Pennsylvania Real Estate Investment Trust · 424B5 · On 12/19/97

Filed On 12/19/97   ·   SEC File 33-61115   ·   Accession Number 950116-97-2326

Prospectus   ·   Rule 424(b)(5)
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 424B5       Prospectus                                           167    965K 

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[GRAPHIC OMITTED]                                                               

PROSPECTUS SUPPLEMENT                                                           
(To Prospectus dated December 17, 1997)                                         

4,000,000 Shares  
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST                                       
Shares of Beneficial Interest 
---------------------   
Pennsylvania Real Estate Investment Trust (the "Company") is a fully  
integrated, self-administered and self-managed real estate investment trust     
("REIT") which acquires, develops, redevelops and operates retail and           
multifamily properties. Founded in 1960, the Company is one of the 15 largest   
publicly held operators of retail properties in the United States.              
   On September 30, 1997, the Company acquired The Rubin Organization, Inc.,
a commercial property development and management firm, and certain related real 
estate interests. The Company's portfolio includes interests in 17 shopping     
centers containing an aggregate of approximately 6.0 million square feet and    
interests in 19 multifamily properties containing 7,236 units. Substantially    
all of the Company's properties are located in the Eastern United States, with  
concentrations in the Mid-Atlantic states and in Florida. The Company also      
provides management, leasing and/or development services for 49 retail          
properties containing approximately 19.2 million square feet and 11 office      
buildings containing approximately 4.0 million square feet for affiliated and   
third-party property owners.                                                    
 All of the Company's Shares of Beneficial Interest, par value $1.00 per
share (the "Shares"), offered hereby (the "Offering") are being sold by the     
Company. To assist the Company in complying with certain qualification          
requirements applicable to REITs, the trust agreement of the Company (the       
"Trust Agreement") provides that no person may beneficially own more than 9.9%  
of the outstanding Shares, subject to certain specified exceptions. See         
"Description of Shares of Beneficial Interest--Restrictions on Transfer" in the 
accompanying Prospectus. Upon completion of the Offering, management and        
trustees of the Company will beneficially own approximately 11.7% of the equity 
in the Company.                                                                 

 The Shares are listed on the New York Stock Exchange (the "NYSE") under
the symbol "PEI." On December 17, 1997, the last reported sale price of the     
Shares on the NYSE was $22 3/8. See "Price Range of Shares and Distributions."  
---------------------   
   See "Risk Factors" beginning on page 4 of the accompanying Prospectus for
certain factors relevant to an investment in the Shares offered hereby.         
---------------------   
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND    
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON  
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT  
OR THE ACCOMPANYING PROSPECTUS. ANY REPRESENTATION  
TO THE CONTRARY IS A CRIMINAL OFFENSE.  
================================================================================
           Price to      Underwriting Discounts    Proceeds to
            Public        and Commissions (1)      Company (2)
--------------------------------------------------------------------------------
Per Share  ......  $    22.375        $     1.34            $    21.035         
--------------------------------------------------------------------------------
Total(3)   ......  $89,500,000        $5,360,000            $84,140,000         
================================================================================
(1) The Company has agreed to indemnify the Underwriters against certain        
liabilities, including liabilities under the Securities Act of 1933, as 
amended. See "Underwriting."                                            
(2) Before deducting expenses payable by the Company estimated at $950,000.     
(3) The Company has granted the Underwriters a 30-day option to purchase up to  
600,000 additional Shares on the same terms and conditions as set forth 
 above soley to cover over-allotments, if any. If such option is exercised
in full, the total Price to Public, Underwriting Discounts and          
 Commissions, and Proceeds to Company will be $102,925,000, $6,164,000 and
$96,761,000, respectively. See "Underwriting."                          
--------------------- 
The Shares offered by this Prospectus Supplement are offered by the   
several Underwriters, subject to prior sale, to withdrawal, cancellation or     
modification of the offer without notice, to delivery and acceptance by the     
Underwriters and to certain further conditions. It is expected that delivery of 
the Shares will be made at the offices of Lehman Brothers Inc., New York, New   
York on or about December 23, 1997.                                             
---------------------   
LEHMAN BROTHERS                                                                 
LEGG MASON WOOD WALKER                              
INCORPORATED                              
MERRILL LYNCH & CO. 
                        SALOMON SMITH BARNEY
                                                    WHEAT FIRST BUTCHER SINGER
December 17, 1997                                                               

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[GRAPHIC OMITTED] 

      [The inside front cover and inside back cover contain 11 pictures of
the following properties: (i) Northeast Tower Center (outside shot of The Home  
Depot with caption indicating anticipated acquisition date); (ii) Crest Plaza   
Shopping Center (outside shot of Weis Markets); (iii) Laurel Mall (aerial shot);
(iv) Hillview Shopping Center (outside shot of Target Greatland with caption    
indicating anticipated acquisition date); (v) Lehigh Valley Mall (two inside    
shots; before and after presentation); (vi) Hillview Shopping Center (outside   
night shot with caption indicating anticipated acquisition date); (vii)         
Cobblestone Apartments (outside shot); (viii) Eagle's Nest Apartments (outside  
shot); (ix) Hidden Lakes Apartments (outside shot); and (x) Palms of Pembroke   
Apartments (outside shot).]                                                     

   [The inside front cover also includes a map of the Eastern United
States setting forth the location of Existing, Acquisition and Development      
Properties and the headquarters and regional offices of the Company.]           

   CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE SHARES. SUCH      
TRANSACTIONS MAY INCLUDE THE PURCHASE OF SHARES PRIOR TO THE PRICING OF THE     
OFFERING FOR THE PURPOSE OF MAINTAINING THE PRICE OF THE SHARES, THE PURCHASE   
OF SHARES FOLLOWING THE PRICING OF THE OFFERING TO COVER A SYNDICATE SHORT      
POSITION IN THE SHARES OR FOR THE PURPOSE OF MAINTAINING THE PRICE OF THE       
SHARES AND THE IMPOSITION OF PENALTY BIDS. FOR A DESCRIPTION OF THESE           
ACTIVITIES, SEE "UNDERWRITING."                                                 

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SUMMARY 

 The following summary is qualified in its entirety by the more detailed
information appearing elsewhere in this Prospectus Supplement and the           
accompanying Prospectus or incorporated therein by reference. Unless otherwise  
indicated, the information in this Prospectus Supplement assumes that the       
Underwriters' over-allotment option is not exercised. Pennsylvania Real Estate  
Investment Trust, a Pennsylvania business trust (the "Company"), conducts       
substantially all of its operations through PREIT Associates, L.P., a Delaware  
limited partnership (the "Operating Partnership"). As used herein, unless the   
context indicates otherwise, the term "Company" includes Pennsylvania Real      
Estate Investment Trust, the Operating Partnership and their subsidiaries and   
affiliates, including PREIT-RUBIN, Inc. (formerly The Rubin Organization,       
Inc.), a commercial property development and management firm in which the       
Company owns 95% of the economic interests in the form of non-voting common     
shares (together with its predecessors, "PREIT-RUBIN").                         

The Company 

   The Company is a fully integrated real estate operating company active in
acquiring, developing, redeveloping, managing and leasing retail and            
multifamily properties. Founded in 1960, the Company is one of the 15 largest   
publicly held operators of retail properties in the United States (in terms of  
square feet owned and/or managed). On September 30, 1997, the Company acquired  
The Rubin Organization, Inc., a commercial property development and management  
firm, and certain related real estate interests.                                

  The Company owns interests in 17 retail properties (the "Existing Retail
Properties") containing an aggregate of approximately 6.0 million square feet,  
19 multifamily properties (the "Multifamily Properties") containing an          
aggregate of 7,236 units, six industrial properties containing an aggregate of  
approximately 700,000 square feet and three parcels of undeveloped land. In     
addition, the Company has entered into agreements to acquire interests in two   
shopping centers containing an aggregate of approximately 824,000 square feet   
(the "Acquisition Properties"). The Company also owns interests in five         
shopping centers under development (the "Development Properties"), which are    
expected to contain an aggregate of approximately 2.2 million square feet upon  
completion. Two of the Development Properties are currently under construction, 
and the Company anticipates that the remaining three Development Properties     
will be completed by the year 2000.                                             

  The Company provides management, leasing and/or development services for
49 retail properties containing approximately 19.2 million square feet and 11   
office buildings containing approximately 4.0 million square feet for           
affiliated and third-party property owners.                                     

  The Company's management team has extensive experience in the commercial
real estate industry. The Company's 21 most senior corporate and property-level 
employees have an average of 23 years of experience in the real estate industry 
and an average of 15 years of experience with the Company and its predecessors. 
The Company has approximately 1,150 employees, approximately 1,000 of whom are  
located on-site at the Company's owned and managed properties. The Company      
maintains its headquarters in Fort Washington, Pennsylvania, a suburb of        
Philadelphia, and has regional offices in Chicago, Illinois, Atlanta, Georgia   
and Boca Raton, Florida.                                                        

Recent Developments 

Acquisition of The Rubin Organization, Inc. On September 30, 1997, the
Company acquired The Rubin Organization, Inc. (renamed "PREIT-RUBIN, Inc.") and 
interests in certain related retail properties (the "TRO Transaction") as part  
of the Company's previously announced strategy to acquire management, leasing   
and development expertise for retail properties, as well as to grow its         
portfolio of owned properties. Founded in 1946, The Rubin Organization was a    
Philadelphia-based owner, operator and developer of commercial real estate      
properties. As part of the TRO Transaction, the Company also acquired interests 
in four of the Existing Retail Properties containing an aggregate of            
approximately 2.1 million square feet, and obtained the right to                

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acquire the Acquisition Properties and four of the Development Properties. Of   
the four Existing Retail Properties acquired, two were purchased from entities  
affiliated with investor Samuel Zell for a combination of cash, assumption of   
debt and issuance of units of limited partner interest in the Operating         
Partnership ("OP Units").                                                       

The following table sets forth certain information regarding the four 
Existing Retail Properties acquired in the TRO Transaction:                     

Recent Acquisitions 

                                                                · Download Table

                                                                         Percentage 
                             Percentage       Total          Owned        Leased at 
Property and Location          Owned       Square Feet    Square Feet     9/30/97   
---------------------------  ------------  -------------  -------------  -----------
                                                                                    
The Court at Oxford Valley                                                          
Langhorne, PA  ............       50%          692,000        457,000        100%   
Magnolia Mall                                                                       
Florence, SC   ............      100%          570,000        570,000         98%   
North Dartmouth Mall                                                                
North Dartmouth, MA  ......      100%          620,000        620,000         88%   
Springfield Park                                                                    
Springfield, PA(1)   ......       50%          209,000         65,000        N/A    
                                               -------        -------               
   Total ..................                  2,091,000      1,712,000               
                                             =========      =========               

------------                                                                    
(1) The Company owns an undivided one-half interest in one of three floors in   
this former department store as a tenant in common. The Company acquired
this vacant property for purposes of redevelopment.                     

The following table sets forth certain information regarding the      
Acquisition Properties:                                                         

Acquisition Properties  

                                                        · Enlarge/Download Table

                           Percentage                                       Percentage   
                             To Be            Total          Owned           Leased at   
Property and Location       Acquired       Square Feet    Square Feet        9/30/97     
-------------------------  --------------  -------------  ----------------  -------------
                                                                                         
Hillview Shopping Center                                                                 
Cherry Hill, NJ .........        50%          340,000         340,000(1)        100%     
Northeast Tower Center(2)                                                                
Philadelphia, PA   ......       100%(3)       484,000         353,000(4)         99%(5)  
                                              -------         -------                    
   Total  ...............                     824,000         693,000                    
                                              =======         =======                    

------------                                                                    
(1) Includes 261,000 square feet of retail space situated on land leased to     
tenants which own their own buildings.                                  
(2) Information includes 121,000 square feet currently under development (Phase 
II). Phase I is 99% leased.                                             
(3) The Company will initially acquire an 89% interest in the partnerships      
which own this property and the right to acquire the remaining 11%      
interest not earlier than three years from the initial acquisition date.
(4) Includes 153,000 square feet of retail space situated on land leased to     
tenants which own their own buildings.                                  
(5) Of constructed and owned space.                                             

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The following table sets forth certain information regarding the                
Development Properties:                                                         

Development Properties  

                                                        · Enlarge/Download Table

                                                   Planned                                          
                                   Percentage       Total                             Expected      
Property and Location             To Be Owned    Square Feet     Status(1)           Completion     
--------------------------------  -------------  -------------  --------------  --------------------
                                                                                                    
Christiana Power Center Phase I                                                                     
Newark, DE .....................       50%           295,000    Construction    Second half of 1998 
Red Rose Commons                                                                                    
Lancaster, PA ..................       50%(2)        463,000    Construction    Second half of 1998 
Warrington Shopping Center                                                                          
Warrington, PA   ...............      100%           415,000     Development    Second half of 1999 
Blue Route Metroplex                                                                                
Plymouth Meeting, PA   .........       50%(2)        760,000     Development    First half of 2000  
Christiana Power Center Phase II                                                                    
Newark, DE .....................       50%           300,000     Development    Second half of 2000 

                                                     -------                                        
   Total   .....................                   2,233,000                                        
                                                   =========                                        

------------                                                                    
(1) "Construction" indicates that construction activities, such as site         
preparation, ground-breaking activities, or exterior construction, have 
commenced. "Development" indicates that development activities, such as 
site surveys, preparation of architectural plans, or initiation of land 
use approvals or rezoning processes, have commenced (but "Construction" 
has not commenced).                                                     
(2) Subject to reduction as described under "The Company -- The TRO Transaction 
-- The Goldenberg Letter Agreement."                                    

Formation of Operating Partnership. The Company recently formed the   
Operating Partnership to hold substantially all of its assets. The Company      
believes that the operating partnership structure provides it with a            
competitive advantage in acquiring properties from sellers who desire to defer  
the tax consequences of a sale. Following the Offering, the Company will own a  
94.2% limited partner interest and a 1.0% sole general partner interest in the  
Operating Partnership. The Company anticipates that all future property         
acquisitions will be owned, directly or indirectly, by the Operating            
Partnership.                                                                    

   Expansion of Credit Facility. On September 30, 1997, the Company replaced
its $75.0 million credit facility with a $150.0 million credit facility (the    
"Credit Facility"). The prior credit facility carried an interest rate equal to 
the 30-day London Interbank Offered Rate ("LIBOR") plus 1.85%. The Company      
reduced the interest rate under the new Credit Facility to LIBOR plus 1.70%,    
which will be further reduced to LIBOR plus 1.40% following the Offering and    
the application of the net proceeds therefrom (see "Management's Discussion and 
Analysis of Financial Condition and Results of Operations -- Liquidity and      
Capital Resources -- The Credit Facility"). Following the Offering, the Company 
will have approximately $105.4 million available under the Credit Facility to   
fund additional growth.                                                         

 NYSE Listing. On November 14, 1997, the Shares commenced trading on the
NYSE. The Company believes that its listing on the NYSE will enhance            
shareholder value by increasing the liquidity of the Shares and increasing the  
Shares' appeal to institutional investors.                                      

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Business and Growth Strategies  

Business Strategies                                                             

  The Company's primary business objective is to maximize the total return
to its shareholders through growth in cash flow and appreciation in the value   
of its assets. The Company plans to achieve this objective by employing the     
operating strategies and capitalizing upon the internal and external growth     
opportunities described below.                                                  

Operating Strategies and Organizational Strengths                               

Fully Integrated Real Estate Operating Company. The Company is a fully
integrated real estate operating company active in acquiring, developing,       
redeveloping, managing and leasing retail and multifamily properties. The       
Company believes that the integration of The Rubin Organization's real estate   
operating skills with its own asset management skills will provide it with the  
ability to develop, acquire and manage a growing portfolio. In addition to      
leasing and property management, the Company's personnel also perform a number  
of staff and administrative functions, including financial services, lease      
administration, legal services, human resources, management information         
systems, marketing, purchasing and risk management.                             

 Development Capabilities. The Company's development group is staffed by
eight full-time development professionals who have significant experience in    
the development of retail, multifamily and other commercial properties. Over    
The Rubin Organization's 50-year history, it and its predecessors have been     
responsible for major development projects such as: Christiana Mall in Newark,  
Delaware; Willow Grove Park Mall in Willow Grove, Pennsylvania; Cumberland Mall 
in Vineland, New Jersey; Newburgh Mall in Newburgh, New York; and Mellon Bank   
Center and historic redevelopments such as The Bellevue and One Penn Center at  
Suburban Station, all in Philadelphia, Pennsylvania.                            

Benefits of Size. As one of the 15 largest publicly held operators of 
retail properties in the United States, the Company believes it has certain     
strategic and financial advantages over smaller operators. These advantages     
include: (i) strong relationships with tenants, facilitating the leasing of     
retail space in its properties; (ii) economies of scale in the operation of its 
properties; (iii) the enhanced ability to attract and retain qualified          
employees; and (iv) improved liquidity and access to capital.                   

Growth Strategies                                                               

The Company seeks to increase cash flow by intensively managing its   
properties and selectively acquiring, repositioning and developing additional   
retail and multifamily properties. The Company also intends to continue to      
pursue strategic acquisitions of other real estate companies and portfolios,    
such as the TRO Transaction, which complement its existing portfolio and        
management capabilities.                                                        

    Internal Growth Strategies. The Company seeks to increase cash flow at its
properties by achieving rent increases while maintaining high occupancy levels  
and aggressively controlling operating expenses. The Company believes that by   
applying its management and leasing skills and experience it can enhance the    
operating performance of the existing portfolio by increasing rents, optimizing 
the tenant mix of its retail and multifamily properties, maintaining high       
occupancy rates and internalizing property management and leasing               
responsibilities for certain of its properties now managed by third parties.    

   Acquisition Strategies. The Company's acquisition strategies focus on the
purchase of middle market retail properties and multifamily properties which    
the Company believes will benefit from more proactive management and leasing,   
selective re-tenanting and strategic capital improvements. The Company also     
intends to continue to take advantage of its third-party management business to 
evaluate and selectively acquire properties managed for its third-party         
clients.                                                                        

   In addition, the Company will continue to evaluate strategic acquisitions
and/or business combinations with other real estate companies and portfolio     
owners. The Company believes that the real estate industry is in a period of    
sustained consolidation, and that opportunities will arise to acquire other     
real estate companies.                                                          

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Repositioning and Redevelopment Strategies. The Company's ability to  
reposition and redevelop retail and multifamily properties is a core element of 
its business and growth strategies. The Company uses its internal redevelopment 
expertise and resources to create value in newly acquired properties,           
frequently in cases in which the prior owner was unable to maximize the         
property's value due to a lack of managerial or financial resources.            

Development of Power Center Retail Properties. The Company's property 
development strategy currently focuses on the construction of power centers in  
its core Mid-Atlantic markets. The Company's development and site selection     
strategy is tenant-driven: the Company uses its relationships with key power    
center tenants such as The Home Depot, Target and Kohl's to identify sites      
desirable to such retailers. After pre-leasing or pre-selling one or more       
portions of a targeted site to key anchor tenants, the Company is able to       
aggressively pre-lease the remaining space to other desirable retail tenants.   

The Offering  

                                                        · Enlarge/Download Table
                                                                                                   
Shares offered .................................... 4,000,000                                      
Shares to be outstanding after the Offering  ...... 12,685,098(1)                                  
Use of proceeds   ................................. To repay indebtedness, including indebtedness  
                                                    incurred in connection with the Company's      
                                                    recent acquisition and development activities, 
                                                    and for general corporate purposes. See "Use of
                                                    Proceeds."                                     
NYSE symbol ....................................... "PEI"                                          

------------                                                                    
(1) Does not include Shares reserved for issuance upon redemption of 646,286    
issued and outstanding OP Units or 933,375 Shares reserved for issuance 
upon the exercise of options which have been granted by the Company,    
314,786 of which are currently exercisable and 618,589 of which become  
exercisable at various times over the next four years.                  

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Summary Financial and Operating Information 

    The following table sets forth certain financial and operating information
for the Company for each of the five years ended August 31, 1997. Such          
information should be read in conjunction with the Company's financial          
statements and the notes thereto, "Management's Discussion and Analysis of      
Financial Condition and Results of Operations" and pro forma financial          
statements contained elsewhere herein. Effective January 1, 1998, the Company's 
fiscal year will be reported on a calendar year basis. The unaudited pro forma  
information is presented as if the Offering and the TRO Transaction had been    
completed on August 31, 1997 for balance sheet purposes and on September 1,     
1996 for purposes of the income statement and other data. The unaudited pro     
forma information is not necessarily indicative of what the actual financial    
position or results of operations of the Company would have been as of and for  
the period presented, nor does it purport to represent the Company's future     
financial position or results of operations.                                    

                                                        · Enlarge/Download Table

                                                               For the Fiscal Years Ended August 31,                      
                                         ---------------------------------------------------------------------------------
                                                                                   Historical                             
                                         Pro Forma     -------------------------------------------------------------------
                                          1997(1)        1997          1996          1995          1994          1993     
                                         -----------   -----------   -----------   -----------   -----------   -----------
                                                           (amounts in thousands, except per share data)                  
                                                                                                                          
Income Statement Data:                                                                                                    
Revenues:                                                                                                                 
 Gross revenues from real estate  ......  $52,721       $40,231       $38,985       $36,978       $27,640       $21,083   
 Interest and other income  ............      488           254           171           176           274           542   
                                          --------      --------      --------      --------      --------      --------  
   Total revenues  .....................   53,209        40,485        39,156        37,154        27,914        21,625   
Expenses:                                                                                                                 
 Property operating expenses   .........   20,253        16,289        16,102        14,859        11,758         8,959   
 Depreciation and amortization .........    8,816         6,259         5,908         5,286         3,541         2,784   
 General and administrative                                                                                               
   expenses  ...........................    3,324         3,324         3,119         3,091         2,528         1,873   
 Interest expense  .....................    9,167         9,086         9,831         8,908         4,162         2,222   
 Provision for losses on investments          500           500            --            --         1,795           320   
                                          --------      --------      --------      --------      --------      --------  
   Total expenses  .....................   42,060        35,458        34,960        32,144        23,784        16,158   
                                          --------      --------      --------      --------      --------      --------  
Income before other income and                                                                                            
 expense  ..............................   11,149         5,027         4,196         5,010         4,130         5,467   
Equity in income of partnerships and                                                                                      
 joint ventures ........................    4,757         4,337         6,258         6,381         4,416         4,750   
Equity in loss of PREIT-RUBIN  .........      (80)           --            --            --            --            --   
Gains on sales of interests in real                                                                                       
 estate   ..............................    1,069         1,069           865           119        12,362         3,875   
Minority interest  .....................     (999)         (198)         (275)         (285)         (221)          (92)  
                                          --------      --------      --------      --------      --------      --------  
Net income   ...........................  $15,896       $10,235       $11,044       $11,225       $20,687       $14,000   
                                          ========      ========      ========      ========      ========      ========  
Per Share Results:                                                                                                        
Income before gains on sales of                                                                                           
 interests in real estate   ............  $  1.17       $  1.06       $  1.17       $  1.28       $  0.96       $  1.17   
Gains on sales of interests in real                                                                                       
 estate   ..............................      .08          0.12          0.10          0.01          1.43          0.45   
                                         ---------     ---------     ---------     ---------     ---------     ---------  
Net income   ...........................  $  1.25       $  1.18       $  1.27       $  1.29       $  2.39       $  1.62   
                                         =========     =========     =========     =========     =========     =========  
Weighted average number of shares                                                                                         
 outstanding (2)   .....................   12,679         8,679         8,676         8,671         8,664         8,643   

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                                                        · Enlarge/Download Table

                                               For the Fiscal Years Ended                              
                                                        August 31,                                     
                                             -------------------------------                           
                                                                Historical                             
                                                Pro Forma      -------------                           
                                                 1997(1)            1997                               
                                             ----------------  -------------                           
                                             (amounts in thousands, except                             
                                                     per share data)                                   
                                                                                                       
Balance Sheet Data                                                                                     
(at end of period):                                                                                    
Investments in real estate, at cost   ......   $  284,765      $ 202,443                               
Total assets  ..............................      262,636        165,657                               
Total debt .................................      116,069        117,412                               
Minority interest   ........................       15,672            540                               
Shareholders' equity   .....................      124,089         40,899                               
Other Data:                                                                                            
Cash flows from operating activities  ......           (3)        15,219                               
Cash flows from investing activities  ......           (3)         7,749                               
Cash flows from financing activities  ......           (3)       (22,599)                              
Funds from operations (4) ..................       29,171         19,660                               
EBITDA (5) .................................       48,719         35,169                               
Total leasable square footage of                                                                       
 retail properties (at end of period) ......    5,968,000      4,470,000                               
Total multifamily units (at end of                                                                     
period) ....................................        7,236          7,236                               
Number of properties (at end of                                                                        
period):                                                                                               
 Retail ....................................           17             15                               
 Multifamily  ..............................           19             19                               
Percentage leased (at end of period):                                                                  
 Retail ....................................           89%            87%                              
 Multifamily  ..............................           97%            97%                              


                                                         For the Fiscal Years Ended August 31,         
                                             ----------------------------------------------------------
                                                                      Historical                       
                                             ----------------------------------------------------------
                                                1996            1995           1994           1993     
                                             -------------  -------------  -------------  -------------
                                                     (amounts in thousands, except per share data)     
                                                                                                       
Balance Sheet Data                                                                                     
(at end of period):                                                                                    
Investments in real estate, at cost   ...... $ 198,542      $ 195,929      $ 154,281      $ 112,262    
Total assets  ..............................   177,725        181,336        142,495        107,854    
Total debt .................................   124,148        122,518         80,155         51,929    
Minority interest   ........................       542            528            408            331    
Shareholders' equity   .....................    46,505         51,771         56,748         51,852    
Other Data:                                                                                            
Cash flows from operating activities  ......    15,090         16,672         15,909         13,034    
Cash flows from investing activities  ......       933        (40,082)       (18,524)       (38,683)   
Cash flows from financing activities  ......   (16,091)        22,356          3,305         25,913    
Funds from operations (4) ..................    18,628         18,963         16,417         16,870    
EBITDA (5) .................................    34,423         33,936         24,854         27,161    
Total leasable square footage of                                                                       
 retail properties (at end of period) ...... 4,806,000      4,866,000      4,798,000      5,527,000    
Total multifamily units (at end of                                                                     
period) ....................................     7,236          7,337          6,815          6,107    
Number of properties (at end of                                                                        
period):                                                                                               
 Retail ....................................        18             18             19             22    
 Multifamily  ..............................        19             20             19             17    
Percentage leased (at end of period):                                                                  
 Retail ....................................        90%            92%            90%            90%   
 Multifamily  ..............................        95%            96%            95%            97%   

------------                                                                    
(1) See Notes to Management's Assumptions to Unaudited Pro Forma Consolidating  
Balance Sheet and Consolidating Income Statement contained elsewhere    
herein.                                                                 
(2) Weighted average number of Shares outstanding excludes Shares issuable upon 
conversion of outstanding OP Units and includes the dilutive effect of  
outstanding options. Income allocable to holders of OP Units is included
in minority interest.                                                   
(3) Pro forma information relating to cash flows from operating, investing and  
financing activities has not been included because the Company believes 
that the information would not be meaningful due to the number of       
assumptions required in order to calculate such information.            
(4) The White Paper on Funds from Operations approved by the Board of Governors 
  of the National Association of Real Estate Investment Trusts ("NAREIT") in
 March 1995 defines Funds from Operations as net income (loss) computed in
accordance with generally accepted accounting principles ("GAAP"),      
excluding gains (or losses) from debt restructuring and sales of        
properties, plus real estate related depreciation and amortization and  
 after adjustments for unconsolidated partnerships and joint ventures. The
Company believes that Funds from Operations is helpful to investors as a
measure of the performance of an equity REIT because, along with cash   
flows from operating activities, financing activities, and investing    
  activities, it provides investors with an indication of the ability of the
Company to incur and service debt, to make capital expenditures and to  
fund other cash needs. The Company computes Funds from Operations in    
accordance with standards established by NAREIT which may not be        
comparable to Funds from Operations 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 the Company.   
Funds from Operations does not represent cash generated from operating  
activities in accordance with GAAP and should not be considered as an   
alternative to net income (determined in accordance with GAAP) as an    
indication of the Company's financial performance or to cash flow from  
 operating activities (determined in accordance with GAAP) as a measure of
the Company's liquidity, nor is it indicative of funds available to fund
the Company's cash needs, including its ability to make cash            
distributions.                                                          
(5) EBITDA is defined as operating income before interest expense, income       
taxes, depreciation and amortization. The Company believes EBITDA is    
useful to investors as an indicator of the Company's ability to service 
  debt and pay cash distributions. EBITDA, as calculated by the Company, may
not be comparable to EBITDA reported by other REITs that do not define  
 EBITDA exactly as the Company defines the term. EBITDA does not represent
cash generated from operating activities determined in accordance with  
  GAAP and should not be considered as an alternative to operating income or
net income determined in accordance with GAAP as an indicator of        
performance or as an alternative to cash flows from operating activities
as an indicator of liquidity.                                           

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THE COMPANY 

General                                                                         

   The Company is a fully integrated real estate operating company active in
acquiring, developing, redeveloping, managing and leasing retail and            
multifamily properties. Founded in 1960, the Company is one of the 15 largest   
publicly held operators of retail properties in the United States (in terms of  
square feet owned and/or managed). On September 30, 1997, the Company acquired  
The Rubin Organization, Inc., a commercial property development and management  
firm, and certain related real estate interests.                                

