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Pennsylvania Real Estate Investment Trust (NYSE:PEI)

Q3 2011 Earnings Call

October 27, 2011 11:00 am ET

Executives

Shawn Southard – Director, Corporate Communications

Ronald Rubin – Chairman and Chief Executive Officer

Edward A. Glickman – President and Chief Operating Officer

Robert F. McCadden – Executive Vice President and Chief Financial Officer

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

Analysts

Quentin Velleley – Citigroup Inc.

Craig Schmidt – Bank of America/Merrill Lynch

Michael Mueller – JPMorgan

Nathan Isbee – Stifel Nicolaus & Company, Inc.

Benjamin Yang – Keefe, Bruyette & Woods

Cedrik Lachance – Green Street Advisors

Jeff Lau – Sidoti & Company

Operator

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Pennsylvania Real Estate Investment Trust Third Quarter 2011 Earnings Conference Call. During today’s presentation, all participants will be in a listen-only mode. Following the presentation, the conference will be opened for questions. (Operator Instructions) This conference is being recorded today, Thursday, October 27, 2011.

At this time, I would like to turn the conference over to Shawn Southard. Please go ahead, sir.

Shawn Southard

Thank you (inaudible). Before management begins their prepared remarks, I would like remind our listeners for this conference call will contain certain forward-looking statements within the meaning of the Federal Securities Laws. Forward-looking statements relate to expectations, beliefs, projections, future plans, strategies, anticipated events, trends and other matters that are not historical fact.

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 the forward-looking statement.

PREIT’s business might be affected by uncertainties affecting real estate businesses generally, as well as specific factors discussed in PREIT’s press releases, documents previously filed with the Securities and Exchange Commission, and in particular PREIT’s Annual Report on Form 10-K. PREIT does not intend to update or revise any forward-looking statements to reflect new information, future events or otherwise.

It is now my pleasure to turn the call over to Ron Rubin, Chairman and CEO of PREIT. Ron, the floor is yours.

Ronald Rubin

Thank you very much. Welcome to the Pennsylvania Real Estate Investment Trust third quarter 2011 conference call. Joining me on the call today are Ed Glickman, President; Bob McCadden, our 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 third quarter results, the status and some of our projects and our expectations for the balance of 2011. After we conclude our remarks, the call will be open for your question.

As noted in our press release, the company has experienced the seven consecutive quarter of same-store sales growth, with improvement at 33 of our 38 malls. This growth during a period of economic in stability this reflects of our demographics an improvements in the quality of our assets and their management. As you will here during this call, the company’s efforts are being recognized by our shoppers, our tenants, and by our vendors.

[Before] have been shopping and new an exciting tenants are leasing space in our properties. These efforts have been recognized by our vendors who have participated in a number of property financing during the quarter what we believe our favorable current. Notwithstanding stability in our sales and then occupancy we understand that recovery remains gradual and have no work must be done.

With stable performance consistent with our guidance, we are making slow steady progress in our efforts to strengthen our financial position. Hostel to improved our operational performance and maximize the value of our properties. To accomplish this we are working to improve our balance sheet complete tenant to service to increase NOI to improved occupancy and to generate positively since spreads for all its part of our strategies to create long-term value for our shareholders.

With that, I’ll turn the call over to Ed Glick.

Edward A. Glickman

Thanks Ron. And thanks to all of you for joining us on this call. The company had a solid third quarter with FFO as adjusted up 24%, below we go to market which is the five prediction our portfolio showed improved comp sales performance occupancy under renewals funds that a level of stability and same-store NOI improved.

Sales per square foot increased 4% over year ago to $362 only $2 of our peak level reported in the second quarter of 2007. With occupancy stable on our comp sales momentum rising we see PREIT’s portfolio becoming increasingly attractive to tenants in 2012. During the quarter, we adjust the last of our 2011 debt maturities we are now fully focused on 2012, when $462 million of our mortgage loan mature.

