively.

Supplemental Retirement Plans

We maintain Supplemental Retirement Plans (the “Supplemental Plans”) covering certain senior management employees. Expenses under the provisions of the Supplemental Plans were $0.2 million, $0.2 million, and $0.3 million for the years ended December 31, 2019, 2018 and 2017, respectively.

Employee Share Purchase Plan

We maintain a share purchase plan through which our employees may purchase common shares at a 15% discount to the fair market value (as defined therein). In the years ended December 31, 2019, 2018 and 2017, approximately 44,000, 31,000, and 38,000 shares, respectively, were purchased for total consideration of $0.2 million, $0.2 million, and $0.4 million, respectively. We recorded expense of approximately $48 thousand, $43 thousand and $0.1 million for the years ended December 31, 2019, 2018 and 2017, respectively, related to the share purchase plan.

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Organization and Summary of Significant Accounting Policies - Revenue Recognition (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Summary Of Significant Accounting Policies [Line Items]
Revenue from tenant rent and other tenant-related activities	95.00%
Straight line rent adjustments	$ 1,600	$ 2,000	$ 2,700
Straight-line rent receivable	30,400	27,200
Account receivable included in accrued income	41,261	38,914
Deferred marketing reimbursement income	200	200
Marketing revenue	4,100	3,900	4,400
Property management fee revenue	500	700	900
Development fee revenue	$ 700	800	$ 900
Accrued Income Receivable
Summary Of Significant Accounting Policies [Line Items]
Account receivable included in accrued income		$ 1,900

XML

Organization and Summary of Significant Accounting Policies - Partnership Investments (Details)	Dec. 31, 2019
Minimum
Summary Of Significant Accounting Policies [Line Items]
Partnership investment, ownership interest	25.00%
Maximum
Summary Of Significant Accounting Policies [Line Items]
Partnership investment, ownership interest	50.00%

XML

Leases (Tables)

12 Months Ended

Dec. 31, 2019

Leases [Abstract]

Lease, Cost

The following table presents additional information pertaining to the Company’s leases:

	For the Year Ended December 31, 2019
(in thousands of dollars)	Solar Panel Leases		Ground Leases		Office, equipment, and vehicle leases		Total
Finance lease cost:
Amortization of right-of-use assets	$	750	$	—	$	—	$	750
Interest on lease liabilities		294		—		—		294
Operating lease costs		—		1,583		1,932		3,515
Variable lease costs		—		165		457		622
Total lease costs	$	1,044	$	1,748	$	2,389	$	5,181

Supplemental Cash Flows and Terms

Other information related to leases as of and for the year ended December 31, 2019 is as follows:

(in thousands of dollars)
Cash paid for the amounts included in the measurement of lease liabilities
Operating cash flows used for finance leases	$	294
Operating cash flows used for operating leases	$	2,205
Financing cash flows used for finance leases	$	632
Weighted average remaining lease term-finance leases (months)		99
Weighted average remaining lease term-operating leases (months)		306
Weighted average discount rate-finance leases		4.42	%
Weighted average discount rate-operating leases		6.42	%

Future Minimum Payments Against Lease Liabilities Maturity

Future payments against lease liabilities as of December 31, 2019 are as follows:

(in thousands of dollars)	Finance leases			Operating leases			Total
2020	$	925		$	2,237		$	3,162
2021		925			2,730			3,655
2022		925			2,538			3,463
2023		925			2,485			3,410
2024		925			2,373			3,298
Thereafter		2,999			46,853			49,852
Total undiscounted lease payments		7,624			59,216			66,840
Less imputed interest		(1,242	)		(28,965	)		(30,207	)
Total lease liabilities	$	6,382		$	30,251		$	36,633

Future Minimum Lease Payments Under Agreements

Future minimum lease payments under these agreements as of December 31, 2018 were as follows:

(in thousands of dollars)	Finance leases		Operating leases		Total
Year ending December 31,
2019	$	925	$	3,264	$	4,189
2020		925		2,237		3,162
2021		925		2,730		3,655
2022		925		2,538		3,463
2023		925		2,485		3,410
Thereafter		3,923		49,226		53,149
	$	8,548	$	62,480	$	71,028

Lessor, Operating Lease, Payments to be Received, Maturity

As of December 31, 2019, the fixed contractual lease payments, including minimum rents and fixed CAM amounts, to be received over the next five years pursuant to the terms of noncancellable operating leases with initial terms greater than one year are included in the table below. The amounts presented assume that no leases are renewed and no renewal options are exercised. Additionally, the table does not include variable lease payments that may be received under certain leases for percentage rents or the reimbursement of operating costs, such as common area expenses, utilities, insurance and real estate taxes. These variable lease payments are recognized in the period when the applicable expenditures are incurred or, in the case of percentage rents, when the sales data is made available.

(in thousands of dollars)
For the Year Ending December 31,
2020	$	205,574
2021		187,241
2022		168,671
2023		149,296
2024		127,355
2025 and thereafter		386,280
	$	1,224,417

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CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Cash flows from operating activities:
Net loss	$ (13,000)	$ (126,503)	$ (32,848)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation	126,583	121,644	119,441
Amortization	16,180	14,554	12,057
Straight-line rent adjustments	(5,166)	(1,989)	(2,686)
Provision for doubtful accounts		2,461	1,763
Non-cash lease termination revenue		(4,200)
Amortization of deferred compensation	6,212	6,925	5,709
Gain on debt extinguishment, net	(24,859)	0	0
Insurance recoveries in excess of property loss	(3,861)	(689)
Gain on sale of interests in real estate and non-operating real estate, net	(5,474)	(9,625)	(881)
Equity in income of partnerships	(8,289)	(11,375)	(14,367)
Gain on sale of real estate by equity method investee	(553)	(2,772)	(6,567)
Cash distributions from partnerships	22,570	9,421	16,849
Amortization of historic tax credits		(829)	(1,768)
Impairment of assets	1,455	129,365	55,793
Impairment of development land parcel	3,562
Impairment of mortgage loan receivable		8,122
Change in assets and liabilities:
Net change in other assets	(4,191)	(5,998)	(5,652)
Net change in other liabilities	223	6,352	(4,752)
Net cash provided by operating activities	111,392	134,864	142,091
Cash flows from investing activities:
Investments in consolidated real estate acquisitions		(17,611)
Cash proceeds from sales of real estate	50,407	13,730	77,778
Cash proceeds from sale of mortgage	8,000
Net proceeds from insurance claims related to damage to real estate assets	6,977	700
Cash distributions from partnerships of proceeds from real estate sold	879	19,727	30,265
Investments in partnerships	(72,939)	(58,112)	(73,434)
Investments in real estate improvements	(34,260)	(35,170)	(51,949)
Additions to construction in progress	(113,791)	(75,649)	(116,550)
Capitalized leasing costs	(568)	(12,022)	(6,066)
Distribution of financing proceeds from equity method investee	25,000	123,000	35,221
Additions to leasehold improvements and corporate fixed assets	(1,055)	(160)	(683)
Net cash used in investing activities	(131,350)	(41,567)	(105,418)
Cash flows from financing activities:
Net proceeds from issuance of preferred shares			286,847
Redemption of Series A Preferred Shares			(115,000)
Borrowings under revolving facilities	190,000	12,000	56,000
Repayments of mortgage loans and finance lease liabilities	(71,387)		(150,000)
Proceeds from mortgage loans		10,185
Principal installments on mortgage loans	(17,911)	(18,655)	(17,945)
Payment of deferred financing costs	(95)	(5,529)	(71)
Value of shares of beneficial interest issued	1,256	1,410	2,085
Dividends paid to common shareholders	(63,787)	(59,145)	(58,651)
Dividends paid to preferred shareholders	(27,375)	(27,375)	(27,403)
Distributions paid to Operating Partnership unit holders and noncontrolling interest	(3,004)	(6,949)	(6,970)
Value of shares retired under equity incentive plans, net of shares issued	(556)	(747)	(1,477)
Net cash provided by (used in) financing activities	7,141	(94,805)	(32,585)
Net change in cash, cash equivalents, and restricted cash	(12,817)	(1,508)	4,088
Cash, cash equivalents, and restricted cash, beginning of period	32,445	33,953	29,865
Cash, cash equivalents, and restricted cash, end of period	$ 19,628	$ 32,445	$ 33,953

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Organization and Summary of Significant Accounting Policies - Other Accounting (Details) - USD ($)	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Cash distributions from partnerships	$ 22,570,000	$ 9,421,000	$ 16,849,000
Net cash (used in) provided by investing activities	$ (131,350,000)	$ (41,567,000)	(105,418,000)
Accounting Standards Update 2016-15
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Cash distributions from partnerships			5,700
Accounting Standards Update 2016-18
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Net cash (used in) provided by investing activities			1,500,000
Accounting Standards Update 2016-18 | Escrow Accounts
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Net cash (used in) provided by investing activities			$ 500,000

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Real Estate Activities - Impairment of Assets (Detail) - USD ($) $ in Thousands	1 Months Ended	3 Months Ended		12 Months Ended
	Dec. 31, 2019	Mar. 31, 2019	Dec. 31, 2018	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Impairment Of Assets [Line Items]
Total Impairment of Assets				$ 5,017	$ 137,487	$ 55,793
Gainesville Land
Impairment Of Assets [Line Items]
Total Impairment of Assets		$ 1,500		1,464	2,089	1,275
Woodland Mall
Impairment Of Assets [Line Items]
Total Impairment of Assets	$ 600			2,098
Exton Square Mall
Impairment Of Assets [Line Items]
Total Impairment of Assets					73,218
Wyoming Valley Mall
Impairment Of Assets [Line Items]
Total Impairment of Assets					32,177
Valley View Mall
Impairment Of Assets [Line Items]
Total Impairment of Assets				1,408	14,294	15,521
Wiregrass Loan Receivable
Impairment Of Assets [Line Items]
Total Impairment of Assets			$ 8,100		8,122
New Garden Township Land
Impairment Of Assets [Line Items]
Total Impairment of Assets					7,567
Logan Valley Mall
Impairment Of Assets [Line Items]
Total Impairment of Assets						38,720
Sunrise Plaza Land
Impairment Of Assets [Line Items]
Total Impairment of Assets						226
Other
Impairment Of Assets [Line Items]
Total Impairment of Assets				$ 47	$ 20	$ 51

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CONSOLIDATED STATEMENTS OF OPERATIONS (Parenthetical) - shares shares in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Income Statement [Abstract]
Antidilutive securities excluded from computation of earnings per share, amount	452	203	93

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Real Estate Activities - Capitalized Construction And Development Information For Our Consolidated Properties (Detail) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
Real Estate Capitalized Costs [Line Items]
Construction in progress	$ 106,011	$ 115,182
Land held for development	5,881	5,881
Deferred costs and other assets, net	103,688	110,805
Capitalized Construction and Development Activities
Real Estate Capitalized Costs [Line Items]
Construction in progress	106,011	115,182
Land held for development	5,881	5,881
Deferred costs and other assets, net	7,274	6,487
Total capitalized construction and development activities	$ 119,166	$ 127,550

XML

Document and Entity Information - USD ($)
$ in Millions

12 Months Ended

Dec. 31, 2019

Mar. 06, 2020

Jun. 30, 2019

Document Information [Line Items]

Document Type

10-K

Amendment Flag

false

Document Period End Date

Dec. 31, 2019

Document Fiscal Year Focus

2019

Document Fiscal Period Focus

FY

Entity Registrant Name

PENNSYLVANIA REAL ESTATE INVESTMENT TRUST

Entity Central Index Key

0000077281

Entity Current Reporting Status

Yes

Entity Voluntary Filers

No

Entity Interactive Data Current

Yes

Current Fiscal Year End Date

--12-31

Entity Filer Category

Accelerated Filer

Entity Well-known Seasoned Issuer

No

Entity Public Float

$ 489.5

Entity Common Stock, Shares Outstanding

78,528,350

Entity Shell Company

false

Entity Small Business

false

Entity Emerging Growth Company

false

Entity File Number

1-6300

Entity Incorporation, State or Country Code

PA

Entity Tax Identification Number

23-6216339

Entity Address, Address Line One

One Commerce Square

Entity Address, Address Line Two

2005 Market Street, Suite 1000

Entity Address, City or Town

Philadelphia

Entity Address, State or Province

PA

Entity Address, Postal Zip Code

19103

City Area Code

215

Local Phone Number

875-0700

Document Annual Report

true

Document Transition Report

false

Documents Incorporated by Reference

Portions of the Registrant’s definitive proxy statement to be filed with the Securities and Exchange Commission pursuant to regulation 14A relating to its 2020 Annual Meeting of Shareholders are incorporated by reference in Part III of this Form 10-K.

Fair Value Measured at Net Asset Value Per Share [Member]

Document Information [Line Items]

Title of 12(b) Security

Shares of Beneficial Interest, par value $1.00 per share

Trading Symbol

PEI

Security Exchange Name

NYSE

Series B Preferred Stock

Document Information [Line Items]

Title of 12(b) Security

Series B Preferred Shares, par value $0.01 per share

Trading Symbol

PEIPrB

Security Exchange Name

NYSE

Series C Preferred Stock

Document Information [Line Items]

Title of 12(b) Security

Series C Preferred Shares, par value $0.01 per share

Trading Symbol

PEIPrC

Security Exchange Name

NYSE

Series D Preferred Stock

Document Information [Line Items]

Title of 12(b) Security

Series D Preferred Shares, par value $0.01 per share

Trading Symbol

PEIPrD

Security Exchange Name

NYSE

XML

Leases - As Lessee (Details)	12 Months Ended
	Dec. 31, 2019
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Lessee, operating lease, renewal term	60 years
Lessee, Operating Lease, Existence of Option to Extend	true
Lessor, Operating Lease, Existence of Option to Extend	false
Minimum
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Lessee, operating lease, term of contract	3 years
Maximum
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Lessee, operating lease, term of contract	40 years

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Equity Offerings - Preferred Share Offerings (Details) - USD ($) $ / shares in Units, $ in Millions			1 Months Ended		12 Months Ended
	Oct. 12, 2017	Sep. 11, 2017	Oct. 04, 2017	Jan. 31, 2017	Dec. 31, 2019	Dec. 31, 2018	Oct. 13, 2017	Jan. 27, 2017
Class Of Stock [Line Items]
Convertible Preferred Stock, Settlement Terms					We may not redeem the Series C Preferred Shares and the Series D Preferred Shares before January 27, 2022 and September 15, 2022, respectively, except to preserve our status as a REIT or upon the occurrence of a Change of Control, as defined in the Trust Agreement addendums designating the Series C Preferred Shares and Series D Preferred Shares. On and after January 27, 2022 for the Series C Preferred Shares and September 15, 2022 for the Series D Preferred Shares, we may redeem any or all of the Series C Preferred Shares or Series D Preferred Shares at $25.00 per share plus any accrued and unpaid dividends. In addition, upon the occurrence of a Change of Control, we may redeem any or all of the Series C Preferred Shares or Series D Preferred Shares for cash within 120 days after the first date on which such Change of Control occurred, at $25.00 per share plus any accrued and unpaid dividends. The Series C Preferred Shares and Series D Preferred Shares have no stated maturity, are not subject to any sinking fund or mandatory redemption provisions, and will remain outstanding indefinitely unless we redeem or otherwise repurchase them or they are converted.
Redemption price per share							$ 25.00
Series C Preferred Stock
Class Of Stock [Line Items]
Preferred Stock, Shares Issued					6,900,000	6,900,000		6,900,000
Shares Issued, Price Per Share								$ 25.00
Proceeds from Issuance or Sale of Equity				$ 166.3
Underwriting Discount On Public Offering								$ 5.4
Underwriting Discount Per Share On Public Offering								$ 0.7875
Equity offering expenses								$ 0.8
Repayments of Debt				$ 117.0
Preferred shares dividend rate				7.20%
Series D Preferred Stock
Class Of Stock [Line Items]
Preferred Stock, Shares Issued		5,000,000			5,000,000	5,000,000
Shares Issued, Price Per Share		$ 25.00
Proceeds from Issuance or Sale of Equity			$ 120.5
Underwriting Discount On Public Offering		$ 4.0
Underwriting Discount Per Share On Public Offering		$ 0.7875
Equity offering expenses		$ 0.5
Preferred shares dividend rate		6.875%
Series D Preferred Stock | Over-Allotment Option
Class Of Stock [Line Items]
Stock Issued During Period, Shares, New Issues		200,000
Series A Preferred Stock
Class Of Stock [Line Items]
Preferred shares dividend rate	8.25%
Redemption price per share	$ 25.00

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Financing Activity - Carrying and Fair Values of Mortgage Loans (Parenthetical) (Details) - USD ($) $ in Millions	Dec. 31, 2019	Dec. 31, 2018
Mortgage Loan
Debt Instrument [Line Items]
Debt issuance costs, line of credit arrangements	$ 1.8	$ 3.1