The Company's portfolio includes interests in 17 shopping centers     
containing an aggregate of approximately 6.0 million square feet and interests  
in 19 multifamily properties containing an aggregate of 7,236 units.            
Substantially all of the Company's properties are located in the Eastern United 
States, with concentrations in the Mid-Atlantic states and in Florida. The      
Company also provides management, leasing and/or development services for 49    
retail properties containing approximately 19.2 million square feet and 11      
office buildings containing approximately 4.0 million square feet for           
affiliated and third-party property owners.                                     

  As used herein, unless the context indicates otherwise, the term "PREIT"
means Pennsylvania Real Estate Investment Trust and the term "TRO" means The    
Rubin Organization, Inc. (now known as PREIT-RUBIN), in each case prior to the  
date of the TRO Transaction.                                                    

Background                                                                      

   PREIT. PREIT was organized in 1960 as one of the first publicly held real
estate investment trusts in the United States. Prior to the TRO Transaction,    
PREIT had historically maintained a limited management staff and relied upon    
its joint venture partners to operate its retail properties. Over the past      
several years, PREIT sought a strategic combination with a real estate          
operating company in order to improve its growth prospects and increase its     
appeal to equity investors. To that end, PREIT identified and evaluated several 
potential transactions, culminating in the TRO Transaction in September 1997.   

TRO. Richard I. Rubin and Co., Inc., the predecessor of The Rubin     
Organization, Inc., was founded in Philadelphia in 1946 by Richard I. Rubin as  
a retail leasing firm. During the 30 years after its organization, the firm     
expanded its business into the development and management of commercial and     
multifamily properties. In the 1970's, Richard I. Rubin's son, Ronald Rubin,    
directed the firm toward larger projects, including enclosed malls and office   
buildings. By the 1980's, Richard I. Rubin and Co., Inc. had become well known  
for its major development projects in the Delaware Valley, such as Christiana   
Mall in Newark, Delaware, and the Mellon Bank Center and the historic           
renovation of the Bellevue Stratford Hotel in Philadelphia, Pennsylvania.       

    In 1992, Richard I. Rubin and Co., Inc. combined its business with Strouse
Greenberg and Co., Inc., a Philadelphia-based developer and manager of          
commercial properties, to form TRO. The combination with Strouse Greenberg      
significantly increased TRO's presence in the commercial property markets and   
positioned TRO to provide real estate services to a broader range of clients    
and properties in the retail, office, residential and hotel sectors. TRO's      
retail property business became the largest and best known segment of the       
business, with TRO becoming one of the 25 largest retail property managers in   
the United States (in terms of square feet managed) prior to its acquisition by 
PREIT.                                                                          

The TRO Transaction                                                             

On September 30, 1997, PREIT and TRO completed the TRO Transaction,   
pursuant to which:                                                    

o PREIT capitalized the Operating Partnership by transferring to it       
substantially all of its assets, or the beneficial interests therein, 
subject to its liabilities.                                           

o The Operating Partnership acquired all of the non-voting common shares, 
   constituting 95% of the economic interest in TRO, in exchange for 200,000
Class A OP Units and the obligation to issue up to 800,000 additional 
 Class A OP Units over the next five years, according to a formula based
    upon the Company's per Share growth in adjusted funds from operations (see
" --  Acquisition of TRO and Related Property Interests").            

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 o The Operating Partnership acquired the interests of certain affiliates of
TRO (the "TRO Affiliates") in: The Court at Oxford Valley, Langhorne, 
Pennsylvania; Magnolia Mall, Florence, South Carolina; North Dartmouth
  Mall, North Dartmouth, Massachusetts; and Springfield Park, Springfield,
Pennsylvania.                                                         

o The Operating Partnership agreed to acquire the interests of certain TRO
Affiliates in: Hillview Shopping Center, Cherry Hill, New Jersey; and 
Northeast Tower Center, Philadelphia, Pennsylvania.                   

o The Operating Partnership acquired the development rights of certain TRO
 Affiliates, subject to related obligations, in: Christiana Power Center
Phases I & II, Newark, Delaware; Red Rose Commons, Lancaster,         
 Pennsylvania; and Blue Route Metroplex, Plymouth Meeting, Pennsylvania.

o The Operating Partnership obtained rights of first refusal with respect 
 to the interests of certain TRO Affiliates in: Christiana Mall, Newark,
Delaware; Cumberland Mall, Vineland, New Jersey; and Fairfield Mall,  
Chicopee, Massachusetts.                                              

o Ronald Rubin was elected chief executive officer of the Company, Edward 
A. Glickman was elected chief financial officer and executive vice    
    president of the Company, and George F. Rubin continued in his capacity as
President of PREIT-RUBIN.                                             

o Ronald Rubin, George F. Rubin and Rosemarie B. Greco were elected as    
  trustees of the Company to fill vacancies created by the resignations of
Robert Freedman, Jack Farber and Robert G. Rogers.                    

Acquisition of TRO and Related Property Interests. As part of the TRO 
Transaction, the Company entered into a contribution agreement (the "TRO        
Contribution Agreement") pursuant to which it acquired all of the non-voting    
shares of TRO for 200,000 Class A OP Units and the obligation to issue up to    
800,000 additional Class A OP Units (the "Contingent TRO OP Units") over the    
following five-year period according to a formula based upon the Company's      
adjusted funds from operations ("Adjusted FFO") per Share during such period.   
Adjusted FFO is defined as the Company's consolidated net income for any period 
plus, to the extent deducted in computing such net income: (i) depreciation     
attributable to real property; (ii) certain amortization expenses; (iii) the    
expenses of the TRO Transaction; (iv) losses on the sale of real estate; (v)    
material write-downs on real estate; (vi) material prepayment penalties; and    
(vii) rents currently due in excess of rents reported, less: (i) rental revenue 
reported in excess of amounts currently due; (ii) lease termination fees; and   
(iii) gains on the sale of real estate. For the 12-month periods ending August  
31, 1996 and August 31, 1997, the Company's Adjusted FFO per Share (without     
giving effect to the TRO Transaction) was $2.15 and $2.26, respectively.        

 The TRO Contribution Agreement establishes "hurdle" and "target" levels
set forth below for the Company's Adjusted FFO per Share during specified       
earn-out periods to determine whether, and to what extent, the Contingent TRO   
OP Units will be issued:                                                        

                                                                · Download Table

                                                     Base          Maximum    
                                  Adjusted        Contingent      Contingent  
                               FFO Per Share     TRO OP Units    TRO OP Units 
                             ------------------  --------------  -------------
Earn-Out Period              Hurdle     Target                                
---------------------------  --------   -------                               
                                                                              
10-1-97 to 12-31-97  ......  $0.58      $0.65         5,000          32,500   
1-1-98 to 12-31-98   ......  $2.40      $2.66        20,000         130,000   
1-1-99 to 12-31-99   ......  $2.53      $2.81        57,500         167,500   
1-1-00 to 12-31-00   ......  $2.65      $2.94        57,500         167,500   
1-1-01 to 12-31-01   ......  $2.83      $3.14        57,500         167,500   
1-1-02 to 9-30-02 .........  $2.19      $2.43        52,500         135,000   
                                                     ------         -------   
   Total ..................                         250,000         800,000   
                                                    =======         =======   

In general: (i) if the "hurdle" level for any earn-out period is not met, no    
Contingent TRO OP Units will be issued in such period; (ii) if the "target"     
level for any earn-out period is met, the maximum number of Contingent TRO OP   
Units for such period will be issued; and (iii) if Adjusted FFO per Share for   
any earn-out period is between the "hurdle" and the "target" levels, the        
Operating Partnership will issue the base Contingent TRO OP Units for such      
period plus a pro rata number of Contingent TRO OP Units based upon the amount  
by which Adjusted FFO per Share exceeds the "hurdle" but was less than the      
"target." To the                                                                

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extent the "target" levels of Adjusted FFO per Share are exceeded, the earn-out 
also provides the TRO principals with the ability to carry back to prior        
periods and to carry forward into the next period amounts in excess of the      
target in the current period, thereby earning additional Contingent TRO OP      
Units (but never more than the maximum amount).                                 

The TRO Contribution Agreement provides that in the event of a share  
split, share dividend or other similar change in the capitalization of the      
Company, the "hurdle" and "target" levels will be proportionately adjusted. The 
TRO Contribution Agreement also provides for the creation of a special          
committee of three independent Trustees to consider, among other matters,       
whether other equitable adjustments, either upward or downward, should be       
effected in the "hurdle" and "target" levels to reflect: (i) the incurrence by  
the Company of non-project specific indebtedness or the raising by the Company  
of equity capital; (ii) any breach by the Company of its representations or     
warranties in the TRO Contribution Agreement which may adversely affect         
Adjusted FFO; and (iii) the effect which any adverse judgment in litigation     
pending against the Company may have on Adjusted FFO. Due to the effect that    
the Offering will have on the TRO Class A Unitholders, the Company has been     
advised that, following the Offering, the TRO Affiliates will request that the  
special committee make downward adjustments in the "hurdle" and "target"        
levels. The special committee will review this request but is under no          
obligation to make modifications to the "hurdle" and "target" levels. If the    
levels are modified, the Company believes that the modifications will not have  
a material effect on the Company's funds from operations per Share.             

For provisions of the TRO Transaction relating to the valuation of the
Acquisition Properties, see "The Properties -- The Acquisition Properties." For 
provisions of the TRO Transaction relating to the valuation of the interests in 
the four Development Properties acquired in the TRO Transaction, see "The       
Properties -- The Development Properties."                                      

    The Goldenberg Letter Agreement. On September 30, 1997, as part of the TRO
Transaction, the Company acquired from TRO its rights and obligations           
(including those of certain TRO Affiliates) under a letter agreement (the       
"Goldenberg Letter Agreement") with The Goldenberg Group, a regional developer  
and manager of retail properties. The Goldenberg Letter Agreement contemplates  
the development of six power centers, three by The Goldenberg Group and three   
by the Company. The Goldenberg Letter Agreement provides that the entity        
developing each respective property will have the right to manage such          
property, but that each of the six properties will be 50% owned by The          
Goldenberg Group and 50% owned by the Company. The Company is obligated under   
the Goldenberg Letter Agreement to provide a $5.0 million revolving capital     
facility to fund pre-development expenses on The Goldenberg Group's three       
projects. In addition, the Company must fund all such expenses on the Company's 
three projects.                                                                 

The Court at Oxford Valley, one of the Existing Retail Properties, was
developed by The Goldenberg Group under the Goldenberg Letter Agreement, and    
Hillview Shopping Center, one of the Acquisition Properties, was developed by   
TRO under the Goldenberg Letter Agreement. The Goldenberg Group's remaining two 
development properties under the Goldenberg Letter Agreement are Red Rose       
Commons and Blue Route Metroplex.                                               

For each of the projects that The Goldenberg Group completes under The
Goldenberg Letter Agreement, the Company must offer The Goldenberg Group a 50%  
equity interest in a project which the Company will develop. If the Company     
fails to offer The Goldenberg Group such projects meeting certain criteria      
within 18 months of the closing of a construction loan on each of Red Rose      
Commons (which occurred on November 28, 1997) and Blue Route Metroplex (which   
is anticipated to occur in the next 24 months), then the interest of the        
Company in Red Rose Commons and/or Blue Route Metroplex, as the case may be,    
will be reduced from 50% to 25%. There can be no assurance that the Company     
will meet its obligations under The Goldenberg Letter Agreement and, therefore, 
that the Company's interest in Red Rose Commons and/or Blue Route Metroplex     
will not be reduced from 50% to 25%.                                            

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Right of First Refusal Properties. As part of the TRO Transaction, the
Company obtained rights of first refusal to purchase the interests of certain   
TRO Affiliates in the three retail properties listed below.                     

Right of First Refusal Properties 

                                                                · Download Table

                                                         Percentage Interest 
                                           Total        Subject to the Right 
Property and Location                   Square Feet       of First Refusal   
-------------------------------------   -------------   ---------------------
                                                                             
Christiana Mall, Newark, DE .........     1,100,000               (1)        
Cumberland Mall, Vineland, NJ  ......       463,000             50%          
Fairfield Mall, Chicopee, MA   ......       418,000             50%          
                                          ---------                          
   Total  ...........................     1,981,000                          
                                          =========                          

------------                                                                    
(1) The interest subject to the right of first refusal is subject to adjustment 
in connection with the refinancing of the participating mortgage which  
currently encumbers this property.                                      

Benefits to the Company of the TRO Transaction                                  

The Company believes that the benefits of the TRO Transaction include:

o Enhanced Operating Performance of the Existing Retail Properties. The   
Company intends to apply TRO's experience in managing, leasing and    
  redeveloping retail properties to maximize the internal growth potential
of the Existing Retail Properties.                                    

o Acquisition Opportunities. The Company believes that TRO's extensive    
 relationships and expertise in the real estate industry, as well as its
third-party retail property management business, should result in a   
 significant increase in the number of potential acquisitions identified
and reviewed by the Company.                                          

o Development Opportunities. The Company anticipates that TRO's experience
and resources in developing retail properties should lead to continued
opportunities to develop new properties.                              

 o Capital Access. By acquiring TRO, the Company has significantly increased
its size and management depth, which the Company believes will make it
more attractive to equity investors.                                  

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Structure of the Company                                                        

The Company conducts substantially all of its activities through the  
Operating Partnership, of which the Company is the sole general partner. Set    
forth below is a diagram of the structure of the Company following the          
completion of the Offering:                                                     

      [GRAPHIC OMITTED] [The graphic sets forth the following information:
(i) the Company is a 1% general partner of the Operating Partnership and 100%   
owner of PREIT Property Trust; (ii) the minority limited partners owns a 4.8%   
limited partner interest in the Operating Partnership; (iii) PREIT Property     
Trust owns a 94.1% limited partner interest in the Operating Partnership; (iv)  
the Operating Partnership owns a 95% non-voting interest in PREIT-RUBIN, Inc.;  
(v) an employee stock bonus plan owns a 5% voting interest in PREIT-RUBIN, Inc. 
and (vi) the Operating Partnership has interests in 45 properties.]             

------------                                                                    
(1) The interests of the Operating Partnership in these properties range from   
25% to 100% (see "The Properties").                                             

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Competitive Advantages                                                          

   The Company believes it enjoys certain competitive advantages in pursuing
its business and growth strategies.                                             

Fully Integrated Organization. The Company is a fully integrated real 
estate operating company with extensive experience in acquiring, developing,    
redeveloping, managing and leasing retail and multifamily properties. The       
Company's 21 most senior corporate and property-level employees have an average 
of 23 years of experience in the commercial and residential real estate         
industry. The Company's diverse real estate capabilities allow it to pursue a   
broad range of growth strategies in its primary markets, and to maintain the    
flexibility to accommodate tenants' varying space needs through expansion,      
redevelopment and development activities.                                       

Focus on Value-Added Acquisition and Repositioning Strategies. The    
Company's acquisition strategy focuses primarily on the identification of       
underperforming retail and multifamily properties which the Company believes    
have the potential for improved cash flow and value appreciation. The Company   
seeks to achieve such improved performance through a number of means,           
including:                                                                      

  o Making strategic capital improvements designed to directly benefit the
property's rental rate structure.                                               

o For retail properties, using the Company's extensive relationships with 
 national and regional tenants to improve the property's occupancy level
and the quality of its tenants.                                       

o Applying the Company's management skills and purchasing power to reduce 
the property's operating expense ratios through economies of scale and
operating efficiencies.                                               

o Utilizing the Company's sophisticated management information systems to 
  closely monitor the property's operations and leasing status in order to
    gauge the effectiveness of its turnaround strategies on a real-time basis.

   With respect to its strategy of acquiring underperforming properties, the
Company attempts to differentiate between properties whose underperformance is  
a function of factors which the Company can improve (such as their tenant mix   
or physical condition) from those whose underperformance is driven by factors   
beyond the Company's control (such as their location). In its analysis of       
acquisition candidates, the Company applies its proprietary market research     
techniques, including the computerized analysis of demographic trends, to       
assess local market conditions.                                                 

   Development Expertise. The Company believes that the depth and experience
of its development group is an integral factor in executing its business        
strategy. The Company applies its development skills to both the development of 
new assets as well as the repositioning of underperforming properties. During   
the last 20 years, the development group has completed over $1.0 billion of     
development and redevelopment projects.                                         

The Company's property development initiatives currently focus on the 
construction of power center retail properties in the Company's core            
Mid-Atlantic markets. The Company currently has interests in seven retail       
properties containing approximately 3.1 million square feet in various stages   
of development, including four properties containing approximately 1.6 million  
square feet under construction. The Development Properties represent built-in   
growth potential which the Company believes will contribute to funds from       
operations beginning in 1998.                                                   

Benefits of Size. As one of the 15 largest publicly held operators of 
retail properties in the United States, the Company believes it has certain     
strategic and financial advantages over smaller operators. These advantages     
include: (i) strong relationships with tenants, facilitating the leasing of     
retail space in its properties; (ii) economies of scale in the operation of its 
properties; (iii) the enhanced ability to attract and retain qualified          
employees; and (iv) improved liquidity and access to capital.                   

o Strong Tenant Relationships. The Company manages and leases retail      
properties, including 49 shopping centers located in 19 states, for   
   affiliated and third-party owners. The breadth of the Company's owned and
    third-party managed portfolio generally provides it with extensive leasing
relationships with numerous national and regional tenants.            

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    As part of its ongoing relationships with such tenants, the Company is
often aware of tenant space needs and preferences early in the site   
  selection process, and is able to leverage this knowledge into the rapid
leasing of the properties as well as to identify new development      
opportunities. In addition, by having multiple locations to offer to  
    prospective tenants within a targeted market area, the Company believes it
is more likely to attract such tenants to its properties. The Company 
believes that these relationships lead to enhanced performance at the 
Company's owned properties, as well as additional tenant-driven       
acquisition and development opportunities.                            

 o Economies of Scale. The size of the Company's owned and managed portfolio
provides it with economies of scale in the operation and management of
    properties, directly benefiting the performance of the Company's owned and
 managed properties. Through the Company's Buying Economies Program (the
"BEP"), the Company negotiates national purchasing contracts with key 
 product and service vendors for items such as telephone service, paint,
floor coverings, landscaping and supplies. In this manner, the Company
   capitalizes upon its purchasing power to improve operating margins at its
  owned and managed properties. The success of the BEP is reflected by the
 fact that the Company is able to sell participation in the BEP to third
parties seeking to share in the benefits of the Company's purchasing  
power.                                                                

  An additional example of economies of scale is the Company's RubinEdge
program. Through this program, the Company negotiates bulk discounts on 
 products and services offered by merchants in its local market areas, and
passes those discounts along to tenants as a value-added benefit for    
locating in a property managed by the Company.                          

o Ability to Attract and Retain Qualified Employees. As a major owner and 
    operator of retail and multifamily properties within its markets, and as a
   publicly traded company, the Company believes that its ability to attract
and retain key employees is enhanced. Employees are attracted to the  
  Company by its reputation, its extensive presence within its markets and
    the potential for advancement opportunities in a growing organization. The
 Company's 21 most senior corporate and property-level employees have an
   average of 23 years experience in the real estate industry and an average
of 15 years with the Company and its predecessors.                    

o Improved Liquidity and Access to Capital. As a public company, the      
  Company believes that it has access to a broader and more cost efficient
range of capital sources than many private real estate companies and  
  opportunity funds with which the Company competes for acquisitions. Upon
completion of the Offering, the Company will have approximately $105.4
   million available under its Credit Facility, which the Company intends to
use to fund its growth strategies.                                    

   Strategic Information Systems. The Company has developed state-of-the-art
management information systems which it utilizes to monitor the performance of  
its existing properties and to strategically target markets for acquisition and 
development activities. The Company's information systems are designed to       
support an on-site management and accounting system at its properties. In       
addition, the Company's high-speed wide area network links each managed         
property with the Company's regional offices and headquarters on a real-time    
basis.                                                                          

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BUSINESS AND GROWTH STRATEGIES  

Business Strategies                                                             

  The Company's primary business objective is to maximize the total return
to its shareholders through growth in cash flow and appreciation in the value   
of its assets. The Company plans to achieve this objective by employing the     
operating strategies and capitalizing upon the internal and external growth     
opportunities described below.                                                  

Operating Strategies and Organizational Strengths                               

Fully Integrated Real Estate Operating Company. The Company is a fully
integrated real estate company active in acquiring, developing, redeveloping,   
managing and leasing retail and multifamily properties. The Company believes    
that in order to remain competitive in today's real estate market, it must be   
able both to identify growth opportunities and capitalize upon those            
opportunities with internal personnel and resources. In its acquisition of The  
Rubin Organization, the Company gained access to the real estate operating      
skills and capabilities which it required to take a more proactive stance       
towards the management of its existing assets, as well as to internally manage  
properties which it seeks to acquire and develop. In addition to leasing and    
property management, the Company's personnel also perform a number of staff and 
administrative functions, including financial services, lease administration,   
legal services, human resources, management information systems, marketing,     
purchasing and risk management.                                                 

 Development Capabilities. The Company's development group is staffed by
eight full-time development professionals who have significant experience in    
the development of retail, multifamily and other commercial properties. The     
development group is headed by Leonard B. Shore, Executive Vice President, who  
has over 42 years of experience in the development of commercial properties.    
Over The Rubin Organization's 50-year history, it and its predecessors have     
been responsible for major development projects such as Christiana Mall in      
Newark, Delaware; Willow Grove Park Mall in Willow Grove, Pennsylvania;         
Cumberland Mall in Vineland, New Jersey; Newburgh Mall in Newburgh, New York;   
and Mellon Bank Center, and historic redevelopments such as The Bellevue and    
One Penn Center at Suburban Station, all in Philadelphia, Pennsylvania.         

Proactive Leasing. The Company has implemented an aggressive leasing  
strategy based upon its knowledge of its markets and tenant needs. The key to   
the Company's strategic approach to retail leasing is its "Leasing Game Plan,"  
an annual review held for each managed property in early fall. In the Leasing   
Game Plan process, the Company's property management and leasing professionals  
meet to develop leasing strategies and establish performance goals for the      
properties for the coming year. This process also serves as the basis of the    
property budgeting process for the coming year.                                 

The Company's retail leasing and development groups have 13 leasing   
professionals with offices in Philadelphia and Chicago, headed by Pat A. Berns, 
Executive Vice President. Ms. Berns has over 18 years of experience in the      
leasing of retail properties, and the other professionals in the group have an  
average of eight years of experience. Leasing agents are given responsibility   
for both specific properties and specific tenants across the entire portfolio.  
The group is compensated on a team basis depending on the total commission      
revenue generated by the group. In 1996, the Company executed 156 tenant leases 
for over 1.4 million square feet in its managed portfolio. Year to date, the    
Company has executed 240 tenant leases for approximately 2.5 million square     
feet in its managed portfolio.                                                  

Examples of the Company's major tenant relationships include:         

o In 1996, the Company leased 13 sites to Kohl's, a Wisconsin-based       
retailer seeking to rapidly expand into the Delaware Valley. These 13 
properties were part of a joint venture between the Company and Kimco 
Realty Corp. to re-lease 26 properties leased or owned by the former  
Clover value retailing subsidiary of Strawbridge & Clothier.          

o During the last three years, the Company has facilitated the acquisition
 and/or development of eight Delaware Valley sites on behalf of The Home
  Depot. In these site acquisitions, the Company acted as developer, owner
and/or broker, depending on the situation and the needs of the tenant.