This includes $100 million of power center loan that can be expanded by their chart. Of the remaining 2012 maturities Cap City, Beaver Valley, Chambersburg and Cherry Hill Mall $230 million represents mortgage loans on Cherry Hill Mall. Based on the strong performance of this assets we expect our refinancing activity are generated excess proceed.

Between the excess proceeds from refinancing and expected of availability of our line of credit, we can more than cover the $137 million balance on the exchange of all those with comes during that.

At present, our operating cash flow covers our return on capital expenditures, our scheduled mortgage principal payment and our current dividend. We see availability of our line of credit and anticipated excess proceeds, we believe we have sufficient liquidity to funds our 2012 development and redevelopment activity.

Our strategies for the coming year is straightforward. We have spent a great deal of time renovating and repositioning our assets. So our timing has been a challenge. Our products at our location were strong. In 2012 and beyond, we intend to focus on our employees’ investment cautiously and diligently allocating capital and working towards rebuilding our NOI as the economy improve.

I thank you for your continued interest in PREIT. And with that, I'll give you to Bob. McCadden.

Robert F. McCadden

Thanks Ed. FFO was adjusted was $29 million or $0.51 per diluted share compared to $23.2 million of $0.41 per diluted share last year. This year's quarter includes impairment charges totaling $52.1 or $0.91 per diluted share. 2010’s third quarter included the amortization deferred financing cost of $1.4 million or $0.03 per diluted share and also included $2.4 million of NOI generated from the power centers that we sold in September of 2010.

Let me address the impairment charges first. We recorded a $28 million write-down the sales for Mall, and sales for New Jersey, and $24.1 million write-down (inaudible) Pennsylvania to reflect our estimate of each property’s fair value. The impairment resulted from our ongoing review of the properties in the portfolio, including an assessment of each assets’ forecasted future cash flows. Based on our assessment of existing and potential cash flows from these two properties, we determined that an adjustment to the carrying value of these assets was required.

Same store NOI excluding lease terminations or the quarter and September 30, 2011 was $58.4 million, an increase of $2.8 million or 4.1% compared to the $65.6 million generated last year’s quarter. Lease terminations were approximately $200,000 this year compared to approximately $400,000 in the prior year.

Same store revenues were in line with last year’s quarter. However, if we’re able to improve our operating margins and generate same store NOI growth as a result of lower bad debt expenses and by reducing our electric utility consumption at a number of our properties. Bad debts were approximately 50 basis points of revenue in the third quarter compared to almost 170 basis points in the prior year quarter.

On a year-to-date basis, bad debts are running approximately 1% of revenues compared to 1.5% of revenues during our last year. Overtime, we hope to move back to historic run rate, which is closer to 75 to 80 basis points of revenues. Our portion of the reduction in utility expenses came from lower consumption; a larger portion was due to better pricing obtained as a result of deregulation, a new energy supply contracts primarily in Pennsylvania.

We recorded $700,000 of higher net utility from the third quarter and about $1 million on a year-to-date basis. Interest and other income in the third quarter included $1.5 million from the bankruptcy related settlement pertaining to the Valley View Downs development in Western Pennsylvania. In both periods, other income also includes the sale of historic tax credits to the 801 Market Street renovation.

Our G&A costs were approximately $700,000 lower this quarter as a result of lower compensation accruals related to mark-to-market long-term incentive plans and another $300,000, we added to long-term incentive plan reversals pertaining to the part of employees.

Outstanding debt for the quarter including our share partnership debt averaged $2.371 billion compared to $2.521 billion in last year's third quarter, a decrease of $150 million. Interest expense was lower than the prior year due to lower outstanding balances combined with lower interest rates on refinanced mortgages and lower spreads on the amended credit facility, which became effective on June 29 of this year.