XML

Share Based Compensation - Additional Information (Details) - USD ($)		12 Months Ended
	Feb. 24, 2020	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
2003 Equity Incentive Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total remaining number of common shares to be issued			1,145,956
Time Based Restricted Stock Awards
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Aggregate fair value of shares granted			$ 5,600,000	$ 5,100,000	$ 4,800,000
Unrecognized compensation expense			$ 4,313,000
Weighted average period			9 months 18 days
Compensation expense, 2020			$ 2,811,000
Restricted Share Unit
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Aggregate compensation expense		$ 1,800,000		$ 2,100,000	1,300,000
Shares vest over period			3 years
Accelerated amortization expense			$ 800,000		$ 400,000
Future aggregate compensation expense			$ 2,800,000
Shares issued			0	0	0
2020 RSUs | Subsequent Event
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of awards granted	709,943
Performance measures of core mall non-anchor occupancy period	3 years
Performance measure fixed charge coverage ratio period	3 years
Performance measure of core mall non-anchor occupancy weighted percentage	50.00%
Performance measures of fixed charge coverage ratio weighted percentage.	50.00%
Non-Employee Trustees
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Aggregate compensation expense			$ 7,000,000.0	$ 6,900,000	$ 5,700,000
Accrued amortization relating to employee separation			1,100,000	100,000	200,000
Income tax benefit for share based compensation arrangements			0
Compensation costs capitalized			200,000	100,000	100,000
Non-Employee Trustees | Time Based Restricted Stock Awards
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Aggregate compensation expense			700,000	500,000	500,000
Aggregate fair value of shares granted			700,000	$ 800,000	$ 700,000
Unrecognized compensation expense			$ 284,000
Shares vest over period			1 year
Number of awards granted			114,800	68,698	64,358
Weighted average grant date fair value			$ 6.35	$ 11.17	$ 11.45
Fair value of shares vested			$ 800,000	$ 600,000	$ 800,000
Compensation expense, 2020			284,000
Employees | Time Based Restricted Stock Awards
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Aggregate compensation expense			3,700,000	4,300,000	3,900,000
Accrued amortization relating to employee separation			200,000	100,000	200,000
Aggregate fair value of shares granted			4,900,000	$ 4,300,000	$ 4,000,000.0
Unrecognized compensation expense			$ 4,029,000
Number of awards granted			683,570	392,697	245,950
Weighted average grant date fair value			$ 7.15	$ 10.99	$ 16.43
Fair value of shares vested			$ 3,800,000	$ 2,000,000.0	$ 3,900,000
Compensation expense, 2020			$ 2,527,000
Employees | Time Based Restricted Stock Awards | Subsequent Event
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of awards granted	1,093,292
Employees | Time Based Restricted Stock Awards | Minimum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares vest over period			1 year
Employees | Time Based Restricted Stock Awards | Minimum | Subsequent Event
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares vest over period	2 years
Employees | Time Based Restricted Stock Awards | Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares vest over period			3 years
Employees | Time Based Restricted Stock Awards | Maximum | Subsequent Event
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares vest over period	3 years
Employees | Outperformance Units (“OPUs”)
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Aggregate compensation expense			$ 800,000
Accrued amortization relating to employee separation			$ 100,000
Number of awards granted			517,783
Employees | Outperformance Units (“OPUs”) | Vest Immediately
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Awards vesting, percentage			50.00%
Employees | Outperformance Units (“OPUs”) | Subject to an Additional One-year Vesting Requirement
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares vest over period			1 year
Awards vesting, percentage			25.00%
Employees | Outperformance Units (“OPUs”) | Subject to an Additional Two-year Vesting Requirement
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares vest over period			2 years
Awards vesting, percentage			25.00%

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Organization and Summary of Significant Accounting Policies - Lease (Details) - USD ($) $ in Thousands		12 Months Ended
	Jan. 01, 2019	Dec. 31, 2019	Dec. 31, 2018
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Operating lease, right-of-use asset		$ 24,100
Operating lease, liability		30,251
Operating lease, lease income		2,700
Offset for credit losses on lease revenue		$ 2,800
Lessor, lease, cost			$ 5,200
Accounting Standards Update 2016-02
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Operating lease, right-of-use asset	$ 24,600
Operating lease, liability	24,600
Ground Leases | Accounting Standards Update 2016-02
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Decrease in operating lease, right-of-use asset	5,500
Decrease in operating lease, liability	$ 5,500

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Organization and Summary of Significant Accounting Policies - Assets Classified as Held for Sale (Details) - Property	1 Months Ended	12 Months Ended
	Nov. 30, 2019	Dec. 31, 2019
Summary Of Significant Accounting Policies [Line Items]
Number of properties held for sale		5
Number of real estate properties sold	14	3
Land Parcels and Outparcels
Summary Of Significant Accounting Policies [Line Items]
Number of properties held for sale		13
Land Parcels
Summary Of Significant Accounting Policies [Line Items]
Number of properties held for sale		2
Outparcels
Summary Of Significant Accounting Policies [Line Items]
Number of properties held for sale		14

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Organization and Summary of Significant Accounting Policies - Intangible Assets (Details) - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2019	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Finite Lived Intangible Assets [Line Items]
Goodwill	$ 5,249				$ 5,249				$ 5,249	$ 5,249	$ 5,249	$ 5,249
Amortization of intangible assets									1,100	1,100
Increase in revenue	88,721	$ 81,374	$ 81,392	$ 85,305	$ 96,042	$ 88,103	$ 91,973	$ 86,282	336,792	362,400	367,490
Increase in expenses									364,108	512,675	422,153
Value of in-place lease intangibles
Finite Lived Intangible Assets [Line Items]
Amortization of intangible assets									3,300	2,400	2,000
Above/(Below) Market Leases
Finite Lived Intangible Assets [Line Items]
Increase in revenue									100	200	100
Above-market ground lease
Finite Lived Intangible Assets [Line Items]
Increase in expenses										$ 100	$ 100
Three Equity Method Investees
Finite Lived Intangible Assets [Line Items]
Goodwill	$ 1,500								$ 1,500

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Leases - Lessor Payments to be Received, Maturity (Details) $ in Thousands	Dec. 31, 2019 USD ($)
Leases [Abstract]
2020	$ 205,574
2021	187,241
2022	168,671
2023	149,296
2024	127,355
2025 and thereafter	386,280
Total payments to be received	$ 1,224,417

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Investments in Partnerships - Term Loan (Details) - USD ($) $ in Thousands	1 Months Ended	3 Months Ended		6 Months Ended	12 Months Ended
	Jan. 31, 2018	Sep. 30, 2019	Mar. 31, 2018	Jun. 30, 2018	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017	Jul. 31, 2019
Schedule of Equity Method Investments [Line Items]
Distribution of financing proceeds from equity method investee					$ 25,000	$ 123,000	$ 35,221
Fashion District Philadelphia
Schedule of Equity Method Investments [Line Items]
Long-term debt	$ 250,000							$ 350,000
Ownership percentage	50.00%				50.00%
Debt instrument, maturity month and year	2023-01
Debt instrument, interest rate terms	LIBOR plus 2.00%
Proceeds from (Repayments of) Long-term debt and capital securities		$ 51,000	$ 250,000
Distribution of financing proceeds from equity method investee		$ 25,000		$ 123,000
Fashion District Philadelphia | LIBOR
Schedule of Equity Method Investments [Line Items]
Debt, variable interest rate	2.00%

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Investments in Partnerships - Summary of Mortgage Loans Secured by Our Unconsolidated Properties (Parenthetical) (Details) - USD ($) $ in Thousands	1 Months Ended	3 Months Ended	12 Months Ended
	Oct. 31, 2017	Dec. 31, 2017	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017	Mar. 31, 2018	Feb. 28, 2018
Partnership Mortgage Loan Activity [Line Items]
Repayment of mortgage loans			$ 71,387		$ 150,000
Cash distributions from partnerships			$ 22,570	$ 9,421	$ 16,849
Pavilion at Market East
Partnership Mortgage Loan Activity [Line Items]
Ownership percentage							40.00%
Mortgage loans payable, net							$ 3,100
Gloucester Premium Outlets
Partnership Mortgage Loan Activity [Line Items]
Ownership percentage						25.00%
Mortgage loans payable, net						$ 21,500
Lehigh Valley Associates, LP
Partnership Mortgage Loan Activity [Line Items]
Ownership percentage	50.00%
Mortgage loans payable, net	$ 96,400
Repayment of mortgage loans	124,600
Cash distributions from partnerships	$ 35,300
Payment for Debt Extinguishment or Debt Prepayment Cost		$ 3,100
Accelerated amortization expense		$ 100

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Commitments and Contingencies - Provision for Employee Separation Expense (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Commitments And Contingencies Disclosure [Abstract]
Severance costs	$ 3.7	$ 1.1	$ 1.3
Accrued severance	$ 3.5

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Commitments and Contingencies

12 Months Ended

Dec. 31, 2019

Commitments And Contingencies Disclosure [Abstract]

Commitments and Contingencies

11. COMMITMENTS AND CONTINGENCIES

Contractual Obligations

As of December 31, 2019, we had unaccrued contractual and other commitments related to our capital improvement projects and development projects of $75.2 million, including $33.1 million of commitments related to the redevelopment of Fashion District Philadelphia, in the form of tenant allowances and contracts with general service providers and other professional service providers. For the purposes of this disclosure, the contractual obligations and other commitments related to Fashion District Philadelphia are included at 100% of the obligation and not at our 50% ownership share. In addition, our operating partnership, PREIT Associates, has jointly and severally guaranteed the obligations of the joint venture we formed with Macerich to develop Fashion District Philadelphia to commence and complete a comprehensive redevelopment of that property costing not less than $300.0 million within 48 months after commencement of construction, which was March 14, 2016. As of December 31, 2019, we expect to meet this obligation.

Employment Agreements

One officer of the Company currently has employment agreements with terms that renew automatically each year for additional one-year terms. This employment agreement provided for aggregate base compensation for the year ended December 31, 2019 of $0.9 million, subject to increases as approved by the Executive Compensation and Human Resources Committee of our Board of Trustees in future years, as well as additional incentive compensation.

A former officer, the Executive Vice President and Chief Financial Officer, executed a Separation of Employment Agreement (the “Separation Agreement”) with the Company on December 23, 2019. Consistent with the officer’s amended and restated employment agreement dated as of December 30, 2008 (together with the May 6, 2009 Amendment thereto) as modified in certain respects by the Separation Agreement, the officer has been paid amounts that were fully earned but not yet paid on or before the last day of full-time employment, in addition to a payment equal to two times the current base salary and a payment equal to two times the average bonus amount in the last three calendar years. The officer may continue to participate in the Company’s benefit plans for eighteen months. The officer will also be paid the supplemental retirement plan account balance, as required by the terms of the employment agreements and the nonqualified supplemental executive retirement agreement.

In March 2020, the Company entered into an employment agreement with Mario C. Ventresca, Jr., its Executive Vice President and Chief Financial Officer.

Provision for Employee Separation Expense

We recorded $3.7 million, $1.1 million and $1.3 million of employee separation expense during the years ended December 31, 2019, 2018 and 2017, respectively, in connection with the termination of certain employees. As of December 31, 2019, $3.5 million of these amounts was accrued and unpaid.

Property Damage from Natural Disaster

During September 2018, Jacksonville Mall in Jacksonville, North Carolina incurred property damage and an interruption of business operations as a result of Hurricane Florence. The property was closed for business during and immediately after the natural disaster, however, significant remediation efforts were quickly undertaken and the mall was reopened shortly thereafter.

During the year ended December 31, 2019, we recorded net recoveries of $4.4 million. These net recoveries primarily relate to remediation expenses and business interruption claims. $0.5 million of the recoveries received relate to business interruption.

During the year ended December 31, 2018, we recorded net recoveries, of approximately $0.7 million. This amount consisted of combined estimated property impairment and remediation losses of $2.3 million, offset by a corresponding insurance claim recovery of $3.0 million.

Legal Actions

In the normal course of business, we have and might become involved in legal actions relating to the ownership and operation of our properties and the properties we manage for third parties. In management’s opinion, the resolutions of any such pending legal actions are not expected to have a material adverse effect on our consolidated financial position or results of operations.

Environmental

We are aware of certain environmental matters at some of our properties. We have, in the past, performed remediation of such environmental matters, and are not aware of any significant remaining potential liability relating to these environmental matters. We might be required in the future to perform testing relating to these matters. We do not expect these matters to have any significant impact on our liquidity or results of operations. However, we can provide no assurance that the amounts reserved will be adequate to cover further environmental costs. We have insurance coverage for certain environmental claims up to $25.0 million per occurrence and up to $25.0 million in the aggregate.

Tax Protection Agreements

There were no tax protection agreements in effect as of December 31, 2019.

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Organization and Summary of Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2019

Accounting Policies [Abstract]

Nature of Operations

Nature of Operations

Pennsylvania Real Estate Investment Trust (“PREIT”), a Pennsylvania business trust founded in 1960 and one of the first equity real estate investment trusts (“REITs”) in the United States, has a primary investment focus on retail shopping malls located in the eastern half of the United States, primarily in the Mid-Atlantic region. As of December 31, 2019, our portfolio consists of a total of 26 properties operating in nine states, including 21 shopping malls, four other retail properties and one development property. The property in our portfolio that is classified as under development does not currently have any activity occurring.

We hold our interest in our portfolio of properties through our operating partnership, PREIT Associates, L.P. (“PREIT Associates” or the “Operating Partnership”). We are the sole general partner of the Operating Partnership and, as of December 31, 2019, held a 97.5% controlling interest in the Operating Partnership, and consolidated it for reporting purposes. The presentation of consolidated financial statements does not itself imply that the assets of any consolidated entity (including any special-purpose entity formed for a particular project) are available to pay the liabilities of any other consolidated entity, or that the liabilities of any consolidated entity (including any special-purpose entity formed for a particular project) are obligations of any other consolidated entity.

Pursuant to the terms of the Operating Partnership’s partnership agreement, each of its limited partners has the right to redeem such partner’s units of limited partnership interest in the Operating Partnership (“OP Units”) for cash or, at our election, we may acquire such OP Units in exchange for our common shares on a one-for-one basis, in some cases beginning one year following the respective issue date of the OP Units, and in other cases immediately. If all of the outstanding OP Units held by limited partners had been redeemed for cash as of December 31, 2019, the total amount that would have been distributed would have been $10.8 million, which is calculated using our December 31, 2019 closing share price on the New York Stock Exchange of $5.33 multiplied by the number of outstanding OP Units held by limited partners, which was 2,022,635 as of December 31, 2019.

We provide management, leasing and real estate development services through two of our subsidiaries: PREIT Services, LLC (“PREIT Services”), which generally develops and manages properties that we consolidate for financial reporting purposes, and PREIT-RUBIN, Inc. (“PRI”), which generally develops and manages properties that we do not consolidate for financial reporting purposes, including properties owned by partnerships in which we own an interest, and properties that are owned by third parties in which we do not have an interest. PREIT Services and PRI are consolidated. PRI is a taxable REIT subsidiary, as defined by federal tax laws, which means that it is able to offer additional services to tenants without jeopardizing our continuing qualification as a REIT under federal tax law.

We evaluate operating results and allocate resources on a property-by-property basis, and do not distinguish or evaluate our consolidated operations on a geographic basis. Due to the nature of our operating properties, which involve retail shopping, we have concluded that our individual properties have similar economic characteristics and meet all other aggregation criteria. Accordingly, we have aggregated our individual properties into one reportable segment. In addition, no single tenant accounts for 10% or more of our consolidated revenue, and none of our properties are located outside the United States.

Consolidation

We consolidate our accounts and the accounts of the Operating Partnership and other controlled subsidiaries, and we reflect the remaining interest in such entities as noncontrolling interest. All significant intercompany accounts and transactions have been eliminated in consolidation.

The operating partnership meets the criteria as a variable interest entity. The Company’s significant asset is its investment in the Operating Partnership, and consequently, substantially all of the Company’s assets and liabilities represent those assets and liabilities of the Operating Partnership. All of the Company’s debt is also an obligation of the Operating Partnership.

Going Concern Considerations

Going Concern Considerations

Under the accounting guidance related to the presentation of financial statements, when preparing financial statements for each annual and interim reporting period, management has the responsibility to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the financial statements are issued.  The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.  The financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern. As a result of the considerations articulated below, we believe there is substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the financial statements are issued.

In applying the accounting guidance, management considered our current financial condition and liquidity sources, including current funds available, forecasted future cash flows and our conditional and unconditional obligations due over the next twelve months. Management specifically considered the following: i) our senior unsecured facility, which includes a revolving facility maturing in 2022 with a balance of $255.0 million as of December 31, 2019 and term loans maturing in 2021 with a balance of $550.0 million as of December 31, 2019; ii) our mortgage loans with varying maturities through 2025 with a principal balance of $901.6 million as of December 31, 2019; iii) the financial covenant compliance requirements of our credit agreements; and (iv) recurring costs of operating our business.