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o The Company recently built the first Target store in the Philadelphia   
  metropolitan area at the newly constructed Hillview Shopping Center. The
Company is also currently involved in two other Target development    
projects in the Delaware Valley.                                      

  Specialty Leasing.  In addition to its traditional leasing services, the
Company has been an innovator in the development and application of specialty   
leasing. Specialty leasing consists of utilizing all available space not        
currently leased to long-term tenants. The Company's Specialty Leasing Group is 
responsible for the kiosk space within enclosed malls and shopping centers      
which it manages, as well as the placement of temporary retail tenants into     
vacant space in enclosed malls and shopping centers. The Company has found that 
the creative use of specialty leasing can be an important source of incremental 
revenue in underperforming shopping centers as well as a major enhancement to   
the shopping atmosphere in an underleased mall. The Specialty Leasing Group is  
headed by Elaine Berger, who has substantial experience in bringing specialty   
leasing into traditional retail properties.                                     

   Intensive Property Management. Retail and multifamily property management
services are provided by skilled property management professionals who are      
organized on a regional basis. Retail property management is headed by William  
B. Berlin, Vice President, who has over 20 years of experience in the           
management of retail properties. Reporting to Mr. Berlin are six regional       
managers, five of whom are responsible for the enclosed malls in particular     
geographic areas and one of whom is responsible for the shopping centers and    
smaller properties. Each regional manager is, in turn, responsible for between  
five and ten shopping centers. All of the Company's managed enclosed malls are  
managed by an experienced on-site manager; all other retail properties are      
managed by a centralized group. The Company requires that all of its property   
managers have earned or be in the process of earning the Certified Shopping     
Center Manager designation from the International Council of Shopping Centers.  

    The Company's multifamily group manages ten of its multifamily communities
and provides asset management for the remaining nine. The Company's hands-on    
management practices emphasize resident services and resident retention. The    
Company maintains its primary multifamily management office at its headquarters 
in Fort Washington, Pennsylvania, and a regional management office in Boca      
Raton, Florida. The Company's multifamily group is headed by Raymond J. Trost,  
Vice President, who has 20 years of experience in multifamily property          
management and has earned the Certified Property Manager and Accredited         
Resident Manager designations from the Institute of Real Estate Management.     

   Marketing. The Company's managed enclosed malls are staffed by a group of
on-site marketing professionals whose goal is to promote the properties with    
consumers in their local market areas. Print and media advertising, as well as  
special events and services, are used to draw shoppers to the properties. All   
of the Company's regional marketing directors hold the Certified Marketing      
Director designation from the International Council of Shopping Centers.        

   The creation of marketing materials and programs for retail properties is
centrally coordinated by the Portfolio Marketing Group (the "PMG"), which is an 
advertising agency providing promotional and marketing services to the managed  
properties as well as other third-party clients. The PMG is headed by Cheryl    
Dougherty, who has over 15 years of experience in shopping center marketing,    
and is staffed by a team of 12 marketing professionals. The PMG creates and     
produces media and print work, catalogs and associated collateral materials and 
allows the Company to capture the profit margin on advertising expenditures.    

Marketing of the Company's multifamily properties is performed by     
experienced on-site leasing teams under the direction of one of the Company's   
regional managers. Occupancy in the Company's multifamily portfolio improved    
from 95% at August 31, 1996 to 97% at August 31, 1997. In order to improve      
occupancy, the Company offers its Preferred Employer Program, which targets     
major area employers and provides incentives to their employees, such as        
reduced application fees and security deposits and flexible lease terms, for    
locating in the Company's properties. Other marketing tools utilized by the     
Company include resident referral programs, internet-based advertising services 
and local apartment rental guides.                                              

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Growth Strategies                                                               

The Company seeks to increase cash flow by intensively managing its   
properties and selectively acquiring, repositioning and developing additional   
retail and multifamily properties. The Company also intends to continue to      
pursue strategic acquisitions of other real estate companies and portfolios,    
such as the TRO Transaction, which complement its existing portfolio and        
management capabilities.                                                        

    Internal Growth Strategies. The Company seeks to increase cash flow at its
properties by achieving rent increases while maintaining high occupancy levels  
and aggressively managing operating expenses. For the four years ended August   
31, 1997, the compounded annual growth rate in property-level earnings before   
interest, taxes, depreciation and amortization ("EBITDA") for the Company's     
multifamily and retail properties was 5.0% and 3.2%, respectively, on a same    
store basis. Same store performance data is calculated for the 16 multifamily   
properties and 12 shopping centers owned by the Company throughout the          
four-year period.                                                               

 The Company believes that by applying its management and leasing skills
and experience it can enhance the operating performance of the existing         
portfolio assets in the following ways:                                         

o Increasing Rents. A key aspect of the Company's strategy is to increase 
  base rents to market levels as leases expire. As of August 31, 1997, the
   Multifamily Properties had an average rent of $595 per month, compared to
   Company-quoted rents for new leases of $659 per month at such properties.
For enclosed mall leases expiring in 1998 in the Existing Retail      
 Properties, the weighted average annual rent was $13.84 per square foot
compared to Company-quoted weighted average rents of $14.18 per square
foot. These figures exclude Gateway Shopping Center, which was sold on
December 17, 1997, and Whitehall Mall, which is being redeveloped to a
revised configuration.                                                

o Optimizing Tenant Mix. The Company seeks to optimize the tenant mix in  
  its retail properties in order to increase their long-term drawing power
and tenant sales, thereby contributing to the Company's ability to    
maintain and increase rental rates. The primary goal of the Company's 
   retail leasing efforts is to obtain the most productive tenants available
in a given trade area, and to maintain the flexibility to adapt to    
changing trends in consumer tastes and retail demand.                 

o Maintaining High Occupancy Rates. The Company believes that it has been 
  successful in attracting, expanding and retaining retail and multifamily
tenants by emphasizing tenant satisfaction and retention. The Company 
 strives to be responsive to the needs of individual tenants through its
    on-site professional management and maintenance staff and, with respect to
    retail properties, by providing tenants with flexible leasing alternatives
to accommodate their changing space requirements.                     

   The Company's success in maintaining and improving occupancy rates is
    demonstrated, in part, by the Company's consistently high occupancy levels
  and by the number of existing tenants which have renewed their leases at
the Company's properties. As of August 31, 1997, the average occupancy
  rate for the Company's multifamily and retail portfolio was 97% and 87%,
respectively.                                                         

o Internalizing Outside Property Management and Leasing. Following the TRO
Transaction, the Company has the added opportunity to enhance property
cash flow by bringing in-house the property management and leasing    
function for certain of its retail properties now managed by third    
   parties. In these instances, the Company believes that it will be able to
  internalize the profit margin implicit in these management contracts, as
   well as more effectively lower operating expenses at such properties as a
   result of the economies of scale discussed above. In the first quarter of
    1998, the Company intends to assume the management of four of its Existing
Retail Properties, containing 694,000 square feet, which are currently
 managed by third parties. With respect to these properties, the Company
 paid third-party property managers approximately $175,000 in management
fees during the year ended August 31, 1997.                           

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Acquisition Strategies                                                          

The Company's acquisition strategies focus on the purchase of middle  
market retail properties and multifamily properties which the Company believes  
will benefit from more proactive management and leasing, selective re-tenanting 
and strategic capital improvements. The Company also intends to continue to     
take advantage of its third-party management business to evaluate and           
selectively acquire properties managed for its third-party clients.             

The Company intends to execute its strategy in the following ways:    

o Acquisition of Middle Market Shopping Centers. The Company's strategy   
    includes the acquisition of well-located enclosed shopping malls in middle
income markets (trade areas in which average annual household income  
    generally falls between $30,000 and $50,000). In some cases, these centers
may be older properties which remain competitive from a functional and
   location standpoint, but which typically have lower rental rates than the
newest properties in their markets and which may require capital      
improvements and re-tenanting.                                        

   The Company intends to target primary trade areas with populations in
   excess of 150,000 in which 20% or more of the population is under the age
of 19. The Company seeks to identify markets which exhibit strong     
potential demand for branded or "fashion" products, but which have few
  existing retail properties geared toward satisfying such demand. In this
   manner, the Company uses unsatisfied demand for branded products to drive
the re-tenanting and repositioning of its acquired shopping centers,  
adding a fashion-oriented anchor tenant and/or upgrading the in-line  
tenant mix.                                                           

     The Company believes that competition to acquire middle market shopping
 centers in its targeted markets is significantly more limited than that
  for larger, "trophy" shopping centers. As a result, the Company believes
it can acquire shopping centers which meet its investment criteria at 
attractive capitalization rates and at a discount to replacement cost.

   For example, the Company recently acquired Magnolia Mall in Florence,
South Carolina from an affiliate of Equity Properties and Development 
    Limited Partnership ("EPDLP"). The property is located at the intersection
 of Interstates 95 and 20 and is the only regional mall within a 70-mile
  radius. The county in which the mall is located contains 276,000 people,
    125,000 of whom are located within 15 miles of the property. The Company's
strategy for Magnolia Mall is to take advantage of what it believes is
unsatisfied demand for branded products in the trade area by upgrading
    merchant quality and replacing underperforming retailers with tenants such
as Gap and GapKids (scheduled to open February 1998). Further, an     
   opportunity exists to add an additional fashion-oriented anchor tenant to
the property. Magnolia Mall was purchased for a gross purchase price  
(including transaction costs) of $46.4 million, which represents an   
   initial capitalization rate of approximately 9.6% (calculated by dividing
 EBITDA for the nine months ended September 30, 1997, annualized, by the
gross purchase price).                                                

o Acquisition of Third-Party Managed Properties. The Company believes that
   the opportunity exists to continue to acquire certain properties which it
   currently manages on behalf of various third parties, including the three
   malls for which it holds a right of first refusal from TRO Affiliates. As
    the property manager and leasing agent for such properties, the Company is
in an advantageous position to evaluate the investment merits of such 
properties. Moreover, the Company believes it will be in a position to
acquire managed properties in negotiated transactions, as opposed to  
bidding processes.                                                    

o Corporate and Portfolio Acquisitions. The Company's growth strategy will
continue to include the evaluation of strategic acquisitions and/or   
business combinations with other real estate companies and portfolio  
   owners. The Company believes that the real estate industry is in a period
  of sustained consolidation, and that opportunities will arise to acquire
  other real estate companies. In this regard, the Company intends to seek
acquisition candidates with portfolios which complement the Company's 
    owned portfolio and where the Company's management skills and those of the
 target may be combined and then applied to enhance property values. The
   Company believes that the TRO Transaction and TRO's prior acquisitions of
Strouse Greenberg & Co., Inc. and the management business of EPDLP    
demonstrate the Company's ability to successfully identify, close and 
integrate strategic corporate and portfolio transactions.             

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o Acquisition of "Class B" Multifamily Properties. During the period      
  1992-1994, the Company's acquisition strategy focused on the purchase of
"Class B" multifamily properties in the Mid-Atlantic region and in    
  Florida. The Company's market research revealed the following conditions
existed at the time: (i) a number of markets were experiencing above  
average population and job growth as the economy was emerging from the
  recession of the early 1990's; (ii) new supply of multifamily properties
was minimal during the recession; (iii) multifamily properties were   
    available for purchase at significant discounts to their replacement cost;
and (iv) many "Class B" multifamily properties were suffering from    
 deferred maintenance due to their owners' inability to raise additional
capital.                                                              

    As a result, the Company embarked on an acquisition program focused on
 "Class B" apartment properties which could be purchased at discounts to
replacement cost and which could be upgraded through strategic capital
    expenditures aimed at increasing occupancy levels and rental rates. During
the period 1992-1994, the Company acquired eight properties containing
3,544 units (1,834 wholly owned units and 1,710 units through joint   
ventures). The initial total investment of the Company and its joint  
 venture partners in these properties was $130.7 million, or $36,871 per
   unit, including strategic capital improvements made following the initial
  investments. The average ratio of EBITDA to the Company's total purchase
 price (including initial capital expenditures) for these properties for
   the first full year following their purchase was approximately 10.0%. The
Company regularly reviews multifamily acquisition opportunities and   
intends to pursue such acquisitions as market conditions warrant.     

o Operating Partnership Unit Acquisitions. The Company recently formed the
  Operating Partnership. As an umbrella partnership REIT, or "UPREIT," the
Company will have the ability to acquire properties for OP Units and  
thereby may provide sellers with deferral of income taxes that would  
    otherwise be payable in a cash sale. The Company believes that its ability
to offer tax-efficient transactions to property sellers should        
  significantly expand the universe of potential acquisitions available to
the Company, and provides it with a competitive advantage over other  
  potential acquirers who are unable to offer tax-efficient consideration.
 An example of the Company's successful use of OP Units for acquisitions
includes the Company's purchase of Magnolia Mall from an affiliate of 
EPDLP for consideration which included OP Units.                      

Repositioning and Redevelopment Strategies                                      

  The Company's ability to reposition and redevelop retail and multifamily
properties is a core element of its business and growth strategies. The Company 
uses its internal redevelopment experience and resources to create value in     
newly acquired properties, frequently in cases in which the prior owner was     
unable to maximize the property's value due to a lack of managerial or          
financial resources.                                                            

   Given its expertise, the Company has the ability to conduct a broad range
of redevelopment activities designed to significantly improve the property's    
operating performance. The Company has redeveloped a number of properties for   
its own account and for third-party clients, including: Beaver Valley Mall, in  
Monaca, Pennsylvania; Hudson Mall, in Jersey City, New Jersey; Wayne Towne      
Center, in Wayne, New Jersey; Cumberland Mall, in Vineland, New Jersey; and     
most recently Richland Mall, in Quakertown, Pennsylvania.                       

Development of Power Center Retail Properties                                   

The Company's property development strategy currently focuses on the  
construction of retail power centers in its core Mid-Atlantic markets. Power    
centers are typically open-air centers with at least 250,000 square feet, and   
usually include at least three "category killer" and/or value-oriented retail   
anchor tenants. Such anchor tenants typically occupy between 60% and 80% of the 
total square footage in a power center. The tenant mix in a power center is     
designed to draw consumers from up to a 15-mile radius, creating a shopping     
destination. The majority of the Company's power center tenants are national    
and regional retailers with at least 15,000 to 150,000 square feet offering a   
variety of products.                                                            

    The Company's development and site selection strategy is tenant-driven, as
the Company uses its relationships with key power center tenants such as The    
Home Depot, Target and Kohl's to identify sites desirable to such retailers.    
After pre-leasing or pre-selling one or more portions of a targeted site to key 
anchor tenants, the Company is able to aggressively pre-lease the remaining     
space to other desirable retail tenants.                                        

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 The Company has significant experience in the adaptive redevelopment of
existing facilities in infill locations. Recently, the Company's development    
group has completed a number of power center projects on sites which were       
previously underutilized industrial/office locations, including:                

 o Delaware Avenue, Philadelphia, Pennsylvania: a 290,000 square foot center
containing The Home Depot, Wal-Mart and McDonalds located on the      
Philadelphia waterfront.                                              

 o Northeast Tower Center, Philadelphia, Pennsylvania: a 484,000 square foot
  center (of which 121,000 square feet remain to be constructed) including
    The Home Depot, Staples The Office Superstore, PETsMART and The Pep Boys -
Manny, Moe & Jack.                                                    

o Hillview Center, Cherry Hill, New Jersey: a 340,000 square foot center  
including Target and Kohl's.                                            

For a table summarizing certain developments currently in process, see "The     
Properties - The Development Properties."                                       

Third-Party Business                                                            

  The Company provides management, leasing and/or development services for
49 retail properties (containing approximately 19.2 million square feet) for    
affiliated and third-party property owners. The Company's third-party clients   
include institutions such as Aetna Life Insurance Company, The Mutual Life      
Insurance Company of New York, and an affiliate of ERE Yarmouth.                

The Company's largest third-party contract is the strategic alliance  
formed with EPDLP to manage, lease and redevelop 18 retail properties. Each of  
the management agreements is for a term of ten years and is cancelable only     
upon a sale of the property. The Company has acquired two properties from       
affiliates of EPDLP, Magnolia Mall and North Dartmouth Mall, and believes that  
there may be additional opportunities to acquire assets from this portfolio.    

    PREIT-RUBIN's management agreements typically provide for a one-year term,
cancelable upon 30 days' notice, with a fee equal to 3.0% to 5.0% of the        
shopping center's gross revenues. Leasing fees are paid either as-collected or  
on a one-time basis. Development services are provided to third-party clients   
on an hourly basis or a negotiated lump sum basis for the project. See "Risk    
Factors -- Risks of Third-Party Management Business" in the accompanying        
Prospectus.                                                                     

PREIT-RUBIN provides real estate development, management, leasing and 
other services to 28 properties in which Ronald Rubin (the Company's Chief      
Executive Officer) and/or other TRO Affiliates own interests. These 28          
properties consist of: two hotel and mixed use properties; eight office         
buildings; ten retail properties (eight with two or less tenants) which contain 
less than 200,000 square feet in the aggregate; the three retail properties for 
which the TRO Affiliates have granted the Company rights of first refusal (see  
"The Company -- Right of First Refusal Properties"); the two retail properties  
which the Company will acquire pursuant to existing agreements (see "The        
Properties -- Acquisition Properties"); and three parcels of land. The          
interests of Mr. Rubin and/or the TRO Affiliates in these 28 properties range   
between 11% and 81%, and Mr. Rubin and/or the TRO Affiliates generally exercise 
the right to select service providers for all of these properties.              

    The Company determined not to purchase these properties as part of the TRO
Transaction, with the exception of the right of first refusal properties and    
the Acquisition Properties, because of its belief that they are not consistent  
with the Company's investment strategy. All services provided to these 28       
properties are set forth in written agreements which the Company believes are   
no less favorable to the Company than agreements between the Company and        
unaffiliated third parties with respect to similar services. Pursuant to Mr.    
Rubin's employment agreement, Mr. Rubin is required to devote his full working  
time, energy, skill and best efforts to the performance of his duties to the    
Company.                                                                        

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USE OF PROCEEDS 

The net proceeds to the Company from the Offering, after deducting    
underwriting discounts and commissions and the estimated expenses of the        
Offering, are approximately $83.2 million ($95.8 million if the Underwriters'   
over-allotment option is exercised in full). The Company expects to use the net 
proceeds of the Offering as follows: (i) approximately $8.8 million for the     
prepayment of a mortgage loan secured by Cobblestone Apartments in Pompano      
Beach, Florida (the "Cobblestone Mortgage"); and (ii) approximately $74.4       
million for the repayment of amounts outstanding under the Credit Facility.     
Approximately $66.2 million of the indebtedness under the Credit Facility was   
incurred to finance various components of the TRO Transaction, including the    
Company's acquisition of three properties in connection with the TRO            
Transaction (Magnolia Mall, North Dartmouth Mall and Springfield Park), as well 
as to fund certain development expenses incurred in connection with the         
Development Properties. The Company expects to use any remaining net proceeds   
to fund the construction of the Christiana Power Center, Phase I, and for       
general corporate purposes. Pending the application of net proceeds from the    
Offering, the Company will invest such net proceeds in interest-bearing         
accounts and short-term interest-bearing securities in accordance with the      
requirements for qualification as a REIT for federal income tax purposes.       

The Cobblestone Mortgage bears interest at 8.25% and is scheduled to  
mature by its terms on December 1, 2002. The Credit Facility currently bears    
interest at LIBOR plus 1.70% and matures on September 30, 1999.                 
PRICE RANGE OF SHARES AND DISTRIBUTIONS 

 The Shares were traded on the American Stock Exchange ("ASE") under the
symbol "PEI" prior to November 14, 1997. On November 14, 1997, the Shares       
commenced trading on the NYSE. The following table sets forth, for the calendar 
quarters indicated, the high and low closing prices of the Shares on the ASE    
and NYSE, as applicable, and the distributions declared by the Company per      
Share for such calendar quarter.                                                

                                                                · Download Table

                                                                   Distributions 
                                             High        Low         Per Share   
                                          -----------   ---------  --------------
                                                                                 
1995                                                                             
----                                                                             
First Quarter ........................... $21 1/4      $18 1/2         $ 0.47    
Second Quarter   ........................  23 5/8       19 7/8           0.47    
Third Quarter ...........................  21 3/4       20 1/8           0.47    
Fourth Quarter   ........................  21 7/8       19 1/4           0.47    

1996                                                                             
----                                                                             
First Quarter ...........................  21 3/4       21 1/4           0.47    
Second Quarter   ........................  21 5/8       19               0.47    
Third Quarter ...........................  21 5/8       18 3/4           0.47    
Fourth Quarter   ........................  25           21               0.47    

1997                                                                             
----                                                                             
First Quarter ...........................  25           20 3/4           0.47    
Second Quarter   ........................  23 3/8       20 7/8           0.47    
Third Quarter ...........................  27 1/4       22 1/2           0.47    
Fourth Quarter (through December 17) ....  25 9/16      22               0.47    

On December 17, 1997, the last reported sale price on the NYSE was    
$22 3/8. As of November 14, 1997, the Shares were held by approximately 1,400   
holders of record.                                                              

 Although the Company currently anticipates that cash distributions will
continue to be paid in the future (in March, June, September and December), the 
payment of future distributions by the Company will be at the discretion of the 
Board of Trustees and will depend on numerous factors, including the Company's  
cash flow, its financial condition, capital requirements, annual distribution   
requirements under the REIT provisions of the Internal Revenue Code of 1986, as 
amended (the "Code"), and such other factors as the Board of Trustees deems     
relevant.                                                                       

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CAPITALIZATION  

  The following table sets forth the capitalization of the Company: (i) on
an historical basis as of August 31, 1997; (ii) on a pro forma basis assuming,  
as of such date, the completion of the TRO Transaction; and (iii) on a pro      
forma basis as adjusted for the Offering and the application of the net         
proceeds as described under "Use of Proceeds." The information set forth in the 
following table should be read in conjunction with the Company's consolidated   
financial statements included herein.                                           

                                                        · Enlarge/Download Table

                                                              August 31, 1997               
                                               ---------------------------------------------
                                                                                 Pro Forma  
                                               Historical       Pro Forma       as Adjusted 
                                               ------------   ---------------   ------------
                                                              (in thousands)                
                                                                                            
Mortgage loans payable   .....................  $  83,528       $ 108,728        $  99,881  
Credit Facility ..............................     33,884          90,531           16,188  
                                                ---------       ---------        ---------  
   Total debt   ..............................    117,412         199,259          116,069  
Minority interest  ...........................        540          15,672           15,672  
Shareholders equity:                                                                        
 Preferred Shares of Beneficial Interest,                                                   
   $1.00 par value; 25,000,000 authorized;                                                  
   none issued and outstanding ...............         --              --               --  
 Shares of Beneficial Interest,                                                             
   $1.00 par value, 100,000,000                                                             
   authorized; 8,685,098 issued and                                                         
   outstanding (8,685,098 pro forma                                                         
   and 12,685,098 pro forma,                                                                
   as adjusted) (1)   ........................      8,685           8,685           12,685  
 Additional paid in capital ..................     53,599          53,599          132,789  
 Distributions in excess of net income  ......    (21,385)        (21,385)         (21,385) 
                                                ---------       ---------        ---------  
 Total shareholders' equity ..................     40,899          40,899          124,089  
                                                ---------       ---------        ---------  
     Total capitalization   ..................  $ 158,851       $ 255,830        $ 255,830  
                                                =========       =========        =========  

------------                                                                    
(1) Does not include Shares reserved for issuance upon redemption of 646,286    
issued and outstanding OP Units or 933,375 Shares reserved for issuance 
upon the exercise of options which have been granted by the Company,    
314,786 of which are currently exercisable and 618,589 of which become  
exercisable at various times over the next four years.                  

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SELECTED FINANCIAL AND OPERATING DATA 

    The following table sets forth certain financial and operating information
for the Company for each of the five years ended August 31, 1997. Such          
information should be read in conjunction with the Company's financial          
statements and the notes thereto, "Management's Discussion and Analysis of      
Financial Condition and Results of Operations" and pro forma financial          
statements contained elsewhere herein. Effective January 1, 1998, the Company's 
fiscal year will be reported on a calendar year basis. The unaudited pro forma  
information is presented as if the Offering and the TRO Transaction had been    
completed on August 31, 1997 for balance sheet purposes and on September 1,     
1996 for purposes of the income statement and other data. The unaudited pro     
forma information is not necessarily indicative of what the actual financial    
position or results of operations of the Company would have been as of and for  
the period presented, nor does it purport to represent the Company's future     
financial position or results of operations.                                    