The average interest rate on borrowings in the third quarter of 2011 fell to 5.86% from 6.19% in last year's third quarter, a decrease of 33 basis points. At the end of September, we had $36 million of cash on hand and $195 million available under the revolving portion of our credit facility. At the end of the quarter, 94.9% of our debt was either fixed or swapped to fixed. Our bank leverage ratio was 57.78% modestly higher than a ration at the end of June.

PREIT’s net loss for the quarter was $59.4 million or $0.34 per share. Last year, we reported a loss of $3.6 million or $0.07 per diluted share, which included a gain on the sale of discontinued operations of $19.2 million.

Regarding our outlook for the balance of 2011, we are adjusting our expectations for 2011’s operating results. We expect GAAP earnings per diluted share will be a net loss between $1.70 and $1.74. We expect FFO has adjusted per diluted share to be in a range of $1.75 to $1.79 per share. This represents a $0.15 per share increase in our guidance from the end of last quarter.

We expect full year same store NOI excluding lease terminations to be roughly flat compared to the prior year. Our guidance for the balance of the year does not contemplate any acquisitions, property sales or capital market transactions other than property refinancing.

With that, I'll now turn the call over to Joe Coradino.

Joseph F. Coradino

Thank you, Bob. We are pleased with the recent retail performance that are seeing marked improvement in selected soft goods retailers and general improvement from other mall based retailers. This has translated into continued sales growth in the portfolio with 33 of our 38 mall showing increases over prior year.

The number of malls in our portfolio reporting sales of over $400 per square foot increased by (inaudible). Pre-registered sales of over $500 per square foot with Cherry Hill Mall leading the pack at $577 a square foot.

Portfolio comp sales for the quarter was 362 per square foot, an increase of 4% over the third quarter of 2010 and the seventh consecutive quarter of sequential growth. Total occupancy at the end of the quarter was 91.9% an increase of 40 basis points as compared to the 91.5% reported for the third quarter of 2010.

Inline occupancy ended the quarter at 87.8% up 100 basis points from the second quarter and 30 basis points lower than the third quarter of 2010. This decrease is largely attributable to the closing of the Borders locations it backfills and not yet taken occupancy at the close of the quarter. During the quarter, our renewal transactions with terms of five years or more were solid registering positive spreads of 11.9%.

Overall, renewals were slightly positive generating rent increases of one half of 1% weighted down by some other shorter term deals. New leases for previously leased space were signed at rent that were 22.6% lower than what the previous tenant was paying. This contraction was driven primarily by the re-leasing of the former Borders locations (inaudible).

We have mitigated the majority of the impact of the Borders bankruptcy. We started the year with 11 Borders and with over one backfill filled. During the quarter, we executed five deals with (inaudible) million, a sixth location is ground leased and expected to be become a [books for million.] The other stores are to be backfilled by Raymour & Flanigan, Forever 21 and expanding regional operator into two books.

As it relates to GAAP’s announcement towards by the end of 2013, we expected five locations within our portfolio will close at least expiration. We’ve executed a lease with (inaudible) to backfill Jacksonville and signed (inaudible) Fashion to take their store to The Mall at Prince Georges'.

We are in discussions with merchants with the remaining three and backfill locations and it is our expectation in the aggregate we will significantly improve upon the former GAAP economics when all the spaces are released.

(Inaudible) JC Penney, Nordstrom Rack, Bravo and Forever 21 will occupy The Cheesecake Factory in the former Strawbridge’s box. Bravo was on track to open it a few weeks, Forever 21 following with the December opening. This space has been turned over to Nordstrom Rack for construction and will open in May of next year and we are underway with our work with JC Penney who will open in September 12.

As already (inaudible) center Rizzieri opened their wellness center expansion in July and two of our restaurant concepts Firecreek Restaurant + Bar and Doghouse Burgers will celebrate their brand openings over the next two weeks.