The Company anticipates not meeting certain financial covenants applicable under the credit agreements during 2020. The Company plans to continue to work with the lender group to obtain temporary debt covenant relief through September 2020 and then pursue a longer term financing solution prior to the expiration of the initial modification. In addition, the Company plans to execute the sale-leaseback of certain properties, sell certain real estate assets and control certain operational costs. Due to the inherent risks, unknown results and significant uncertainties associated with each of these matters and the direct correlation between these matters and our ability to satisfy our financial obligations that may arise over the applicable twelve month period, we are unable to conclude that it is probable that we will be able to meet our obligations arising within twelve months of the date of issuance of these financial statements under the parameters set forth in this accounting guidance.

As a result, management evaluated whether this was mitigated by our approved plans and expectations for the applicable period under the second step of this accounting standard.

Our ability to satisfy obligations under our senior unsecured credit facility and mortgage loans, maintain compliance with our debt covenants and fund recurring costs of operations depends primarily on management’s ability to obtain relief from the lender group in regards to debt covenants, execute the sale-leaseback of certain properties, complete the sale of certain real estate assets which will provide cash from those sales, and continue to control operational costs. While controlling operational costs are within management’s control to some extent, executing the sale-leaseback transactions, selling real estate assets, and obtaining relief from the lender group through modified debt covenant requirements involve performance by third parties and therefore cannot be considered probable of occurring.

Partnership Investments

Partnership Investments

We account for our investments in partnerships that we do not control using the equity method of accounting. These investments, each of which represents a 25% to 50% noncontrolling ownership interest at December 31, 2019, are recorded initially at our cost, and subsequently adjusted for our share of net equity in income and cash contributions and distributions. We do not control any of these equity method investees for the following reasons:

• Except for two properties that we co-manage with our partner, the other entities are managed on a day-to-day basis by one of our other partners as the managing general partner in each of the respective partnerships. In the case of the co-managed properties, all decisions in the ordinary course of business are made jointly.

• The managing general partner is responsible for establishing the operating and capital decisions of the partnership, including budgets, in the ordinary course of business.

• All major decisions of each partnership, such as the sale, refinancing, expansion or rehabilitation of the property, require the approval of all partners.

• Voting rights and the sharing of profits and losses are in proportion to the ownership percentages of each partner.

We do not have a direct legal claim to the assets, liabilities, revenues or expenses of the unconsolidated partnerships beyond our rights as an equity owner, in the event of any liquidation of such entity, and our rights as a tenant in common owner of certain unconsolidated properties.

We record the earnings from the unconsolidated partnerships using the equity method of accounting in the consolidated statements of operations in the caption entitled “Equity in income of partnerships,” rather than consolidating the results of the unconsolidated partnerships with our results. Changes in our investments in these entities are recorded in the consolidated balance sheet caption entitled “Investment in partnerships, at equity.” In the case of deficit investment balances, such amounts are recorded in “Distributions in excess of partnership investments.”

We hold legal title to a property owned by one of our unconsolidated partnerships through a tenancy in common arrangement. For this property, such legal title is held by us and another entity, and each has an undivided interest in title to the property. With respect to this property, under the applicable agreement between us and the other entity with an ownership interest, we and such other entity have joint control because decisions regarding matters such as the sale, refinancing, expansion or rehabilitation of the property require the approval of both us and the other entity owning an interest in the property. Hence, we account for this property like our other unconsolidated partnerships using the equity method of accounting. The balance sheet items arising from the properties appear under the caption “Investments in partnerships, at equity.”

For further information regarding our unconsolidated partnerships, see note 3.

Statements of Cash Flows

Statements of Cash Flows

We consider all highly liquid short-term investments with a maturity of three months or less at purchase or acquisition to be cash equivalents. At December 31, 2019 and 2018, cash and cash equivalents and restricted cash totaled $19.6 million and $32.4 million, respectively, and included tenant security deposits of $1.8 million and $2.3 million, respectively. Cash paid for interest was $59.4 million, $58.4 million and $55.4 million for the years ended December 31, 2019, 2018 and 2017, respectively, net of amounts capitalized of $7.7 million, $6.4 million and $7.6 million, respectively.

The following table provides a summary of cash, cash equivalents, and restricted cash reported within the statement of cash flows as of December 31, 2019, 2018 and 2017.

	December 31,
(in thousands of dollars)	2019		2018		2017
Cash and cash equivalents	$	12,211	$	18,084	$	15,348
Restricted cash included in other assets		7,417		14,361		18,605
Total cash, cash equivalents, and restricted cash shown in the statement of cash flows	$	19,628	$	32,445	$	33,953

Our restricted cash consists of cash held in escrow by banks for real estate taxes and other purposes.

Significant Non-Cash Transactions

Significant Non-Cash Transactions

In the third quarter of 2019, we conveyed Wyoming Valley Mall to the lender of the mortgage loan secured by the property. The loan had a balance of approximately $72.8 million as of the conveyance on September 26, 2019. The conveyance was a non-cash transaction with the exception of $7.5 million of cash and escrow balances which were transferred to the lender.

During the second quarter of 2018, we received the building and improvements formerly occupied by one of our tenants as part of the consideration for the termination of that tenant’s lease. We recorded non-cash lease termination income of $4.2 million in connection with this transaction, which we determined was the fair value of the building and improvements.

Paydowns of the 2014 5-Year Term Loan and the 2015 5-Year Term Loan of $150.0 million each were made in the year ended December 31, 2018, which were directly paid from the 2018 Term Loan Facility borrowing and are considered to be non-cash transactions.

During 2017, a $150.0 million paydown of the 2013 Revolving Facility was made, which was directly paid from an additional borrowing from our 2014 7-Year Term Loan, and is considered to be a non-cash transaction.

In our statement of cash flows, we report cash flows on our revolving facilities on a net basis. Aggregate borrowings on our revolving facilities were $229.0 million, $65.0 million and $309.0 million, and aggregate repayments were $39.0 million, $53.0 million and $403.0 million for the years ended December 31, 2019, 2018 and 2017, respectively.

Accrued construction costs decreased by $8.5 million in the year ended December 31, 2019, increased by $15.7 million in the year ended December 31, 2018 and decreased by $8.3 million in the year ended December 31, 2017, representing non-cash changes in construction in progress.

Use of Estimates

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires our management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenue and expense during the reporting periods. Actual results could differ from those estimates. We believe that our most significant and subjective accounting estimates and assumptions are those relating to asset impairment and fair value.

Our management makes complex or subjective assumptions and judgments in applying its critical accounting policies. In making these judgments and assumptions, our management considers, among other factors, events and changes in property, market and economic conditions, estimated future cash flows from property operations, and the risk of loss on specific accounts or amounts.

Revenue Recognition

Revenue Recognition

We derive over 95% of our revenue from tenant rent and other tenant-related activities. Tenant rent includes base rent, percentage rent, expense reimbursements (such as reimbursements of costs of common area maintenance (“CAM”), real estate taxes and utilities), and the amortization of above-market and below-market lease intangibles (as described below under “Intangible Assets”).

On January 1, 2018, we adopted ASC 606, Revenue from Contracts with Customers. ASC 606 provides a single comprehensive model to use in accounting for revenue arising from contracts with customers, and gains and losses arising from transfers of non-financial assets including sales of property and equipment, real estate, and intangible assets. The majority of our revenues are derived from leases and are not subject to ASC 606; rather, they were governed by ASC 840 through December 31, 2018 and are subject to ASC 842 effective January 1, 2019. See Lease accounting related under New Accounting Developments for our adoption impact from ASC 842 on January 1, 2019.

We record base rent on a straight-line basis, which means that the monthly base rent revenue according to the terms of our leases with our tenants is adjusted so that an average monthly rent is recorded for each tenant over the term of its lease. When tenants vacate prior to the end of their lease, we accelerate amortization of any related unamortized straight-line rent balances, and unamortized above-market and below-market intangible balances are amortized as a decrease or increase to real estate revenue, respectively. The straight-line rent adjustment increased revenue by $1.6 million, $2.0 million, and $2.7 million in the years ended December 31, 2019, 2018 and 2017, respectively. The straight-line rent receivable balances included in tenant and other receivables on the accompanying consolidated balance sheet as of December 31, 2019 and 2018 were $30.4 million and $27.2 million, respectively.

Percentage rent represents rental revenue that the tenant pays based on a percentage of its sales, either as a percentage of its total sales or as a percentage of sales over a certain threshold. In the latter case, we do not record percentage rent until the sales threshold has been reached.

Revenue for rent received from tenants prior to their due dates is deferred until the period to which the rent applies.

In addition to base rent, certain lease agreements contain provisions that require tenants to reimburse a fixed or pro rata share of certain CAM costs, real estate taxes and utilities. Tenants generally make monthly expense reimbursement payments based on a budgeted amount determined at the beginning of the year. Effective January 1, 2019, we recognize fixed CAM revenue prospectively on a straight-line basis. Prior to that, during the year, our income increased or decreased based on actual expense levels and changes in other factors that influenced the reimbursement amounts, such as occupancy levels. As of December 31, 2018, our tenant accounts receivable included accrued income of $1.9 million because actual reimbursable expense amounts eligible to be billed to tenants under applicable contracts exceeded amounts actually billed. Prior to the adoption of ASC 842, we recorded reimbursement revenue from tenants whose leases include fixed CAM provisions in accordance with the contractual terms of the respective leases.

Certain lease agreements contain co-tenancy clauses that can change the amount of rent or the type of rent that tenants are required to pay, or, in some cases, can allow the tenant to terminate their lease, in the event that certain events take place, such as a decline in property occupancy levels below certain defined levels or the vacating of an anchor store. Co-tenancy clauses do not generally have any retroactive effect when they are triggered. The effect of co-tenancy clauses is applied on a prospective basis to recognize the new rent that is in effect.

Payments made to tenants as inducements to enter into a lease are treated as deferred costs that are amortized as a reduction of rental revenue over the term of the related lease.

Lease termination fee revenue is recognized in the period when a termination agreement is signed, collectibility is assured, and the tenant has vacated the space. In the event that a tenant is in bankruptcy when the termination agreement is signed, termination fee income is deferred and recognized when it is received.

We also generate revenue by providing management services to third parties, including property management, brokerage, leasing and development. Management fees generally are a percentage of managed property revenue or cash receipts. Leasing fees are earned upon the consummation of new leases. Development fees are earned over the time period of the development activity and are recognized on the percentage of completion method. These activities are collectively included in “Other income” in the consolidated statements of operations.

Revenue from the reimbursement of marketing expenses is generated through tenant leases that require tenants to reimburse a defined amount of property marketing expenses. Our contractual performance obligations are fulfilled as marketing expenditures are made. Tenant payments are received monthly as required by the respective lease terms. We defer income recognition if the reimbursements exceed the aggregate marketing expenditures made through that date. Deferred marketing reimbursement revenue is recorded in tenants’ deposits and deferred rent on the consolidated balance sheet, and was $0.2 million and $0.2 million as of December 31, 2019 and 2018, respectively. The marketing reimbursements are recognized as revenue at the time that the marketing expenditures occur. Marketing revenue, included in other real estate revenues in the consolidated statements of operations, was $4.1 million, $3.9 million, and $4.4 million and for the years ended December 31, 2019, 2018 and 2017, respectively.

Property management revenue from management and development activities is generated through contracts with third party owners of real estate properties or with certain of our joint ventures, and is recorded in other income in the consolidated statement of operations. In the case of management fees, our performance obligations are fulfilled over time as the management services are performed and the associated revenues are recognized on a monthly basis when the customer is billed. In the case of development fees, our performance obligations are fulfilled over time as we perform certain stipulated development activities as set forth in the respective development agreements and the associated revenues are recognized on a monthly basis when the customer is billed. Property management fee revenue was $0.5 million, $0.7 million, and $0.9 million for the years ended December 31, 2019, 2018 and 2017, respectively. Development fee revenue was $0.7 million, $0.8 million, and $0.9 million for the years ended December 31, 2019, 2018 and 2017, respectively.

Fair Value

Fair Value

Fair value accounting applies to reported balances that are required or permitted to be measured at fair value under relevant accounting authority.

Fair value measurements are determined based on the assumptions that market participants would use in pricing the asset or liability. As a basis for considering market participant assumptions in fair value measurements, these accounting requirements establish a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within Levels 1 and 2 of the hierarchy) and the reporting entity’s own assumptions about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy).

Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities that we have the ability to access.

Level 2 inputs are inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs might include quoted prices for similar assets and liabilities in active markets, as well as inputs that are observable for the asset or liability (other than quoted prices), such as interest rates, foreign exchange rates and yield curves that are observable at commonly quoted intervals.

Level 3 inputs are unobservable inputs for the asset or liability and are typically based on an entity’s own assumptions, as there is little, if any, related market activity.

In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability. We utilize the fair value hierarchy in our accounting for derivatives (Level 2) and financial instruments (Level 2) and in our reviews for impairment of real estate assets (Level 3) and goodwill (Level 3).

Financial Instruments

Financial Instruments

Carrying amounts reported on the consolidated balance sheet for cash and cash equivalents, tenant and other receivables, accrued expenses, other liabilities and the 2018 Revolving Facility approximate fair value due to the short-term nature of these instruments. Most of our variable rate debt is subject to interest rate derivative instruments that have effectively fixed the interest rates on the underlying debt. The estimated fair value for fixed rate debt, which is calculated for disclosure purposes, is based on the borrowing rates available to us for fixed rate mortgage loans with similar terms and maturities.

Impairment of Assets

Impairment of Assets

Real estate investments and related intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the property might not be recoverable, which is referred to as a “triggering event.” In connection with our review of our long-lived assets for impairment, we utilize qualitative and quantitative factors in order to estimate fair value. The significant qualitative factors that we use include age and condition of the property, market conditions in the property’s trade area, competition with other shopping centers within the property’s trade area and the creditworthiness and performance of the property’s tenants. The significant quantitative factors that we use include historical and forecasted financial and operating information relating to the property, such as net operating income, occupancy statistics, vacancy projections and tenants’ sales levels. Our fair value assumptions relating to real estate assets are within Level 3 of the fair value hierarchy.

If there is a triggering event in relation to a property to be held and used, we will estimate the aggregate future cash flows, net of estimated capital expenditures, to be generated by the property, undiscounted and without interest charges. In addition, this estimate may consider a probability weighted cash flow estimation approach when alternative courses of action to recover the carrying amount of a long-lived asset are under consideration or when a range of possible values is estimated.

The determination of undiscounted cash flows requires significant estimates by our management, including the expected course of action at the balance sheet date that would lead to such cash flows. Subsequent changes in estimated undiscounted cash flows arising from changes in the anticipated action to be taken with respect to the property could affect the determination of whether an impairment exists, and the effects of such changes could materially affect our net income. If the estimated undiscounted cash flows are less than the carrying value of the property, the carrying value is written down to its fair value.

Assessment of our ability to recover certain lease related costs must be made when we have a reason to believe that a tenant might not be able to perform under the terms of the lease as originally expected. This requires us to make estimates as to the recoverability of such costs.

An other-than-temporary impairment of an investment in an unconsolidated joint venture is recognized when the carrying value of the investment is not considered recoverable based on evaluation of the severity and duration of the decline in value. To the extent impairment has occurred, the excess carrying value of the asset over its estimated fair value is recorded as a reduction to income.

Real Estate

Real Estate

Land, buildings, fixtures and tenant improvements are recorded at cost and stated at cost less accumulated depreciation. Expenditures for maintenance and repairs are charged to operations as incurred. Renovations or replacements, which improve or extend the life of an asset, are capitalized and depreciated over their estimated useful lives. For financial reporting purposes, properties are depreciated using the straight-line method over the estimated useful lives of the assets. The estimated useful lives are as follows:

Buildings	20-40 years
Land improvements	15 years
Furniture/fixtures	3-10 years
Tenant improvements	Lease term

We are required to make subjective assessments as to the useful lives of our real estate assets for purposes of determining the amount of depreciation to reflect on an annual basis with respect to those assets based on various factors, including industry standards, historical experience and the condition of the asset at the time of acquisition. These assessments affect our annual net income. If we were to determine that a different estimated useful life was appropriate for a particular asset, it would be depreciated over the newly estimated useful life, and, other things being equal, result in changes in annual depreciation expense and annual net income.

We recognize gains from sales of real estate properties and interests in partnerships when an enforceable contract is in place, control of the asset transfers to a buyer and it is probable that we will collect the consideration due in exchange for transferring the asset.

