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Executives

Garth Russell – KCFA Strategic Communications

Ron Rubin – Chairman and CEO

Ed Glickman – President and COO

Bob McCadden – EVP and CFO

Joe Coradino – President PREIT Services, LLC and PREIT-RUBIN, Inc.

Analysts

Manny [ph] – Citi

Craig Schmidt – Bank of America/Merrill Lynch

Michael Mueller – JP Morgan

Ben Yang – Keefe, Bruyette & Woods

Quentin Velleley – Citi

Pennsylvania Real Estate Investment Trust (PEI) Q4 2009 Earnings Call March 12, 2010 11:00 AM ET

Operator

Good day, ladies and gentlemen. Thank you for standing by. Welcome to the Pennsylvania Real Estate Investment Trust Fourth Quarter 2009 Earnings conference call. (Operator instructions) I would now like to turn the conference over to our host, Mr. Garth Russell, with KCFA Strategic Communications. Please go ahead sir.

Garth Russell

Thank you Jerry. Before turning the call over to management for their prepared remarks, I would like to state that this conference call will contain certain forward-looking statements within the meaning of federal securities laws. 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 PREIT's current views about future events 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 these forward-looking statements.

PREIT's business may be affected by uncertainties affecting real estate businesses generally, as well as specific factors discussed in PREIT's press releases, documents PREIT has filed with the Securities and Exchange Commission, and in particular PREIT's annual report on Form 10-K for the year ended December 31, 2008. PREIT does not intend to update or revise any forward-looking statements to reflect new information, future events or otherwise.

Now I would like to turn the call over to Ron Rubin, Chairman and Chief Executive Officer of PREIT. Ron, the floor is yours.

Ron Rubin

Thank you very much Garth. Welcome to the Pennsylvania Real Estate Investment Trust 2009 year-end conference call. Joining me on the call today are Ed Glickman, President; Bob McCadden, CFO; and Joe Coradino, president of our management company and head of our retail operations. Also in the room today are Vice Chairman George Rubin and General Counsel Bruce Goldman.

Today we will discuss our fourth quarter results, the status of our current projects, our expectations for 2010, and some recent events. After we conclude our remarks, the call will be open for your questions.

As we announced yesterday, the company has executed a new 670 million secured credit facility with our bank group led by Wells Fargo. This new facility replaces the previous line of credit and term loan. It has been a long process, and we would like to thank our bankers for their continued support.

While Ed Glickman will provide more details shortly, we are pleased that the facility’s terms will allow us to pursue our goal of creating long-term value for our shareholders. As we have discussed on previous calls, our 2009 results reflect the effects of economic downturn, and its corresponding impact on consumer spending. Despite the difficult conditions, the leased nearly 3 million square feet during the year, and sales at our properties stabilized as the year progressed.

We also achieved numerous major milestones at our redevelopment properties. The transformations of our Cherry Hill, Plymouth Meeting, and Voorhees properties are substantially complete. We feel that we are ahead of the curve, and will capture a larger share of regional consumer spending at these and in our other redevelopment properties as the economy improves.

Later, Joe Coradino will discuss in greater detail the results of our efforts, and the effect these efforts have had on shoppers and retailers in the regions that we serve. As I have noted in previous calls, while the economic environment has changed the basic fundamentals of our business has not. Our management team is focused, working to satisfy company capital needs, looking for ways to delever in order to strengthen our financial position, and to place stores in service, increase NOI and occupancy, and generate positive leasing spreads. As always, we remain focused on creating long-term value for our shareholders.

And with that, I will turn the call over to Ed Glickman.

Ed Glickman

Thanks Ron. Good morning and thank you for joining us on this call. This has been quite an exciting week at PREIT. From an operating standpoint, we are starting to experience stability from a financial standpoint, as well as much better feel than in early 2009. Prior to the impact of gains and impairments, PREIT is reporting FFO of $2.78 per share for the full year.