By year end these two concepts will be joined by Spoon Me and It’s A Doggie Dog World. The construction of the (inaudible) will begin shortly for 2012 opening (inaudible) opened in the mall on September 30. On the residential front occupancies of rental units is 87%. At Crossroads Mall in Beckley, West Virginia we had significantly upgraded the center with four major tenants PetsMart, Sheetz, Encore Books and DICK'S Sporting Goods replacing several underperforming retailers. When DICK’S opens next month in line occupancy for the Center will increase to over 90% from less than 70% in late 2009. these new tenants have striking the centers market position and continue to improve its sales productivity.

During the quarter we executed leases with exciting retailers including (inaudible) a number of these are opened during the fourth quarter and will be joined by books in million at six locations, (inaudible) and for ever 21 and Bravo will grow.

With the addition of the recently executed and in retailers in restaurants the stage is set for the continued growth of our portfolio. With that we re ready for questions.

Question-and-Answer Session

Operator

Thank you sir. We will now begin the question and answer session. (Operator Instructions). Our first question is from the line of Quinton with Citi. Please go ahead.

Quentin Velleley – Citigroup Inc.

Hi, good morning guys. Just in terms of the impairments, I’m just sort of curious given the value of the (inaudible) for those two assets now, whether or not when you are looking at fair value whether that was sort of marked down to a cost of a land value or whether it was still sort of an investment asset value I guess would say. And if so what kind of cap rate have they’ve been impaired to?

Robert F. McCadden

So Quentin, when we look at the fair value of the asset there is a couple of techniques that we use. One is just kind of cash flow approach; in second case we actually look around and get third-party appraisal and the appraisal usually typically uses multiple approaches for use of this kind of cash flow market comp and the cost approach and then reconcile the three. So if you’re looking at generally a cap rate that was used probably somewhere around 10% to 11% for these assets, that wasn’t (inaudible) to the ultimate value that the assets are written down, so it’s really factoring all the things that I described as well as at a residual value what if it was as it’s no longer functioning in its current state.

So it’s multiple approaches of evaluation and then trying to reconcile the various numbers they come up with, so report these items ultimately agreed to by the management team.

Quentin Velleley – Citigroup Inc.

Okay. And then with (inaudible) could you spend a bit of CapEx on 3Q 2010, so may be if you can just sort of talk through what happened there given you spend the CapEx and then incurred an impairment I don’t know if anything (inaudible) in the market or the performance?

Robert F. McCadden

No, that’s certainly (inaudible) to explain, if you remember back in 2006 and 2007, we run to construction with a new replacement sort of box house was actually an addition to them all and we spend roughly $17 million, $18 million on that new box house, while we’re at the construction box house began experiencing major difficulty and ultimately filed for bankruptcy. In the bankruptcy process they rejected to lease for that store which hadn’t been occupied, and we’ve been working for the last four to five years to find some alternative uses for that box, and we think we may have a possibility for use. But the rental rates that we would expect from the (inaudible) is substantially lower than what we had anticipated from box house and ultimately that led to the decision to in effect write this asset down. It was actually spent five years ago.

Quentin Velleley – Citigroup Inc.

Okay, got it. And then, and Robert you may have said this in your prepared remarks that just in terms of the operating expenses which were much lower and hence much better than what we are expecting can you just sort of run through what the improvement was caused by and whether or not that sort of going to be recurring in that?

Robert F. McCadden

Well I think the two figure with bad debt expense which are running at third quarter’s 50 basis points of revenues, you know of all last year we were about 150 basis points, (inaudible) including the third quarter were about 100 basis points; historical average is somewhere between 75 and 80, so we’re hoping with the recovering economy, and hopefully healthy financial position of some of the retailers that we will begin to deal to sustain that rubble, not necessarily the 50 basis point, but certainly something below where we have been running in the last couple of years.

And the other key driver was our ability to purchase that utility cost, electric utilities in the open market with the regulation in Pennsylvania and in certain of our malls we actually redistribute those utilities to our tenants. The tenant rate is set by Public Utility Commission and to the extent we’re able to buy and to see those payments accrue to our benefit.

Ronald Rubin

Okay, that’s great. And (inaudible) is online, I think he’s got a question as well.