Real Estate Acquisitions

We account for our property acquisitions by allocating the purchase price of a property to the property’s assets based on management’s estimates of their fair value. Debt assumed in connection with property acquisitions is recorded at fair value at the acquisition date, and any resulting premium or discount is amortized through interest expense over the remaining term of the debt, resulting in a non-cash decrease (in the case of a premium) or increase (in the case of a discount) in interest expense. The determination of the fair value of intangible assets requires significant estimates by management and considers many factors, including our expectations about the underlying property, the general market conditions in which the property operates and conditions in the economy. The judgment and subjectivity inherent in such assumptions can have a significant effect on the magnitude of the intangible assets or the changes to such assets that we record.

Intangible Assets

Intangible Assets

Our intangible assets on the accompanying consolidated balance sheets as of December 31, 2019 and 2018 each included $5.2 million (in each case, net of $1.1 million of amortization expense recognized prior to January 1, 2002) of goodwill recognized in connection with the acquisition of The Rubin Organization in 1997. Approximately $1.5 million of this goodwill balance is allocated to three equity method investees with negative investment balances.

Changes in the carrying amount of goodwill for the three years ended December 31, 2019 were as follows:

			Accumulated
(in thousands of dollars)	Basis		Amortization			Total
Balance, January 1, 2017	$	6,322	$	(1,073	)	$	5,249
Goodwill divested		—		—			—
Balance, December 31, 2017		6,322		(1,073	)		5,249
Goodwill divested		—		—			—
Balance, December 31, 2018		6,322		(1,073	)		5,249
Goodwill divested		—		—			—
Balance, December 31, 2019	$	6,322	$	(1,073	)	$	5,249

We allocate a portion of the purchase price of a property to intangible assets. Our methodology for this allocation includes estimating an “as-if vacant” fair value of the physical property, which is allocated to land, building and improvements. The difference between the purchase price and the “as-if vacant” fair value is allocated to intangible assets. There are three categories of intangible assets to be considered: (i) value of leases, (ii) above- and below-market value of in-place leases and (iii) customer relationship value, including operating covenants.

The value of in-place leases is estimated based on the value associated with the costs avoided in originating leases comparable to the acquired in-place leases, as well as the value associated with lost rental revenue during the assumed lease-up period. The value of in-place leases is amortized as real estate amortization over the remaining lease term.

Above-market and below-market in-place lease values for acquired properties are recorded based on the present value of the difference between (i) the contractual amounts to be paid pursuant to the in-place leases and (ii) management’s estimates of fair market lease rates for comparable in-place leases, based on factors such as historical experience, recently executed transactions and specific property issues, measured over a period equal to the remaining non-cancelable term of the lease. Above-market lease values are amortized as a reduction of rental income over the remaining terms of the respective leases. Below-market lease values are amortized as an increase to rental income over the remaining terms of the respective leases, including any below-market optional renewal periods, and are included in “Accrued expenses and other liabilities” in the consolidated balance sheets.

We allocate purchase price to customer relationship intangibles based on management’s assessment of the fair value of such relationships.

The following table presents our intangible assets and liabilities, net of accumulated amortization, as of December 31, 2019 and 2018:

	December 31,
(in thousands of dollars)	2019		2018
Intangible Assets:
Value of lease intangibles, net	$	8,155	$	12,594
Above-market lease intangibles, net		—		25
Subtotal		8,155		12,619
Goodwill, net		5,249		5,249
Total intangible assets	$	13,404	$	17,868
Intangible Liabilities
Below-market lease intangibles, net	$	215	$	403
Above-market ground lease	$	—	$	5,484
Total intangible liabilities	$	215	$	5,887

Intangible liabilities are included in “Accrued expenses and other liabilities” in the consolidated balance sheets.  Amortization of lease intangibles was $3.3 million, $2.4 million, and $2.0 million for the years ended December 31, 2019, 2018 and 2017, respectively.

Net amortization of above-market and below-market lease intangibles increased revenue by $0.1 million, $0.2 million and $0.1 million for the years ended December 31, 2019, 2018 and 2017, respectively. Amortization of above-market ground lease intangibles increased expenses by $0.1 million for each of the years ended December 31, 2018 and 2017, respectively. In the normal course of business, our intangible assets will amortize in the next five years and thereafter as follows:

(in thousands of dollars)	Value of Lease		Customer		Below Market
For the Year Ending December 31,	Intangibles		Relationship Value		Leases, net
2020	$	1,518	$	77	$	(67	)
2021		1,429		—		(42	)
2022		1,299		—		(10	)
2023		1,296		—		(10	)
2024		1,251		—		(10	)
2025 and thereafter		1,285		—		(76	)
Total	$	8,078	$	77	$	(215	)

Assets Classified as Held for Sale

Assets Classified as Held for Sale

The determination to classify an asset as held for sale requires significant estimates by us about the property and the expected market for the property, which are based on factors including recent sales of comparable properties, recent expressions of interest in the property, financial metrics of the property and the physical condition of the property. We must also determine if it will be possible under those market conditions to sell the property for an acceptable price within one year. When assets are identified by our management as held for sale, we discontinue depreciating the assets and estimate the sales price, net of selling costs, of such assets. We generally consider operating properties to be held for sale when they meet criteria such as whether the sale transaction has been approved by the appropriate level of management and there are no known material contingencies relating to the sale such that the sale is probable and is expected to qualify for recognition as a completed sale within one year. If the expected net sales price of the asset that has been identified as held for sale is less than the net book value of the asset, the asset is written down to fair value less the cost to sell. Assets and liabilities related to assets classified as held for sale are presented separately in the consolidated balance sheet. If we determine that a property no longer meets the held-for-sale criteria, we reclassify the property’s assets and liabilities to their original locations on the consolidated balance sheet and record depreciation and amortization expense for the period that the property was in held-for-sale status.

In June 2018, we determined that the land parcel in Gainesville, Florida met the criteria to classify it as held for sale. This determination was made because the property was under contract, and we believed that we will likely complete a sale of the property within one year. We completed the sale of the land parcel in multiple transactions in 2019. Additionally, in December 2018, we determined that the land parcel in New Garden Township, Pennsylvania met the criteria to classify it as held for sale. This determination was made because we were in advanced negotiations with a buyer and believed that the sale would likely be complete within one year. In April 2019, we completed the sale of the New Garden Township land parcel.

As of December 31, 2019, we determined that 13 land parcels and outparcels met the criteria to be classified as held for sale. The determination was made because we entered into agreements to sell multiple outparcels to a buyer and two separate land parcels in separate transactions. We also believe that we would likely complete the sale transactions within one year. The outparcels were part of an agreement executed in November 2019 with one buyer to sell 14 outparcels across five properties, of which three were sold as of December 31, 2019. In January 2020, an additional outparcel under this arrangement was sold.

We also have two separate agreements to sell land parcels at Woodland Mall and Moorestown Mall.

Capitalization of Costs

Capitalization of Costs

Costs incurred in relation to development and redevelopment projects for interest, property taxes and insurance are capitalized only during periods in which activities necessary to prepare the property for its intended use are in progress. Costs incurred for such items after the property is substantially complete and ready for its intended use are charged to expense as incurred. Capitalized costs, as well as tenant inducement amounts and internal and external commissions, are recorded in construction in progress. We capitalize a portion of development department employees’ compensation and benefits related to time spent involved in development and redevelopment projects. We also capitalize interest on equity method investments while the investee is engaged in activities necessary to commence its planned principal activities.

We capitalize payments made to obtain options to acquire real property. Other related costs that are incurred before acquisition that are expected to have ongoing value to the project are capitalized if the acquisition of the property is probable. If the property is acquired, other expenses related to the acquisition are recorded to project costs and other expenses. When it is probable that the property will not be acquired, capitalized pre-acquisition costs are charged to expense.

For leases under which we are a lessor, certain internal leasing and legal costs such as salaries, commissions and benefits related to time spent by leasing and legal department personnel involved in originating leases with third-party tenants were previously capitalized under ASC 840. However, they are now being recorded as period costs in accordance with ASC 842. We will continue to amortize previously capitalized initial direct costs over the remaining terms of the associated leases.

The following table summarizes our capitalized salaries, commissions and benefits, real estate taxes and interest for the years ended December 31, 2019, 2018 and 2017:

	For the Year Ended December 31,
(in thousands of dollars)	2019		2018		2017
Development/Redevelopment:
Salaries and benefits	$	1,332	$	1,380	$	1,296
Real estate taxes	$	1,057	$	1,198	$	1,035
Interest	$	7,725	$	6,395	$	7,620
Leasing:
Salaries, commissions and benefits	$	568	$	7,022	$	6,066

Receivables

Receivables

We review the collectibility of our tenant receivables related to tenant rent including base rent, straight-line rent, expense reimbursements and other revenue or income. We specifically analyze billed and unbilled revenues, including straight-line rent receivable, historical collection issues, customer creditworthiness and current economic and industry trends. The receivables analysis places particular emphasis on past-due accounts and considers the nature and age of the receivables, the payment history and financial condition of the payor, the basis for any disputes or negotiations with the payor, and other information that could affect collectibility. If deemed uncollectible, we record an offset for credit losses directly to lease revenue.

Income Taxes

Income Taxes

We have elected to qualify as a real estate investment trust, or REIT, under Sections 856-860 of the Internal Revenue Code of 1986, as amended, and intend to remain so qualified.

In some instances, we follow methods of accounting for income tax purposes that differ from generally accepted accounting principles. Earnings and profits, which determine the taxability of distributions to shareholders, will differ from net income or loss reported for financial reporting purposes due to differences in cost basis, differences in the estimated useful lives used to compute depreciation, and differences between the allocation of our net income or loss for financial reporting purposes and for tax reporting purposes.

We could be subject to a federal excise tax computed on a calendar year basis if we were not in compliance with the distribution provisions of the Internal Revenue Code. We have, in the past, distributed a substantial portion of our taxable income in the subsequent fiscal year and might also follow this policy in the future. No provision for excise tax was made for the years ended December 31, 2019, 2018 and 2017, as no excise tax was due in those years.

The per share distributions paid to common shareholders had the following components for the years ended December 31, 2019, 2018 and 2017:

	For the Year Ended December 31,
	2019		2018		2017
Ordinary income	$	—	$	0.25	$	—
Non-dividend distribution		0.84		0.59		0.84
Per-share distributions	$	0.84	$	0.84	$	0.84

The per share distributions paid to Series A, Series B, Series C and Series D preferred shareholders had the following components for the years ended December 31, 2019, 2018 and 2017:

	For the Year Ended December 31,
	2019		2018		2017
Series A Preferred Share Dividends (1)
Ordinary income					$	—
Non-dividend distributions						1.70
					$	1.70
Series B Preferred Share Dividends
Ordinary income	$	—	$	1.84	$	—
Non-dividend distributions		1.84		—		1.84
	$	—	$	1.84	$	1.84
Series C Preferred Share Dividends
Ordinary income	$	—	$	1.80	$	—
Non-dividend distributions		1.80		—		1.59
	$	—	$	1.80	$	1.59
Series D Preferred Share Dividends
Ordinary income	$	—	$	1.72	$	—
Non-dividend distributions		1.72		—		0.45
	$	—	$	1.72	$	0.45

⁽¹⁾ The Series A Preferred Shares were redeemed in 2017.

We follow accounting requirements that prescribe a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken in a tax return. We must determine whether it is “more likely than not” that a tax position will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. Once it is determined that a position meets the “more likely than not” recognition threshold, the position is measured at the largest amount of benefit that is greater than 50% likely to be realized upon settlement to determine the amount of benefit to recognize in the consolidated financial statements.

PRI is subject to federal, state and local income taxes. We had no federal or state income tax provision or benefit in the year ended December 31, 2019, but had a nominal provision in the year ended December 31, 2018 and a nominal benefit in the year ended December 31, 2017. We had net deferred tax assets of $14.3 million and $16.7 million for the years ended December 31, 2019 and 2018, respectively. The deferred tax assets are primarily the result of net operating losses. A valuation allowance has been established for the full amount of the net deferred tax assets, because we have determined that it is more likely than not that these assets will not be realized based on recent earnings history for our taxable REIT subsidiaries. The deferred tax assets were remeasured for the year ended December 31, 2017 to account for the tax provisions in H.R. 1 (the Tax Cuts and Jobs Act), which was signed into law on December 22, 2017.

Deferred Financing Costs

Deferred Financing Costs

Deferred financing costs include fees and costs incurred to obtain financing. Such costs are amortized to interest expense over the terms of the related indebtedness. Interest expense is determined in a manner that approximates the effective interest method in the case of costs associated with mortgage loans, or on a straight line basis in the case of costs associated with our 2018 Revolving Facility (and in prior years, our 2013 Revolving Facility) and Term Loans (see note 4).

Derivatives

Derivatives

In the normal course of business, we are exposed to financial market risks, including interest rate risk on our interest-bearing liabilities. We attempt to limit these risks by following established risk management policies, procedures and strategies, including the use of derivative financial instruments. We do not use derivative financial instruments for trading or speculative purposes.

Currently, we use interest rate swaps to manage our interest rate risk. The valuation of these instruments is determined using widely accepted valuation techniques, including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs.

Derivative financial instruments are recorded on the consolidated balance sheet as assets or liabilities based on the fair value of the instrument. Changes in the fair value of derivative financial instruments are recognized currently in earnings, unless the derivative financial instrument meets the criteria for hedge accounting. If the derivative financial instruments meet the criteria for a cash flow hedge, the gains and losses in the fair value of the instrument are deferred in other comprehensive income. Gains and losses on a cash flow hedge are reclassified into earnings when the forecasted transaction affects earnings. A contract that is designated as a hedge of an anticipated transaction that is no longer likely to occur is immediately recognized in earnings.

The anticipated transaction to be hedged must expose us to interest rate risk, and the hedging instrument must reduce the exposure and meet the requirements for hedge accounting. We must formally designate the instrument as a hedge and document and assess the effectiveness of the hedge at inception and on a quarterly basis. Interest rate hedges that are designated as cash flow hedges are designed to mitigate the risks associated with future cash outflows on debt.

We incorporate credit valuation adjustments to appropriately reflect both our own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of our derivative contracts for the effect of nonperformance risk, we have considered the impact of netting and any applicable credit enhancements. Although we have determined that the majority of the inputs used to value our derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with our derivatives utilize Level 3 inputs, such as estimates of current credit spreads, to evaluate the likelihood of default by us and our counterparties. As of December 31, 2019, we have assessed the significance of the effect of the credit valuation adjustments on the overall valuation of our derivative positions and have determined that the credit valuation adjustments are not significant to the overall valuation of our derivatives. As a result, we have determined that our derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy.

Operating Partnership Unit Redemptions

Operating Partnership Unit Redemptions

Shares issued upon redemption of OP Units are recorded at the book value of the OP Units surrendered.

Share-Based Compensation Expense

Share-Based Compensation Expense

Share based payments to employees and non-employee trustees, including grants of restricted shares and share options, are valued at fair value on the date of grant, and are expensed over the applicable vesting period.

Earnings Per Share

Earnings Per Share

The difference between basic weighted average shares outstanding and diluted weighted average shares outstanding is the dilutive effect of common share equivalents. Common share equivalents consist primarily of shares that are issued under employee share compensation programs and outstanding share options whose exercise price is less than the average market price of our common shares during these periods.

New Accounting Developments, Lease Accounting Related

New Accounting Developments

Lease accounting related

Effective January 1, 2019, we adopted Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842) (“ASC 842”) and related guidance using the optional transition method and elected to apply the provisions of the standard as of the adoption date rather than the earliest date presented. Prior period amounts were not restated. We implemented the standard using the following practical expedients:

• We have elected the package of practical expedients that allows us to not reassess (i) whether any expired or existing contracts are or contain leases, (ii) the lease classification for any expired or existing leases, and (iii) initial direct costs for any existing leases.

• For leases under which we are the lessor, we also have elected to not separate non-lease components such as common area maintenance (“CAM”) and real estate reimbursements from the associated lease component (minimum rent). Instead, we account for the lease and non-lease components as a single component because such non-lease components would otherwise be accounted for under the new revenue guidance (ASC 606) and both (1) the timing and pattern of transfer are the same for the non-lease components and associated lease component, and (2) the lease component, if accounted for separately, would be classified as an operating lease. Utility reimbursements are presented separately and not in the single component as the pattern of transfer is not aligned with the use of the property and therefore the criteria for use of the practical expedient are not met.

The adoption of this standard had the following effects on our financial statements as of December 31, 2019 and for the year ended December 31, 2019:

As of January 1, 2019, for leases under which the Company is a lessee, we recorded a right-of-use (“ROU”) asset of $24.6 million and corresponding lease liability for all leases previously accounted for as operating leases under ASC 840. The Company also derecognized an unfavorable ground lease liability of $5.5 million and reduced the corresponding ROU asset by the same amount. As of December 31, 2019, the ROU asset was $24.1 million and is included in deferred costs and other assets, net and the lease liability was $30.3 million and is included in accrued expenses and other liabilities in the accompanying consolidated balance sheet.