                                                        · Enlarge/Download Table

                                                               For the Fiscal Years Ended August 31,                      
                                         ---------------------------------------------------------------------------------
                                                                                   Historical                             
                                         Pro Forma     -------------------------------------------------------------------
                                          1997(1)        1997          1996          1995          1994          1993     
                                         -----------   -----------   -----------   -----------   -----------   -----------
                                                           (amounts in thousands, except per share data)                  
                                                                                                                          
Income Statement Data:                                                                                                    
Revenues:                                                                                                                 
 Gross revenues from real estate  ......  $52,721       $40,231       $38,985       $36,978       $27,640       $21,083   
 Interest and other income  ............      488           254           171           176           274           542   
                                          --------      --------      --------      --------      --------      --------  
   Total revenues. .....................   53,209        40,485        39,156        37,154        27,914        21,625   
Expenses:                                                                                                                 
 Property operating expenses   .........   20,253        16,289        16,102        14,859        11,758         8,959   
 Depreciation and amortization .........    8,816         6,259         5,908         5,286         3,541         2,784   
 General and administrative                                                                                               
   expenses. ...........................    3,324         3,324         3,119         3,091         2,528         1,873   
 Interest expense. .....................    9,167         9,086         9,831         8,908         4,162         2,222   
 Provision for losses on investments          500           500            --            --         1,795           320   
                                          --------      --------      --------      --------      --------      --------  
   Total expense   .....................   42,060        35,458        34,960        32,144        23,784        16,158   
                                          --------      --------      --------      --------      --------      --------  
Income before other income and                                                                                            
 expense  ..............................   11,149         5,027         4,196         5,010         4,130         5,467   
Equity in income of partnerships and                                                                                      
 joint ventures.   .....................    4,757         4,337         6,258         6,381         4,416         4,750   
Equity in loss of PREIT-RUBIN  .........      (80)           --            --            --            --            --   
Gains on sales of interests in real                                                                                       
 estate   ..............................    1,069         1,069           865           119        12,362         3,875   
Minority interest  .....................     (999)         (198)         (275)         (285)         (221)          (92)  
                                          --------      --------      --------      --------      --------      --------  
Net income   ...........................  $15,896       $10,235       $11,044       $11,225       $20,687       $14,000   
                                          ========      ========      ========      ========      ========      ========  
Per Share Results:                                                                                                        
Income before gains on sales of                                                                                           
 interests in real estate   ............    $1.17         $1.06         $1.17         $1.28         $0.96         $1.17   
Gains on sales of interests in real                                                                                       
 estate   ..............................      .08          0.12          0.10          0.01          1.43          0.45   
                                         ---------     ---------     ---------     ---------     ---------     ---------  
Net income   ...........................    $1.25         $1.18         $1.27         $1.29         $2.39         $1.62   
                                         =========     =========     =========     =========     =========     =========  
Weighted average number of shares                                                                                         
 outstanding (2)   .....................   12,679         8,679         8,676         8,671         8,664         8,643   

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                                              For the Fiscal Years Ended                               
                                                       August 31,                                      
                                            -------------------------------                            
                                                                Historical                             
                                              Pro Forma       -------------                            
                                               1997(1)             1997                                
                                            ----------------  -------------                            
                                            (amounts in thousands, except                              
                                              per share and property data)                             
                                                                                                       
Balance Sheet Data                                                                                     
 (at end of period):                                                                                   
Investments in real estate, at cost  ......   $  284,765      $  202,443                               
Total assets.   ...........................      262,636         165,657                               
Total debt   ..............................      116,069         117,412                               
Minority interest  ........................       15,672             540                               
Shareholders' equity  .....................      124,089          40,899                               
Other Data:                                                                                            
Cash flows from operating activities.......           (3)         15,219                               
Cash flows from investing activities.......           (3)          7,749                               
Cash flows from financing activities.......           (3)        (22,599)                              
Funds from operations (4)   ...............       29,171          19,660                               
EBITDA (5).  ..............................       48,719          35,169                               
Total leasable square footage of                                                                       
 retail properties (at end of period)......    5,968,000       4,470,000                               
Total multifamily units (at end of                                                                     
 period)  .................................        7,236           7,236                               
Number of properties (at end of                                                                        
 period):                                                                                              
 Retail   .................................           17              15                               
 Multifamily ..............................           19              19                               
Percentage leased (at end of period):                                                                  
 Retail   .................................           89%             87%                              
 Multifamily ..............................           97%             97%                              


                                                       For the Fiscal Years Ended August 31,           
                                            ---------------------------------------------------------- 
                                                1996           1995           1994           1993      
                                            -------------  -------------  -------------  ------------- 
                                             (amounts in thousands, except per share and property data)
                                                                                                       
Balance Sheet Data                                                                                     
 (at end of period):                                                                                   
Investments in real estate, at cost  ...... $  198,542     $  195,929     $  154,281     $  112,262    
Total assets.   ...........................    177,725        181,336        142,495        107,854    
Total debt   ..............................    124,148        122,518         80,155         51,929    
Minority interest  ........................        542            528            408            331    
Shareholders' equity  .....................     46,505         51,771         56,748         51,852    
Other Data:                                                                                            
Cash flows from operating activities ......     15,090         16,672         15,909         13,034    
Cash flows from investing activities ......        933        (40,082)       (18,524)       (38,683)   
Cash flows from financing activities ......    (16,091)        22,356          3,305         25,913    
Funds from operations (4)   ...............     18,628         18,963         16,417         16,870    
EBITDA (5).  ..............................     34,423         33,936         24,854         27,161    
Total leasable square footage of                                                                       
 retail properties (at end of period) .....  4,806,000      4,866,000      4,798,000      5,527,000    
Total multifamily units (at end of                                                                     
 period)  .................................      7,236          7,337          6,815          6,107    
Number of properties (at end of                                                                        
 period):                                                                                              
 Retail   .................................         18             18             19             22    
 Multifamily ..............................         19             20             19             17    
Percentage leased (at end of period):                                                                  
 Retail   .................................         90%            92%            90%            90%   
 Multifamily ..............................         95%            96%            95%            97%   

------------                                                                    
(1) See Notes to Management's Assumptions to Unaudited Pro Forma Consolidating  
Balance Sheet and Consolidated Income Statement contained elsewhere     
herein.                                                                 
(2) Weighted average number of Shares outstanding excludes Shares issuable upon 
conversion of outstanding OP Units and includes the dilutive effect of  
outstanding options. Income allocable to holders of OP Units is included
in minority interest.                                                   
(3) Pro forma information relating to cash flows from operating, investing and  
financing activities has not been included because the Company believes 
that the information would not be meaningful due to the number of       
assumptions required in order to calculate such information.            
(4) The White Paper on Funds from Operations approved by the Board of Governors 
  of NAREIT in March 1995 defines Funds from Operations as net income (loss)
 (computed in accordance with GAAP), excluding gains (or losses) from debt
restructuring and sales of properties, plus real estate related         
depreciation and amortization and after adjustments for unconsolidated  
partnerships and joint ventures. The Company believes that Funds from   
Operations is helpful to investors as a measure of the performance of an
equity REIT because, along with cash flows from operating activities,   
  financing activities, and investing activities, it provides investors with
 an indication of the ability of the Company to incur and service debt, to
make capital expenditures and to fund other cash needs. The Company     
  computes Funds from Operations in accordance with standards established by
NAREIT which may not be comparable to Funds from Operations 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 the Company. Funds from Operations does not represent  
cash generated from operating activities in accordance with GAAP and    
should not be considered as an alternative to net income (determined in 
accordance with GAAP) as an indication of the Company's financial       
performance or to cash flow from operating activities (determined in    
accordance with GAAP) as a measure of the Company's liquidity, nor is it
 indicative of funds available to fund the Company's cash needs, including
its ability to make cash distributions.                                 
(5) EBITDA is defined as operating income before interest expense, income       
taxes, depreciation and amortization. The Company believes EBITDA is    
useful to investors as an indicator of the Company's ability to service 
  debt and pay cash distributions. EBITDA, as calculated by the Company, may
not be comparable to EBITDA reported by other REITs that do not define  
 EBITDA exactly as the Company defines the term. EBITDA does not represent
cash generated from operating activities determined in accordance with  
  GAAP and should not be considered as an alternative to operating income or
net income determined in accordance with GAAP as an indicator of        
performance or as an alternative to cash flows from operating activities
as an indicator of liquidity.                                           

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF 
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 

The following discussion should be read in conjunction with the       
Consolidated Financial Statements of the Company and the notes thereto          
contained elsewhere herein.                                                     

Overview                                                                        

    The following discussion is based on the consolidated financial statements
of the Company and compares the results of operations of the Company for the    
fiscal year ended August 31, 1997 with the results of operations of the Company 
for the fiscal year ended August 31, 1996, and the results of operations of the 
Company for the fiscal year ended August 31, 1996 with the results of           
operations of the Company for the fiscal year ended December 31, 1995. The      
discussion set forth in "Results of Operations" below does not include the      
effects of the TRO Transaction, which occurred on September 30, 1997.           

Results of Operations                                                           

Fiscal 1997 Compared With Fiscal 1996                                           

   Gross revenues from real estate for the fiscal year ended August 31, 1997
increased by 3% to $40.2 million from $39.0 million in the prior year. The 1997 
period included $0.4 million of revenues attributable to Forestville Plaza in   
which the Company acquired its partners' remaining 25% interest in the prior    
fiscal year. The 1996 period included $0.5 million of revenues attributable to  
Chateau Apartments which the Company sold in June 1996. Revenues from           
properties owned during both periods increased by $1.0 million primarily as a   
result of increases in apartment revenues.                                      

   Operating expenses for the fiscal year ended August 31, 1997 increased 1%
to $16.3 million from $16.1 million in the prior year. The 1997 period included 
$0.2 million of expenses attributable to Forestville Plaza in which the Company 
acquired its partners' remaining 25% interest in the prior fiscal year. The     
1996 period included $0.3 million of expenses attributable to Chateau           
Apartments which the Company sold. Operating expenses from properties owned     
during both periods increased by $0.3 million.                                  

 Depreciation and amortization for the fiscal year ended August 31, 1997
increased by 7% to $6.3 million from $5.9 million in 1996, primarily as a       
result of ongoing capital expenditures in apartments.                           

  General and administrative expenses increased by 6% to $3.3 million from
$3.1 million in 1996, primarily as a result of costs associated with litigation 
with a partner.                                                                 

 Mortgage and bank loan interest expense decreased by 8% to $9.1 million
from $9.8 million in 1996, primarily as a result of decreased borrowing against 
the Company's credit facility.                                                  

    In fiscal year 1996, a partnership in which the Company has a 50% interest
signed an option to sell a parcel of land at a stipulated price, subject to the 
buyer's obtaining certain zoning variance approvals. In fiscal year 1997, the   
option expired. As a result, management revised its estimate of the property's  
selling price and recorded a $0.5 million provision for investment losses to    
reduce the property held for sale to its estimated net realizable value.        

Equity in income of partnerships and joint ventures decreased in the  
fiscal year ended August 31, 1997, by 32% to $4.3 million from $6.3 million in  
1996, primarily as a result of an increase in mortgage interest expense of $2.9 
million ($1.8 million of which was the Company's proportional share). The       
increase in partnership mortgage interest expense is attributable to prepayment 
fees of $1.9 million ($1.1 million of which was the Company's proportional      
share) in connection with refinancings, as well as additional interest expense  
associated with the refinancings, of Regency Apartments, Lehigh Valley Mall and 
Cambridge Hall Apartments in 1997. In addition, equity in income from           
properties owned during both periods exclusive of the increase in mortgage      
interest mentioned above increased by $0.5 million.                             

    Net income for the fiscal year ended August 31, 1997 before gains on sales
of interests in real estate decreased 10% to $9.2 million from $10.2 million    
for the comparable period in 1996. In fiscal year 1997, net gains on the sales  
of interests in real estate were $1.1 million, as compared to $0.9 million in   
1996. The net                                                                   

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gains on sales of interests in real estate of $1.1 million in 1997 consisted of 
gains on the sale of the Company's joint venture interest in shopping centers   
in Lancaster, Beaver Falls and Waynesburg, PA of $1.5 million, offset by a loss 
on the sale of a shopping Center in Margate, FL of $0.4 million. The gains in   
1996 totaling $0.9 million were derived from the sale of land in Bucks County,  
PA and the sale of the Chateau Apartments in Midland, TX. In 1997, net income   
was reduced by an accounting provision of $0.5 million for losses on land held  
for sale in the Company's investment portfolio and prepayment fees of $1.9      
million paid in connection with refinancing of two partnership properties, the  
Company's share of which was $1.1 million.                                      

Fiscal 1996 Compared With Fiscal 1995                                           

   Gross revenues from real estate for the fiscal year ended August 31, 1996
increased by 5% to $39.0 million from $37.0 million in 1995. The increase is    
due primarily to an increase in revenues of $1.2 million from the Boca Palms    
Apartments, which was acquired in November 1994 and $0.4 million from           
Forestville Plaza which became wholly owned during the year. Exclusive of Boca  
Palms Apartments and Forestville Plaza, revenues from properties owned during   
both periods increased 2% to $33.7 in 1996 from $33.1 million in 1995.          

  Operating expenses in the fiscal year ended August 31, 1996 increased by
8% to $16.1 million from $14.9 million in 1995. The increase is due primarily   
to $0.4 million of increased expenses from the Boca Palms Apartments,           
approximately $0.2 million of additional operating expenses as a result of the  
harsh winter weather in the Mid-Atlantic region and $0.1 million attributable   
to the increased ownership of Forestville Plaza.                                

  Depreciation and amortization increased by 13% to $5.9 million from $5.3
million in 1995, primarily as a result of the acquisition of Boca Palms, the    
remaining interest in Forestville Plaza, and ongoing capital expenditures.      
Interest expense increased by 11% to $9.9 million from $8.9 million in 1995 as  
a result of increased borrowings to finance the Boca Palms acquisition and for  
general corporate purposes.                                                     

 For fiscal year ended August 31, 1996, $0.7 million was charged against
the allowance for investment losses, $0.3 million for carrying costs for land   
held for sale, and $0.4 million of development expenses incurred at Crest       
Plaza, Allentown, Pennsylvania, for a potential expansion of the shopping       
center, including a Caldor store. The lease with Caldor was canceled and the    
cost was written off following a bankruptcy declaration by Caldor.              

Equity in income of partnerships and joint ventures decreased by 2% to
$6.3 million from $6.4 million in 1995, primarily as a result of a              
non-recurring lease termination fee received from a shopping center tenant in   
the amount of $0.2 million for fiscal year 1995. The Company's share of         
partnership and joint venture income in 1996 was also reduced by approximately  
$0.1 million as compared to the prior year due to higher operating expenses     
resulting from the harsh winter weather discussed earlier.                      

Net income for the fiscal year ended August 31, 1996, before gains on 
sales of interests in real estate, decreased by 8% to $10.2 million from $11.1  
million for the comparable period in 1995. In the 1996 period, the gains on the 
sales of interests in real estate were $0.9 million as compared to the 1995     
period which included a gain on sale of interest in real estate of $0.1         
million. Net income was reduced by an increase in operating expenses of $0.3    
million primarily due to winter conditions in the Mid-Atlantic region and the   
receipt in the prior year of $0.2 million as a non-recurring termination fee    
from a shopping center tenant.                                                  

Liquidity and Capital Resources                                                 

The Company expects to meet its short-term liquidity requirements     
generally through its available working capital and net cash provided by        
operations. The Company believes that the net cash provided by operations will  
be sufficient to allow the Company to make any distributions necessary to       
enable the Company to continue to qualify as a REIT under the Code. The Company 
also believes that the foregoing sources of liquidity will be sufficient to     
fund its short-term liquidity needs for the foreseeable future, including       
capital expenditures, tenant improvements and leasing commissions.              

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   The Company expects to meet certain long-term liquidity requirements such
as property acquisitions, scheduled debt maturities, renovations, expansions    
and other non-recurring capital improvements through long-term secured and      
unsecured indebtedness and the issuance of additional equity securities. The    
Company also expects to use funds available under its $150.0 million Credit     
Facility to fund acquisitions, development activities and capital improvements  
on an interim basis.                                                            

 In addition to amounts due under the Credit Facility and under the Term
Loan (as hereinafter defined), during the next three years mortgage loans       
secured by properties owned by three partnerships in which the Company has an   
interest mature by their terms. Balloon payments on these loans total $17.0     
million, of which the Company's proportionate share is $8.5 million.            

The Credit Facility                                                       

Coincident with the closing of the TRO Transaction, the Operating     
Partnership entered into the Credit Facility with a group of banks led by       
CoreStates Bank, N.A. The obligations of the Operating Partnership under the    
Credit Facility have been guaranteed by the Company.                            

The Credit Facility is for an initial term of two years and bears     
interest, at the borrower's election, at: (i) the higher of CoreStates' prime   
rate, or the Federal Funds lending rate, plus 0.5%, in each case as in effect   
from time to time; or (ii) 30-day LIBOR plus margins ranging from 1.1% to 1.7%, 
depending on the ratio of the Company's consolidated liabilities to gross asset 
value (the "Leverage Ratio"), each as determined pursuant to the terms of the   
Credit Facility.                                                                

The Credit Facility contains affirmative and negative covenants       
customarily found in facilities of this type, as well as requirements that the  
Company maintain, on a consolidated basis: (i) a maximum Leverage Ratio of 65%; 
(ii) a maximum ratio of Senior Liabilities (as defined in the Credit Facility   
agreement) to Unencumbered Asset Value (as defined in the Credit Facility       
agreement) of 73%; (iii) minimum tangible net worth of $115.0 million; (iv) a   
minimum ratio of annualized consolidated property net operating income to total 
annual debt service of 1.40:1; and (v) a minimum ratio of annualized            
consolidated property net operating income to pro forma debt service of 1.30:1. 
As of September 30, 1997, the Company's Leverage Ratio was approximately 58%.   
As long as the Leverage Ratio is 50% or greater, the lending banks will hold    
unrecorded mortgages on 11 unencumbered properties which the Operating          
Partnership owns, directly or indirectly, and would be entitled to record such  
mortgages upon any event of default. Immediately following the Offering, the    
Company's Leverage Ratio will be 43%.                                           

As of September 30, 1997, the Operating Partnership had drawn $95.0   
million on the Credit Facility, which was used to repay amounts outstanding on  
the Company's prior credit facility and to fund the cash portion of the TRO     
Transaction referred to in Note 10 of the Notes to Consolidated Financial       
Statements of the Company contained elsewhere herein.                           

Secured Term Loan                                                         

   In addition to the Credit Facility, the Company previously borrowed $35.0
million (the "Term Loan") from a bank group at a fixed rate of 8.62% until      
March 1998, at which time the rate is to be reset at either a fixed or floating 
rate at the option of the Company. The loan is secured by three apartment       
properties, had a balance of $34.0 million on August 31, 1997, and matures in   
March 1998. The Company may, at its option, extend the maturity of this loan    
for two additional one year periods upon the satisfaction of certain specified  
conditions. The Company believes that it satisfies all of the conditions for    
these optional extensions.                                                      

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Schedule of Indebtedness                                                  

   As of September 30, 1997, certain of the Company's properties are subject
to mortgage indebtedness as set forth below:                                    

                                                                · Download Table

                                                  Percentage    Interest      
Property                   Location                 Owned        Rate(1)      
-------------------------  ---------------------  ------------  --------------
                                                                              
Multifamily Properties:                                                       
 Camp Hill                 Camp Hill, PA              100%        9.50%       
 Cobblestone               Pompano Beach, FL          100%        7.75(5)     
 Shenandoah Village        West Palm Beach, FL        100%        5.90        
 Emerald Point             Virginia Beach, VA          65%(4)     6.79        
 Cambridge Hall            West Chester, PA            50%        8.35        
                           Altamonte Springs,                                 
 Charter Pointe            FL                          40%(4)     7.50        
 Countrywood               Tampa, FL                   50%(4)     8.00        
 Eagle's Nest              Coral Springs, FL           50%        8.24        
 Fox Run                                                                      
  Phase 1                  Bear, DE                    50%        7.75        
  Phase 2                  Bear, DE                    50%        8.38        
  Phase 3                  Bear, DE                    50%        7.28        
 Fox Run Warminster        Warminster, PA              50%        7.88        
 Regency Lakeside          Omaha, NE                   50%(4)     7.56        
 Will-O-Hill               Reading, PA                 50%        7.75        
   Subtotal Multifamily Properties                                            
Retail Properties:                                                            
 Magnolia Mall             Florence, SC               100%        8.20        
 Mandarin Corners          Jacksonville, FL           100%        9.13        
 Ingleside Center          Thorndale, PA               50%        7.50        
 Ingleside Center          Thorndale, PA              100%        7.50        
 Laurel Mall               Hazleton, PA                40%        7.63        
 Lehigh Valley Mall        Allentown, PA               50%        7.90        
 Court at Oxford Valley    Langhorne, PA               50%        8.02        
 Park Plaza                Pinellas Park, FL           50%        7.75        
 Palmer Park Mall          Easton, PA                  50%      80% of        
                                                                 Prime        
 Palmer Park Mall          Easton, PA                  50%        8.75        
 Palmer Park Mall          Easton, PA                  50%      LIBOR +       
                                                                  1.75%       
 Punta Gorda Mall          Punta Gorda, FL             25%       10.25        
 Rio Mall                  Rio Grande, NJ              50%        8.63        
   Subtotal Existing Retail Properties                                        
Other Debt:                                                                   
 Line of Credit                                       100%      LIBOR +       
                                                                  1.70%       
 Secured Term Loan                                    100%        8.62        
 Palmer Park Bank Loan                                 50%         8.5%       
   Subtotal Other Debt:                                                       
     Total/Weighted Average                                       7.78%       


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                                                 Estimated                            Estimated    
                             Principal           Annual Debt                        Balance Due on 
Property                     Balance(2)           Service       Maturity Date(3)       Maturity    
-------------------------  -------------------  --------------  ------------------  ---------------
                                                                                                   
Multifamily Properties:                                                                            
 Camp Hill                  $    6,737,087       $    760,116         3/1/07         $   4,919,623 
 Cobblestone                     8,832,268            798,792        12/1/02             8,154,842 
 Shenandoah Village              8,640,000            597,960        10/1/25                    -- 
 Emerald Point                  16,872,414(6)       1,424,412         3/1/08            12,446,206 
 Cambridge Hall                  2,686,227            246,078        10/1/16             1,665,051 
 Charter Pointe                  2,194,066            220,411         2/1/06             1,547,768 
 Countrywood                     3,119,948            346,286         9/1/03             2,378,452 
 Eagle's Nest                    7,881,655            763,037        11/1/00             7,470,894 
 Fox Run                                                                                           
  Phase 1                        2,143,671            252,702        12/1/98             2,091,469 
  Phase 2                        2,332,305            245,436        12/1/98             2,286,373 
  Phase 3                        2,800,024            265,205        11/1/00             2,714,376 
 Fox Run Warminster              1,901,551            198,882         8/1/05             1,373,482 
 Regency Lakeside               10,188,529            865,093         2/1/07             8,924,075 
 Will-O-Hill                       895,082            101,436         8/1/12                    -- 
                            ----------------     ------------                        ------------- 
Subtotal Multifamily                                                                               
  Properties                     77,224,827          7,085,846                           55,972,611
                             ----------------     ------------                        -------------
Retail Properties:                                                                                 
 Magnolia Mall                  25,153,992          2,597,726         2/1/07            17,904,398 
 Mandarin Corners                8,398,637          1,002,192         8/1/08             4,064,056 
 Ingleside Center                  672,030            106,416         9/1/06                    -- 
 Ingleside Center                  884,736            148,536         8/1/00               626,193 
 Laurel Mall                    10,587,224          1,155,000        12/1/03             8,832,000 
 Lehigh Valley Mall             26,671,938          2,479,260        10/1/06            21,750,439 
 Court at Oxford Valley         24,616,800          2,319,426        7/10/11            15,966,965 
 Park Plaza                        135,421             75,915         9/7/99                    -- 
 Palmer Park Mall                  293,284             78,107        3/25/98               279,583 
 Palmer Park Mall                1,411,415            301,620        10/1/03                    -- 
 Palmer Park Mall                  938,960             69,577        3/25/98               938,960 
 Punta Gorda Mall                  536,039             69,480         2/1/98               532,375 
 Rio Mall                          210,809            103,845        12/1/99                    -- 
                            ----------------     ------------                        ------------- 
 Subtotal Existing             100,511,286         10,507,100                           70,894,969 
  Retail Properties         ----------------     ------------                        ------------- 

Other Debt:                                                                                        
 Line of Credit                 95,319,437          7,015,000        9/30/99            95,319,437 
 Secured Term Loan              33,926,568          3,400,000        3/20/98            33,926,568 
 Palmer Park Bank Loan             510,558            112,062         1/1/00               350,313 
                            ----------------     ------------                        ------------- 
   Subtotal Other Debt:        129,246,005         10,415,000                          129,246,005 
                            ----------------     ------------                        ------------- 
     Total/Weighted Average $  307,492,676       $ 28,007,946                        $ 256,113,585 
                            ================     ============                        ============= 

------------                                                                    
(1) Effective rate at September 30, 1997.                                       
(2) Represents the Company's proportionate share of principal balance.          
(3) As of September 30, 1997, the weighted average maturity of the Company's    
mortgage indebtedness was 7.6 years.                                    
(4) The Company's share of net cash flows from this property may be greater     
than its stated percentage interest because of certain preferred return 
provisions in the respective partnership agreements. Amounts shown as   
percentage owned in this this table represent the Company's share of net
 cash flow to which it is entitled after distribution of preferred returns
to all partners.                                                        
(5) Increased to 8.25% on December 1, 1997.                                     
(6) Represents 100% of debt secured by property; the Company's proportionate    
share is 65%; minority interest is 35%.                                 

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Interest Rate Protection                                                        

   In order to reduce exposure to variable interest rates, in March 1995 the
Company purchased a three-year interest rate cap on $15.0 million of            
indebtedness limiting the underlying 30-day LIBOR rate to 7.5% until March      
1998. In June 1995, the Company entered into a six-year interest rate swap      
agreement with CoreStates Bank, N.A. on $20.0 million of indebtedness which     
fixes a rate of 6.12% per annum versus 30-day LIBOR until 2001. As a result of  
these transactions, the Company has fixed or hedged $35.0 million of the        
outstanding balance on its Credit Facility as of August 31, 1997.               

Contingent Liability                                                            

The Company, along with certain of its joint venture partners, has    
guaranteed debt totaling $16.0 million, (See Notes 2 and 3 of the Notes to      
Consolidated Financial Statements of the Company contained elsewhere herein.)   

Cash Flows                                                                      

    Net cash provided by operating activities increased by approximately 1% to
$15.2 million for the year ended August 31, 1997 as compared to $15.1 million   
the same period last year. Operating cash flow was higher primarily as a result 
of timing of collections of receivables.                                        

 Net cash provided by investing activities was $7.7 million for the year
ended August 31, 1997 as compared to $0.9 million in the same period last year. 
For the year ended August 31, 1997, the Company refinanced two properties and   
received $15.4 million, sold interests in four shopping centers and received    
proceeds of $2.1 million, invested $6.2 million in real estate and incurred     
deposits to acquire real estate of $5.3 million. For the year ended August 31,  
1996, the Company sold two properties and received net cash proceeds of $5.2    
million.                                                                        

 Net cash used in financing activities increased by 40% to $22.6 million
for the year ended August 31, 1997 as compared to $16.1 million in the same     
period last year. Financing activities included a $5.4 million reduction in     
bank loans payable and distributions paid to shareholders of $16.3 million.     
Financing activities in 1996 included proceeds of a mortgage note payable on    
Shenandoah Village Apartments of $8.8 million, a $5.0 million reduction in bank 
loans payable and distributions paid to shareholders of $16.3 million.          