Quentin Velleley – Citigroup Inc.

Hey, guys. Good morning. Just had a question for you; (inaudible) how much money have you put towards the whole – with your license initiative there?

Robert F. McCadden

It’s not a material amount and we’re coming, we’re closely coming to an end with the (inaudible)

Quentin Velleley – Citigroup Inc.

Right.

Operator

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

Craig Schmidt – Bank of America/Merrill Lynch

Great, thank you. Just looking at the average rent base; in third quarter ’09 it was 29/32 and third quarter ’10, it’s 28/92 and it’s 28/55 this quarter; I am wondering just looking out a year ahead do you think it was still flow a little further or is that trend going to reverse itself?

Robert F. McCadden

Craig, this is Bob. I think one of the things that I think we talked about in prior quarter is that we have a disproportionate amount of our leases expiring in our $350 square foot properties, so to some extent as we’ve seen in this quarter the average base rent was really concentrated in the bottom quarter of the portfolio and again it’s really a function of where the economy is (inaudible) come up for renewals because in fact that we were trying to set our tenants rental rates based on over our occupancy cost which is driven largely by how rents are performing at our stores.

Craig Schmidt – Bank of America/Merrill Lynch

Great, and then just sensing about you know going from orders to the books (inaudible) was there any cause there, you know it’s lot of getting back in the book category just given kind of the physical challenges for that space.

Edward A. Glickman

Well. we think in the this shale course you know, we’ve taken the larger format books to million as they have obviously in addition to a coffee shop, they have introduced the yoghurt, a yoghurt shop and they have certainly dedicated less space to books there. We think a suitable replacement. We also think there is room for two book retailers in this country at this point and so we’re, we’re optimistic that they’re going to continue to operate and drive traffic and sales at the properties.

Craig Schmidt – Bank of America/Merrill Lynch

Okay. Thank you.

Operator

Thank you. Our next question is from the line of Michael Mueller with JPMorgan. Please go ahead.

Michael Mueller – JPMorgan

Yeah, hi. Just want to go back to the guidance and the Q3 deed again. And I mean, if we look at the guidance how much it went off, it was the $0.15 at the midpoint and that looks to be about what the upsides in the quarter was relative to the [stream]. If we look at the implied fourth quarter guidance if they are similar to where most (inaudible) before hand, so it’s not that big of a seasonal pause. I mean, should we think of the NOI, it sounds like the G&A relates a little bit lower is that’s the key, the NOI would you consider Q3 to be a little bit more of an anomaly or is that something that’s going to repeat say every year now in terms of just having a much bigger Q3.

Ronald Rubin

No, I think that’s for the reason I talked about, you know, obviously you know the day that we saw an unusually healthy result in last years fourth quarter we firstly had no bad debt expense and again, just based on this (inaudible) of the receivables. So, you know, when you’re comparing fourth quarter of this year to last year just keep in mind that the bad debt expense was relatively immaterial in the fourth quarter of 2010, which I think was an experience shared by many of our peers, if you remember from (inaudible) transcripts from the last year end. So I don’t think there was anything unusual and the other issue is, we’re now on a deregulated energy environment and that’s going to be a function of you know, we’re trying to fight forward for some of our procurement needs and so that’s why we get the function of where the market is at a point in time.

Michael Mueller – JPMorgan

Okay. Thank you.

Operator

Thank you. Our next question comes from the line of Nathan Isbee with Stifel Nicolaus. Please go ahead.

Nathan Isbee – Stifel Nicolaus & Company,Inc.

Hi, good morning. As you had spoke in the last call about middle market still being buyers market there was a reluctance to go the longer term deal and this was bit of a reversal from the tone coming out by TSC. Can you just characterize the discussions over the last few months where those have gone with the kind of especially at your second (inaudible)?