Effective January 1, 2019, we changed our fixed CAM revenue recognition to be recognized prospectively on a straight-line basis. In the year ended December 31, 2019, $2.7 million, of such revenues were recognized and are included within lease revenue in the accompanying consolidated statements of operations; previously, such amounts were recognized as billed in accordance with the terms of the respective leases.

We review the collectability of both billed and unbilled lease revenues each reporting period, taking into consideration the tenant’s payment history, credit profile and other factors, including its operating performance. For any tenant receivable balances deemed to be uncollectible, under ASC 842 we record an offset for credit losses directly to Lease revenue in the consolidated statement of operations. Previously, under ASC 840, uncollectible tenants’ receivables were reported in Other property operating expenses in the consolidated statement of operations. We recorded offsets for credit losses of $2.8 million for the year ended December 31, 2019.

For leases under which the Company is a lessor, certain internal leasing and legal costs that were previously capitalized under ASC 840 are now recorded as period costs under ASC 842. For the year ended December 31, 2018, we capitalized $5.2 million of internal leasing and legal salaries and benefits, respectively. No such costs were capitalized for the year ended December 31, 2019. We will continue to amortize previously capitalized initial direct costs over the remaining terms of the associated leases.

New Accounting Developments, Other Accounting

Other accounting

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. ASU 2016-15 is intended to reduce diversity in the practice of how certain transactions are classified in the statement of cash flows, including classification guidance for distributions received from equity method investments. We adopted this new standard effective January 1, 2018 using the retrospective transition method. The statement of cash flows for the year ended December 31, 2017 has been restated to reflect the adoption of ASU 2016-15. Upon adoption, we changed the prior period presentation of the statement of cash flows for the year ended December 31, 2017 for $5.7 million of cash distributions from partnerships that was previously presented within net cash used in investing activities to now be reflected within net cash provided by operating activities for the year ended December 31, 2017 using the nature of the distribution approach.

In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230), which provides guidance on the presentation of restricted cash or restricted cash equivalents within the statement of cash flows. Accordingly, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. We adopted this standard effective January 1, 2018. The adoption of ASU No. 2016-18 changed our presentation of the statement of cash flows to provide additional details regarding changes in restricted cash and we utilized a retrospective transition method for each period presented within financial statements. In applying the retrospective transition method, net cash used in investing activities for the year ended December 31, 2017 increased by $1.5 million and net cash provided by investing activities for the year ended December 31, 2017 increased by $0.5 million, as the change in escrow accounts is now included directly in net change in cash, cash equivalents and restricted cash. See note 1 for details regarding cash and restricted cash as presented within the consolidated statement of cash flows.

In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business.  The update adds further guidance that assists preparers in evaluating whether a transaction will be accounted for as an acquisition of an asset or a business. We expect that future property acquisitions will generally qualify as asset acquisitions under the standard, which requires the capitalization of acquisition costs to the underlying assets. We adopted this new guidance effective January 1, 2017. This new guidance did not have a significant impact on our financial statements.

In October 2018, the FASB issued ASU 2018-16, Derivatives and Hedging (Topic 815): Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) as a Benchmark Interest Rate for Hedge Accounting.  This ASU adds the OIS rate based on SOFR as a U.S. benchmark interest rate to facilitate the LIBOR to SOFR transition and provide sufficient lead time for entities to prepare for changes to interest rate hedging strategies for both risk management and hedge accounting purposes. Because we adopted ASU 2017-12, this guidance became effective January 1, 2019. This new guidance did not have a material impact on our consolidated financial statements.

In January 2017, the FASB issued ASU 2017-04,  Intangibles—Goodwill and Other (Topic 350)—Simplifying the Test for Goodwill Impairment. ASU 2017-04 simplifies the accounting for goodwill impairments by eliminating the requirement to compare the implied fair value of goodwill with its carrying amount as part of step two of the goodwill impairment test referenced in ASC 350,  Intangibles—Goodwill and Other. As a result, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value. However, the impairment loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. In January 2018, we elected to early adopt ASU 2017-04 effective January 1, 2018. This new guidance did not have any impact on our consolidated financial statements.

In February 2017, the FASB issued ASU 2017-05, Other Income- Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance. ASU 2017-05 focuses on recognizing gains and losses from the transfer of nonfinancial assets with noncustomers. It provides guidance as to the definition of an “in substance nonfinancial asset,” and provides guidance for sales of real estate, including partial sales. We adopted this new guidance effective January 1, 2018. This new guidance did not have a significant impact on our consolidated financial statements.

In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging: Targeted Improvements to Accounting for Hedging Activities (ASU 2017-12). The purpose of this updated guidance is to better align a company’s financial reporting for hedging activities with the economic objectives of those activities. We early adopted ASU 2017-12 on January 1, 2018. ASU 2017-12 requires a modified retrospective transition method in which we will recognize the cumulative effect of the change on the opening balance of each affected component of equity in the statement of financial position as of the date of adoption. The adoption of this standard did not have a material impact on our consolidated financial statements.

In October 2018, the Financial Accounting Standards Board (“FASB”) issued ASU 2018-16, Derivatives and Hedging (Topic 815): Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) as a Benchmark Interest Rate for Hedge Accounting. This ASU adds the OIS rate based on SOFR as a U.S. benchmark interest rate to facilitate the LIBOR to SOFR transition and provide sufficient lead time for entities to prepare for changes to interest rate hedging strategies for both risk management and hedge accounting purposes. Because we adopted ASU 2017-12, this guidance became effective January 1, 2019. The adoption of this guidance did not have a material impact on our consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses, and subsequently issued amendments to the initial and transitional guidance within ASU 2018-19, ASU 2019-04 and ASU 2019-05 between November 2018 and May 2019. ASU 2016-13 introduced new guidance for an approach based on expected losses to estimate credit losses on certain types of financial instruments, and will affect our accounting for trade receivables and notes receivable. We adopted this new standard on January 1, 2020. Our receivables primarily relate to leases under ASC 842, which are not within the scope of ASU 2016-13. The adoption of this new standard is not expected to have a material impact on our consolidated financial statements.

New Accounting Developments, Immaterial Error Correction

Immaterial error correction

The Consolidated Statements of Operations and the Consolidated Statements of Comprehensive Income for the year ended December 31, 2017 includes the impact of correcting the reporting of net loss (income) attributable to noncontrolling interest and common shareholders. Specifically, the correction adjusts for a computational error by reducing net income (and comprehensive income) or by increasing the net loss (and comprehensive loss) attributable to noncontrolling interest by $3.4 million for the year ended December 31, 2017. The 2018 and 2017 quarterly results were also adjusted by increasing the net loss (and comprehensive loss) attributable to noncontrolling interest in the amount of $0.7 million for each of the three months ended March 31, 2018 and 2017; $0.7 million and $0.8 million for the three months ended June 30, 2018 and 2017, respectively; $0.8 million for the three months ended September 30, 2017; and $1.2 million for the three months ended December 31, 2017. The adjustments also increased the amount of net income (and comprehensive income) or decreased the amount of net loss (and comprehensive loss) attributable to PREIT and PREIT common shareholders by the corresponding amounts. The adjustments also increased the amount of basic and diluted earnings per share or decreased the amount of basic and diluted loss per share by $0.05 for the year ended December 31, 2017. The 2018 and 2017 quarterly results were also adjusted by increasing the amount of basic and diluted earnings per share or decreased the amount of basic and diluted loss per share by $0.01 for each of the three months ended March 31, 2018 and 2017; June 30, 2018 and 2017; and September 30, 2017; and, by $0.02 for the three months ended December 31, 2017.

The Consolidated Statement of Equity for the years ended December 31, 2018 and 2017 included the cumulative impact of $9.3 million and $7.8 million, respectively, which corrected the reporting of noncontrolling interest by decreasing noncontrolling interest and increasing Total Equity - Pennsylvania Real Investment Trust by the corresponding amount.

These corrections had no impact on the previously reported amounts of net income (loss), total equity, and consolidated cash flows from operating, investing or financing activities.

We evaluated these corrections and determined, based on quantitative and qualitative factors, that the changes were not material to the consolidated financial statements taken as a whole for any previously filed consolidated financial statements.

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Financing Activity (Tables)

12 Months Ended

Dec. 31, 2019

Real Estate Properties [Line Items]

Schedule of Credit Facility Interest Expense

Interest expense and the deferred financing fee amortization related to the Credit Agreements for the years ended December 31, 2019, 2018 and 2017 were as follows:

	For the Year Ended December 31,
(in thousands of dollars)	2019	2018	2017
Revolving Facilities:
Interest expense	$7,526	$1,807	$2,463
Deferred financing amortization	1,097	1,052	796
Term Loans:
Interest expense	20,922	17,585	14,935
Deferred financing amortization	760	763	759
Accelerated financing fee	—	363	—

Schedule of Applicable Margin Interest Rates

		Applicable Margin
Level	Ratio of Total Liabilities to Gross Asset Value	Revolving Loans that are LIBOR Loans	Revolving Loans that are Base Rate Loans	Term Loans that are LIBOR Loans	Term Loans that are Base Rate Loans
1	Less than 0.450 to 1.00	1.20%	0.20%	1.35%	0.35%
2	Equal to or greater than 0.450 to 1.00 but less than 0.500 to 1.00	1.25%	0.25%	1.45%	0.45%
3	Equal to or greater than 0.500 to 1.00 but less than 0.550 to 1.00	1.30%	0.30%	1.60%	0.60%
4	Equal to or greater than 0.550 to 1.00 (1)	1.55%	0.55%	1.90%	0.90%

(1) The rates in effect under the Credit Agreements were based upon the Level 4 Ratio of Total Liabilities to Gross Asset Value as of December 31, 2019.

Carrying and Fair Values of Mortgage Loans

The estimated fair values of our consolidated mortgage loans based on year-end interest rates and market conditions at December 31, 2019 and 2018 are as follows:  

	2019				2018
(in millions of dollars)	Carrying Value		Fair Value		Carrying Value		Fair Value
Consolidated mortgage loans (1)	$	899.8	$	873.9	$	1,047.9	$	1,002.3

(1) The carrying value of consolidated mortgage loans has been reduced by unamortized debt issuance costs of $1.8 million and $3.1 million as of December 31, 2019 and 2018, respectively.

Mortgage Loan Activity

The following table presents the mortgage loans we have entered into or extended since January 1, 2018 relating to our consolidated properties:  

Financing Date	Property	Amount Financed or Extended (in millions of dollars )		Stated Interest Rate	Maturity
2018 Activity:
January	Francis Scott Key (1)	$	68.5	LIBOR plus 2.60%	January 2022
February	Viewmont Mall (2)	$	10.2	LIBOR Plus 2.35%	March 2021

⁽¹⁾ The $68.5 million mortgage loan’s maturity date was extended to January 2022, and has a one-year extension option that would further extend the maturity date to January 2023.

^{(2) In 2018, the mortgage was increased by $10.2 million to $67.2 million.}

Consolidated Properties

Real Estate Properties [Line Items]

Timing of Principal Payments and Terms of Mortgage Loans

The following table outlines the timing of principal payments and balloon payments pursuant to the terms of our consolidated mortgage loans of our consolidated properties as of December 31, 2019:

(in thousands of dollars) For the Year Ending December 31,	Principal Amortization		Balloon Payments		Total
2020	$	16,266	$	27,161	$	43,427
2021		17,862		188,785		206,647
2022		13,463		355,988		369,451
2023		6,584		53,299		59,883
2024		6,405		-		6,405
2025 and thereafter		4,406		211,346		215,752
Total principal payments	$	64,986	$	836,579		901,565
Less: Unamortized debt issuance costs						1,812
Carrying value of mortgage notes payable					$	899,753

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Organization and Summary of Significant Accounting Policies - Summary of Intangible Assets Amortized in Next Five Years (Details) $ in Thousands	Dec. 31, 2019 USD ($)
Goodwill And Intangible Assets [Line Items]
Below Market Leases, net, 2020	$ (67)
Below Market Leases, net, 2021	(42)
Below Market Leases, net, 2022	(10)
Below Market Leases, net, 2023	(10)
Below Market Leases, net, 2024	(10)
Below Market Leases, net, 2025 and thereafter	(76)
Below Market Leases, net, Total	(215)
Value of in-place lease intangibles
Goodwill And Intangible Assets [Line Items]
Intangibles, 2020	1,518
Intangibles, 2021	1,429
Intangibles, 2022	1,299
Intangibles, 2023	1,296
Intangibles, 2024	1,251
Intangibles, 2025 and thereafter	1,285
Intangibles. Total	8,078
Customer Relationship Value
Goodwill And Intangible Assets [Line Items]
Intangibles, 2020	77
Intangibles. Total	$ 77

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Organization and Summary of Significant Accounting Policies - Summary of Estimated Useful Lives of Assets (Details)	12 Months Ended
	Dec. 31, 2019
Property Plant And Equipment [Line Items]
Tenant improvements	Lease term
Buildings | Minimum
Property Plant And Equipment [Line Items]
Estimated useful lives	20 years
Buildings | Maximum
Property Plant And Equipment [Line Items]
Estimated useful lives	40 years
Land improvements
Property Plant And Equipment [Line Items]
Estimated useful lives	15 years
Furniture/fixtures | Minimum
Property Plant And Equipment [Line Items]
Estimated useful lives	3 years
Furniture/fixtures | Maximum
Property Plant And Equipment [Line Items]
Estimated useful lives	10 years

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Organization and Summary of Significant Accounting Policies - Income Taxes (Details) - USD ($)	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Accounting Policies [Abstract]
Income tax expense (benefit)	$ 0	$ 0	$ 0
Net deferred tax assets	$ 14,300,000	$ 16,700,000

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Related Party Transactions - Additional Information (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Related Party Transactions [Abstract]
Total rent expense	$ 1.7	$ 1.3	$ 1.3
Health Insurance Premiums paid to related party	$ 2.5	$ 2.7

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Investments in Partnerships - Mortgage Loans of Unconsolidated Properties (Details)	12 Months Ended
	Dec. 31, 2019 Property
Mortgage Loan
Mortgage Loans On Real Estate [Line Items]
Debt Instrument, weighted average interest rate	4.04%
Mortgage Loan | Fixed Interest Rate
Mortgage Loans On Real Estate [Line Items]
Debt Instrument, weighted average interest rate	4.08%
Mortgage Loan | Fixed Interest Rate | Minimum
Mortgage Loans On Real Estate [Line Items]
Debt instrument, interest rate during period	3.88%
Mortgage Loan | Fixed Interest Rate | Maximum
Mortgage Loans On Real Estate [Line Items]
Debt instrument, interest rate during period	5.95%
Mortgage Loan | Variable Interest Rate
Mortgage Loans On Real Estate [Line Items]
Debt Instrument, weighted average interest rate	3.94%
Unconsolidated Properties
Mortgage Loans On Real Estate [Line Items]
Number of properties securing mortgage debt	7
Number of fixed rate mortgage loans payable	5
Number of variable rate mortgage loans payable	2
Unconsolidated Properties | Mortgage Loan
Mortgage Loans On Real Estate [Line Items]
Property under development	1
Mortgage loan due date	2027
Debt Instrument, weighted average interest rate	4.43%
Unconsolidated Properties | Mortgage Loan | Fixed Interest Rate
Mortgage Loans On Real Estate [Line Items]
Debt Instrument, weighted average interest rate	4.55%
Unconsolidated Properties | Mortgage Loan | Fixed Interest Rate | Minimum
Mortgage Loans On Real Estate [Line Items]
Debt instrument, interest rate during period	4.06%
Unconsolidated Properties | Mortgage Loan | Fixed Interest Rate | Maximum
Mortgage Loans On Real Estate [Line Items]
Debt instrument, interest rate during period	5.56%
Unconsolidated Properties | Mortgage Loan | Variable Interest Rate
Mortgage Loans On Real Estate [Line Items]
Debt Instrument, weighted average interest rate	3.37%
Unconsolidated Properties | Mortgage Loan | Variable Interest Rate | Minimum
Mortgage Loans On Real Estate [Line Items]
Debt instrument, interest rate during period	3.19%
Unconsolidated Properties | Mortgage Loan | Variable Interest Rate | Maximum
Mortgage Loans On Real Estate [Line Items]
Debt instrument, interest rate during period	4.60%