Funds from Operations                                                           

The White Paper on Funds from Operations approved by the Board of     
Governors of NAREIT in March 1995 defines Funds from Operations as net income   
(loss) (computed in accordance with GAAP), excluding gains (or losses) from     
debt restructuring and sales of properties, plus real estate related            
depreciation and amortization and after adjustments for unconsolidated          
partnerships and joint ventures. The Company believes that Funds from           
Operations is helpful to investors as a measure of the performance of an equity 
REIT because, along with cash flow from operating activities, financing         
activities, and investing activities, it provides investors with an indication  
of the ability of the Company to incur and service debt, to make capital        
expenditures and to fund other cash needs. The Company computes Funds from      
Operations in accordance with standards established by NAREIT which may not be  
comparable to Funds from Operations 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 the Company. Funds from Operations   
does not represent cash generated from operating activities in accordance with  
GAAP and should not be considered as an alternative to net income (determined   
in accordance with GAAP) as an indication of the Company's financial            
performance or to cash flow from operating activities (determined in accordance 
with GAAP) as a measure of the Company's liquidity, nor is it indicative of     
funds available to fund the Company's cash needs, including its ability to make 
cash distributions.                                                             

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  Funds from Operations for each of the previous five fiscal years were as
follows:                                                                        

                                                        · Enlarge/Download Table

                                                                                     For the Fiscal                           
                                                                                 Years Ended August 31,                       
                                                          --------------------------------------------------------------------
                                                           1997          1996          1995           1994          1993      
                                                          -----------   -----------   -----------   ------------   -----------
                                                                                     (in thousands)                           
                                                                                                                              
Net income  .............................................  $ 10,235      $11,044       $11,225       $  20,687      $ 14,000  
Less:  Gains on sales of interests in real estate  ......    (1,069)        (865)         (119)        (12,362)       (3,875) 
Plus:  Provision for losses .............................       500           --            --           1,795           320  
    Depreciation and amortization                                                                                             
       Wholly owned and consolidated partnerships........     5,989        5,650         5,044           3,322         2,685  
       Unconsolidated partnerships and joint ventures....     3,380        3,334         3,214           3,229         4,119  
    Refinancing prepayment fees  ........................     1,133           --            --              --            --  
Less: Depreciation of non-real estate assets ............      (222)        (202)         (173)           (146)         (104) 
      Amortization of deferred financing costs ..........      (286)        (333)         (228)           (108)         (275) 
                                                           --------      -------       -------       ---------      --------  
Funds from operations   .................................  $ 19,660      $18,628       $18,963       $  16,417      $ 16,870  
                                                           ========      =======       =======       =========      ========  

Capital Expenditures                                                            

    During fiscal 1997, the Company made $3.6 million in capital expenditures:
$2.9 million for multifamily communities ($502 per unit owned, adjusted for     
partnership interests) and $0.7 million for shopping centers. The Company's     
policy is to capitalize expenditures for items which are expected to have       
useful lives exceeding one year, such as floor coverings, appliances and major  
exterior preparation and painting for apartments. During fiscal 1997, $0.8      
million ($171 per unit owned) was expended for floor covering and $0.3 million  
($71 per unit owned) for appliances.                                            

  In addition, the Company made $1.2 million in non-recurring improvements
to multifamily communities in 1997 which included $0.7 million for exterior     
preparation and painting.                                                       

Inflation                                                                       

Inflation can have many effects on the financial performance of the   
Company. Shopping center leases often provide for the payment of rents based on 
a percentage of sales which may increase with inflation. Leases may also        
require tenants to bear all or a portion of operating expenses, which may       
reduce the impact of expense increases on the Company. Apartment leases         
normally provide for a one-year term, which may allow the Company to seek       
increased rents as leases are renewed or when new tenants are obtained.         

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THE PROPERTIES  

The Existing Retail Properties                                                  

   The Company has interests in the 17 Existing Retail Properties containing
an aggregate of approximately 6.0 million square feet. The Company currently    
manages two of its wholly owned properties and expects to manage the remaining  
four wholly owned properties by the end of the first quarter of 1998. The       
Company's 11 joint venture retail properties are managed by the Company's joint 
venture partners, or an entity designated by the Company and the partner, and   
in most such instances a change in the management of the property requires the  
concurrence of both partners. Eight of the 17 Existing Retail Properties        
containing an aggregate of approximately 3.7 million square feet are located in 
Pennsylvania and four containing an aggregate of approximately 0.6 million      
square feet are located in Florida.                                             

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The following table sets forth certain information regarding the 17   
Existing Retail Properties as of (or for the fiscal year ended) August 31,      
1997:                                                                           

                                                        · Enlarge/Download Table

                                                                     Year          Total       Owned                           
                                                   Percentage       Built/        Square       Square    Percentage            
Property Name                  Location              Owned       Renovated(1)     Feet(2)       Feet      Leased(3)            
-----------------------------  ------------------  ------------  --------------  -----------  ---------  ------------          
                                                                                                                               
Lehigh Valley Mall             Allentown, PA            50%        1977/1996     1,054,000     489,000        99%              
Court at Oxford Valley(5)      Langhorne, PA            50%             1996       692,000     457,000       100               
North Dartmouth Mall           North Dartmouth,        100%        1971/1987       620,000     620,000        88               
                               MA                                                                                              
Whitehall Mall                 Allentown, PA            50%        1964/1982       603,000     521,000        84               
Magnolia Mall                  Florence, SC            100%        1979/1992       570,000     570,000        98               
Laurel Mall                    Hazleton, PA             40%        1973/1995       558,000     558,000        97               
Palmer Park Mall(6)            Easton, PA               50%        1972/1982       349,000     349,000        68               
Forestville Shopping Center    Forestville, MD         100%        1974/1983       218,000     218,000        73               
Mandarin Corners               Jacksonville, FL        100%             1986       216,000     216,000        99               
Springfield Park(7)            Springfield, PA          50%        1963/1997       209,000      65,000       N/A               
Rio Mall                       Rio Grande, NJ           50%        1973/1992       161,000     161,000        73               


                                                                   In-Line Stores                    Property                  
                                                                    Average Base                     Revenue-                  
                                    Principal                         Rent Per        Property       Company's     Property    
Property Name                        Tenants         Base Rent     Square Foot(4)      Revenue        Share         EBITDA     
-----------------------------  -------------------  -------------  ----------------  -------------  ------------  -------------
                                                                                                                               
Lehigh Valley Mall             J.C. Penney,          $10,189,000       $ 21.75        $14,840,000    $7,420,000    $10,183,000 
                               Strawbridge's,                                                                                  
                               Macy's                                                                                          
Court at Oxford Valley(5)      Dick's Clothing &       7,048,000         14.65          8,125,000     4,062,000      6,367,000 
                               Sporting Goods,                                                                                 
                               Best Buy, Phar-                                                                                 
                               Mor, HomePlace,                                                                                 
                               The Home Depot,                                                                                 
                               BJ Wholesale Club                                                                               
North Dartmouth Mall           J.C. Penney,            3,977,000         23.52          6,268,000     6,268,000      4,047,000 
                               Sears, Ames,                                                                                    
                               General Cinema                                                                                  
                               Theatres                                                                                        
Whitehall Mall                 Sears, Kohl's           2,186,000         11.37          3,940,000     1,970,000      2,212,000 
Magnolia Mall                  J.C. Penney,            4,097,000         20.00          6,222,000     6,222,000      4,511,000 
                               Sears, Belk,                                                                                    
                               Rose's                                                                                          
Laurel Mall                    Boscov's Dept.          3,609,000         10.44          4,915,000     1,966,000      3,262,000 
                               Store, Kmart, J.C.                                                                              
                               Penney                                                                                          
Palmer Park Mall(6)            The Bon-Ton,            2,036,000         14.19          2,868,000     1,434,000      1,828,000 
                               Eckerd Drug Store                                                                               
Forestville Shopping Center    Ames                      638,000          6.44            766,000       766,000        462,000 
Mandarin Corners               Wal-Mart,               1,671,000         10.72          1,984,000     1,984,000      1,517,000 
                               Upton's, Carmike                                                                                
                               Cinemas                                                                                         
Springfield Park(7)            Target                    N/A              N/A             N/A            N/A           N/A     
Rio Mall                       Kmart, Staples            462,000         12.25            768,000       384,000        294,000 
                               The Office                                                                                      
                               Superstore                                                                                      


                                Property                                                                                       
                                EBITDA-                                                                                        
                                Company's                                                                                      
Property Name                    Share                                                                                         
-----------------------------  -----------                                                                                     
                                                                                                                               
Lehigh Valley Mall              $5,092,000                                                                                     
Court at Oxford Valley(5)        3,183,000                                                                                     
North Dartmouth Mall             4,047,000                                                                                     
Whitehall Mall                   1,106,000                                                                                     
Magnolia Mall                    4,511,000                                                                                     
Laurel Mall                      1,305,000                                                                                     
Palmer Park Mall(6)                914,000                                                                                     
Forestville Shopping Center        462,000                                                                                     
Mandarin Corners                 1,517,000                                                                                     
Springfield Park(7)                N/A                                                                                         
Rio Mall                           147,000                                                                                     

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                                                                     Year          Total                                    
                                                   Percentage       Built/        Square                                    
Property Name                 Location               Owned       Renovated(1)     Feet(2)                                   
----------------------------  -------------------  ------------  --------------  -----------                                
                                                                                                                            
Crest Plaza                   Allentown, PA            100%        1959/1991        153,000                                 
Park Plaza Shopping Center    Pinellas Park, FL         50%        1963/1983        151,000                                 
South Blanding Village        Jacksonville, FL         100%             1986        107,000                                 
Ormond Beach Mall             Daytona                   25%        1966/1991        103,000                                 
                              Beach, FL                                                                                     
Ingleside Center              Thorndale, PA             70%(8)     1981/1995        102,000                                 
Punta Gorda Mall              Punta Gorda, FL           25%        1965/1992        102,000                                 
                                                                                  ---------                                 
  Total/weighted average                                                          5,968,000                                 
                                                                                  =========                                 


                                                                                             In-Line Stores                 
                                Owned                                                         Average Base                  
                               Square      Percentage         Principal                         Rent Per        Property    
Property Name                   Feet        Leased(3)          Tenants         Base Rent     Square Foot(4)      Revenue    
----------------------------  -----------  ------------  -------------------  -------------  ----------------  -------------
                                                                                                                            
Crest Plaza                      153,000       83%       Weis Market,          $   866,000        $ 6.30        $ 1,001,000 
                                                         Eckerd Drug Store                                                  
Park Plaza Shopping Center       151,000       95        Eckerd Drug               695,000          6.52            900,000 
                                                         Store, Ace                                                         
                                                         Hardware, Publix                                                   
                                                         Supermarket                                                        
South Blanding Village           107,000       94        Food Lion,                687,000          8.24            839,000 
                                                         Scotty's                                                           
Ormond Beach Mall                103,000       94        Belk-Lindsey,             345,000          5.43            512,000 
                                                         Publix                                                             
                                                         Supermarket,                                                       
                                                         Eckerd Drug Store                                                  
Ingleside Center                 102,000      100        Kmart                     444,000          N/A             448,000 
Punta Gorda Mall                 102,000       87        Beall's, Publix           340,000          5.30            612,000 
                                                         Supermarket,                                                       
                                                         Eckerd Drug Store                                                  
                               ---------   ----                                -----------                      ----------- 
  Total/weighted average       4,942,000   89.2%                               $39,290,000                      $55,008,000 
                               =========   ----                                ===========                      =========== 


                               Property                      Property                                                       
                               Revenue-                       EBITDA-                                                       
                               Company's      Property       Company's                                                      
Property Name                    Share         EBITDA          Share                                                        
----------------------------  -------------  -------------  ------------                                                    
                                                                                                                            
Crest Plaza                    $ 1,001,000    $   719,000    $   719,000                                                    
Park Plaza Shopping Center         450,000        626,000        313,000                                                    
South Blanding Village             839,000        593,000        593,000                                                    
Ormond Beach Mall                  128,000        344,000         86,000                                                    
Ingleside Center                   314,000        430,000        301,000                                                    
Punta Gorda Mall                   153,000        408,000        102,000                                                    
                               -----------    -----------    -----------                                                    
  Total/weighted average       $35,361,000    $37,803,000    $24,398,000                                                    
                               ===========    ===========    ===========                                                    

--------                                                                        
(1) Year initially completed and, where applicable, the most recent year in     
    which the property was substantially renovated or an additional phase of the
property was completed.                                                 
(2) Total Square Feet includes space owned or ground leased by anchors, and     
Owned Square Feet and Percent Leased excludes such space.               
(3) Percent Leased is calculated as a percent of Owned Square Feet for which    
leases were in effect as of August 31, 1997.                            
(4) Excludes space not owned by the Company and space subject to ground leases. 
(5) Rent, Revenue and EBITDA for The Court at Oxford Valley are based on        
annualized results for the nine months ended September 30, 1997.        
(6) Includes an 82,000 square foot Clover store currently vacant.               
(7) The Company owns an undivided one-half interest as a tenant in common in    
one of three floors in this former department store currently vacant and
  under development. Its share of reconstruction costs is approximately 15%.
(8) Represents a weighted average. The Company owns 100% of a portion of the    
 center and has a 50% interest in the partnership which owns the remaining
portion of the center.                                                  

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 The following table sets forth certain information, as of September 30,
1997, regarding principal tenants in the Existing Retail Properties:            

Principal Tenants 

                                                        · Enlarge/Download Table

                                                 Square Footage    Square Footage    Total Square 
                                    Number of        Owned             Leased          Footage    
Tenant Name(1)                       Stores        By Tenant         By Tenant         Occupied   
----------------------------------  -----------  ----------------  ----------------  -------------
                                                                                                  
Ace Hardware                             1                --          20,000              20,000  
Ames                                     2                --         166,123             166,123  
BJ Wholesale Club                        1                --         105,000             105,000  
Beall's                                  1                --          22,000              22,000  
Belk                                     1                --         119,046             119,046  
Belk-Lindsey                             1                --          14,000              14,000  
Best Buy                                 1                --          59,495              59,495  
The Bon-Ton                              1                --          82,500              82,500  
Boscov's Department Store                1                --         183,000             183,000  
Dick's Clothing & Sporting Goods         1                --          63,115              63,115  
Eckerd Drug Store                        5                --          57,500              57,500  
Food Lion                                1                --          29,000              29,000  
The Home Depot                           1                --         130,000             130,000  
HomePlace                                1                --          54,096              54,096  
J.C. Penney                              4           188,000         254,359             442,359  
Kmart Corp.                              3                --         263,000             263,000  
Kohl's(2)                                1            82,000              --              82,000  
Macy's                                   1           212,000              --             212,000  
Phar-Mor(3)                              1                --          45,621              45,621  
Publix Supermarket                       3                --         106,000             106,000  
Rose's                                   1                --          53,000              53,000  
Scotty's                                 1                --          45,000              45,000  
Sears                                    3                --         412,604             412,604  
Staples The Office Superstore            1                --          20,000              20,000  
Strawbridge's                            1           165,000              --             165,000  
Target                                   1           140,000              --             140,000  
Upton's(4)                               1                --          51,800              51,800  
Wal-Mart                                 1                --          82,000              82,000  
Weis Market                              1                            45,000              45,000  
                                        --           -------       ---------           ---------  
  Total                                 43           787,000       2,483,259           3,270,259  
                                        ==           =======       =========           =========  

------------                                                                    
(1) Actual tenant may be an affiliate of the entity listed.                     
(2) Subleased to Kohl's by Kimco Realty Corp.                                   
(3) Subleased to Phar-Mor by an affiliate of Melville Realty Corporation.       
(4) Subleased to Upton's by J. Byron.                                           

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Set forth below is a description of each of the Existing Retail       
Properties:                                                                     

Lehigh Valley Mall. Lehigh Valley Mall is a 1.1 million square foot,  
two-level, enclosed regional mall located in Allentown, Pennsylvania at the     
intersection of Route 22 and Route 145 (MacArthur Road). The mall originally    
opened in 1977, and the Company completely renovated the mall's common areas in 
1996 with the addition of marble floors, new brighter lighting, landscaping,    
ceiling treatments and many new tenant store fronts. The mall is located on a   
100-acre site, with approximately 125 in-line stores and three anchors: J.C.    
Penney, Macy's and Strawbridge's. The Company has a 50% interest in the         
partnership which owns the mall.                                                

    The Court at Oxford Valley. The Court at Oxford Valley is a 692,000 square
foot power center located in Langhorne, Pennsylvania, directly opposite the 1.5 
million square foot Oxford Valley Mall. The Court, which opened in 1996, is     
located on a 95-acre site, with the following principal tenants: Dick's         
Clothing & Sporting Goods, Best Buy, Phar-Mor, HomePlace, BJ Wholesale Club and 
The Home Depot. BJ Wholesale Club and The Home Depot each own their stores. The 
Company has a 50% interest in the partnership which owns the shopping center.   

North Dartmouth Mall. North Dartmouth Mall is a 620,000 square foot,  
one-level, regional mall located in North Dartmouth, Massachusetts,             
approximately three miles west of New Bedford and eight miles east of Fall      
River, Massachusetts, directly accessible from Interstate 195. The mall, which  
opened in 1971 and was renovated in 1987, contains 50 in-line stores anchored   
by Sears, J.C. Penney, Ames and General Cinema Theatres. The Company owns 100%  
of, and manages, the mall.                                                      

Whitehall Mall. Whitehall Mall is a 603,000 square foot, one-level,   
enclosed regional mall located in Allentown, Pennsylvania, directly across from 
Lehigh Valley Mall. The mall was completed in 1964 and renovated in 1982. This  
mall is located on a 51-acre site, with 61 in-line stores anchored by Sears and 
Kohl's. The Company has a 50% interest in the mall as a tenant in common. The   
Company expects to commence redevelopment of Whitehall Mall in January 1998.    
When redeveloped, the mall will include the existing Sears and Kohl's stores as 
well as a number of additional value-oriented retailers in a revised            
configuration.                                                                  

    Magnolia Mall. Magnolia Mall is a 570,000 square foot, one-level, regional
mall located in Florence, South Carolina at the Highway 20 interchange of       
Interstate 95, approximately midway between Myrtle Beach and Columbia, South    
Carolina. The mall serves a geographically large primary trade area, with the   
closest regional shopping center located approximately 70 miles from the        
center. The mall was opened in 1979 and was renovated in 1992. The mall is      
located on an 88-acre site, with 66 in-line stores and four anchors: Sears,     
Belk, J.C. Penney and Rose's. The Company owns (subject to a ground lease) 100% 
of, and manages, the mall. Fee title may be purchased for $5.7 million in 2004. 

Laurel Mall. Laurel Mall is a 558,000 square foot, one-level, enclosed
mall located in Hazleton, Pennsylvania at the intersection of Interstate 81,    
Pennsylvania Route 309 and Airport Road. The mall opened in 1973, and was       
expanded in 1995 with the addition of J.C. Penney and 52,000 square feet of     
additional in-line space. The mall is located on a 55-acre site, with 72        
in-line stores and three anchors: Boscov's Department Store, J.C. Penney and    
Kmart Corp. The Company has a 40% interest in the partnership which owns the    
center.                                                                         

    Palmer Park Mall. Palmer Park Mall is a 349,000 square foot, enclosed mall
located in Easton, Pennsylvania, one mile north of U.S. Route 22 on             
Pennsylvania Route 248. The center, which opened in 1972 and was expanded and   
redeveloped in 1982, is located on a 50-acre site, with 59 in-line stores       
(including an Eckerd Drug Store) anchored by The Bon-Ton. Negotiations with a   
second anchor to replace a former Clover store are underway. Substantial        
redevelopment planning is proceeding with the purchase by the partnership       
owning the mall of the Clover building and the renovation of the Clover         
building. The Company has a 50% interest in the partnership which owns the      
mall.                                                                           

Forestville Shopping Center.  Forestville Shopping Center is a 218,000
square foot community center located in Forestville (suburban Washington, DC),  
Maryland on Old Marlboro Pike and Forestville Road (Interstate 495 and Route    
4). The center, which opened in 1974 and was renovated in 1983, is located on   
an 18-acre site, with 20 in-line stores anchored by Ames.                       

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 Mandarin Corners Shopping Center. Mandarin Corners Shopping Center is a
216,000 square foot community center located on San Jose Boulevard and          
Interstate 295, ten miles southwest of downtown Jacksonville, Florida. The      
center, which opened in 1986, is located on a 23-acre site, with 25 in-line     
stores anchored by Wal-Mart, which expanded in 1993, Upton's and Carmike        
Cinemas.                                                                        

    Springfield Park. Springfield Park is located in Springfield, Pennsylvania
at the intersection of Route 1 (Baltimore Pike) and Route 420, approximately    
one-half mile north of the Springfield Mall and about one mile north from the   
interchange of Route 1 and Interstate 476. Target, the Company and the          
Company's co-tenant acquired condominium interests in the former Strawbridge &  
Clothier store, now vacant. Target plans to occupy the lower levels, which will 
be expanded to approximately 147,000 square feet. The Company owns a 50%        
interest in the third level (approximately 65,000 square feet) and a 4,000      
square foot outparcel. All levels of the building have access to at-grade       
parking. The Company anticipates the releasing of the third level in the second 
half of 1998.                                                                   

 Rio Mall. Rio Mall is a 161,000 square foot community center located in
Rio Grande, New Jersey on a 16-acre site at the intersection of Route 9 and     
Route 47. The center, which opened in 1973, was renovated in 1992 with the      
expansion of Kmart. The center contains 16 in-line stores anchored by Kmart and 
Staples The Office Superstore. The Company has a 50% interest in the            
partnership which owns the center.                                              

Crest Plaza Shopping Center. Crest Plaza Shopping Center is a 153,000 
square foot neighborhood center located in South Whitehall Township,            
Pennsylvania on a 33-acre site at the intersection of Cedar Crest Boulevard and 
Walbert Avenue. The center, which opened in 1959, was renovated and expanded in 
1991. The center contains 21 in-line stores anchored by Weis Market.            

    Park Plaza Shopping Center. Park Plaza Shopping Center is a 151,000 square
foot neighborhood center located on 49th Street and Park Boulevard, Pinellas    
Park, Florida. The center opened in 1963 and was renovated in 1983, led by the  
expansion and remodeling of Publix Supermarket. The center is located on a      
15-acre site, with 24 in-line stores anchored by Publix Supermarket, Eckerd     
Drug Store and Ace Hardware. The Company has a 50% interest in the center as a  
tenant in common.                                                               

 South Blanding Village Shopping Center. South Blanding Village Shopping
Center is a 107,000 square foot neighborhood center located in Orange Park      
(suburban Jacksonville), Florida. The center, which opened in 1986, is located  
on a 17.5-acre site, with 13 in-line stores anchored by Food Lion and Scotty's. 

    Ormond Beach Mall. Ormond Beach Mall is a 103,000 square foot neighborhood
center located in Daytona Beach, Florida. The center, which opened in 1966, was 
expanded and remodeled in 1991. Ormond Beach Mall is located on an 11-acre      
site, with 18 in-line stores anchored by Publix Supermarket, Belk-Lindsay and   
Eckerd Drug. The Company has a 25% interest in the center as a tenant in        
common.                                                                         

  Ingleside Shopping Center. Ingleside Shopping Center is a 102,000 square
foot neighborhood center located in Thorndale, PA on a 10-acre site at the      
intersection of Lincoln Highway (Business U.S. Route 30) and Bailey Road,       
Chester County. The center, which opened in 1981, was redeveloped in 1995 with  
Kmart occupying the entire property. The Company owns 100% of a portion of the  
center and has a 50% interest in the partnership which owns the remaining       
portion of the center.                                                          

  Punta Gorda Mall. Punta Gorda Mall is a 102,000 square foot neighborhood
center located in Punta Gorda, Florida on U.S. Route 41 and Tamiami Trail. The  
center, which opened in 1965, was remodeled in 1992. The center is located on a 
77-acre site, and includes 21 in-line stores anchored by Publix Supermarket,    
Beall's and Eckerd Drug Store. The Company has a 25% interest in the center as  
a tenant in common.                                                             

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The following table sets forth scheduled lease expirations and certain
other information, as of August 31, 1997, for leases in place for the Existing  
Retail Properties assuming that none of the tenants exercises renewal options   
or termination rights:                                                          

                                                        · Enlarge/Download Table

                                                                             Base Rent    Percent of Total Leased 
                                               Annualized    Approximate    Per Square          Square Feet       
                                 Number of     Base Rent     Square Feet     Foot of          Represented By      
                                  Expiring    of Expiring    of Expiring     Expiring            Expiring         
Year Ending December 31,          Leases        Leases         Leases         Leases              Leases          
-------------------------------  -----------  -------------  -------------  ------------  ------------------------
                                                                                                                  
1998   ........................       85       $ 2,726,056       303,954       $8.97               6.9%           
1999   ........................       50         1,929,919       327,654        5.89               7.4            
2000   ........................       56         1,752,427       158,080       11.00               3.6            
2001   ........................       72         3,531,402       432,572        8.16               9.8            
2002   ........................       46         1,929,045       178,057       10.83               4.0            
2003   ........................       37         2,662,176       231,062       11.52               5.2            
2004   ........................       28         2,830,863       224,083       12.63               5.1            
2005   ........................       32         2,049,362       124,892       16.41               2.8            
2006   ........................       48         4,717,681       554,385        8.51              12.6            
2007   ........................       26         3,587,946       496,852        7.22              11.3            
                                      --       -----------     ---------       -----              ----            
 Total/weighted average  ......      480       $27,716,877     3,031,591       $9.14              68.8%           
                                     ===       ===========     =========       -----              ====            

The Acquisition Properties                                                      

The Company has entered into agreements to acquire a 100% interest in 
Northeast Tower Center and a 50% interest in Hillview Shopping Center.          

Hillview Shopping Center and Northeast Tower Center are power centers 
being acquired from TRO Affiliates as part of the TRO Transaction. The          
Company's actual aggregate purchase price (in the form of assumed debt and      
equity) for each property will be based on the following formula: (i) leased    
space will be valued at a 10.0% capitalization rate on net cash flow (as        
defined in the agreements); and (ii) unleased space will be valued based on an  
appraisal process. The equity portion of the purchase price will be payable, in 
each case, in OP Units valued at $23.40 per unit, which was the average closing 
price of the Shares over the 20 trading days prior to July 30, 1997, the date   
that the definitive documentation for the TRO Transaction was executed.         
Accordingly, the actual equity portion of the purchase price will be a function 
of additional lease-up activity and other factors prior to the Company's        
purchase of the Acquisition Properties.                                         

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The following table sets forth certain information, as of November 28,
1997, regarding the Acquisition Properties:                                     

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                                                Percentage        Expected      Total                                   
                                                  To Be          Acquisition    Square                                  
Property Name               Location             Acquired           Date         Feet                                   
--------------------------  ------------------  --------------  -------------  ---------                                
                                                                                                                        
Hillview Shopping Center    Cherry Hill, NJ           50%           1998       340,000                                  
Northeast Tower Center      Philadelphia, PA         100%(3)        1999       484,000                                  
                                                                               -------                                  
  Total                                                                        824,000                                  
                                                                               =======                                  


                               Owned                                      Estimated                                     
                              Square                 Principal           Acquisition                 Construction       
Property Name                  Feet                   Tenants                Cost                       Status          
--------------------------  ----------------  ------------------------  --------------------  --------------------------
                                                                                                                        
Hillview Shopping Center     340,000(1)       Target, Kohl's,             $  14,700,000(2)    All tenants open except   
                                              PETsMART, HomePlace,                            PETsMART                  
                                              Babies 'R Us, Crown                                                       
                                              Books                                                                     
Northeast Tower Center       353,000(4)       The Home Depot,                25,700,000(5)    Phase I: 363,000 square   
                                              PETsMART, Staples The                           feet completed. Phase II: 
                                              Office Superstore, Old                          Expected completion is    
                                              Navy, The Pep Boys --                           Fall 1998                 
                                              Manny, Moe & Jack                                                         
                             -------                                      -------------                                 

  Total                      693,000                                      $  40,400,000                                 
                             =======                                      =============                                 

______________                                                                  
(1) Includes 261,000 square feet of retail space situated on land leased to     
tenants which own their own buildings.                                  
(2) Includes allocated portion of expected assumed indebtedness of $12.9        
million at Company's proportionate share.                               
(3) The Company will initially acquire an 89% interest in the partnerships      
which own this property and the right to acquire the remaining 11%      
interest not earlier than three years from the initial acquisition date.
(4) Includes 153,000 square feet of retail space situated on land leased to     
tenants which own their own buildings.                                  
(5) Includes expected assumed indebtedness of $20.5 million.                    