Edward A. Glickman

Well, I would say that this year we’re facing as you finally know from our (inaudible) report we started the year I think about over 2 million square feet and that’s about a 1000 million square feet. We’re likely going to be slightly below that million square feet of all of those long ago the next year shows essentially as Bob mentioned earlier, we’re dealing with many of the mid tier, lower tier models by having them on, having those incentives on short term leases. And looking for some (inaudible) in the economy before we get into the longer term association, you know essentially given our leasing expectations in terms of the number of square feet that have been raised, but you know where we says put is extraordinarily low of closing so I don’t think the situation around the corner property is specific have really changed dramatically for when we had that conversation.

Nathan Isbee – Stifel Nicolaus & Company,Inc.

Okay. And, can you just talk about the terms of the (inaudible) deal how long was it?

Robert F. McCadden

Three to five year deals.

Nathan Isbee – Stifel Nicolaus & Company,Inc.

Okay. Thank you.

Operator

Thank you. Our next question comes from the line of Ben Yang – Keefe, Bruyette & Woods. Please go ahead.

Benjamin Yang – Keefe, Bruyette & Woods

Yeah. Hi, good morning. Just following on the rent question earlier. You mentioned setting rents based on overall occupancy cost, but your sales have been rising in the past two years, while you’re occupancy cost are generally following. So, does that necessarily imply that your target occupancy costs are nearly is falling as well, and what exactly is that target for your portfolio average.

Robert F. McCadden

I think if you look at our portfolio average we should be somewhere in the 12% to 13% range. Look, I think you have to distinguish between assets that are on the (inaudible) properties over $400, $500 a foot and be a much higher occupancy cost probably in the mid teens compared to assets are in the lower rank which probably had it well was the right size remained as assets.

Benjamin Yang – Keefe, Bruyette & Woods

But overall, it looks like its pretty broad based and when you comment on 33 of your malls reporting positive sales growth, but if you look at your supplemental it looks like 27 of your malls reported declines in your average rent, so I mean, is that occupancy cost target following are your retailers a little reluctant to take what they might have done a few years ago?

Robert F. McCadden

There is a couple of things guys on when you look at the statistics. Comp store sales, we don’t actually include sales and so it’s kind of an occupancy for at least 24 months. So negative 10 is that we’ve added you’ve got the lower capital portfolio or more regional or local and they haven’t yet reported there you know that’s not includes in our comp store comparison yet. So overtime you may actually see some normalization of this occupancy cost in that part of portfolio.

Edward A. Glickman

Plus there is a lag, I mean I should begin to see sales rise there is a lag to be able to begin to see upward movement in risk and essentially the number of tenants that we have coming into our portfolio that we've recently done deals with opening that complete the redevelopments and or start to complete the redevelopments or finish the redevelopments I think will drive rentals and renewals upward again, but there is a lag.

Benjamin Yang – Keefe, Bruyette & Woods

Totally, I understand the lag, but I guess after two years I would have expected it to translate into the run by now. So but based on the lag, I guess that there is some built in growth given that sales have been trending positive for a while. Is that a fair assessment or do you need some type of improvement in the overall economy to capitalize on some type of win growth?

Edward A. Glickman

I think the answer to the question is below.

Benjamin Yang – Keefe, Bruyette & Woods

Okay. Thank you.

Operator

Thank you. Our next question comes from the line of Cedrik Lachance with Green Street Advisors. Please go ahead.

Cedrik Lachance – Green Street Advisors

Thanks. Ed, (inaudible) largely about trying to negotiate leases in both with some of the retailers you are shifting the strategy a little bit. Have you been able to have you had some success I guess in some of those lease negotiations. And is it going to change some of the percentage rent deals that we from your top tenants?

Edward A. Glickman

I think you're addressing your accounts transactions.

Cedrik Lachance – Green Street Advisors

Yeah. Major accounts transactions and you were trying to look at perhaps addressing lease maturities little differently and trying to negotiate a number of resource each tenant rather than going mall by mall.

Edward A. Glickman

Correct.