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Financing Activity - Credit Agreements (Details)		12 Months Ended
	May 24, 2018 USD ($)	Dec. 31, 2019 USD ($) Agreement qtr Occasion	Dec. 31, 2018 USD ($)	Dec. 31, 2017 USD ($)
Debt Instrument [Line Items]
Outstanding line of credit		$ 255,000,000	$ 65,000,000
Debt instrument, covenant compliance		As of December 31, 2019, we were in compliance with all such financial covenants. We anticipate not meeting certain financial covenants applicable under the credit agreements during 2020. See Going Concern Considerations section in Note 1.
Unsecured Debt
Debt Instrument [Line Items]
Debt issuance costs, line of credit arrangements		$ 2,000,000.0
Term Loans
Debt Instrument [Line Items]
Outstanding borrowings		550,000,000.0
2018 Revolving Facility
Debt Instrument [Line Items]
Outstanding line of credit		$ 255,000,000.0
Credit Agreements
Debt Instrument [Line Items]
Number of credit agreements | Agreement		2
Deferred financing amortization	$ 400,000
Credit Agreements | Covenant Term One
Debt Instrument [Line Items]
Covenant compliance, Minimum Tangible Net Worth		$ 1,463,200,000
Covenant compliance, percent of net proceeds of all equity issuances		75.00%
Credit Agreements | Covenant Term Two
Debt Instrument [Line Items]
Total liabilities to gross asset value, ratio		0.60
Covenant compliance, number of consecutive quarters total liabilities to gross asset value ratio exceeding threshold | qtr		2
Covenant compliance, number of occasions total liabilities to gross asset value ratio exceeding threshold | Occasion		2
Credit Agreements | Covenant Term Two | Maximum
Debt Instrument [Line Items]
Total liabilities to gross asset value, ratio		0.625
Credit Agreements | Covenant Term Three
Debt Instrument [Line Items]
Covenant compliance, ratio of adjusted EBITDA to fixed charges, minimum		1.50
Credit Agreements | Covenant Term Four, Through June 30, 2020
Debt Instrument [Line Items]
Covenant compliance, minimum unencumbered debt yield		0.110
Credit Agreements | Covenant Term Four, After June 30, 2020 Through June 30, 2021
Debt Instrument [Line Items]
Covenant compliance, minimum unencumbered debt yield		0.1125
Credit Agreements | Covenant Term Four, After June 30, 2021
Debt Instrument [Line Items]
Covenant compliance, minimum unencumbered debt yield		0.1150
Credit Agreements | Covenant Term Five
Debt Instrument [Line Items]
Covenant compliance, minimum unencumbered NOI to unsecured interest expense, ratio		1.75
Credit Agreements | Covenant Term Six
Debt Instrument [Line Items]
Covenant compliance, secured indebtedness to gross asset value, maximum ratio		0.60
Credit Agreements | Covenant Term Seven
Debt Instrument [Line Items]
Covenant compliance, maximum distribution percent of funds from operations		95.00%
Covenant compliance, maximum distribution percent of REIT taxable income		110.00%
Credit Agreements | Property With Average Sales Of More Than $500 Per Square Foot
Debt Instrument [Line Items]
Covenant compliance, capitalization rate		6.50%
Credit Agreements | Property Other Than With Average Sales Of $500 Per Square Foot
Debt Instrument [Line Items]
Covenant compliance, capitalization rate		7.50%
Credit Agreements | Term Loans
Debt Instrument [Line Items]
Outstanding borrowings		$ 550,000,000.0
Deferred financing amortization		760,000	763,000	$ 759,000
Credit Agreements | 2018 Revolving Facility
Debt Instrument [Line Items]
Outstanding line of credit		255,000,000.0
Remaining borrowing capacity		30,100,000
Maximum borrowing capacity	$ 400,000,000
Credit facility maturity date	2022-05
Deferred financing amortization		$ 1,097,000	$ 1,052,000	$ 796,000
Facility fee percentage		0.30%
Credit Agreements | Senior Unsecured Facility
Debt Instrument [Line Items]
Maximum borrowing capacity	$ 700,000.0
Credit Agreements | 2013 Revolving Facility
Debt Instrument [Line Items]
Maximum borrowing capacity	400,000,000
Credit Agreements | 2018 Term Loan Facility
Debt Instrument [Line Items]
Maximum borrowing capacity	$ 300,000,000
Credit facility maturity date	2023-05
Credit Agreements | 2014 5-Year Term Loan
Debt Instrument [Line Items]
Maximum borrowing capacity	$ 150,000,000
Credit Agreements | 2015 5-Year Term Loan
Debt Instrument [Line Items]
Maximum borrowing capacity	$ 150,000,000
Credit Agreements | 2014 Seven Year Term Loan
Debt Instrument [Line Items]
Outstanding line of credit		$ 250,000,000.0
Credit facility maturity date		2021-12

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Commitments and Contingencies - Property Damage from Natural Disaster (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Loss Contingencies [Line Items]
Net recoveries	$ 3,861	$ 689
Insurance recoveries, net	4,362	689	$ 0
Jacksonville Mall, Jacksonville, North Carolina
Loss Contingencies [Line Items]
Net recoveries	4,400	700
Business interruption recoveries	$ 500
Loss Contingency, Estimate of Possible Loss		2,300
Insurance recoveries, net		$ 3,000

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Derivatives (Tables)

12 Months Ended

Dec. 31, 2019

Derivative Instruments And Hedging Activities Disclosure [Abstract]

Fair Value of Derivative Instruments

The following table summarizes the terms and estimated fair values of our interest rate swap derivative instruments designated as cash flow hedges of interest rate risk at December 31, 2019 and 2018 based on the year they mature. The notional values provide an indication of the extent of our involvement in these instruments, but do not represent exposure to credit, interest rate or market risks.

Maturity Date	Aggregate Notional Value at December 31, 2019 (in millions of dollars)		Aggregate Fair Value at December 31, 2019 (1) (in millions of dollars)			Aggregate Fair Value at December 31, 2018 (1) (in millions of dollars)			Weighted Average Interest Rate
Interest Rate Swaps
2020	$	100.0	$	0.2		$	1.9			1.23	%
2021		495.6		(1.4	)		8.1			1.66	%
2022		—		—			—			—
2023		200.0		(7.3	)		(0.4	)		2.67	%
Forward Starting Swaps
2023		100.0		(3.4	)		(2.6	)		2.75	%
Total	$	895.6	$	(11.9	)	$	7.0			1.96	%

(1) As of December 31, 2019 and 2018, derivative valuations in their entirety were classified in Level 2 of the fair value hierarchy and we did not have any significant recurring fair value measurements related to derivative instruments using significant unobservable inputs (Level 3).

Effect of Our Derivative Financial Instruments on Our Consolidated Statements of Operations

The tables below present the effect of derivative financial instruments on accumulated other comprehensive income and on our consolidated statements of operations for the years ended December 31, 2019 and 2018:

	Year Ended December 31,
	Amount of Gain or (Loss) Recognized in Other Comprehensive Income on Derivative Instruments								Amount of Gain or (Loss) Reclassified from Accumulated Other Comprehensive Income into Interest Expense
(in millions of dollars)	2019			2018			2017		2019			2018		2017
Derivatives in Cash Flow Hedging Relationships
Interest rate products	$	(15.8	)	$	(0.4	)	$	4.0	$	(3.1	)	$	2.4	$	2.3

	Year Ended December 31,
(in millions of dollars)	2019			2018			2017
Total interest expense presented in the consolidated statements of operations in which the effects of cash flow hedges are recorded	$	(64.0	)	$	(61.4	)	$	(58.4	)
Amount of gain (loss) reclassified from accumulated other comprehensive income into interest expense	$	(3.1	)	$	2.4		$	2.3

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Historic Tax Credits

12 Months Ended

Dec. 31, 2019

Historic Tax Credits [Abstract]

Historic Tax Credits

12. HISTORIC TAX CREDITS

In the second quarter of 2012, we closed a transaction with a Counterparty (the “Counterparty”) related to the historic rehabilitation of an office building located at 801 Market Street in Philadelphia, Pennsylvania (the “Project”). In December 2018, the historic tax credit arrangement ended when the Counterparty exercised its put option and the Project paid a total of $1.0 million, comprised of $0.9 million in exchange for the Counterparty’s ownership interest and an additional $0.1 million in accrued priority returns for 2018.

The tax credits received by the Counterparty were subject to five year credit recapture periods that ended in 2018. Our obligation to the Counterparty with respect to the tax credits was ratably relieved annually each year. In each of the third quarters of 2018 and 2017, we recognized $1.0 million and $1.9 million, respectively, as “Other income” in the consolidated statements of operations.

We also recorded $0.2 million of priority returns earned by the Counterparty during each of the third quarters of 2018 and 2017, respectively.

In aggregate, we recorded $0.8 million and $1.8 million in net income to “Other income” in the consolidated statements of operations in connection with the Project during the years ended December 31, 2018 and 2017, respectively.

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Organization and Summary of Significant Accounting Policies (Tables)

12 Months Ended

Dec. 31, 2019

Summary Of Significant Accounting Policies [Line Items]

Schedule of Cash Flow, Supplemental Disclosures

The following table provides a summary of cash, cash equivalents, and restricted cash reported within the statement of cash flows as of December 31, 2019, 2018 and 2017.

	December 31,
(in thousands of dollars)	2019		2018		2017
Cash and cash equivalents	$	12,211	$	18,084	$	15,348
Restricted cash included in other assets		7,417		14,361		18,605
Total cash, cash equivalents, and restricted cash shown in the statement of cash flows	$	19,628	$	32,445	$	33,953

Summary of Estimated Useful Lives of Assets

The estimated useful lives are as follows:

Buildings	20-40 years
Land improvements	15 years
Furniture/fixtures	3-10 years
Tenant improvements	Lease term

Changes in Carrying Amount of Goodwill

Changes in the carrying amount of goodwill for the three years ended December 31, 2019 were as follows:

			Accumulated
(in thousands of dollars)	Basis		Amortization			Total
Balance, January 1, 2017	$	6,322	$	(1,073	)	$	5,249
Goodwill divested		—		—			—
Balance, December 31, 2017		6,322		(1,073	)		5,249
Goodwill divested		—		—			—
Balance, December 31, 2018		6,322		(1,073	)		5,249
Goodwill divested		—		—			—
Balance, December 31, 2019	$	6,322	$	(1,073	)	$	5,249

Summary of Intangible Assets and Liabilities, Net of Accumulated Amortization

The following table presents our intangible assets and liabilities, net of accumulated amortization, as of December 31, 2019 and 2018:

	December 31,
(in thousands of dollars)	2019		2018
Intangible Assets:
Value of lease intangibles, net	$	8,155	$	12,594
Above-market lease intangibles, net		—		25
Subtotal		8,155		12,619
Goodwill, net		5,249		5,249
Total intangible assets	$	13,404	$	17,868
Intangible Liabilities
Below-market lease intangibles, net	$	215	$	403
Above-market ground lease	$	—	$	5,484
Total intangible liabilities	$	215	$	5,887

Summary of Intangible Assets Amortized in Next Five Years

In the normal course of business, our intangible assets will amortize in the next five years and thereafter as follows:

(in thousands of dollars)	Value of Lease		Customer		Below Market
For the Year Ending December 31,	Intangibles		Relationship Value		Leases, net
2020	$	1,518	$	77	$	(67	)
2021		1,429		—		(42	)
2022		1,299		—		(10	)
2023		1,296		—		(10	)
2024		1,251		—		(10	)
2025 and thereafter		1,285		—		(76	)
Total	$	8,078	$	77	$	(215	)

Schedule of Capitalized Salaries, Commissions and Benefits, Real Estate Taxes and Interest

The following table summarizes our capitalized salaries, commissions and benefits, real estate taxes and interest for the years ended December 31, 2019, 2018 and 2017:

	For the Year Ended December 31,
(in thousands of dollars)	2019		2018		2017
Development/Redevelopment:
Salaries and benefits	$	1,332	$	1,380	$	1,296
Real estate taxes	$	1,057	$	1,198	$	1,035
Interest	$	7,725	$	6,395	$	7,620
Leasing:
Salaries, commissions and benefits	$	568	$	7,022	$	6,066

Schedule of Distributions Paid to Shareholders

The per share distributions paid to common shareholders had the following components for the years ended December 31, 2019, 2018 and 2017:

	For the Year Ended December 31,
	2019		2018		2017
Ordinary income	$	—	$	0.25	$	—
Non-dividend distribution		0.84		0.59		0.84
Per-share distributions	$	0.84	$	0.84	$	0.84

Series A And Series B Preferred Shares [Member]

Summary Of Significant Accounting Policies [Line Items]

Schedule of Distributions Paid to Shareholders

The per share distributions paid to Series A, Series B, Series C and Series D preferred shareholders had the following components for the years ended December 31, 2019, 2018 and 2017:

	For the Year Ended December 31,
	2019		2018		2017
Series A Preferred Share Dividends (1)
Ordinary income					$	—
Non-dividend distributions						1.70
					$	1.70
Series B Preferred Share Dividends
Ordinary income	$	—	$	1.84	$	—
Non-dividend distributions		1.84		—		1.84
	$	—	$	1.84	$	1.84
Series C Preferred Share Dividends
Ordinary income	$	—	$	1.80	$	—
Non-dividend distributions		1.80		—		1.59
	$	—	$	1.80	$	1.59
Series D Preferred Share Dividends
Ordinary income	$	—	$	1.72	$	—
Non-dividend distributions		1.72		—		0.45
	$	—	$	1.72	$	0.45

⁽¹⁾ The Series A Preferred Shares were redeemed in 2017.

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Financing Activity

12 Months Ended

Dec. 31, 2019

Debt Disclosure [Abstract]

Financing Activity

4. FINANCING ACTIVITY

Credit Agreements

We have entered into two credit agreements (collectively, as amended, the “Credit Agreements”): (1) the 2018 Credit Agreement, which, as described in more detail below, includes (a) the 2018 Revolving Facility, and (b) the 2018 Term Loan Facility, and (2) the 2014 7-Year Term Loan. The 2018 Term Loan Facility and the 2014 7-Year Term Loan are collectively referred to as the “Term Loans.”

As of December 31, 2019, we had borrowed $550.0 million under the Term Loans and $255.0 million under the 2018 Revolving Facility. The carrying value of the Term Loans on our consolidated balance sheet as of December 31, 2019 is net of $2.0 million of unamortized debt issuance costs. The net operating income (“NOI”) from our unencumbered properties is at a level such that within the Unencumbered Debt Yield covenant (as described below) under the Credit Agreements, the maximum unsecured amount that was available to us as of December 31, 2019 was $30.1 million.

Interest expense and the deferred financing fee amortization related to the Credit Agreements for the years ended December 31, 2019, 2018 and 2017 were as follows:

	For the Year Ended December 31,
(in thousands of dollars)	2019	2018	2017
Revolving Facilities:
Interest expense	$7,526	$1,807	$2,463
Deferred financing amortization	1,097	1,052	796
Term Loans:
Interest expense	20,922	17,585	14,935
Deferred financing amortization	760	763	759
Accelerated financing fee	—	363	—

Credit Agreements

On May 24, 2018, we entered into an Amended and Restated Credit Agreement (the “2018 Credit Agreement”) with Wells Fargo Bank, National Association, U.S. Bank National Association, Citizens Bank, N.A., and the other financial institutions signatory thereto, for an aggregate $700.0 million senior unsecured facility consisting of (i) a $400 million senior unsecured revolving credit facility (the “2018 Revolving Facility”), which replaced our previously existing $400 million revolving credit agreement (the “2013 Revolving Facility”), and (ii) a $300 million term loan facility (the “2018 Term Loan Facility”), which was used to pay off a previously existing $150 million five year term loan (the “2014 5-Year Term Loan”) and a second $150 million five year term loan (the “2015 5-Year Term Loan”). The maturity date of the 2018 Revolving Facility is May 23, 2022, subject to two six-month extensions at our election, and the maturity date of the 2018 Term Loan Facility is May 23, 2023. In connection with this activity, we recorded accelerated amortization of financing costs of $0.4 million.

As of December 31, 2019, $250.0 million was outstanding under the 2014 7-Year Term Loan, which matures on December 29, 2021.

On June 5, 2018, we entered into the Fifth Amendment (the “Amendment”) to the 2014 7-Year Term Loan. The Amendment was entered into to make certain provisions of the 2014 7-Year Term Loan consistent with the 2018 Credit Agreement. Among other things, the Amendment (i) adds and updates certain definitions and provisions, including tax-related provisions, relating to foreign lenders under the 2014 7-Year Term Loan, (ii) updates the definition of “Existing Credit Agreement” to refer to the 2018 Credit Agreement, which updates the cross defaults between the 2014 7-Year Term Loan and the 2018 Credit Agreement (replacing such cross defaults to the agreements the 2018 Credit Agreement replaced), (iii) adds and amends provisions consistent with those provided in the 2018 Credit Agreement for determining an alternative rate of interest to LIBOR, when and if required, and (iv) adjusts or eliminates some of the covenants applicable to the Borrower, as defined therein. The Amendment does not extend the maturity date of the 2014 7-Year Term Loan or change the amounts that can be borrowed thereunder.

Identical covenants and common provisions contained in the Credit Agreements

Each of the Credit Agreements contains certain affirmative and negative covenants and other provisions, which are identical to those contained in the other Credit Agreements, and which are described in detail below.