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Set forth below are descriptions of the Acquisition Properties.       

Hillview Shopping Center. Hillview Shopping Center is a 340,000 square
foot power center which opened in October 1997 and is located on Route 38 in    
Cherry Hill, New Jersey, directly opposite the 1.3 million square foot Cherry   
Hill Mall. Approximately 261,000 square feet of space represents stores owned   
by tenants located on land leased by the Company to such tenants. Tenants in    
the center include Target, Kohl's, Babies 'R Us, HomePlace, PETsMART, Crown     
Books and Silver Diner. The Company expects to acquire a 50% interest in the    
center held by the TRO Affiliates in early 1998.                                

 Northeast Tower Center. Northeast Tower Center is a 484,000 square foot
power center located on Roosevelt Boulevard (Route 1) in the northeast section  
of Philadelphia. The first phase of the center, totaling 363,000 square feet,   
was completed in 1997. The center is being developed by PREIT-RUBIN and all of  
the equity interests in the center are owned by TRO Affiliates. The tenants in  
the center include The Home Depot, PETsMART, The Pep Boys - Manny, Moe & Jack,  
Staples The Office Superstore and Old Navy. When fully completed, the center is 
expected to contain approximately ten other stores.                             

   Shortly after completion of the center, which is currently anticipated to
occur during fall 1998, the Company intends to initially acquire 89% of the     
interests of the partnerships which own the property. The Company will have the 
absolute right to acquire the remaining 11% no less than 36 months following    
the initial acquisition date.                                                   

The Development Properties                                                      

The Company or a joint venture partner has rights in five Development 
Properties, four of which (Red Rose Commons, Blue Route Metroplex, and          
Christiana Power Center Phases I and II) were acquired in connection with the   
TRO Transaction. As each of the four Development Properties is completed and    
leased up, it will be valued based on the following principles: (i) all space   
leased and occupied by "credit tenants" will be valued at ten times adjusted    
cash flow (computed as specified in the applicable contribution agreement       
between the Company and TRO); (ii) all space leased to a credit tenant but      
unoccupied will be valued at ten times adjusted cash flow calculated as though  
the space were built and occupied as set forth in the budget for such property; 
and (iii) space not leased or occupied, whether built or unbuilt, will be       
valued as mutually agreed upon or, failing agreement, by an appraisal process.  
The Company will be obligated to issue Class A OP Units equal to 50% of the     
amount, if any, by which the value of the Company's interest in each project    
exceeded the aggregate cost of such project at the time of completion, with     
provisions for netting negative amounts arising in connection with completion   
or abandonment of any project against earlier completed projects. There can be  
no assurance that construction will be commenced on any Development Property    
for which construction has not commenced as of the date hereof or that any      
Development Property for which construction has commenced will be completed as  
planned. See "Risk Factors -- Possible Environmental Liabilities" and "-- Risks 
of Development" in the accompanying Prospectus.                                 

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The following table sets forth certain information, as of November 10,
1997, regarding the Development Properties:                                     

                                                        · Enlarge/Download Table

                                                                              Planned      Planned                
                                                               Percentage      Total        Owned                 
                                                                 To Be        Square       Square                 
Property Name                          Location                  Owned         Feet         Feet                  
-------------------------------------  ----------------------  ------------  -----------  -----------             
                                                                                                                  
Christiana Power Center Phase I        Newark, DE                   50%         295,000      142,000              
Red Rose Commons(2)                    Lancaster, PA                50%         463,000      265,000              
Warrington Shopping Center(3)          Warrington, PA              100%         415,000      140,000              
Blue Route Metroplex(2)(3)             Plymouth Meeting, PA         50%         760,000      319,000              
Christiana Power Center Phase II(4)    Newark, DE                   50%         300,000      150,000              
                                                                              ---------    ---------              
  Total                                                                       2,233,000    1,016,000              
                                                                              =========    =========              


                                                     Total          Estimated                                     
                                        Square     Estimated       Development                                    
                                        Feet       Development       Cost -                           Expected    
Property Name                           Leased        Cost        Company Share      Status(1)       Completion   
-------------------------------------  ---------  --------------  ---------------  --------------  ---------------
                                                                                                                  
Christiana Power Center Phase I         169,000    $ 37,800,000     $18,900,000    Construction    Second half of 
                                                                                                   1998           
Red Rose Commons(2)                     352,000      29,000,000      14,500,000    Construction    Second half of 
                                                                                                   1998           
Warrington Shopping Center(3)                --      13,900,000      13,900,000    Development     Second half of 
                                                                                                   1999           
Blue Route Metroplex(2)(3)                   --      48,400,000      24,200,000    Development     First half of  
                                                                                                   2000           
Christiana Power Center Phase II(4)          --              --              --    Development     Second half of 
                                                                                                   2000           
                                        -------    ------------     -----------                                   
  Total                                 521,000    $129,100,000     $71,500,000                                   
                                        =======    ============     ===========                                   

--------                                                                        
(1) "Construction" indicates that construction activities, such as site         
preparation, ground-breaking activities, or exterior construction, have 
commenced. "Development" indicates that development activities, such as 
site surveys, preparation of architectural plans, or initiation of land 
use approvals or rezoning processes, have commenced (but "Construction" 
has not commenced).                                                     
(2) Subject to reduction to 25% under the terms of the Goldenberg Letter        
   Agreement (see "The Company -- The TRO Transaction -- The Goldenberg Letter
Agreement").                                                            
(3) Construction of this project is subject to obtaining site plan approval.    
(4) This project is not currently zoned for retail use, and participation by    
the Company in the development is subject to rezoning.                  

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Set forth below are descriptions of the five Development Properties:  

Christiana Power Center -- Phases I and II. Christiana Power Center is
located adjacent to the Christiana Mall in Newark, Delaware at the Delaware     
Route 1 interchange of Interstate 95. Phase I of the center is expected to      
contain approximately 295,000 square feet, of which 137,000 square feet has     
been ground leased to Costco, 32,000 square feet is subject to a binding lease  
and the remaining 126,000 square feet is currently subject to discussions with  
various tenants. Construction of Phase I commenced in November 1997 and is      
expected to be completed in the second half of 1998.                            

Phase II of the Christiana Power Center is planned for 300,000 square 
feet. The construction of Phase II is subject to rezoning for retail use, and   
Phase II is not expected to open until the second half of 2000.                 

    Red Rose Commons. Red Rose Commons is a power center located in Lancaster,
Pennsylvania. This project is being developed in a joint venture with The       
Goldenberg Group in which the Company will have a 50% interest. The center is   
expected to contain 463,000 square feet and be anchored by The Home Depot, Weis 
Market, HomePlace, The Sports Authority, Office Max, PETsMART, Barnes & Noble   
Book Store and The Pep Boys - Manny, Moe & Jack. Construction commenced in      
November 1997, and the center is expected to open in the second half of 1998.   

    Warrington Shopping Center. Warrington Shopping Center is a proposed power
center expected to contain approximately 415,000 square feet located at the     
intersection of Route 611 and Street Road in Warrington, Pennsylvania.          
Development activity on this project is in the preliminary stages and a number  
of land use approvals and leasing commitments must be obtained prior to the     
commencement of construction in 1998.                                           

    Blue Route Metroplex. Blue Route Metroplex is located in Plymouth Meeting,
Pennsylvania. This proposed power center is expected to contain approximately   
760,000 square feet with an additional parcel for office or hotel development.  
The opening date for the Blue Route Metroplex is expected to occur during the   
first half of 2000. The site has been properly zoned for the intended uses and  
final site plan approval is pending. This project is being developed in a joint 
venture with The Goldenberg Group, in which the Company will have a 50%         
interest. The Company's interest in the property will be limited to the retail  
portion of the project.                                                         

The Multifamily Properties                                                      

  The Company has interests in 19 Multifamily Properties with an aggregate
of 7,236 units. The Company manages ten of its Multifamily Properties, and the  
nine remaining Multifamily Properties held are managed by the Company's         
partners.                                                                       

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The following table sets forth certain information regarding the 19   
Multifamily Properties as of (or for the period ended) August 31, 1997:         

                                                        · Enlarge/Download Table

                                                                      Year        Number                               
                                                    Percentage       Built/         Of         Total       Percentage  
Property Name              Location                   Owned       Renovated(1)     Units    Square Feet     Occupied   
-------------------------  -----------------------  ------------  --------------  --------  -------------  ------------
                                                                                                                       
Emerald Point              Virginia Beach, VA            65%      1965/1993           862       846,000       96%      
Boca Palms                 Boca Raton, FL               100%      1970,1991           522       673,000        97      
                                                                     /1994                                             
Lakewood Hills             Harrisburg, PA               100%      1972, 1975,         562       630,000        96      
                                                                  1982/1988                                            
Regency Lakeside           Omaha, NE                     50%      1970/1990           433       492,000        99      
Kenwood Gardens            Toledo, OH                   100%      1951/1989           504       404,000        98      
Fox Run, Delaware          Bear, DE                      50%           1988           414       359,000        96      
Eagle's Nest               Coral Springs, FL             50%           1989           264       343,000        97      
Palms of Pembroke          Pembroke Pines, FL           100%      1989/1995           348       340,000        95      
Hidden Lakes               Dayton, OH                   100%      1987/1994           360       306,000        98      
Cobblestone                Pompano Beach, FL            100%      1986/1994           384       297,000        95      
Countrywood                Tampa, FL                     50%      1977/1997           536       295,000        95      
Shenandoah Village         West Palm Beach, FL          100%      1985/1993           220       286,000        97      
Marylander                 Baltimore, MD                100%      1951/1989           510       279,000        98      
Camp Hill Plaza            Camp Hill, PA                100%      1967/1994           300       277,000        97      
Charter Pointe             Altamonte Springs, FL         40%      1974/1993           312       258,000        96      
Fox Run                    Warminster, PA                50%      1969/1992           196       232,000        99      
Cambridge Hall             West Chester, PA              50%      1967/1993           232       186,000        99      
Will-O-Hill                Reading, PA                   50%      1970/1986           190       152,000        99      
2031 Locust Street         Philadelphia, PA             100%      1929/1986            87        89,000        98      
                                                                                    -----     ---------                
 Total/Weighted Average                                                             7,236     6,744,000       97%      
                                                                                    =====     =========                


                                        Monthly        Monthly                        Property                         
                            Average     Quoted         Quoted                         Revenue -                        
                             Rent        Rent           Rent           Property        Company       Property          
Property Name              per Unit    per Unit    per Square Foot      Revenue         Share         EBITDA           
-------------------------  ----------  ----------  -----------------  -------------  -------------  -------------      
                                                                                                                       
Emerald Point                $  463      $  515       $ 0.52          $ 4,943,000    $ 3,213,000    $ 2,829,000        
Boca Palms                      802         917         0.71            5,159,000      5,159,000      2,820,000        
Lakewood Hills                  590         663         0.59            4,036,000      4,036,000      2,409,000        
Regency Lakeside                886         933         0.82            4,690,000      2,345,000      2,896,000        
Kenwood Gardens                 362         422         0.53            2,294,000      2,294,000      1,002,000        
Fox Run, Delaware               588         609         0.70            3,224,000      1,612,000      1,858,000        
Eagle's Nest                    812         898         0.69            2,650,000      1,325,000      1,302,000        
Palms of Pembroke               788         901         0.92            3,598,000      3,598,000      2,142,000        
Hidden Lakes                    523         622         0.73            2,400,000      2,400,000      1,407,000        
Cobblestone                     644         724         0.94            3,106,000      3,106,000      1,791,000        
Countrywood                     409         443         0.80            2,796,000      1,398,000      1,242,000        
Shenandoah Village              820         923         0.71            2,279,000      2,279,000      1,246,000        
Marylander                      461         510         0.93            2,990,000      2,990,000      1,698,000        
Camp Hill Plaza                 598         675         0.73            2,214,000      2,214,000      1,359,000        
Charter Pointe                  470         518         0.63            1,840,000        736,000        831,000        
Fox Run                         637         671         0.57            1,512,000        756,000        766,000        
Cambridge Hall                  607         628         0.78            1,748,000        874,000        894,000        
Will-O-Hill                     487         522         0.65            1,142,000        571,000        592,000        
2031 Locust Street            1,172       1,302         1.27            1,290,000      1,290,000        627,000        
                             ------      ------       ------          -----------    -----------    -----------        
 Total/Weighted Average      $  595      $  659       $ 0.71          $53,911,000    $42,196,000    $29,711,000        
                             ------      ------       ------          ===========    ===========    ===========        

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                             Property         
                             EBITDA -         
                              Company         
Property Name                  Share          
-------------------------  -------------------
                                              
Emerald Point                $  2,229,000(2)  
Boca Palms                      2,820,000     
Lakewood Hills                  2,409,000     
Regency Lakeside                2,016,000(2)  
Kenwood Gardens                 1,002,000     
Fox Run, Delaware                 929,000     
Eagle's Nest                      651,000     
Palms of Pembroke               2,142,000     
Hidden Lakes                    1,407,000     
Cobblestone                     1,791,000     
Countrywood                       881,000(2)  
Shenandoah Village              1,246,000     
Marylander                      1,698,000     
Camp Hill Plaza                 1,359,000     
Charter Pointe                    558,000(2)  
Fox Run                           383,000     
Cambridge Hall                    447,000     
Will-O-Hill                       296,000     
2031 Locust Street                627,000     
                             --------------   
 Total/Weighted Average      $ 24,891,000     
                             ==============   

--------                                                                        
(1) Year initially completed and most recently renovated, and where applicable, 
year(s) in which additional phases were completed at the property.      
(2) The Company's share of EBITDA from this property for the year ended August  
  31, 1997 is greater than its stated percentage interest because of certain
preferred return provisions in the respective partnership agreements.   

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Other Properties                                                                

    Shortly following the initial organization of the Company, it acquired six
industrial properties. The Company has not acquired any property of this type   
in over 20 years and the Company does not consider these properties to be part  
of its core portfolio. In the aggregate, these properties contributed less than 
3% of the Company's net rental income for the fiscal year ended August 31,      
1997, and the Company is currently evaluating the potential disposition of      
these assets.                                                                   

    The following table sets forth certain information, as of August 31, 1997,
regarding the six industrial properties:                                        

Industrial Properties 

                                                                · Download Table

                               Year       Percentage      Square     Percentage 
Property and Location        Acquired       Owned         Feet         Leased   
--------------------------   ----------   ------------   ---------   -----------
                                                                                
Office and Warehouse                                                            
Annandale, VA ............     1962           100%       332,000        100%    
Warehouse                                                                       
Pennsauken, NJ   .........     1962           100%        12,000        100%    
Warehouse                                                                       
Allentown, PA ............     1962           100%        16,000        100%    
Warehouse                                                                       
Pennsauken, NJ   .........     1963           100%        30,000        100%    
Warehouse and Plant                                                             
Lowell, MA ...............     1963           100%       197,000        100%    
Warehouse and Plant                                                             
Ft. Washington, PA  ......     1962            50%       141,000        100%    
                                                         -------                
  Total ..................                               728,000                
                                                         =======                

  The Company also holds partial interests in three parcels of undeveloped
land. Over the next 12 months, the Company anticipates determining, with its    
respective joint venture partners, whether any of these parcels present         
appropriate development opportunities for the Company; in the event that they   
do not, the Company intends to consider the potential disposition of these      
assets.                                                                         

    The following table sets forth certain information, as of August 31, 1997,
regarding the three land parcels:                                               

Land Parcels  

 Year       Percentage
Location                    Acquired       Owned       Acres                    
-------------------------   ----------   -----------   ------                   
Rancocas, NJ ............     1971          75%         54                      
Elizabethtown, PA  ......     1972          50%         22                      
Coral Springs, FL  ......     1990          50%         14                      
                                  --
Total   ...............                               90                    
                                  ==

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MANAGEMENT  

Trustees and Officers                                                           

    The Company's Board of Trustees consists of nine members, five of whom are
not employed by or otherwise affiliated with the Company. The following table   
sets forth certain information with respect to the Trustees, senior officers,   
and other significant employees of the Company:                                 

                                                        · Enlarge/Download Table

Name                          Age                          Position                       
----------------------------  -----  -----------------------------------------------------
                                                                                          
Trustees:                                                                                 
Sylvan M. Cohen ............   83    Chairman of the Board of Trustees                    
Ronald Rubin*   ............   66    Chief Executive Officer and Trustee                  
Jonathan B. Weller .........   51    President, Chief Operating Officer and Trustee       
George F. Rubin*   .........   54    President of PREIT-RUBIN and Trustee                 
William R. Dimeling   ......   56    Trustee                                              
Rosemarie B. Greco*   ......   51    Trustee                                              
Lee H. Javitch  ............   65    Trustee                                              
Leonard I. Korman  .........   61    Trustee                                              
Jeffrey P. Orleans .........   51    Trustee                                              

Senior Officers:                                                                          
Edward A. Glickman .........   40    Executive Vice President and Chief Financial Officer 
Jeffrey A. Linn ............   48    Senior Vice President-Acquisitions and Secretary     
Dante J. Massimini .........   64    Senior Vice President-Finance and Treasurer          
Raymond J. Trost   .........   42    Vice President-Multifamily Asset Management          
Leonard B. Shore   .........   66    Executive Vice President-Development of PREIT-       
                                     RUBIN                                                
Joseph F. Coradino .........   46    Executive Vice President of PREIT-RUBIN              
Alan F. Feldman ............   34    Chief Operating Officer-Retail Division of PREIT-    
                                     RUBIN                                                
Pat A. Berns ...............   43    Executive Vice President-Retail Leasing of PREIT-    
                                     RUBIN                                                
Other Significant Employees:                                                              
Elaine Berger   ............   43    Vice President-Specialty Leasing                     
William B. Berlin  .........   58    Vice President-Retail Management                     
Richard E. Brown   .........   45    Vice President-Asset Management                      
Timothy J. Bruce   .........   40    Vice President-Retail Leasing                        
David J. Bryant ............   39    Vice President-Financial Services                    
Harvey Diamond  ............   50    Vice President-Retail Leasing                        
Douglas S. Grayson .........   39    Vice President-Development                           
Eric M. Mallory ............   37    Vice President-Acquisitions                          
James L. Paterno   .........   34    Vice President-Office Leasing                        
Denny D. Moore  ............   41    Vice President-Retail Leasing                        

------------                                                                    
* Elected pursuant to the terms of the TRO Contribution Agreement.              

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Sylvan M. Cohen is Chairman of the Board of Trustees. Mr. Cohen was a 
founder of the Company in 1960 and served as its Chief Executive Officer for 37 
years. He is of counsel to the law firm of Drinker Biddle & Reath LLP and       
formerly a partner in the Philadelphia law firm of Cohen, Shapiro, Polisher,    
Shiekman and Cohen. Mr. Cohen is a former chairman of the National Association  
of Real Estate Investment Trusts and of the International Council of Shopping   
Centers ("ICSC"). He remains a member of the board of the ICSC. Mr. Cohen has   
served on numerous civic and charitable boards and is a member of the Advisory  
Board of the Real Estate Center at the Wharton School of the University of      
Pennsylvania. Mr. Cohen is a director of FPA Corporation, a trustee of EQK      
Realty Investments I, and a trustee of Arbor Property Trust. He is a graduate   
of the University of Pennsylvania and the University of Pennsylvania Law        
School.                                                                         

Ronald Rubin is Chief Executive Officer and Trustee. Mr. Rubin joined 
Richard I. Rubin and Co., Inc. in 1953 and served it in a number of capacities. 
He served as chairman and chief executive officer of The Rubin Organization,    
Inc. for over 25 years. Mr. Rubin is a past president of the Greater            
Philadelphia Chamber of Commerce and was instrumental in the organization of    
the Center City District, which is funded by local businesses to assure a       
cleaner, safer downtown in Philadelphia. Mr. Rubin has served on numerous       
boards and in various leadership positions in the Philadelphia community. He is 
a director of PECO Energy Corp. He is the brother of George F. Rubin.           

  Jonathan B. Weller is President and Chief Operating Officer and Trustee.
Mr. Weller joined the Company in 1993. From 1970 to 1993, Mr. Weller served in  
various capacities for Eastdil Realty, a real estate investment banking firm,   
where he most recently served as executive vice president and a member of the   
board of directors. Mr. Weller is a graduate of Williams College and the        
Columbia University Business School.                                            

   George F. Rubin is President of PREIT-RUBIN and Trustee. Mr. Rubin joined
The Rubin Organization, Inc. in 1970 and has served in various capacities since 
that time. Mr. Rubin is active in various retail organizations. He serves on    
the boards of various civic and educational and charitable organizations,       
including Lafayette College, Elwyn Institute and Thorncroft Therapeutic         
Horseback Riding, Inc., where he is chairman. He is a graduate of Lafayette     
College. He is the brother of Ronald Rubin.                                     

 William R. Dimeling, Trustee, has been a partner in Dimeling, Schreiber
and Park, an investment partnership since 1982. He is a general partner at      
Dimeling, Schreiber and Park Reorganization Fund, L.P., Funds I and II, and     
serves on the boards of a number of portfolio companies of those funds. He is   
also a director of Addison Capital Shares and Aero Services International, Inc. 
He is a graduate of Yale College and the University of Pennsylvania Law School. 

  Rosemarie B. Greco, Trustee, is a businesswoman. She served as president
and chief executive officer of CoreStates Bank, N.A. and as president of        
CoreStates Financial Corp. from August 1994 to August 1997. From 1991 to 1994,  
Ms. Greco served as chief retail banking officer of CoreStates and president of 
CoreStates First Pennsylvania Bank. Prior to 1991, Ms. Greco served as          
president of Fidelity Bank. Ms. Greco is a director of General Accident         
Insurance Company of America, and also serves on the boards of various civic    
and professional organizations. She is a graduate of St. Joseph's University.   

   Lee H. Javitch, Trustee, is a private investor. He served as chairman and
chief executive officer of Giant Food Stores, Inc. from 1979 to 1983. Prior to  
that time, he served in various senior management positions with Giant Foods.   
He is a director of First Maryland BanCorp and Dauphin Deposit Corp. He serves  
on the board of the Jewish Theological Seminary of America. He is a graduate of 
Syracuse University.                                                            

    Leonard I. Korman, Trustee, has been president and chief executive officer
of Korman Commercial Properties, Inc., a commercial real estate management and  
development firm, since 1996. He was a general partner of The Korman Co., a     
real estate management and development firm. He is a director of CoreStates     
Bank, N.A. and a trustee of the Pennsylvania Academy of Fine Arts and Albert    
Einstein Medical Center. Mr. Korman is a graduate of the Wharton School of the  
University of Pennsylvania.                                                     

 Jeffrey P. Orleans, Trustee, has served as chairman and chief executive
officer of FPA Corporation, a publicly held residential real estate developer,  
since 1993. Prior to that time, he was president of Orleans Construction        
Company. He is a director of New Jersey National Bank, the National Association 
of Home Builders and a trustee of Albert Einstein Medical Center as well as     
other civic, educational and professional organizations. Mr. Orleans is a       
graduate of Drexel University.                                                  

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Edward A. Glickman is Executive Vice President and Chief Financial    
Officer. He joined The Rubin Organization, Inc. in 1993. From 1989 to 1993, Mr. 
Glickman was employed by Presidential Realty Corporation, a publicly traded     
REIT, where he served as chief financial officer. Prior to that time, Mr.       
Glickman was employed by Shearson Lehman Brothers and Smith Barney. Mr.         
Glickman is a graduate of the University of Pennsylvania and the Harvard        
Business School.                                                                

  Jeffrey A. Linn is Senior Vice President for Acquisitions and Secretary.
Mr. Linn joined the Company in 1974 and has served in various capacities,       
including Vice President for Operations and Development. He is a board member   
of the National Housing Counsel and a member of ICSC. Mr. Linn is a graduate of 
Brandeis University.                                                            

  Dante J. Massimini is Senior Vice President and Treasurer. Mr. Massimini
joined the Company in 1971 and has held a number of positions since that time.  
Mr. Massimini is a graduate of LaSalle College.                                 

  Raymond J. Trost is Vice President for Multifamily Asset Management. Mr.
Trost joined the Company in 1983 and has held a number of positions since that  
time. Mr. Trost holds a real estate broker's license and is a licensed real     
estate appraiser. He holds various professional designations in the multifamily 
management industry.                                                            

  Leonard B. Shore is Executive Vice President-Development of PREIT-RUBIN.
Mr. Shore joined The Rubin Organization, Inc. in 1968 and has held a variety of 
positions in commercial real estate development, with 45 years of experience in 
the commercial real estate industry. Mr. Shore directed development for Willow  
Grove Park Mall, Willow Grove, Pennsylvania; Cumberland Mall, Vineland, New     
Jersey; Newburgh Mall, Newburgh, New York; and Christiana Mall, Newark,         
Delaware. In 1987-88, Mr. Shore directed the renovation of Philadelphia's       
historic Bellevue Stratford hotel into a mixed use facility. Mr. Shore is a     
graduate of Temple University.                                                  

Joseph F. Coradino is Executive Vice President of PREIT-RUBIN. Mr.    
Coradino joined The Rubin Organization, Inc. in 1981. Prior to that time, he    
was a leasing representative for Jackson Cross Company where he directed        
commercial brokerage activities for Southern New Jersey. Mr. Coradino began his 
real estate career with Kravitz Properties Inc., where he was a leasing         
specialist for enclosed mall shopping center space. Mr. Coradino has 20 years   
of experience in the commercial real estate industry, and is active in many     
professional, civic and charitable organizations. Mr. Coradino is a graduate of 
Temple University and the Schools of City Planning and Finance of the           
University of Arizona.                                                          

Alan F. Feldman is Chief Operating Officer-Retail Division, of        
PREIT-RUBIN. Mr. Feldman joined The Rubin Organization, Inc. in 1992. Prior to  
that time, Mr. Feldman was director of the community shopping center division   
of Strouse Greenberg & Co., Inc. Mr. Feldman has eight years of experience in   
the shopping center industry, and is a member of the ICSC. Mr. Feldman is a     
graduate of Tufts University and the Wharton School of the University of        
Pennsylvania.                                                                   

 Pat A. Berns is Executive Vice President-Retail Leasing of PREIT-RUBIN.
She joined The Rubin Organization, Inc. in 1983. Prior to joining The Rubin     
Organization, Inc., she was employed by First Union Real Estate, Cleveland,     
Ohio, as a leasing representative, and by R&B Enterprises as a space planner    
for commercial, retail and industrial properties. She is a member of the ICSC.  
Ms. Berns is a graduate of City College, New York.                              