After giving effect to the gains and impairments that I will discuss shortly, we are reporting FFO of $1.69. Portfolio occupancy ended the year at 89.8%, down 90 basis points from a year ago, but up 40 basis points from the end of the third quarter. Due to lower occupancy levels and occupancy cost pressures, our same-store NOI declined 4.4% year-over-year. PREIT have held up fairly well, stabilizing at about $334 during the fourth quarter of 2009.

We attribute this limited total decline in sales to the stable nature of our core mid-Atlantic markets, the lower volatility of our middle-class customers, and the work we have done to rejuvenate our properties. Most of our markets never experienced the rapid growth of early 2000s, and they have not experienced the depth of the decline felt in some other areas of the country. In contrast to the spring of 2009, we are actually starting to see some green shoots in performance as Joe Coradino will discuss, and we are hopeful that 2010 will represent a period of retailer stability.

We do not expect that this activity will make a significant contribution to our performance in 2010; however, we do believe that this activity will contribute to improved metrics in 2011.

Bob McCadden will discuss our earnings forecast and associated assumptions in a moment. Before that however, I would like to discuss the impairments. We have had to impair two of our Florida investments, Orlando Fashion Square and the Springhills development at Gainesville. In both cases we have been dramatically impacted by the economic fallout in the Florida market. As part of our annual evaluation of our property values, we have concluded that we must write down these two assets by your total of 74.2 million or $1.62 per share.

Now to the capital step. During 2009, we completed five refinancings for $62 million, three new secured financings for $59 million and received proceeds of $63 million from the sale of two assets and a number of shares [ph]. These activities gave us the wherewithal to finish our construction work on our redevelopment properties, repurchase over $104 million of converts at a significant discount, and create $77 million of cash on hand by the end of the year.

Yesterday, we announced that with the unanimous approval and participation of the bank group, has closed the restructuring and extension of its bank line of credit and term loan facilities. Under the new facilities, PREIT will have line of credit of $150 million and term loans of 520 million. In addition, PREIT has received a $30 million loan against its new River Valley Mall. These facilities will have initial terms of three years and may be extended for an additional one year.

The facility will float against LIBOR at the spread of between 400 and 490 basis points depending on leverage. There is no LIBOR floor. At the inception of this facility, the term loan will be fully drawn, and we expect to have approximately $80 million of availability on our line of credit.

We believe that this initial availability, combined with our organic cash flow will provide us with sufficient capital to complete the stabilization of our existing redevelopment projects, as well as to cover recurring capital expenses and operating requirements throughout the term of the facility.

The company intends to pursue a myriad of strategies in order to delever the balance sheet. These strategies include access to new equity capital markets, venturing existing assets with partners, continuing to sell non-strategic properties, and the national amortization of our in place mortgage debt. Given this intent, the company has agreed to reduce the term loan by $33 million at the end of each anniversary of the facility. The limited nature of this undertaking gives us a significant amount of flexibility in implementing our capital strategies.

Now I like to talk for a second about the exchangeable notes. Early in 2009 the decline in the company's stock price and a general rise in the cost of credit created a decline in the marketplace of PREIT’s exchangeable notes. We were able to repurchase $104.6 million of these notes in exchange for $47.2 million in cash, and 4.3 million common shares reporting a $27 million gain.

As of now there are only $136.9 million of converts remaining outstanding. The remaining notes which have a coupon of 4% and come due in May 2012 are trading close to par. For that reason, we are not anxious to retire them at this time, and view their ultimate disposition as part of our overall going forward capital plan.

Just as a reminder, the refinancing of our newly expanded and redeveloped Cherry Hill mall will be one of the tools at our disposal to retire these remaining bonds in due course. Before the retirement of the Cherry Hill mortgage, a number of our other properties, including two of our major power centers will be coming up for refinancing. These assets are stable and at present we expect that we will not be required to make significant pay downs in order to extend or replace the existing loans. We therefore believe that following this refinancing, we are in pretty good shape from a liquidity standpoint. This puts us in a position where we can concentrate the majority of our equity capital activities on reducing leverage, and once we have reduced leverage in growing our business.

We appreciate the flexibility given to the company by our bank group, which allows us to approach delevering in a manner that will recapitalize the company, while allowing us to continue to optimize our capital structure.