Amounts borrowed under the Credit Agreements bear interest at the rate specified below per annum, depending on our leverage, in excess of LIBOR, unless and until we receive an investment grade credit rating and provides notice to the Administrative Agent (the “Rating Date”), after which alternative rates would apply, as described below. In determining our leverage (the ratio of Total Liabilities to Gross Asset Value), the capitalization rate used to calculate Gross Asset Value is 6.50% for each property having an average sales per square foot of more than $500 for the most recent period of 12 consecutive months and (b) 7.50% for any other property. Capitalized terms used and not otherwise defined in this Annual Report on Form 10-K have the meanings ascribed to such terms in the applicable credit agreement document. The 2018 Revolving Facility is subject to a facility fee, which is currently 0.30%, depending upon leverage, and is recorded as interest expense in the consolidated statements of operations. In the event we seek and obtain an investment grade credit rating, alternative facility fees would apply.

		Applicable Margin
Level	Ratio of Total Liabilities to Gross Asset Value	Revolving Loans that are LIBOR Loans	Revolving Loans that are Base Rate Loans	Term Loans that are LIBOR Loans	Term Loans that are Base Rate Loans
1	Less than 0.450 to 1.00	1.20%	0.20%	1.35%	0.35%
2	Equal to or greater than 0.450 to 1.00 but less than 0.500 to 1.00	1.25%	0.25%	1.45%	0.45%
3	Equal to or greater than 0.500 to 1.00 but less than 0.550 to 1.00	1.30%	0.30%	1.60%	0.60%
4	Equal to or greater than 0.550 to 1.00 (1)	1.55%	0.55%	1.90%	0.90%

(1) The rates in effect under the Credit Agreements were based upon the Level 4 Ratio of Total Liabilities to Gross Asset Value as of December 31, 2019.

We may prepay the amounts due under the Credit Agreements at any time without premium or penalty, subject to reimbursement obligations for the lenders’ breakage costs for LIBOR borrowings.

The Credit Agreements contain certain affirmative and negative covenants, including, without limitation, requirements that PREIT maintain, on a consolidated basis: (1) Minimum Tangible Net Worth of $1,463.2 million, plus 75% of the Net Proceeds of all Equity Issuances effected at any time after March 31, 2018; (2) maximum ratio of Total Liabilities to Gross Asset Value of 0.60:1, provided that it will not be a Default if the ratio exceeds 0.60:1 but does not exceed 0.625:1 for more than two consecutive quarters on more than two occasions during the term; (3) minimum ratio of Adjusted EBITDA to Fixed Charges of 1.50:1; (4) minimum Unencumbered Debt Yield of (a) 11.0% through and including June 30, 2020, (b) 11.25% any time after June 30, 2020 through and including June 30, 2021, and (c) 11.50% anytime thereafter; (5) minimum Unencumbered NOI to Unsecured Interest Expense of 1.75:1; (6) maximum ratio of Secured Indebtedness to Gross Asset Value of 0.60:1; and (7) Distributions may not exceed (a) with respect to our preferred shares, the amounts required by the terms of the preferred shares, and (b) with respect to our common shares, the greater of (i) 95.0% of Funds From Operations (FFO) and (ii) 110% of REIT taxable income for a fiscal year. The covenants and restrictions in the Credit Agreements limit our ability to incur additional indebtedness, grant liens on assets and enter into negative pledge agreements, merge, consolidate or sell all or substantially all of our assets, and enter into transactions with affiliates. The Credit Agreements are subject to customary events of default and are cross-defaulted with one another.

As of December 31, 2019, we were in compliance with all such financial covenants. We anticipate not meeting certain financial covenants applicable under the credit agreements during 2020. See Going Concern Considerations section in Note 1.

Consolidated Mortgage Loans

Our consolidated mortgage loans, which are secured by 10 of our consolidated properties, are due in installments over various terms extending to the year 2025.  Seven of these mortgage loans bear interest at fixed interest rates that range from 3.88% to 5.95% and had a weighted average interest rate of 4.08% at December 31, 2019. Three of our mortgage loans bear interest at variable rates and had a weighted average interest rate of 3.94% at December 31, 2019. The weighted average interest rate of all consolidated mortgage loans was 4.04% at December 31, 2019. Mortgage loans for properties owned by unconsolidated partnerships are accounted for in “Investments in partnerships, at equity” and “Distributions in excess of partnership investments,” and are not included in the table below.

The following table outlines the timing of principal payments and balloon payments pursuant to the terms of our consolidated mortgage loans of our consolidated properties as of December 31, 2019:

(in thousands of dollars) For the Year Ending December 31,	Principal Amortization		Balloon Payments		Total
2020	$	16,266	$	27,161	$	43,427
2021		17,862		188,785		206,647
2022		13,463		355,988		369,451
2023		6,584		53,299		59,883
2024		6,405		-		6,405
2025 and thereafter		4,406		211,346		215,752
Total principal payments	$	64,986	$	836,579		901,565
Less: Unamortized debt issuance costs						1,812
Carrying value of mortgage notes payable					$	899,753

The estimated fair values of our consolidated mortgage loans based on year-end interest rates and market conditions at December 31, 2019 and 2018 are as follows:  

	2019				2018
(in millions of dollars)	Carrying Value		Fair Value		Carrying Value		Fair Value
Consolidated mortgage loans (1)	$	899.8	$	873.9	$	1,047.9	$	1,002.3

(1) The carrying value of consolidated mortgage loans has been reduced by unamortized debt issuance costs of $1.8 million and $3.1 million as of December 31, 2019 and 2018, respectively.

The consolidated mortgage loans contain various customary default provisions. As of December 31, 2019, we were not in default on any of the consolidated mortgage loans.

Mortgage Loan Activity

The following table presents the mortgage loans we have entered into or extended since January 1, 2018 relating to our consolidated properties:  

Financing Date	Property	Amount Financed or Extended (in millions of dollars )		Stated Interest Rate	Maturity
2018 Activity:
January	Francis Scott Key (1)	$	68.5	LIBOR plus 2.60%	January 2022
February	Viewmont Mall (2)	$	10.2	LIBOR Plus 2.35%	March 2021

⁽¹⁾ The $68.5 million mortgage loan’s maturity date was extended to January 2022, and has a one-year extension option that would further extend the maturity date to January 2023.

^{(2) In 2018, the mortgage was increased by $10.2 million to $67.2 million.}

Other Mortgage Loan Activity

In March 2019, we defeased a $58.5 million mortgage loan including accrued interest, secured by Capital City Mall in Camp Hill, Pennsylvania using funds from our 2018 Revolving Facility and the balance from available working capital. We recorded a loss on debt extinguishment of $4.8 million in March 2019 in connection with this defeasance.

As discussed in Note 2, in September 2019, we conveyed Wyoming Valley Mall to the lender of the mortgage loan secured by the property. The loan had a balance of approximately $72.8 million as of the conveyance on September 26, 2019. In connection with the conveyance, $7.5 million of cash and escrow balances were transferred to the lender and we recorded a net gain on extinguishment of debt of $29.6 million.

In April 2019, we received a notice from the servicer of the Cumberland Mall mortgage of a cash sweep event due to the failure of an anchor tenant to renew for a full term. We satisfied this requirement in August 2019.

We have a $27.4 million mortgage, secured by Valley View Mall in La Crosse, Wisconsin, which matures in July 2020. Subsequent to December 31, 2019, we have commenced disposition discussions with the lender regarding the property.

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Schedule III - Summary of Real Estate and Accumulated Depreciation (Details) (Parenthetical) $ in Millions	Dec. 31, 2019 USD ($)
Mortgage Loan
Real Estate and Accumulated Depreciation [Line Items]
Debt Issuance Costs, Net	$ 1.8

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Share Based Compensation

12 Months Ended

Dec. 31, 2019

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Share Based Compensation

8. SHARE BASED COMPENSATION

Share Based Compensation Plans

As of December 31, 2019, we make share based compensation awards using our 2018 Equity Incentive Plan, which is a share based compensation plan that was approved by our shareholders in 2018. Previously, we maintained six other plans pursuant to which we granted equity awards in various forms. Certain restricted shares and certain options granted under these previous plans remain subject to restrictions or remain outstanding and exercisable, respectively. In addition, we previously maintained two plans pursuant to which we granted options to our non-employee trustees.

We recognize expense in connection with share based awards to employees and trustees by valuing all share based awards at their fair value on the date of grant, and then expensing them over the applicable vesting period.

For the years ended December 31, 2019, 2018 and 2017, we recorded aggregate compensation expense for share based awards of $7.0 million (including a net reversal of $1.1 million of amortization relating to employee separation), $6.9 million (including $0.1 million of accelerated amortization relating to employee separation), and $5.7 million (including a net reversal of $0.2 million of amortization relating to employee separation), respectively, in connection with the equity incentive programs described below. There was no income tax benefit recognized in the income statement for share based compensation arrangements. For the years ended December 31, 2019, 2018 and 2017, we capitalized compensation costs related to share based awards of $0.2 million, $0.1 million, and $0.1 million, respectively.

2018 Equity Incentive Plan

Subject to any future adjustments for share splits and similar events, the total remaining number of common shares that may be issued to employees or trustees under our 2018 Equity Incentive Plan (pursuant to options, restricted shares, shares issuable pursuant to current or future RSU Programs, or otherwise) was 1,145,956 as of December 31, 2019. The share based awards described in this footnote were made under the 2003 Equity Incentive Plan and the 2018 Equity Incentive Plan.

Restricted Shares Subject to Time Based Vesting

The aggregate fair value of the restricted shares that we granted to our employees and non-employee trustees in 2019, 2018 and 2017 was $5.6 million, $5.1 million, and $4.8 million, respectively, based on the share price on the date of the grant. As of December 31, 2019, there was $4.3 million of total unrecognized compensation cost related to unvested share based compensation arrangements granted under the 2003 Equity Incentive Plan and the 2018 Equity Incentive Plan. The cost is expected to be recognized over a weighted average period of 0.8 years.

A summary of the status of our unvested restricted shares as of December 31, 2019 and changes during the years ended December 31, 2019, 2018 and 2017 is presented below:

	Shares			Weighted Average Grant Date Fair Value
Unvested at January 1, 2017		386,412		$	21.88
Shares granted		336,296			14.95
Shares vested		(238,859	)		19.56
Shares forfeited		(34,427	)		18.00
December 31, 2017		449,422		$	16.85
Shares granted		461,395			11.02
Shares vested		(260,178	)		16.58
Shares forfeited		(29,241	)		14.17
December 31, 2018		621,398		$	13.29
Shares granted		798,370			7.04
Shares vested		(349,533	)		13.14
Shares forfeited		(131,971	)		8.75
December 31, 2019		938,264		$	8.67

Restricted Shares Awarded to Employees

In 2019, 2018 and 2017, we made grants of restricted shares subject to time based vesting. The awarded shares vest over periods of one to three years, typically in equal annual installments, provided the recipient remains our employee on the vesting date. For all grantees, the shares generally vest immediately upon death or disability. Recipients are entitled to receive an amount equal to the dividends on the shares prior to vesting. We granted a total of 683,570, 392,697, and 245,950 restricted shares subject to time based vesting to our employees in 2019, 2018 and 2017, respectively. The weighted average grant date fair values of time based restricted shares was $7.15 per share in 2019, $10.99 per share in 2018, and $16.43 per share in 2017. The aggregate fair value of the restricted shares granted in 2019, 2018, and 2017 were $4.9 million, $4.3 million, and $4.0 million, respectively. Compensation cost relating to time based restricted share awards is recorded ratably over the respective vesting periods. We recorded $3.7 million (including a net reversal of $0.2 million of accelerated amortization relating to employee separation), $4.3 million (including $0.1 million of accelerated amortization relating to employee separation) and $3.9 million (including $0.2 million of accelerated amortization relating to employee separation) of compensation expense related to time based restricted shares for the years ended December 31, 2019, 2018 and 2017, respectively. The total fair value of shares vested during the years ended December 31, 2019, 2018 and 2017 was $3.8 million, $2.0 million, and $3.9 million, respectively.

On February 24, 2020, the Company granted 1,093,292 time-based restricted shares to employees that vest over periods of two to three years in annual installments. 

Outperformance Units (“OPUs”) Awarded to Employees

Of the time-based restricted shares granted to employees in 2019 described above, 517,783 have Outperformance Units (“OPUs”) attached to them. The OPUs will entitle the employees to receive additional shares tied to a multiple of the employee’s time-based restricted share award if the Company achieves certain specified operating performance metrics measured over a three-year period. If any shares are issued in respect of the OPUs at the end of the three-year measurement period, 50% will vest immediately, 25% will be subject to an additional one-year vesting requirement, and 25% will be subject to an additional two-year vesting requirement. Dividend equivalents on the common shares will accrue on any awarded OPUs and are credited to “acquire” more OPUs for the account of the employee at the 20-day average closing price per common share ending on the dividend payment date, but will vest only if performance measures are achieved. We recorded $0.8 million (including a net reversal of $0.1 million of accelerated amortization relating to employee separation) of compensation expense related to OPUs for the year ended December 31, 2019.

Restricted Shares Awarded to Non-Employee Trustees

As part of the compensation we pay to our non-employee trustees for their service, we grant restricted shares subject to time based vesting. The awarded shares vest over a one-year period. These annual awards have been made under the 2003 Equity Incentive Plan and the 2018 Equity Incentive Plan. We granted a total of 114,800, 68,698, and 64,358 restricted shares subject to time based vesting to our non-employee trustees in 2019, 2018, and 2017, respectively. The weighted average grant date fair values of time based restricted shares was $6.35 per share in 2019, $11.17 per share in 2018, and $11.45 per share in 2017. The aggregate fair value of the restricted shares granted in 2019, 2018 and 2017 were $0.7 million, $0.8 million, $0.7 million, respectively, based on the share price on the date of the grant. Compensation cost relating to time based restricted share awards is recorded ratably over the respective vesting periods. We recorded $0.7 million, $0.5 million, and $0.5 million of compensation expense related to time based vesting of non-employee trustee restricted share awards in 2019, 2018 and 2017, respectively. As of December 31, 2019, there was $0.3 million of total unrecognized compensation expense related to unvested restricted share grants to non-employee trustees. The total fair value of shares granted to non-employee trustees that vested was $0.8 million, $0.6 million, and $0.8 million for the years ended December 31, 2019, 2018 and 2017, respectively. In 2020, we will record compensation expense of $0.3 million in connection with the amortization of existing non-employee trustee restricted share awards.

We will record future compensation expense in connection with the vesting of existing time based restricted share awards to employees and non-employee trustees as follows:

	Future Compensation Expense
(in thousands of dollars) For the Year Ending December 31,	Employees		Non-Employee Trustees		Total
2020	$	2,527	$	284	$	2,811
2021		1,352		—		1,352
2022		150		—		150
2023				—		—
Total	$	4,029	$	284	$	4,313

Restricted Share Unit Programs

In 2019, 2018, 2017, 2016 and 2015, our Board of Trustees established the 2019-2021 RSU Program, 2018-2020 RSU Program, 2017-2019 RSU Program, 2016-2018 RSU Program, and the 2015-2017 RSU Program, respectively (collectively, the “RSU Programs”).

Under the RSU Programs, we may make awards in the form of market based performance-contingent restricted share units, or RSUs. The RSUs represent the right to earn common shares in the future depending on our performance in terms of total return to shareholders (as defined in the RSU Programs) for applicable three year periods or a shorter period ending upon the date of a change in control of the Company (each, a “Measurement Period”) relative to the total return to shareholders, as defined, for the applicable Measurement Period of companies comprising an index of real estate investment trusts (the “Index REITs”). In both 2019 and 2018, only one half of the awarded RSUs were tied to our relative total return to shareholders compared to the Index REITs, with the other half of the RSUs being tied to our absolute level of total return to shareholders. Dividends are deemed credited to the participants’ RSU accounts and are applied to “acquire” more RSUs for the account of the participants at the 20 -day average price per common share ending on the dividend payment date. If earned, awards will be paid in common shares in an amount equal to the applicable percentage of the number of RSUs in the participant’s account at the end of the applicable Measurement Period.

The aggregate fair values of the RSU awards in 2019, 2018 and 2017 were determined using a Monte Carlo simulation probabilistic valuation model, and are presented in the table below. The table also sets forth the assumptions used in the Monte Carlo simulations used to determine the aggregate fair values of the RSU awards in 2019, 2018 and 2017 by grant date:

(in thousands of dollars, except per share data)	RSUs and assumptions by Grant Date
Grant Date:	January 29, 2019						January 19, 2018						February 27, 2017
Measurement Basis:	Absolute TSR RSUs			Relative TSR RSUs			Absolute TSR RSUs			Relative TSR RSUs			Relative TSR RSUs
RSUs granted		210,193			210,193			115,614			115,614			140,490
Aggregate fair value of shares granted	$	1,550		$	1,890		$	1,336		$	1,779		$	1,620
Weighted average fair value per share	$	7.38		$	8.99		$	10.93		$	14.56		$	11.53
Volatility		40.3	%		40.3	%		31.6	%		31.6	%		25.8	%
Risk free interest rate		2.58	%		2.58	%		2.19	%		2.19	%		1.42	%
PREIT Stock Beta compared to Dow Jones US Real Estate Index (1)	n/a			n/a			n/a			n/a				0.706

(1) 2019 and 2018’s RSU Award valuations used a matrix approach, where the correlation was calculated between PREIT and each of its peers and each peer against all other peers.