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Executive Compensation                                                          

The following table sets forth certain information concerning the     
compensation paid by the Company during the fiscal years ended August 31, 1997, 
1996 and 1995 to the Company's Chief Executive Officer and the four other most  
highly compensated executive officers of the Company.                           

                                                        · Enlarge/Download Table

                                                                                     Long Term                   
                                                                                    Compensation                 
                                                    Annual Compensation                Awards                    
                                          ----------------------------------------  --------------   All Other   
       Name and Principal                                         Other Annual                      Compensation 
            Position              Year     Salary      Bonus     Compensation(1)      Options           (2)      
--------------------------------  ------  ----------  ---------  -----------------  --------------  -------------
                                                                                                                 
Sylvan M. Cohen(3)                1997     $345,000    $     0        $     0                0         $ 9,070   
 Chairman and Chief               1996      342,333          0              0                0           9,070   
 Executive Officer and Trustee    1995      333,000          0              0           20,000           9,070   
Jonathan B. Weller                1997      301,731     50,000         22,414           20,000          26,611   
 President and Chief              1996      297,212          0          7,182           20,000          25,608   
 Operating Officer and Trustee    1995      281,539          0         37,463           35,000          32,408   
Robert G. Rogers(4)               1997      193,365          0         33,414                0               0   
 Executive Vice                   1996      191,923          0          7,182            5,000          69,654   
 President and Trustee            1995      183,269          0              0           10,000          72,499   
Jeffrey A. Linn                   1997      134,375     20,000         33,835           10,000          14,042   
 Senior Vice President-           1996      130,797          0          5,163           10,000          14,114   
 Acquisitions and                 1995      116,346          0              0           15,000          16,985   
 Secretary                                                                                                       
Dante J. Massimini                1997      128,365      5,000         39,204            5,000          60,661   
 Senior Vice President-           1996      125,673          0          5,174            5,000          59,897   
 Finance and                      1995      116,538          0              0           10,000          54,706   
 Treasurer                                                                                                       

------------                                                                    
(1) Amounts shown in fiscal 1997 represent: (i) discretionary contributions by  
 the Company to the accounts of Messrs. Weller, Rogers, Linn and Massimini
 in the Company's 401(k) retirement plan in the amounts of $7,164, $7,164,
 $6,010 and $5,704, respectively; and (ii) paid accrued vacation salary of
$15,250, $26,250, $27,825 and $33,500, respectively. Amounts shown in   
fiscal 1996 represent discretionary contributions by the Company to the 
accounts of the named executive officers in the Company's 401(k)        
retirement plan. Amounts shown for fiscal 1995 for Mr. Weller include   
$14,352 for relocation expenses, $12,378 for reimbursement for taxes    
 resulting from payment of living expenses on behalf of Mr. Weller in 1994
and $10,733 in respect of a leased automobile.                          
(2) All amounts for Mr. Cohen represent annual premium payments on life         
  insurance provided under Mr. Cohen's employment agreement. Amounts for Mr.
Weller include $9,750 of annual premium payments on life insurance      
provided under Mr. Weller's employment agreement. All other amounts     
  represent contributions by the Company with respect to fiscal 1997, fiscal
1996 and fiscal 1995 under the non-qualified retirement plan approved   
  during fiscal 1995 in which Messrs. Weller, Rogers, Massimini and Linn are
participants.                                                           
(3) Effective September 30, 1997, Mr. Cohen is no longer Chief Executive        
Officer.                                                                
(4) Mr. Rogers resigned as a Trustee of the Company effective September 30,     
1997 and as an officer of the Company effective December 31, 1997.      

Committees of the Board                                                         

The Company has a standing Audit Committee, Executive Compensation and
Human Resources Committee and Property Committee.                               

The Audit Committee is currently comprised of Ms. Rosemarie B. Greco  
(Chair), Mr. Lee H. Javitch and Mr. Jeffrey P. Orleans. The principal duties of 
the Audit Committee are to recommend independent public accountants for         
appointment by the Company; to review with the independent accountants the      
planned scope and results of the annual audit and their reports and             
recommendations; and to review with the independent accountants matters         
relating to the Company's system of internal controls.                          

The Executive Compensation and Human Resources Committee is currently 
comprised of Messrs. Leonard I. Korman (Chair), William R. Dimeling and Lee H.  
Javitch. The principal duties of the Executive Compensation and Human Resources 
Committee are to recommend compensation arrangements for the executive officers 
of the Company and to administer the Company's stock option plans.              

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  The Property Committee is currently comprised of Messrs. Sylvan M. Cohen
(Chair), Leonard I. Korman, and Jeffrey P. Orleans. Messrs. Ronald Rubin and    
Jonathan B. Weller serve as ex officio members of the Property Committee. The   
principal duties of the Property Committee are to review acquisitions and       
dispositions of portfolio properties proposed by management and make            
recommendations thereon to the Board of Trustees.                               

  The Trustees have also constituted a committee consisting of Mr. Leonard
I. Korman (Chair), Ms. Rosemarie B. Greco and Mr. William R. Dimeling for the   
purpose of addressing and resolving any matters which may arise in the          
implementation of the provisions of the TRO Transaction following the closing   
of the TRO Transaction.                                                         

Stock Option Plans                                                              

  Set forth below are the stock option plans of the Company and the number
of Shares authorized to be granted and outstanding under each:                  

                    Shares                       Options
                  Authorized To     Options      Currently
Plan                          Be Granted       Granted     Exercisable          
--------------------------   ---------------   ---------   ------------         
1990 Incentive                                                                  
and Non-Qualified                                                             
Stock Option Plan  ......      400,000        340,125       223,286           
Jonathan B. Weller                                                              
Non-Qualified                                                                 
Stock Option Plan  ......      100,000        100,000        75,000           
1990 Option Plan                                                                
for Non-Employee                                                              
Trustees  ...............      100,000         38,250        16,500           
1997 Stock Option                                                               
Plan   ..................      560,000        455,000             0           

The 1990 Incentive and Non-Qualified Stock Option Plan authorizes the 
grant of incentive of non-qualified stock options to key employees. The         
Jonathan B. Weller Non-Qualified Stock Option Plan was adopted by the Company   
pursuant to provisions of Mr. Weller's employment agreement and he is the only  
person eligible to receive options under such plan. The 1990 Option Plan for    
Non-Employee Trustees provides for the automatic grant of non-qualified stock   
options in respect of 1,000 Shares to each non-employee Trustee of the Company  
on the last trading day of January of each year at a price equal to the closing 
price of the Shares on that date.                                               

All options are granted with exercise prices equal to at least market 
value on the grant date, and it is the general policy of the Company that       
options vest in four equal annual installments commencing on the first          
anniversary of the grant date. All of the outstanding options expire ten years  
after their grant.                                                              

The 1997 Stock Option Plan was adopted in connection with the TRO     
Transaction and options on 455,000 Shares were granted to former TRO officers   
and employees on September 30, 1997 at an exercise price of $25.41 per Share.   
All options granted on September 30, 1997 vest in four equal annual             
installments commencing January 1, 1999, and on each anniversary date thereof.  
It is anticipated that the remaining 105,000 options authorized under the 1997  
Stock Option Plan will be granted over the next three months to approximately   
40 employees.                                                                   

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Employment Agreements                                                           

The Company and PREIT-RUBIN are parties to employment agreements with 
substantially all of their respective executive officers, including Messrs.     
Sylvan M. Cohen, Ronald Rubin, Jonathan B. Weller, George F. Rubin, Edward A.   
Glickman, Jeffrey A. Linn and Daniel J. Massimini.                              

  Mr. Cohen's employment agreement was originally entered into in 1985 and
has been amended and extended several times since that date. The current        
expiration date of Mr. Cohen's employment agreement is December 31, 2000. Mr.   
Cohen's employment agreement provides for current annual base compensation of   
$345,000 and for post-termination benefits for the life of Mr. Cohen equal to   
50% of the highest rate of Mr. Cohen's compensation while employed by the       
Company. Mr. Cohen's spouse is also entitled to payments under the contract if  
she survives him. Mr. Cohen did not participate in the Company's now terminated 
defined benefit plan and does not participate in the Company's defined          
contribution plan.                                                              

  The Company is party to an employment agreement with Ronald Rubin for an
initial term of five years, extending year-to-year thereafter until terminated  
by either party. The agreement took effect on September 30, 1997. During the    
period of his employment, Mr. Rubin is required to devote his full working      
time, energy, skill and best efforts to the performance of his duties. Under    
the agreement, he may not participate in any other business pursuits, except he 
may maintain his existing ownership interest in approximately 28 commercial     
properties in which the Company will have no interest so long as the aggregate  
time he devotes to such properties is insignificant and such activities do not  
interfere with, detract from or affect the performance of his duties to the     
Company.                                                                        

    The contract provides for annual base salary of $345,000, provided that at
all times during the terms of the contract the base salary be at least equal to 
the highest amount paid to any other person employed by the Company. For each   
fiscal year commencing after December 31, 1997, Mr. Rubin will be entitled to   
incentive compensation under the Company's cash incentive bonus plan. The       
contract also provides for the grant pursuant to the 1997 Stock Option Plan of  
non-qualified options to purchase 150,000 Shares. Such options were granted to  
Mr. Rubin on September 30, 1997 at an exercise price of $25.41, which was the   
closing price of the Shares on September 30, 1997. The options vest in four     
equal annual installments beginning January 1, 1999.                            

  If Mr. Rubin's employment is terminated other than for cause or a change
in control of the Company, he will be entitled to lump sum severance equal to   
the present value of his base salary and a target incentive bonus for the       
remaining portion of the contract term at the time of termination. If his       
employment is terminated pursuant to a change in control (including voluntary   
termination by Mr. Rubin within 60 days of a change in control), the Company    
must pay him up to three times the present value of his base salary and target  
incentive compensation, subject to all reductions necessary to preserve the     
deductibility of all such payments under the Code. During Mr. Rubin's           
employment and for one year thereafter if his employment is terminated for      
cause, Mr. Rubin is prohibited from competing with the Company as provided for  
therein. Any non-competition agreement would terminate upon a change in control 
of the Company.                                                                 

The Company is party to an employment agreement with Mr. Weller which 
provides that Mr. Weller is to serve as President and Chief Operating Officer   
of the Company with responsibility for the day-to-day management of the         
Company. The employment term, which began on January 31, 1994, was originally   
for a three year period, and was automatically extended, as of January 31, 1996 
and January 31, 1997. The agreement will be extended for new three-year terms   
beginning on each January 31 thereafter unless the Company gives Mr. Weller     
written notice at least 60 days prior to January 31 in a year that the term is  
not to be extended. Mr. Weller's annual base salary under the agreement         
currently is $305,000. In accordance with the employment agreement, on December 
14, 1993, the Company granted Mr. Weller non-qualified stock options to         
purchase 100,000 Shares of the Company at an exercise price equal to the fair   
market value of the Shares on such date.                                        

 Messrs. George F. Rubin's and Edward A. Glickman's employment contracts
are for two years and are automatically renewable for year-to-year terms        
thereafter unless prior notice is given by either party. In many respects,      
these contracts otherwise contain terms similar to those of the contract with   
Ronald Rubin, except that the severance payments upon a change in control are   
equal to two times the individual's base salary and                             

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targeted incentive compensation, subject to reduction to satisfy limitations on 
deductibility, and the individual may only obtain such payment if he resigns    
for Good Reason (as defined in the agreements) following a change in control.   
The annual base rates of compensation under such agreements for Messrs. George  
F. Rubin and Edward A. Glickman are $250,000 and $230,000 per annum,            
respectively.                                                                   

    The Company is also party to employment agreements with Messrs. Jeffrey A.
Linn and Dante J. Massimini. Mr. Linn's contract extends until December 31,     
2000. Mr. Massimini's employment agreement will expire on September 30, 1999.   
Mr. Linn serves as Senior Vice President-Acquisitions and Secretary and Mr.     
Massimini serves as Senior Vice President-Finance and Treasurer. The current    
annual base compensation for Mr. Linn and Mr. Massimini is $134,375 and         
$128,365, respectively.                                                         

Cash Incentive Bonus Plan                                                       

    Incentive Bonus Plan. The Company has established an incentive bonus plan,
effective January 1, 1998, for certain officers and key employees of the        
Company. The plan is a nonqualified, unfunded plan with bonuses to be paid from 
the general assets of the Company.                                              

  The Executive Compensation and Human Resources Committee of the Board of
Trustees administers the plan. The Committee has designated those officers and  
key employees who are eligible to receive a bonus under the plan, and each of   
the individuals who entered into employment agreements in connection with the   
TRO Transaction have been included as eligible to participate in the plan. A    
bonus pool has been created equal to a graduated percentage of "Adjusted Funds  
Available for Distribution," which is generally defined as funds from           
operations less certain adjustments, including annual capital expenditures,     
reserves for capital expenditures, distributions by the Company and working     
capital reserves. One-half of the pool will be paid to the participants based   
on set individual percentages. All or a portion of the remainder of the pool    
may be awarded by senior management (in its discretion, but subject to the      
approval of the Committee) to any of the participants in the plan and/or to any 
other employees of the Company who achieve the goals and objectives stated in   
the Trust's business plan. The plan provides that in no event will incentive    
compensation paid under the plan exceed $1,500,000 in any plan year.            

   Bonuses will be paid in single-sum cash payments within a reasonable time
after the Company's fiscal year-end financial statements are approved. Except   
as provided in a participant's employment agreement, only participants who are  
employed by the Company on December 31 of each plan year will be eligible to    
receive payments under the plan (unless the participant was no longer an        
employee due to a reorganization, or because he retired on or after age 65,     
became disabled, or died).                                                      

PREIT-RUBIN Stock Bonus Plan                                                    

Contemporaneously with the closing of the TRO Transaction, PREIT-RUBIN
established a stock bonus plan for all of its employees who have completed at   
least one year of service on the day prior to the effective date of the plan.   
The plan will qualify for favorable tax treatment under section 401(a) of the   
Internal Revenue Code and all of the outstanding voting common shares of        
PREIT-RUBIN will be held by the trust established under the plan.               

PREIT-RUBIN issued all of its voting common shares to the plan for the
plan year ending December 31, 1997. The shares will be allocated to the plan    
accounts of the eligible employees as of December 31, 1997, pro rata, based on  
their covered compensation for 1997. The shares held by the plan will be        
appraised annually as of each December 31. The value of an employee's account   
under the plan will be paid to the employee upon termination of service. Since  
the articles of incorporation of PREIT-RUBIN restrict ownership of all of the   
outstanding voting common shares of PREIT-RUBIN to employees of PREIT-RUBIN or  
to a tax-qualified plan for the benefit of employees, benefits to terminated    
employees will be paid only in cash.                                            

Voting on major corporate transactions (including mergers,            
recapitalizations, liquidations, and similar transactions) will be passed       
through by the plan trustee to the plan's participants. Voting by the plan      
trustee on other matters will be directed by majority vote of the Stock Bonus   
Plan Committee, who will be appointed by the Board of Directors of PREIT-RUBIN. 

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Other Benefit Plans                                                             

   The Company maintains a 401(k) profit sharing and retirement savings plan
in which substantially all of the officers and employees are eligible to        
participate and a Supplemental Retirement Plan in which the executive officers  
named in the Summary Compensation Table other than Mr. Cohen are participants.  
Under the Supplemental Retirement Plan, the Company is required to make defined 
contributions to the plan annually in amounts equal to amounts that would have  
been required to be contributed under the Company's defined benefit pension     
plan, which was terminated in fiscal 1995, in order to fund the targeted        
retirement benefit (after taking into account amounts distributed under the     
terminated defined benefit pension plan, together with an assumed rate of       
return thereon). The Company has recorded $92,000, $160,000 and $168,000 of     
contributions due under the provisions of the Supplemental Retirement Plan for  
the years ended August 31, 1997, 1996 and 1995, respectively.                   

Independent Trustee Compensation                                                

    Trustees who are not officers of the Company receive an annual retainer of
$7,000 plus $1,250 per Board of Trustees meeting attended and $750 per          
Committee meeting attended. The Company made one-time cash payments of $25,000  
each to Mr. Jack Farber and Mr. Robert Freedman upon their resignations as      
Trustees in August and September, 1997, respectively, after 26 years and nine   
years of service, respectively. The Company also made one-time cash payments in 
1997 of $10,000 to each of the three members of the Special Acquisition         
Committee of the Board which met in 1996 and 1997 in connection with the        
negotiation of the TRO Transaction.                                             

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PRINCIPAL SECURITYHOLDERS 

The following table sets forth certain information regarding the      
beneficial ownership of Shares and OP Units by: (i) each trustee of the         
Company; (ii) each executive officer of the Company; (iii) all trustees and     
executive officers of the Company as a group; and (iv) each person or entity    
who is expected to be the beneficial owner of 5% or more of the outstanding     
Shares immediately following the completion of the Offering. Except as          
indicated below, all of such Shares and OP Units are owned directly, and the    
indicated person has sole voting and investment power. The extent to which a    
person holds OP Units is set forth in the footnotes below. The address of each  
person listed below is c/o Pennsylvania Real Estate Investment Trust, 455       
Pennsylvania Avenue, Suite 135, Fort Washington, Pennsylvania 19034.            

                                                        · Enlarge/Download Table

                                           Shares and OP Units Beneficially Owned(1)   
                                        -----------------------------------------------
                                                             Percentage     Percentage 
                                                             Before the      After the 
Name                                        Number            Offering       Offering  
--------------------------------------  ------------------   ------------   -----------
                                                                                       
Sylvan M. Cohen  .....................  650,291 (2)           6.9%           4.9%      
Ronald Rubin  ........................  143,584 (3)           1.5            1.1       
Jonathan B. Weller  ..................  105,910 (4)           1.1              *       
George F. Rubin  .....................   87,523 (5)             *              *       
William R. Dimeling ..................    7,187 (6)             *              *       
Rosemarie B. Greco  ..................        0                 *              *       
Lee H. Javitch   .....................    5,500 (6)             *              *       
Leonard I. Korman   ..................  482,663 (7)           5.2            3.6       
Jeffrey P. Orleans  ..................   51,413 (8)             *              *       
Edward A. Glickman  ..................   13,606 (9)             *              *       
Jeffrey A. Linn  .....................   29,771 (10)            *              *       
Dante J. Massimini  ..................   20,931 (11)            *              *       
                                        ---------            ----           ----       
   All Trustees and executive officers                                                 
    as a group (12 persons)  .........  1,586,338 (12)       16.7%          11.7%      
                                        ============         ====           ====       

------------                                                                    
* Less than one percent                                                         
(1) All data on holdings are as of November 1, 1997. Unless otherwise indicated 
  in the following footnotes, each Trustee and Non-Trustee executive officer
has sole voting and investment power with respect to all such Shares and
OP Units.                                                               
(2) Includes 186,558 Shares owned by Mr. Cohen's spouse, 37,056 Shares owned by 
a trust of which Mr. Cohen's wife is a co-trustee, 252 Shares owned by a
  corporation 50% of whose outstanding shares are owned by Mr. Cohen and the
  remaining 50% of whose outstanding shares are owned by Jeffrey P. Orleans,
a Trustee of the Company, 71,815 Shares owned by a charitable remainder 
 unitrust of which Mr. Cohen is a co-trustee, and 28,523 Shares subject to
options that are currently exercisable. Mr. Cohen disclaims beneficial  
ownership of all of the Shares referred to in this footnote other than  
Shares owned by trusts of which Mr. Cohen is a trustee or a co-trustee, 
Shares owned of record by Mr. Cohen's wife and the Shares subject to    
options.                                                                
(3) Represents Class A OP Units first redeemable on September 30, 1998 for cash 
or, at the option of the Company, for a like number of Shares.          
(4) Includes 94,710 Shares subject to options that are currently exercisable,   
 and 400 Shares held by Mr. Weller as custodian for his children under the
New York Uniform Gifts to Minors Act.                                   
(5) Includes 900 Shares held by a trust, the beneficiary of which is Mr.        
 Rubin's daughter. Mr. Rubin is not a trustee of that trust. Also includes
500 shares held by Mr. Rubin's spouse. Mr. Rubin disclaims beneficial   
  ownership of all Shares referred to in this footnote. Also includes 86,123
Class A OP Units first redeemable on September 30, 1998 for cash or, at 
the option of the Company, a like number of Shares.                     
(6) Includes 5,500 Shares subject to options that are currently exercisable.    
(7) Includes: (i) 420 Shares owned by Mr. Korman's spouse; (ii) 87,570 Shares   
held by a charitable foundation of which Mr. Korman is a co-trustee; and
(iii) 151,585 Shares held by trusts of which Mr. Korman is a co-trustee.
Mr. Korman disclaims beneficial ownership of all but 10,528 of the      
foregoing Shares.                                                       

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(8) Includes 450 Shares owned by Mr. Orleans' spouse, 1,000 Shares for which  
  Mr. Orleans is custodian for his children under the Pennsylvania Uniform
    Gifts to Minors Act, 947 Shares owned by an adult daughter of Mr. Orleans,
  360 Shares held by trusts of which Mr. Orleans is co-trustee, 252 Shares
 owned by a corporation 50% of whose shares are owned by Mr. Orleans and
  the remaining 50% of whose shares are owned by Sylvan M. Cohen, Chairman
of the Board of Trustees of the Company and 3,000 Shares subject to   
  options that are currently exercisable. Mr. Orleans disclaims beneficial
   ownership of the Shares owned by Mr. Orleans' wife and certain Shares for
which he serves as custodian under the Pennsylvania Uniform Gifts to  
Minors Act.                                                           
(9) Represents Class A OP Units redeemable first on September 30, 1998 for    
cash or, at the option of the Company, a like number of Shares.       
(10) Includes 21,431 Shares subject to options that are currently exercisable   
 and 500 Shares that are held by Mr. Linn as custodian for his son under
the Pennsylvania Uniform Gifts to Minors Act.                         
(11) Includes 20,331 Shares subject to options that are currently exercisable.  
(12) Includes 178,995 Shares subject to options that are currently exercisable. 
In certain instances, two Trustees beneficially own the same Shares   
because they share voting or investment power over such Shares. Such  
Shares have been counted only once in this total.                     

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UNDERWRITING  

The underwriters of the Offering (the "Underwriters"), for whom Lehman
Brothers Inc., Legg Mason Wood Walker, Incorporated, Merrill Lynch, Pierce,     
Fenner & Smith Incorporated, Smith Barney Inc. and Wheat, First Securities,     
Inc. are acting as representatives (the "Representatives"), have severally      
agreed, subject to the conditions contained in the Underwriting Agreement (the  
form of which is incorporated by reference as an exhibit to the Registration    
Statement of which the accompanying Prospectus forms a part), to purchase from  
the Company, and the Company has agreed to sell to each Underwriter, the        
aggregate number of Shares set forth below opposite the name of each such       
Underwriter.                                                                    

                                                       Number of
              Underwriters                            Shares
-------------------------------------------------------------  ----------       
Lehman Brothers Inc.  ....................................     800,000    
Legg Mason Wood Walker, Incorporated .....................     800,000    
Merrill Lynch, Pierce, Fenner & Smith Incorporated  ......     800,000    
Smith Barney Inc.  .......................................     800,000    
Wheat, First Securities, Inc.  ...........................     800,000    
Total  ................................................   4,000,000 
                                                         =========

The Underwriting Agreement provides that the obligations of the       
Underwriters to purchase the Shares are subject to certain conditions, and that 
if any of the Shares are purchased by the Underwriters, all such Shares must be 
so purchased.                                                                   

The Company has been advised by the Underwriters that they propose to 
offer the Shares directly to the public initially at the public offering price  
set forth on the cover page of this Prospectus Supplement, and to certain       
dealers at such public offering price less a selling concession not in excess   
of $.75 per share. The selected dealers may reallow a concession not in excess  
of $.10 per share to certain brokers or dealers. After the Offering, the public 
offering price, the concession to selected dealers, and the reallowance may be  
changed by the Representatives.                                                 

The Company has agreed to indemnify the Underwriters against certain  
liabilities, including liabilities under the Securities Act of 1933, as         
amended, or to contribute to the payments the Underwriters may be required to   
make in respect thereof.                                                        

    The Company has granted to the Underwriters an option to purchase up to an
additional 600,000 Shares at the public offering price, less underwriting       
discounts and commissions, solely to cover over-allotments, if any. The         
Underwriters may exercise this option at any time within 30 days after the date 
of this Prospectus Supplement. To the extent that the Underwriters exercise     
this option, each Underwriter will be obligated, subject to certain conditions, 
to purchase a number of additional Shares proportionate to such Underwriter's   
initial commitment as indicated in the preceding table.                         

  The Company, certain executive officers and trustees who own OP Units or
Shares and the holders of the outstanding Class B OP Units have agreed, for a   
period of 90 days from the date of this Prospectus Supplement, not to, directly 
or indirectly, offer for sale, sell or otherwise dispose of (or enter into any  
transaction or device which is designed to, or could be expected to, result in  
the disposition by any person at any time in the future of) Shares (other than  
the Shares offered hereby and Shares issued pursuant to the stock options       
outstanding on the date hereof and any OP Units or Shares that may be issued in 
connection with any acquisition of a property or in connection with the         
redemption of OP Units) or sell or grant options, rights or warrants with       
respect to any Shares (other than the grant of options pursuant to the stock    
option plans existing on the date hereof), without the prior written consent of 
Lehman Brothers Inc.                                                            

    At the request of the Company, the Underwriters have reserved up to 40,000
Shares for sale at the public offering price to certain trustees of the         
Company. The number of Shares available to the general public will be reduced   
to the extent these persons purchase the reserved Shares. Any reserved Shares   
that are not so purchased by such persons at the closing of the Offering will   
be offered by the Underwriters to the general public on the same terms as the   
other Shares offered by this Prospectus Supplement.                             