Cedrik Lachance – Green Street Advisors

Your changing strategy a little bit. I'm kind of curious as to what the response has been from tenants and what it means perhaps going forward in terms of percentage of rent deals as we see from selling to top tenant?

Edward A. Glickman

Yeah. Essentially, we have approached the major account transactions differently and we've been successful in concluding a number of those transactions we've about 73% of those – of our renewals completed with really three major accounts out there still open.

And part of that has been really trying to drive rents the question that was previously asked is really the issue and so we've got three major accounts some of our – fit into the top 20 category, the good news is those tenants are growing sales within our portfolio, number one and those companies they're performing.

So we've taken a very hard line and hopefully we'll have positive results on a going forward basis.

Cedrik Lachance – Green Street Advisors

And in terms of the percentage rent leases, there you're going to be able to reduce other percentage rent leases with some of your top tenants or is it a trend that's likely to continue?

Edward A. Glickman

We've actually decreased in the number of tenants on a percentage of sales basis, those leases (inaudible) maturity we have been converting them, we are converting too traditional for leases. We have actually, we feel kind of popping out of that maybe earlier part of this year and each month sequentially we started to see that as well.

Cedrik Lachance – Green Street Advisors

Okay. And you are talking about (inaudible) where you're seeing done a couple of big box deals to take away some of the in line space, is it something that you're going to continue to do in many of your second TMLs or is there a trend that have seen at this point?

Edward A. Glickman

Well, it's something we've been doing for a while actually that goes back to the original acquisition account that we've begun to incorporate, we've done it at Lycoming Mall, we have done at number of our properties. And we think on a selective basis particularly where there is a competitive environment where the possibility of developing a power center near the property and you have significant vacancy as the case of Crossroads where we're opening up Dick’s Sporting Goods next week. We do see that as a potential solution for some of the second-tier properties, just a) they're well located and b) they have a competitive franchise.

Cedrik Lachance – Green Street Advisors

Okay. And in terms of rental rate how would you compare rent you can yet sell to big box vendors versus what you are getting in the in line space?

Edward A. Glickman

Yeah. Obviously not as high. It's unusual to get rents in a mall less than $20 a square foot and you're probably in the mid to high teens with the boxes, but at the same time, you are replacing vacant space. So the comparison to give the inline tenants is certainly worth considering, but in many cases, space has been vacant for a number of years.

Cedrik Lachance – Green Street Advisors

Okay, great. Thank you.

Operator

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

Quentin Velleley – Citigroup Inc.

Hey guys, it's Quentin here again. Just wanted to take on your G&A, what would you consider a good run rate going forward?

Edward A. Glickman

Probably about 9.5 a quarter.

Quentin Velleley – Citigroup Inc.

Okay, great. That's it. Thanks.

Operator

Thank you. (Operator Instructions) And our next question is from the line of Jeffrey Lau with Sidoti & Company. Please go ahead.

Jeffrey Lau – Sidoti & Company

Hi, good morning. Can you guys remind me the last time you guys took impairment with those impairments are on that assets (inaudible)?

Edward A. Glickman

Yeah. We took impairments on a couple of development assets, I want again to go together in new product in Pennsylvania.

Jeffrey Lau – Sidoti & Company

Okay.

Edward A. Glickman

And we have also looked down Orlando Fashion Square.

Jeffrey Lau – Sidoti & Company

Okay.

Edward A. Glickman

That was in '09.

Jeffrey Lau – Sidoti & Company

Thanks.

Operator

Thank you. And I'm showing no further questions at this time, I'd like to turn the conference back over to Mr. Rubin for any closing remarks.

Ronald Rubin

Okay, thank you very much for joining with us today and for your continued support. We look forward to sharing our full year results on our next earnings conference call in February. So thanks again. And have a good day.

Operator

Thank you sir. Ladies and gentlemen, this does conclude the Pennsylvania Real Estate Investment Trust third quarter 2011 earnings conference call. Thank you for your participation. You may now disconnect.

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