Bob McCadden will now give you more detail on our financial performance. Bob.

Bob McCadden

Thank you Ed. Net loss attributable to PREIT for the fourth quarter was $61.1 million or $1.41 per diluted share. FFO for the quarter was negative $23.8 million or $0.52 per share. These results included gains from repurchasing exchangeable notes and impairment charges taken on our Orlando Fashion Square and Springhills, which were written down by $62.7 million and $11.5 million respectively.

Also during the quarter, we repurchased $55.5 million of exchangeable notes and recorded a $13.1 million gain, of which $9.9 million was previously included in our guidance. Excluding these charges and gains, FFO was $37.3 million or $0.81 per diluted share.

Same store NOI was down $2.5 million or 5.4% when compared to the prior year's quarter. Non-anchor occupancy at the end of the year was down approximately 290 basis points from last year, primarily due to store closings by bankrupt tenants. The $2 million negative impact on NOI from bankrupt tenants was partially mitigated by inline tenant and anchor openings at our redevelopment properties.

Lease terminations in the 2009 quarter were approximately $1 million less than the prior period. In addition, the 2009 quarter included $1.1 million increase in snow removal costs, and $0.5 million increase in bad debt expense. Orlando Fashion Square accounted for approximately $1.3 million of the total of $4.5 million decrease in the quarter.

Since the beginning of 2008, 720,000 square feet of space has been impacted by bankruptcy filings. Because we had commitments for approximately 50% of this space, and are negotiating leases for another 10% of this space. When we include our specialty leasing tenants, total occupancy for our closed malls was 91.7% compared to 91.8% at the end of last year.

Interest expense increased by $1.3 million over last year's quarter as a result of placing completed and development assets into service. At the end of the year, we had outstanding debt of $2.7 billion, a decrease of $87 million in the balance as of December 30.

Our average nominal interest rate at the end of the year was 4.9% compared to 5.07% a year ago. After giving effect [ph] to the higher interest rate on the new credit facility, our pro forma interest-rate at the end of the year was 5.41%. At the end of the quarter, 77.5% of the company's total indebtedness, including our share of (inaudible).

Page 30 of our supplemental reporting package includes selective debt ratios for the new credit facility on a pro forma basis, and a list of the collateral properties. Just as a reminder, we will not be required to report revised covenants until the end of the first quarter of 2010.

Turning to 2010 guidance, we expect GAAP earnings per diluted share to be a net loss between $1.51 and $1.53. We expect FFO per diluted share to be in a range of $1.94 to $2.06. Our guidance range takes into consideration the following factors. An overall decline in NOI of 1% to 2%, excluding lease termination fees. In 2009, we recorded lease termination fees of $2.2 million. The midpoint of our guidance range assumes termination fees of a similar amount.

Interest expense will decrease due to the higher interest rate on our credit facility, cessation of interest capitalization of assets placed in service over the past year, and maturity of several below-market rate loans during 2010. In 2009 we placed $286 million of assets into service, including $40 million in the fourth quarter.

Our FFO guidance does not include the effects of any acquisitions, dispositions, gains from the sale of non-operating assets, running significant changes in our capital structure. With that, I will turn the call over to Joe Coradino.

Joe Coradino

Thanks Bob. We are pleased about the completion of the credit facility, could also had an eventful quarter on the operating side of our business. We have seen our first mall eclipse $500 per square foot in sales. We have opened 265,000 square feet of anchor space, 198,000 square feet of stores, over 10,000 square feet, and 153,000 square feet of inline [ph] stores.

We continue to see signs of stabilization in the fundamentals of our business. We experienced only three additional bankruptcies during the quarter representing just five stores, with all but one having being assumed. Comp store sales have stabilized in our portfolio at 334 per square feet, an 8.2% decline from our high of 364, with January sales up 4%.