Compensation cost relating to the RSU awards is expensed ratably over the applicable three year vesting period. We recorded $1.8 million (including a reversal of $0.8 million of accelerated amortization relating to employee separation), $2.1 million, and $1.3 million (including a reversal of $0.4 million of accelerated amortization relating to employee separation) of compensation expense related to the RSU Programs for the years ended December 31, 2019, 2018 and 2017, respectively. We will record future aggregate compensation expense of $2.8 million related to the existing awards under the RSU Programs.

For the years ended December 31, 2019, 2018 and 2017, no shares were issued from the 2017-2019, 2016-2018, and 2015-2017 RSU programs because the required criteria were not met.

On February 24, 2020, the Board of Trustees established the 2020-2022 Equity Award program, and the Company granted 709,943 RSUs to employees (the “2020 RSUs”). The 2020 RSUs have a three-year measurement period that ends on December 31, 2022 or a shorter period ending upon the change in control of the Company. The 2020 RSUs represent the right to receive common shares in the future depending on the Company’s performance in the achievement of operating performance measures and a modification based on total return to shareholders. The preliminary number of common shares to be issued by the Company with respect to the 2020 RSUs awarded is based on a multiple determined by achievement of certain specified operating performance measures during the applicable Measurement Period. These performance measures, the three-year core mall non-anchor occupancy and the three-year fixed charge coverage ratio, are each weighted 50%. The preliminary number of common shares to be issued by the Company as determined under the operating performance goals will be adjusted, upwards or downwards, depending on the Company’s total return to shareholders, as defined, for the applicable Measurement Period relative to the performance of other real estate investment trusts comprising a leading index of retail real estate investment trusts. Unlike the RSUs awarded in 2018 and 2019, the number of shares that may be issued with respect to the 2020 RSUs are not dependent on any absolute level of total return to shareholders.

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Organization and Summary of Significant Accounting Policies - Going Concern Considerations (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Real Estate Properties [Line Items]
Outstanding line of credit	$ 255,000	$ 65,000
Mortgage loans payable, net	$ 899,753	$ 1,047,906
Mortgage Loan
Real Estate Properties [Line Items]
Borrowing expiration year	2025
Mortgage loans payable, net	$ 901,600
2018 Revolving Facility
Real Estate Properties [Line Items]
Credit facility maturity year	2022
Outstanding line of credit	$ 255,000
Term Loans
Real Estate Properties [Line Items]
Credit facility maturity year	2021
Outstanding borrowings	$ 550,000

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Share Based Compensation (Tables)

12 Months Ended

Dec. 31, 2019

Share-based Compensation Arrangement by Share-based Payment Award [Line Items]

Summary of Status of Unvested Restricted Shares and Changes

A summary of the status of our unvested restricted shares as of December 31, 2019 and changes during the years ended December 31, 2019, 2018 and 2017 is presented below:

	Shares			Weighted Average Grant Date Fair Value
Unvested at January 1, 2017		386,412		$	21.88
Shares granted		336,296			14.95
Shares vested		(238,859	)		19.56
Shares forfeited		(34,427	)		18.00
December 31, 2017		449,422		$	16.85
Shares granted		461,395			11.02
Shares vested		(260,178	)		16.58
Shares forfeited		(29,241	)		14.17
December 31, 2018		621,398		$	13.29
Shares granted		798,370			7.04
Shares vested		(349,533	)		13.14
Shares forfeited		(131,971	)		8.75
December 31, 2019		938,264		$	8.67

Assumptions Used in Monte Carlo Simulations Used to Determine Aggregate Fair Values

The table also sets forth the assumptions used in the Monte Carlo simulations used to determine the aggregate fair values of the RSU awards in 2019, 2018 and 2017 by grant date:

(in thousands of dollars, except per share data)	RSUs and assumptions by Grant Date
Grant Date:	January 29, 2019						January 19, 2018						February 27, 2017
Measurement Basis:	Absolute TSR RSUs			Relative TSR RSUs			Absolute TSR RSUs			Relative TSR RSUs			Relative TSR RSUs
RSUs granted		210,193			210,193			115,614			115,614			140,490
Aggregate fair value of shares granted	$	1,550		$	1,890		$	1,336		$	1,779		$	1,620
Weighted average fair value per share	$	7.38		$	8.99		$	10.93		$	14.56		$	11.53
Volatility		40.3	%		40.3	%		31.6	%		31.6	%		25.8	%
Risk free interest rate		2.58	%		2.58	%		2.19	%		2.19	%		1.42	%
PREIT Stock Beta compared to Dow Jones US Real Estate Index (1)	n/a			n/a			n/a			n/a				0.706

(1) 2019 and 2018’s RSU Award valuations used a matrix approach, where the correlation was calculated between PREIT and each of its peers and each peer against all other peers.

Time Based Restricted Stock Awards

Share-based Compensation Arrangement by Share-based Payment Award [Line Items]

Summary of Future Compensation Expense

We will record future compensation expense in connection with the vesting of existing time based restricted share awards to employees and non-employee trustees as follows:

	Future Compensation Expense
(in thousands of dollars) For the Year Ending December 31,	Employees		Non-Employee Trustees		Total
2020	$	2,527	$	284	$	2,811
2021		1,352		—		1,352
2022		150		—		150
2023				—		—
Total	$	4,029	$	284	$	4,313

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Organization and Summary of Significant Accounting Policies - Significant Non-Cash Transactions (Details) - USD ($) $ in Thousands		3 Months Ended		12 Months Ended
	Sep. 26, 2019	Sep. 30, 2019	Jun. 30, 2018	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Summary Of Significant Accounting Policies [Line Items]
Non-cash lease termination income			$ 4,200		$ 4,200
Line of credit facilities gross repayments				$ 39,000	53,000	$ 403,000
Line of credit facilities gross borrowings				229,000	65,000	309,000
Increase (decrease) in accrued construction costs				$ (8,500)	15,700	(8,300)
2014 5-Year Term Loan and 2015 5-Year Term Loan
Summary Of Significant Accounting Policies [Line Items]
Line of credit facilities gross repayments					$ 150,000
2014 7-Year Term Loan
Summary Of Significant Accounting Policies [Line Items]
Line of credit facilities gross repayments						$ 150,000
Wyoming Valley Mall | Commercial Real Estate | Mortgage Loan
Summary Of Significant Accounting Policies [Line Items]
Debt default, amount	$ 72,800
Repayments of cash and escrow balance	$ 7,500	$ 7,500

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CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Thousands, $ in Thousands		12 Months Ended
		Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Real estate revenue:
Lease revenue		$ 302,311	$ 324,829	$ 325,010
Expense reimbursements		19,979	21,322	22,468
Other real estate revenue		12,668	12,078	14,046
Total real estate revenue		334,958	358,229	361,524
Other income		1,834	4,171	5,966
Total revenue		336,792	362,400	367,490
Property operating expenses:
CAM and real estate taxes		(113,260)	(113,235)	(111,275)
Utilities		(14,733)	(15,990)	(16,151)
Other property operating expenses		(8,565)	(12,007)	(12,879)
Total property operating expenses		(136,558)	(141,232)	(140,305)
Depreciation and amortization		(137,784)	(133,116)	(128,822)
General and administrative expenses		(46,010)	(38,342)	(36,736)
Provision for employee separation expenses		(3,689)	(1,139)	(1,299)
Insurance recoveries, net		4,362	689	0
Project costs and other expenses		(284)	(693)	(768)
Total operating expenses		(319,963)	(313,833)	(307,930)
Interest expense, net		(63,987)	(61,355)	(58,430)
Gain on debt extinguishment, net		24,859	0	0
Impairment of assets		(1,455)	(137,487)	(55,793)
Total expenses		(364,108)	(512,675)	(422,153)
Loss before equity in income of partnerships, gain on sales of real estate by equity method investee, gain on sales of real estate, net, gain on sales of interest in non operating real estate, and adjustment to gain on sales of interests in non operating real estate		(27,316)	(150,275)	(54,663)
Equity in income of partnerships		8,289	11,375	14,367
Gain on sales of real estate by equity method investee		553	2,772	6,567
Gain (loss) on sales of real estate, net		2,744	1,722	(27)
Gain on sales of interests in non operating real estate		2,718	8,126	1,270
Adjustment to gain on sales of interests in non operating real estate		12	(223)	(362)
Net loss		(13,000)	(126,503)	(32,848)
Less: net loss attributed to noncontrolling interest		2,128	16,174	6,895
Net loss attributable to PREIT		(10,872)	(110,329)	(25,953)
Less: preferred share dividends		(27,375)	(27,375)	(27,845)
Less: loss on redemption on preferred shares		0	0	(4,103)
Net loss attributable to PREIT common shareholders		(38,247)	(137,704)	(57,901)
Net loss		(13,000)	(126,503)	(32,848)
Noncontrolling interest		2,128	16,174	6,895
Preferred share dividends		(27,375)	(27,375)	(27,845)
Loss on redemption of preferred shares		0	0	(4,103)
Dividends on unvested restricted shares		(883)	(542)	(372)
Net loss used to calculate earnings per share – basic and diluted		$ (39,130)	$ (138,246)	$ (58,273)
Basic and diluted loss per share (in dollars per share)		$ (0.52)	$ (1.98)	$ (0.84)
Weighted average shares outstanding – basic (in shares)		75,221	69,749	69,364
Effect of dilutive common share equivalents (in shares)	[1]	0	0	0
Weighted average shares outstanding – diluted (in shares)		75,221	69,749	69,364
Development Land Parcel
Property operating expenses:
Impairment of assets		$ (3,562)	$ 0	$ 0

[1] For the years ended December 31, 2019, 2018 and 2017, there were net losses allocable to common shareholders, so the effect of common share equivalents of 452, 203 and 93 for the years ended December 31, 2019, 2018 and 2017, respectively, is excluded from the calculation of diluted loss per share, as their inclusion would be anti-dilutive.

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Investments in Partnerships - Summary of Equity Investments (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
Investments in real estate, at cost:
Operating properties	$ 883,530	$ 575,149
Construction in progress	251,029	420,771
Total investments in real estate	1,134,559	995,920
Accumulated depreciation	(229,877)	(212,574)
Net investments in real estate	904,682	783,346
Cash and cash equivalents	34,766	20,446
Deferred costs and other assets, net	43,476	30,549
Total assets	982,924	834,341
LIABILITIES AND PARTNERS’ INVESTMENT:
Mortgage loans payable, net	499,057	507,090
FDP Term Loan, net	299,091	247,901
Other liabilities	79,166	34,463
Total liabilities	877,314	789,454
Net investment	105,610	44,887
Partners’ share	50,997	21,583
PREIT’s share	54,613	23,304
Excess investment	17,464	15,763
Net investments and advances	72,077	39,067
Investment in partnerships, at equity	159,993	131,124
Distributions in excess of partnership investments	$ (87,916)	$ (92,057)

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CONSOLIDATED STATEMENTS OF EQUITY (Parenthetical) - $ / shares	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Common stock, dividend per share paid (in dollars per share)	$ 0.84	$ 0.84	$ 0.84
Distributions paid to Operating Partnership unit holders	0.84	0.84	0.84
Preferred shares, par value (in dollars per share)	0.01	0.01	0.01
Common stock, par value (in dollars per share)	1.00	1.00	1.00
Series A Preferred Stock
Preferred stock, dividends per share paid (in dollars per share)			1.7016
Preferred shares, par value (in dollars per share)	0.01	0.01	0.01
Series B Preferred Stock
Preferred stock, dividends per share paid (in dollars per share)	1.8436	1.8438	1.8438
Preferred shares, par value (in dollars per share)	0.01	0.01	0.01
Series C Preferred Stock
Preferred stock, dividends per share paid (in dollars per share)	1.80	1.80	1.5900
Preferred shares, par value (in dollars per share)	0.01	0.01	0.01
Series D Preferred Stock
Preferred stock, dividends per share paid (in dollars per share)	1.719	1.719	0.4488
Preferred shares, par value (in dollars per share)	$ 0.01	$ 0.01	$ 0.01

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Organization and Summary of Significant Accounting Policies - Immaterial Error Correction (Details) - USD ($)	3 Months Ended						12 Months Ended
	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2017	Sep. 30, 2017	Jun. 30, 2017	Mar. 31, 2017	Dec. 31, 2017	Dec. 31, 2018
Accounting Policies [Abstract]
Increase decrease in net loss attributable to noncontrolling interests	$ 700,000	$ 700,000	$ 1,200,000	$ 800,000	$ 800,000	$ 700,000	$ 3,400,000
Increase decrease in earnings per share, basic and diluted (in dollars per share)	$ 0.01	$ 0.01	$ 0.02	$ 0.01	$ 0.01	$ 0.01	$ 0.05
Cumulative decrease to noncontrolling interest			$ 7,800				$ 7,800	$ 9,300

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Real Estate Activities - Acquisitions (Detail) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Moorestown Mall And Valley Mall.
Real Estate Properties [Line Items]
Purchased real estate and improvements	$ 17.6
Moorestown Mall, Valley View Mall And Valley Mall
Real Estate Properties [Line Items]
Purchased real estate and improvements		$ 13.9

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Share Based Compensation - Assumptions Used in Monte Carlo Simulations Used to Determine Aggregate Fair Values (Details) - USD ($) $ / shares in Units, $ in Thousands	Jan. 29, 2019	Jan. 19, 2018	Feb. 27, 2017
Absolute TSR RSUs
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
RSUs granted	210,193	115,614
Aggregate fair value of shares granted	$ 1,550	$ 1,336
Weighted average fair value per share	$ 7.38	$ 10.93
Volatility	40.30%	31.60%
Risk free interest rate	2.58%	2.19%
Relative TSR RSUs
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
RSUs granted	210,193	115,614	140,490
Aggregate fair value of shares granted	$ 1,890	$ 1,779	$ 1,620
Weighted average fair value per share	$ 8.99	$ 14.56	$ 11.53
Volatility	40.30%	31.60%	25.80%
Risk free interest rate	2.58%	2.19%	1.42%
PREIT Stock Beta compared to Dow Jones US Real Estate Index			0.706

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Financing Activity - Other Mortgage Loan Activity (Details) - USD ($) $ in Thousands		1 Months Ended	3 Months Ended	12 Months Ended
	Sep. 26, 2019	Mar. 31, 2019	Sep. 30, 2019	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Debt Instrument [Line Items]
Gain (loss) on debt extinguishment, net				$ 24,859	$ 0	$ 0
Mortgage loans, carrying value				899,753	$ 1,047,906
Mortgage Loan
Debt Instrument [Line Items]
Mortgage loans, carrying value				901,600
Capital City Mall, Camp Hill, Pennsylvania | Commercial Real Estate | Mortgage Loan
Debt Instrument [Line Items]
Repayments of Debt		$ 58,500
Gain (loss) on debt extinguishment, net		$ (4,800)
Wyoming Valley Mall | Commercial Real Estate | Mortgage Loan
Debt Instrument [Line Items]
Gain (loss) on debt extinguishment, net	$ 29,600			29,600
Debt default, amount	72,800
Repayments of cash and escrow balance	$ 7,500		$ 7,500
Valley View Mall | Commercial Real Estate | Mortgage Loan
Debt Instrument [Line Items]
Mortgage loans, carrying value				$ 27,400
Debt instrument, maturity month and year				2020-07

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Financing Activity - Carrying and Fair Values of Mortgage Loans (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
Debt Instrument [Line Items]
Mortgage loans, carrying value	$ 899,753	$ 1,047,906
Carrying Value | Mortgage Loan
Debt Instrument [Line Items]
Mortgage loans, carrying value	899,800	1,047,900
Fair Value | Mortgage Loan
Debt Instrument [Line Items]
Mortgage loans, fair value	$ 873,900	$ 1,002,300

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Benefit Plans - Additional Information (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Benefit Plans [Line Items]
Percentage of defined plan agreement	30.00%
Contributions to plan	$ 900	$ 900	$ 900
Supplemental Retirement Plans expenses	$ 200	$ 200	$ 300
Employee Share Purchase Plan
Benefit Plans [Line Items]
Common stock purchase at a discount	15.00%
Stock Issued During Period, Shares, Employee Stock Purchase Plans	44,000	31,000	38,000
Shares purchase consideration	$ 200	$ 200	$ 400
Expenses recorded to the share purchase plan	$ 48	$ 43	$ 100