We're continuing to realize the impact of our investment in redevelopment, despite the difficult retail market. Our efforts to upgrade the merchandising in our properties has resulted in improved sales metrics. At Jacksonville mall in North Carolina, the enhanced tenant roster of Barnes & Noble, (inaudible) and Red Robin has helped drive comp sales productivities for tenants open for 12 months over $500 per square foot in January and helped us to secure a new lease with the Buckle, which is expected to open in July.

At Cherry Hill mall, the average sales per activity for tenants open for less than 12 months is $487 a square foot, and we expect this number to top $500 for square foot in the near future. Our sales have continuously increased since the opening of Nordstrom. This improvement is a testament to our efforts to secure the right merchants for the market. We strengthened our tenant line-up during the quarter with the addition of American Apparel, Pandora, Metropark, and an expanded Forever 21.

Since the close of the quarter, the Buckle opened a new store, and we executed a lease with Guess [ph], who will open next week. These tenants join an already remarkable line-up including Nordstrom, Urban Outfitters, Coach, The Capital Grille, Seasons 52, (inaudible) J. Crew and Apple making charity [ph] of the retail show place itself. At this time in line occupancy and his approximately 93.5%.

At Plymouth Meeting mall, 12 month continuous occupancy tenants reported an average of $309 square foot in sales, an increase of 14% driven by the new additions of the properties, specifically the restaurants, California Pizza kitchen, Chang’s, and Redstone Grill, which are significantly outperforming the mall average.

(inaudible) held a grand opening on January 12, registering as the number one volume opening in the mid-Atlantic region. We have begun to see marked increases in traffic and retailer interest as a result of these additions to the property. During the quarter, Saxbys Coffee and Designer Bear opened in the mall. At this time, 82% of the planned expansion portion of the project is leased, opened and operated.

At Voorhees Town Center, the 13,000 square feet Intoxx Fitness opened on March 4. The first two residential buildings are open with 75% of the units occupied. By early spring, the final two residential buildings located in the boulevard will come online. The residential occupancy combined with the transaction in progress, including two signature restaurants, a coffee shop, a boutique pet accessory shop as a third offering, as well as an additional major office reserve will generate the necessary critical mass at this award winning mixed use development.

The recently Target opened a Springfield mall, and Barnes & Noble opened at Woodland Mall in Grand Rapids, Michigan. Target, (inaudible) Macy’s is the second anchor at Springfield, while Barnes & Noble complements the merchandising mix at Woodland. At Whitehall Mall, in Allentown, Pennsylvania (inaudible) and a former grocery store, and on February 16th PETsMART replaced the former Goody's store at Commons at Magnolia.

Other key deals executed since our last call include PetSmart and Sheath [ph] at Crossroads mall in West Virginia. In addition to the four Hhgregg transactions announced last quarter, we are pleased to report that this electronics retailer will also open in the former Linens n Things location on the Lehigh Valley Mall site in Allentown.

The five transactions now account for approximately 153,000 square feet of TLA dedicated as a result of the bankruptcy filings of Linens and Circuit City. Construction is on track or a late spring opening at Lehigh, (inaudible), Paxton Town Center, Red Rose Commons, Wyoming Valley.

We believe this retailer service-oriented full line electronics hot goods will complement our merchandising mix. It is noteworthy that total occupancy at our strip and power centers is expected to increase to approximately 95% with the opening of new stores. We continue our operational initiative to drive occupancy by seeking out non-traditional uses for our properties.

As part of our focus on introducing these uses, in December (inaudible) opened our Wyoming Valley Mall in Wilkes-Barre, Pennsylvania occupying a former theater, and in Uniontown mall, Gallatin Home Health Care opened a medical office. Our specialty leasing department was also successful in their efforts to address the impact of the January ’09 Steve & Barry’s closure at South Mall. Taking advantage of the popularity of antiques in the Allentown area, we transformed the 49,000 square foot space into an antiques and collectible mall, all 92 available stalls have been leased with additional vendors planned for the spring. This initiative was honored with the gold ICSC MAXI Award.

We are encouraged by the signs of stabilization and the improving retail climate. With our redevelopments complete, we have created a solid platform for future growth. We look forward to sharing continued positive portfolio developments with you on future calls. With that we're ready for questions.

Question-and-Answer Session

Operator

Thank you sir. (Operator instructions). And our first question comes from the line of Quentin Velleley with Citi. Please go ahead.

Manny – Citi

Hi guys. It is actually Manny [ph] here with Quentin. My first quarter on the new line covenants similar to your previous line, is there some type of workout period, so you did reach one of the covenants, do you have some kind of clause in there that allows you to work it out over some period of time?

Ron Rubin

Similar to the facility that we had previously that is a two quarter period.

Manny – Citi

Okay. And then also on the line, if you were to raise equity, whether that would be through stock issuance or some dispositions or other types of new capital? Would there be any type of changes to the restrictions on the line?

Ron Rubin

Depends on how much equity we want to raise, and what we -- there is a couple of guidelines on the corporate debt covenants in a facility, debt covenant. So depending upon where those were at the point of raise equity, there is a waterfall through which the capital would be applied. And it switches over from 25% to the revolver, 75% to the term loan to inverts after a hit a break line test.

Bob McCadden

Manny, the details are included in the 8-K that was filed last night.

Manny – Citi

Okay, perfect. And then just too quick ones on guidance, do you guys assume -- what do you assume for your LIBOR assumptions?

Bob McCadden

(inaudible) yes, increasing over time.

Manny – Citi

And my last one is, it seems like your leasing spreads in the first-half of ’09 were much stronger than the second half. Could you just give us some idea of what happened there?

Ron Rubin

Well, I think definitely about the point where, if you look at -- not too much leasing spreads with some of the new leases that we put in place. We are looking to back fill the space previously occupied by bankrupt tenants. As an example, we’ve had a number of Border Book [ph] stores that closed. When we look back -- there was no downtime and limited capital commitments. So, you know, you have seen some of the dollar rates the new leases (inaudible). And you also see the effect of some of the rental lease as tenants come up for renewal (inaudible) prior quarters, and in fact exchanging smaller increases or in some cases negative increases in base rents in exchange for the opportunity to reset their trades under a one or two-year lease.

Manny – Citi

And then can you just remind us, are you leasing spreads quoted on when they are signed or when tenants move in.

Ron Rubin

(inaudible).

Manny – Citi

Thanks guys.

Operator

Thank you. And our next question comes from the line of Craig Schmidt with Bank of America/Merrill Lynch. Please go ahead.

Craig Schmidt - Bank of America/Merrill Lynch

Good morning. Which of your mall assets are unencumbered at this point?

Ron Rubin

At this point, none of the mall assets are unencumbered. We have a property that is part of the Gallery Mall at Market East, and the two land holdings that we have at Gainesville, Florida, and Chester County, Pennsylvania, are unencumbered.

Craig Schmidt - Bank of America/Merrill Lynch

Great. And then I noticed about 14 of your malls have occupancy below 80% looking at it on a non-anchor basis. You know, what do you look to do going forward to increase the small shop occupancy?

Ron Rubin

Well, obviously better performing malls are less of a challenge. At least in light of that, we have introduced a program internally on a number of levels. One in some markets we have hired outside brokers to assist in the effort. Our Orlando Fashion Square is an example of that. Across our portfolio, we have created a general managers’ leasing program again in an effort to solicit local and regional tenants, and we are also beginning to focus on alternative uses.

And all of those areas are getting traction in one level or another. We have about 26,000 square feet in leases with alternative uses that we are working on Orlando. We have had in excess of 10 leases executed on the general managers’ program. So it is no holds barred approach. We are looking at all avenues to drive occupancy, particularly in the assets that are more difficult to lease.

Craig Schmidt - Bank of America/Merrill Lynch

And on the alternative uses, where do those rents stack up prior to the previous rents?

Ron Rubin

On a generalized basis, they tend to be somewhat lower, but they tend to also have lower tenant allowances as well.

Craig Schmidt - Bank of America/Merrill Lynch

Okay, thank you.

Operator

Thank you. And our next question comes from the line of Michael Mueller with JP Morgan.

Michael Mueller - JP Morgan

Hi few questions. First of all, for the four redevelopment properties, can you talk about what the rough run rate of the in place NOI is today, and then versus the stabilized NOI. So, how much more is to come over the next few years?

Ron Rubin

We generally don't talk about specific property NOI.

Michael Mueller - JP Morgan

Okay. Your same-store guidance of down 1% to 2%, does that include the redevelopments in there, or exclude the redevelopments?

Ron Rubin

Yes, we have only signed [ph] the past four or five years. We don’t distinguish if the property is owned in both periods.

Michael Mueller - JP Morgan

Okay. So it still includes the redevelopment. So what is the offset to -- because I'm assuming you got leasing activity, you talked about coming online in ’09 and some in ’10 for the redevelopment. So, where is the offset that is driving the same-store negative in 2010? Is it coming from a handful of properties or is it on a more broad-based?

Ron Rubin

I think it is more broad-based.

Bob McCadden

I think it reflects. You know, if you look at the observation of what is happening to the leasing spreads over the last 12 months, and you saw a decrease over the course of 2009, and as we mentioned earlier those are on a side basis, for those leases to get into and in fact we realize a rent paying pattern, we are saying generally probably on average slightly lower rents.

Michael Mueller - JP Morgan

Okay. The spreads we saw at the tail end of the year, are they a better gauge for what we should expect the signings to be kind of moving through 2010?

Ron Rubin

At least for the first half of the year.

Michael Mueller - JP Morgan

At least for the first half, okay. Just a couple more, in terms of capitalized interest, can you talk about the 2010 expectation versus where you were in “09?

Bob McCadden

We were probably somewhere around 5. We rounded [ph] up at $5 million in 2009. And 2010 will be a similar dollar amount. I think basically in 2009, we benefited from very low LIBOR rates, and a low spend on our credit facility. And next year we will have lower average amount outstanding for capitalization but the rates are going to be moving up, because we tend to use the rate on our credit facility as the basis for interest capitalization. It will be a similar dollar amount, those are dollars in development.

Michael Mueller - JP Morgan

Got it. And just to other ones, number one on the term loan, what is the interest rate on the new term loan, and then secondly can you put some rough parameters around the deleveraging goals, I mean what you think is achievable, what is the goal, meaning how should we think about it as 2010 versus spread out over multiple years?

Ron Rubin

Let me answer this. The interest rate on the term loan is the same as the general credit facility.

Michael Mueller - JP Morgan

It is okay.

Ron Rubin

As we said, we will be at 490 at the end of this year.

Michael Mueller - JP Morgan

Okay.

Bob McCadden

In terms of your second question, which is regarding deleveraging, built into the loan is a -- facility is a requirement to reduce the combined total by $33 million a year in each of the next three years. So, $100 million in total. There is also some natural deleveraging that goes on by virtue of the large number of secured properties we have with mortgages and declining amortization. And on top of that obviously we are opportunistically looking at capital markets, and what that might hold for us. So, we intend to have a broad-based approach to delevering the company.

Michael Mueller - JP Morgan

Okay. So, theoretically if you raised let us say $100 million from either asset sales or rent and you paid down $100 million, would that take care kind of year one, two, and three requirements, the $33, $33, $34 million?

Ron Rubin

Well, $100 million is sum of those three numbers. That would do it.

Michael Mueller - JP Morgan

No, okay, I wasn’t sure if it is -- okay. Okay, I appreciate it. Thank you.

Operator

Thank you. (Operator instructions) And our next question comes from the line of Ben Yang with Keefe, Bruyette & Woods. Please go ahead.

Ben Yang - Keefe, Bruyette & Woods

Hi good morning. I was wondering if you could talk about the 30 million receivable you have with (inaudible), given the company’s recent bankruptcy. I'm wondering whether you think that amount is collectable at this point, or there may be some write-down of the properties, and if it is, whether that is baked into your 2010 guidance.

Bob McCadden

Ben, we never recorded the receivables by (inaudible) because of the speculative nature. So we had no exposure to that. In fact, to the extent if we got anything from the bankruptcy that would all be outside the company.

Ben Yang - Keefe, Bruyette & Woods

Okay, great. And then regarding the $10 million unsecured loan to (inaudible). Is there any change in the status of that loan?

Ron Rubin

They are performing loan. They are paying their interest every month.

Ben Yang - Keefe, Bruyette & Woods

And you have that recorded on your book?

Ron Rubin

Yes. That is included in our receivables.

Ben Yang - Keefe, Bruyette & Woods

Okay, great. That is it. Thank you.

Operator

Thank you. Our next question is a follow up from the line of Quentin Velleley with Citi. Please go ahead.

Quentin Velleley - Citi

Good morning. Just staying on the deleveraging side of it, obviously your covenants are predominantly based on where EBITDA or NOI is. And if you look at your portfolio on your redevelopments, arguably there could be some upside in NOI from the current portfolio, and where occupancy is, but also the redevelopments. So putting that all together, as you look at the leveraging, how much kind of NOI upside is there over the next three years that could actually help you delever the company?

Ron Rubin

Well, we are hopeful that there is NOI upside, and we believe that we will start to see a better leasing environment towards the latter part of 2010. But during 2010 itself, we're experiencing the full-year impact of the spreads as Joe and Bob mentioned that resulted in the last couple of quarters in 2009. So the growth in NOI is likely to come in 2011 and 2012. But just to get back to the deleveraging point, which is quite [ph]. We hope to delever through the organic growth of the company, the NOI, and the benefits that we will get ultimately from the investment we made in redevelopment.

But we realize that there has been a revaluation of real estate, and that we need to be more pro active than that. You know, we are very pleased that we have the ability on the way the facility is set for us to do that in an orderly fashion, but we do intend to do it. There is no question about that.

Quentin Velleley - Citi

And do you have an actual target that you are aiming at, whether that is EBITDA or gross assets, is there some long-term target that you have now?

Ron Rubin

Well, I think the long-term target of the company has always been to be between 50% and 60% leverage. I mean, where we found ourselves was with the precipitous drop in value during the middle of the capital intensive period in our company’s history that took us to the point of having overlevered the company. It was not our intent to find ourselves in a situation from a capital planning perspective. It was a result of the market placements, and what took place over the long term, we like to run the company at a lower level of leverage. It is really a question of how we get there, and I mentioned a few ways.

But one of them is that we have a number of mortgages that have required reductions over time. We have agreed with the bank group that we won't reduce the outstanding under the combined facilities. We have had numerous discussions with potential joint-venture partners on ways in which we can utilize our assets to feed joint ventures, and maybe create some liquidity and also we have been discussing options in the equity capital markets.

But we're not going to do anything precipitously. We are going to do these things as far of an overall capital plan, which will delever the company over the coming years.

Quentin Velleley - Citi

Perfect. Thank you.

Operator

Thank you. And our next question comes from the line of Michael Mueller with JP Morgan. Please go ahead.

Michael Mueller - JP Morgan

Hi, just one quick follow up, for 2010, the $33 million pay down, what is the capital source for that because I think guidance mentioned no dispositions or capital markets activities?

Ron Rubin

We closed the new credit facility of $80 million of available capital, acquiring capacity, and as I mentioned our normal operations should provide sufficient cash flow to pay our normal recurring capital expenditures, and other operating needs. So, we sit here today having $80 million availability under the credit facility.

Michael Mueller - JP Morgan

So, you can use the credit facility as a source to pay that. Okay. Thank you.

Operator

Thank you. And Mr. Rubin, there are no further questions at this time. Please continue with any closing remarks you may have.

Ron Rubin

Thank you very much. Thanks to all of you for joining us this morning, and for your continued interest and support. We look forward to providing our next update on our first quarter earnings conference call in a couple of months. We are very pleased about the closing of the facility, and we want to thank you again and have a very good day.

Operator

Ladies and gentlemen, this concludes the Pennsylvania Real Estate Investment Trust fourth quarter 2009 earnings conference call. Thank you for your participation. You may now disconnect.

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