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    Until the distribution of the Shares is completed, rules of the Securities
and Exchange Commission may limit the ability of the Underwriters and certain   
selling group members to bid for and purchase Shares. As an exception to these  
rules, the Representatives are permitted to engage in certain transactions that 
stabilize the price of the Shares. Such transactions may consist of bids or     
purchases for the purpose of pegging, fixing or maintaining the price of the    
Shares.                                                                         

 If the Underwriters create a short position in the Shares in connection
with the Offering (i.e., if they sell more Shares than are set forth on the     
cover page of this Prospectus Supplement), the Representatives may reduce that  
short position by purchasing Shares in the open market. The Representatives     
also may elect to reduce any short position by exercising all or part of the    
over-allotment option described herein.                                         

   The Representatives also may impose a penalty bid on certain Underwriters
and selling group members. This means that if the Representatives purchase      
Shares in the open market to reduce the Underwriters' short position or to      
stabilize the price of the Shares, they may reclaim the amount of the selling   
concession from the Underwriters and selling group members who sold those       
Shares as part of the Offering.                                                 

    In general, purchases of a security for the purpose of stabilization or to
reduce a syndicate short position could cause the price of the security to be   
higher than it might otherwise be in the absence of such purchases. The         
imposition of a penalty bid might have an effect on the price of a security to  
the extent that it were to discourage resales of the security by purchasers in  
the Offering.                                                                   

  Neither the Company nor any of the Underwriters makes any representation
or prediction as to the direction or magnitude of any effect that the           
transactions described above may have on the price of the Shares. In addition,  
neither the Company nor any of the Underwriters makes any representation that   
the Representatives will engage in such transactions or that such transactions, 
once commenced, will not be discontinued without notice.                        

The Company retained Lehman Brothers Inc. as its exclusive financial  
advisor in connection with the TRO Transaction, and the Company paid Lehman     
Brothers Inc. a fee of $1,750,000 for such services.                            

EXPERTS 

The financial statements and financial statement schedules included or
incorporated by reference in this Prospectus Supplement, to the extent and for  
the periods indicated in their reports, have been audited by Arthur Andersen    
LLP, independent public accountants, and are included herein in reliance upon   
the authority of said firm as experts in giving said reports.                   

LEGAL MATTERS 

The validity of the Shares offered hereby and the statements in the   
accompanying Prospectus under "Federal Income Tax Considerations" will be       
passed upon for the Company by Drinker Biddle & Reath LLP. Sylvan M. Cohen,     
Chairman of the Board of the Company and a principal shareholder of the         
Company, is of counsel to Drinker Biddle & Reath LLP. Certain legal matters     
will be passed upon for the Underwriters by Hogan & Hartson L.L.P.              

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PENNSYLVANIA REAL ESTATE INVESTMENT TRUST 
INDEX TO FINANCIAL STATEMENTS 

                                                        · Enlarge/Download Table
                                                                                               
UNAUDITED PRO FORMA CONSOLIDATING FINANCIAL STATEMENTS                                         
Pro Forma Consolidating Balance Sheet as of August 31, 1997 ..............................  F-3
Pro Forma Consolidating Income Statement for the Year Ended August 31, 1997   ............  F-4
Notes and Management's Assumptions to Unaudited Pro Forma Consolidating Financial              
  Statements .............................................................................  F-5
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST                                                      
Report of Independent Public Accountants  ................................................  F-9
Consolidated Balance Sheets as of August 31, 1997 and 1996  .............................. F-10
Consolidated Statements of Income for the Years Ended August 31, 1997, 1996 and 1995   ... F-11
Consolidated Statements of Shareholders' Equity for the Years Ended August 31, 1997, 1996      
  and 1995 ............................................................................... F-12
Consolidated Statements of Cash Flows for the Years Ended August 31, 1997, 1996 and 1995   F-13
Notes to Consolidated Financial Statements   ............................................. F-14
THE RUBIN ORGANIZATION, INC. AND SUBSIDIARY                                                    
Report of Independent Public Accountants  ................................................ F-23
Consolidated Balance Sheets as of September 30, 1997 (unaudited), December 31, 1996 and        
December 31, 1995 (unaudited) ............................................................ F-24
Consolidated Statements of Operations for the Years Ended December 31, 1996, 1995              
  (unaudited) and 1994 (unaudited) and for the Nine Months Ended September 30, 1997            
  and 1996 (unaudited) ................................................................... F-26
Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 1996,         
  1995 (unaudited) and 1994 (unaudited) and for the Nine Months Ended September 30, 1997       
  (unaudited) ............................................................................ F-27
Consolidated Statements of Cash Flows for the Years Ended December 31, 1996, 1995              
  (unaudited) and 1994 (unaudited) and for the Nine Months Ended September 30, 1997            
  and 1996 (unaudited) ................................................................... F-28
Notes to Consolidated Financial Statements   ............................................. F-30
FINANCIAL STATEMENTS OF OXFORD VALLEY ROAD ASSOCIATES                                          
Report of Independent Public Accountants  ................................................ F-41
Balance Sheet as of September 30, 1997 ................................................... F-42
Statement of Operations for the Nine Months Ended September 30, 1997 ..................... F-43
Statement of Partners' Capital for the Nine Months Ended September 30, 1997   ............ F-44
Statement of Cash Flows for the Nine Months Ended September 30, 1997 ..................... F-45
Notes to Financial Statements ............................................................ F-46
FINANCIAL STATEMENTS OF NORTH DARTMOUTH MALL                                                   
Report of Independent Public Accountants  ................................................ F-50
Statements of Revenues and Certain Expenses for the Nine Months Ended September 30, 1997       
  and the Year Ended December 31, 1996  .................................................. F-51
Notes to Statements of Revenues and Certain Expenses  .................................... F-52
FINANCIAL STATEMENTS OF MAGNOLIA MALL                                                          
Report of Independent Public Accountants  ................................................ F-53
Statements of Revenues and Certain Expenses for the Nine Months Ended September 30, 1997       
  and the Year Ended December 31, 1996  .................................................. F-54
Notes to Statements of Revenues and Certain Expenses  .................................... F-55

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PENNSYLVANIA REAL ESTATE INVESTMENT TRUST 

PRO FORMA CONSOLIDATING FINANCIAL INFORMATION 

The following sets forth the pro forma consolidating balance sheet of 
Pennsylvania Real Estate Investment Trust (the "Company") as of August 31, 1997 
and the pro forma consolidating statement of operations for the year ended      
August 31, 1997 to give effect to the following transactions:                   

The Offering                                                                    

The Company consummated the Offering and applied the net proceeds     
therefrom as described under "Use of Proceeds," including:                      

o The Company issued 4,000,000 Shares at $22 3/8 per Share.               

o The $8.8 million Cobblestone Mortgage was prepaid in full.              

o The remaining net proceeds of the Offering were used to repay amounts   
outstanding under the Credit Facility.                                

The TRO Transaction                                                             

On September 30, 1997, PREIT and TRO completed the TRO Transaction,   
pursuant to which:                                                              

o PREIT capitalized the Operating Partnership by transferring to it       
substantially all of its assets or the beneficial interests therein,  
subject to its liabilities.                                           

o The Operating Partnership acquired all of the non-voting common shares, 
    constituting 95% of the economic interests of PREIT-RUBIN, in exchange for
200,000 Class A OP Units and the obligation to issue up to 800,000    
additional Class A OP Units over the next five years according to a   
  formula based upon the Company's per share growth in adjusted funds from
operations.                                                           

 o The Operating Partnership acquired the interests of certain affiliates of
    TRO ("TRO Affiliates") in The Court at Oxford Valley, Magnolia Mall, North
Dartmouth Mall and Springfield Park.                                  

o The Operating Partnership agreed to acquire the interests of certain TRO
    Affiliates in Hillview Shopping Center and Northeast Tower Center, both of
which are currently under construction, at prices based upon a        
pre-determined formula.                                               

o The Operating Partnership acquired the development rights of certain TRO
Affiliates, subject to related obligations, in Christiana Power Center
(Phases I & II), Red Rose Commons and Blue Route Metroplex.           

 As the acquisitions of Hillview Shopping Center, Northeast Tower Center
and the Development Properties are expected to occur in the future at 
   amounts that are not currently determinable, the financial impact of such
future events has not been reflected in the accompanying pro forma    
financial statements.                                                 

   All of the acquisitions described above have been recorded by the Company
using the purchase method of accounting.                                        

The accompanying pro forma consolidating financial information is     
presented as if the transactions described above had been consummated on August 
31, 1997 for balance sheet purposes and September 1, 1996 for purposes of the   
statement of operations. This unaudited pro forma consolidating financial       
information should be read in conjunction with the historical financial         
statements of the Company, The Rubin Organization, Inc., Magnolia Mall, North   
Dartmouth Mall and Oxford Valley Road Associates and the related notes thereto  
all included elsewhere herein. In management's opinion, all adjustments         
necessary to reflect the effects of the transactions have been made.            

   The pro forma consolidating financial information is unaudited and is not
necessarily indicative of what the actual financial position or results of      
operations of the Company would have been had the transactions described above  
been consummated as of the dates indicated, nor does it purport to represent    
the future financial position and the results of operations of the Company.     

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PENNSYLVANIA REAL ESTATE INVESTMENT TRUST 

PRO FORMA CONSOLIDATING BALANCE SHEET 
AS OF AUGUST 31, 1997 
(Unaudited) 
(in thousands)  

                                                        · Enlarge/Download Table

                                                                                                           The Company 
                                                     PREIT          The TRO                 The             Pro Forma, 
                                                   Historical     Transaction            Offering          as Adjusted 
                                                   ------------  --------------------  ------------------  ------------
                                                                                                                       
Assets                                                                                                                 
Investments in real estate, at cost                                                                                    
 Retail properties  ..............................  $  37,398       $   82,322 (A)        $       --        $ 119,720  
 Multifamily properties   ........................    159,967               --                    --          159,967  
 Industrial properties ...........................      5,078               --                    --            5,078  
                                                    ---------       ----------            ----------        ---------  
   Total investments in real estate   ............    202,443           82,322                    --          284,765  
    Less accumulated depreciation  ...............     50,711               --                    --           50,711  
                                                    ---------       ----------            ----------        ---------  
                                                      151,732           82,322                    --          234,054  
Property under development   .....................         --            1,950 (B)                --            1,950  
Investment in PREIT-RUBIN ........................         --            4,595 (C)                --            4,595  
Investments in partnerships and joint                                                                                  
 ventures, at equity   ...........................      1,039           13,269 (D)                --           14,308  
Advances to PREIT-RUBIN   ........................         --            1,613 (E)                --            1,613  
                                                    ---------       ----------            ----------        ---------  
                                                      152,771          103,749                    --          256,520  
    Less allowance for possible losses ...........      1,831               --                    --            1,831  
                                                    ---------       ----------            ----------        ---------  
                                                      150,940          103,749                    --          254,689  
Other Assets:                                                                                                          
 Cash and cash equivalents   .....................      1,399               --                    --            1,399  
 Rents and sundry receivables   ..................        590               --                    --              590  
 Deferred costs, prepaid real estate taxes                                                                             
   and expenses, net   ...........................      7,393           (1,770) (F)               --            5,623  
 Deposits on properties   ........................      5,335           (5,000)(G)                --              335  
                                                    ---------       ----------            ----------        ---------  
Total Assets  ....................................  $ 165,657       $   96,979            $       --        $ 262,636  
                                                    =========       ==========            ==========        =========  
Liabilities and Shareholders' Equity                                                                                   
Mortgage notes payable ...........................  $  83,528       $   25,200 (H)        $   (8,847)(K)    $  99,881  
Bank and other loans payable .....................     33,884           56,647 (I)           (74,343)(L)       16,188  
Tenants' deposits and deferred rents  ............      1,346               --                    --            1,346  
Accrued pension and other benefits ...............      1,091               --                    --            1,091  
Accrued expenses and other liabilities   .........      4,369               --                    --            4,369  
                                                    ---------       ----------            ----------        ---------  
Total Liabilities   ..............................    124,218           81,847               (83,190)         122,875  
                                                    ---------       ----------            ----------        ---------  
Minority interest   ..............................        540           15,132 (J)                --           15,672  
                                                    ---------       ----------            ----------        ---------  
Shareholders' Equity                                                                                                   
Shares of beneficial interest   ..................      8,685               --                 4,000 (M)       12,685  
Additional paid in capital   .....................     53,599               --                79,190 (M)      132,789  
Distributions in excess of net income ............    (21,385)              --                    --          (21,385) 
                                                    ---------       ----------            ----------        ---------  
Total Shareholders' Equity   .....................     40,899               --                83,190          124,089  
                                                    ---------       ----------            ----------        ---------  
Total Liabilities and Shareholders' Equity  ......  $ 165,657       $   96,979            $       --        $ 262,636  
                                                    =========       ==========            ==========        =========  

The accompanying notes and management's assumptions are an integral part of     
this statement. 

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PENNSYLVANIA REAL ESTATE INVESTMENT TRUST 

PRO FORMA CONSOLIDATING INCOME STATEMENT  
FOR THE YEAR ENDED AUGUST 31, 1997  
(Unaudited) 
(In thousands, except share and per share data) 

                                                        · Enlarge/Download Table

                                                                                                              The     
                                                                                                            Company   
                                                     PREIT         The TRO                The              Pro Forma  
                                                   Historical    Transaction           Offering           as Adjusted 
                                                   ------------  ------------------  -------------------  ------------
                                                                                                                      
Revenues                                                                                                              
Gross revenues from real estate ..................  $ 40,231        $ 12,490(a)         $       --         $ 52,721   
Interest and other income ........................       254             234(b)                 --              488   
                                                    --------        --------            ----------         --------   
Total revenues   .................................    40,485          12,724                    --           53,209   
                                                    --------        --------            ----------         --------   
Expenses                                                                                                              
Property operating expenses  .....................    16,289           3,964(a)                 --           20,253   
Depreciation and amortization   ..................     6,259           2,557(c)                 --            8,816   
General and administrative expenses   ............     3,324              --                    --            3,324   
Interest expense .................................     9,086           6,183(d)             (6,102) (h)       9,167   
Provisions for losses on investments  ............       500              --                    --              500   
                                                    --------        --------            ----------         --------   
Total expenses   .................................    35,458          12,704                (6,102)          42,060   
                                                    --------        --------            ----------         --------   
Income before gains on sales of interests in                                                                          
 real estate, equity in unconsolidated                                                                                
 entities and minority interest ..................     5,027              20                 6,102           11,149   
Equity in loss of PREIT-RUBIN   ..................        --             (80) (e)               --              (80)  
Equity in income of partnerships and joint                                                                            
 ventures  .......................................     4,337             420(f)                 --            4,757   
Gains on sales of interests in real estate  ......     1,069              --                    --            1,069   
                                                    --------        --------            ----------         --------   
Income before minority interest ..................    10,433             360                 6,102           16,895   
Minority interest   ..............................      (198)           (731) (g)              (70) (i)        (999)  
                                                    --------        --------            ----------         --------   
Net income .......................................  $ 10,235        $   (371)           $    6,032         $ 15,896   
                                                    ========        ========            ==========         ========   
Net income per Share   ...........................  $   1.18                                               $   1.25   
Weighted average number of Shares                                                                                     
 outstanding  ....................................     8,679                                                 12,679   

The accompanying notes and management's assumptions are an integral part of     
this statement. 

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PENNSYLVANIA REAL ESTATE INVESTMENT TRUST 

NOTES TO MANAGEMENT'S ASSUMPTIONS TO UNAUDITED PRO FORMA  
CONSOLIDATING BALANCE SHEET 

                                                        · Enlarge/Download Table
                                                                                                    
(A)  To record the acquisition of wholly owned retail properties as follows:                        
      o Purchase price of Magnolia Mall, including $998 of allocated transaction costs... $  46,363 
      o Purchase price of North Dartmouth Mall, including $959 of allocated transaction             
        costs ...........................................................................    35,959 
                                                                                          --------- 
      Total investment in wholly owned retail properties   .............................. $  82,322 
                                                                                          ========= 
(B)  To record the Operating Partnership's acquisition of development assets, including             
     transactions costs   ............................................................... $   1,950 
                                                                                          ========= 
(C)  To record the acquisition of 95% of the common stock of PREIT-RUBIN for 200,000                
     Class A OP Units at $23.40 per unit and $793 of allocated transaction costs, net of            
     cash acquired of $878............................................................... $   4,595 
                                                                                          ========= 
(D)  To record the Operating Partnership's investments in joint ventures:                           
      o Investment in The Court at Oxford Valley for approximately 233,000 Class A OP               
        Units at $23.40 per unit and $688 of allocated transaction costs  ............... $   6,140 
      o TRO's and TRO Affiliates' rights under Goldenberg Letter Agreement   ............     6,442 
      o Development costs related to Christiana Power Center Phase I   ..................       687 
                                                                                          --------- 
      Net investment in partnerships and joint ventures ................................. $  13,269 
                                                                                          ========= 
(E)  To advance PREIT-RUBIN funds for the reimbursement of EPDLP management                         
     contract start-up costs and pre-development expenses  .............................. $   1,613 
                                                                                          ========= 
(F)  To adjust deferred costs:                                                                      
      o Reclassify previously capitalized transaction costs   ........................... $  (2,545)
      o Financing costs incurred relating to the $150.0 million Credit Facility .........       775 
                                                                                          --------- 
                                                                                          $  (1,770)
                                                                                          ========= 
(G)  To reclassify the deposit on purchase of Magnolia Mall to retail properties   ...... $  (5,000)
                                                                                          ========= 
(H)  To record the mortgage note payable assumed in connection with the purchase of                 
     Magnolia Mall  ..................................................................... $  25,200 
                                                                                          ========= 
(I)  To record borrowings under the Credit Facility:                                                
      o Purchase of Magnolia Mall and North Dartmouth Mall .............................. $  45,165 
      o Fund the remaining cash portion of the TRO Transaction, including transaction               
        costs ...........................................................................    11,482 
                                                                                          --------- 
      Total borrowings under the Credit Facility  ....................................... $  56,647 
                                                                                          ========= 
(J)  To record minority interest as follows:                                                        
      o OP Units issued to acquire PREIT-RUBIN .......................................... $   4,680 
      o OP Units issued in connection with Magnolia Mall acquisition   ..................     5,000 
      o OP Units issued to acquire interest in the Court at Oxford Valley ...............     5,452 
                                                                                          --------- 
      Total minority interest   ......................................................... $  15,132 
                                                                                          ========= 
(K)  Repayment of the outstanding Cobblestone Mortgage  ................................. $   8,847 
                                                                                          ========= 
(L)  Repayment of outstanding borrowings under the Credit Facility  ..................... $  74,343 
                                                                                          ========= 
(M)  Net proceeds of Offering calculated as follows:                                                
     Gross proceeds of Offering ......................................................... $  89,500 
     Less: Underwriting discounts and commissions .......................................    (5,360)
           Other transaction costs ......................................................      (950)
                                                                                          --------- 
           Net proceeds of Offering   ................................................... $  83,190 
                                                                                          ========= 
           Shares issued at $1 par value ................................................ $   4,000 
                                                                                          ========= 
           Additional paid in capital ................................................... $  79,190 
                                                                                          ========= 

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PENNSYLVANIA REAL ESTATE INVESTMENT TRUST 

NOTES TO MANAGEMENT'S ASSUMPTIONS TO UNAUDITED  
PRO FORMA CONSOLIDATING INCOME STATEMENT  

(a) To record the income and expenses associated with the acquisition of wholly 
owned retail properties as follows:                                     

                                                                · Download Table

                                                          North                 
                                           Magnolia      Dartmouth     Shopping 
                                             Mall          Mall        Centers  
                                          Historical    Historical    Pro Forma 
                                          ------------  ------------  ----------
                                                                                
Revenues                                                                        
  Gross revenues from real estate  ......   $ 6,222         6,268      $ 12,490 
  Interest and other income  ............        17            15            32 
                                            -------         -----      -------- 
                                              6,239         6,283        12,522 
Expenses                                                                        
  Property operating expenses   .........     1,728         2,236         3,964 
                                            -------         -----      -------- 
  EBITDA   ..............................   $ 4,511       $ 4,047      $  8,558 
                                            =======       =======      ======== 

                                                        · Enlarge/Download Table
                                                                                                  
(b)  To record additional interest and other income as follows:                                   
     Interest and other income of Magnolia Mall and North Dartmouth Mall  ............... $    32 
     Accrual of interest income on note receivable from PREIT-RUBIN .....................     202 
                                                                                          ------- 
                                                                                          $   234 
                                                                                          ======= 
(c)  To record additional depreciation expense as follows:                                        
     Magnolia Mall -- depreciable basis of $45,998 over 30-year useful life  ............ $ 1,533 
     North Dartmouth Mall -- depreciable basis of $30,709 over 30-year useful life ......   1,024 
                                                                                          ------- 
                                                                                          $ 2,557 
                                                                                          ======= 
(d)  To record additional interest expense as follows:                                            
     Magnolia Mall $25,200 mortgage note payable assumed at 8.20%........................ $ 2,066 
     Magnolia Mall bank borrowings of $10,165 at 7.25% to fund remaining purchase price       737 
     North Dartmouth Mall bank borrowings of $35,000 at 7.25% to fund purchase price  ...   2,538 
     Deposit of $5,000 at 7.25% .........................................................     363 
     Bank borrowings of $11,482 at 7.25% to fund the cash portion of transaction costs...     832 
     Less capitalized interest on bank borrowings for property under development   ......    (605)
     Net increase in amortization of financing costs related to Credit Facility .........     252 
                                                                                          ------- 
                                                                                          $ 6,183 
                                                                                          ======= 

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PENNSYLVANIA REAL ESTATE INVESTMENT TRUST 

NOTES TO MANAGEMENT'S ASSUMPTIONS TO UNAUDITED  
PRO FORMA CONSOLIDATING INCOME STATEMENT  

(e) To record equity in income (loss) of PREIT-RUBIN as follows:                

                                                        · Enlarge/Download Table

                                                          TRO         Pro Forma                    
                                                       Historical    Adjustments     Pro Forma     
                                                       ------------  -------------  ---------------
                                                                                                   
Revenues                                                                                           
  Management fees   .................................    $ 6,171       $   --          $ 6,171     
  Leasing commissions  ..............................      9,605           --            9,605     
  Consulting fees   .................................      1,763           --            1,763     
  Development fees  .................................        581           --              581     
  Publication income   ..............................      2,201           --            2,201     
  Other income   ....................................        147           --              147     
                                                         -------       ------          -------     
   Total revenues   .................................     20,468           --           20,468     
                                                         -------       ------          -------     
Operating Expenses                                                                                 
  Salaries, commissions, temporary services, payroll                                               
    taxes and employee benefits .....................     11,781          300(1)        12,081     
  Rent expense   ....................................        784           --              784     
  Other operating expenses   ........................      3,744           --            3,744     
  Depreciation and amortization .....................        961           --              961     
  Non-recurring expenses associated with the TRO                                                   
    Transaction  ....................................        890           --              890     
  Expenses for start-up of EPDLP management                                                        
    contracts .......................................        951           --              951     
                                                         -------       --------        -------     
   Total operating expenses  ........................     19,111          300           19,411     
                                                         -------       --------        -------     
  Income from operations  ...........................      1,357         (300)           1,057     
  Interest expense  .................................       (891)         362(2)          (529)    
  Equity in loss from partnership investments  ......       (131)         131(3)             0     
                                                         -------       --------        -------     
  Income before income taxes ........................        335          193              528     
  Provision for income taxes ........................         --         (211)            (211)(4) 
                                                         -------       --------        -------     
Net income ..........................................    $   335       $  (18)             317     
                                                         =======       ========        =======     
 Amortization of excess purchase price over net assets                                             
   acquired recorded in consolidation ..........................................          (401)(5) 
 Net loss after intangible amortization  .......................................       $   (84)    
                                                                                       =======     
 Operating Partnership's interest (95%) in loss of PREIT-RUBIN   ...............       $   (80)(6) 
                                                                                       =======     

------------                                                                    

                                                        · Enlarge/Download Table
                                                                                               
(1) To record additional compensation expense in accordance with existing employment           
    contracts                                                                                  
(2) To adjust interest expense as follows:                                                     
    o Elimination of interest on debt not assumed  .................................... $  564 
    o Accrual of interest on note payable to PREIT ....................................   (202)
                                                                                        ------ 
                                                                                        $  362 
                                                                                        ====== 
(3) To eliminate equity in loss of partnerships and joint ventures not being acquired.         
(4) Estimated tax provision calculated using 40% effective tax rate.                           
(5) To record amortization of excess purchase price over net assets acquired over a            
    ten-year amortization period.                                                              
(6) Represents 95% of PREIT-RUBIN's net loss after intangible amortization.                    

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PENNSYLVANIA REAL ESTATE INVESTMENT TRUST 

NOTES TO MANAGEMENT'S ASSUMPTIONS TO UNAUDITED  
PRO FORMA CONSOLIDATING INCOME STATEMENT  

                                                        · Enlarge/Download Table
                                                                                                   
(f) To record the Company 50% share of income from The Court at Oxford Valley:                     
    o Equity in the net income of The Court at Oxford Valley      ........................ $   605 
    o Less amortization of the excess purchase price over the net book value of assets             
      acquired  ..........................................................................    (185)
                                                                                           ------- 
                                                                                           $   420 
                                                                                           ======= 
(g) To adjust the minority interest's share of the income in the Operating Partnership             
    (6.9% prior to the consummation of the Offering).   .................................. $  (731)
                                                                                           ======= 
(h) To record the interest expense savings associated with the repayment of the following          
    debt amounts:                                                                                  
    o Payment of the Cobblestone Mortgage ................................................ $   690 
    o Payment of bank borrowings incurred in connection with the TRO Transaction .........   4,469 
    o Payment of other bank borrowings ...................................................     943 
                                                                                           ------- 
                                                                                           $ 6,102 
                                                                                           ======= 
(i) To adjust the minority interest's share of income in the Operating Partnership (4.8%           
    following the consummation of the Offering)                                            $   (70)
                                                                                           ======= 

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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS  

To Pennsylvania Real Estate Investment Trust:                                   

We have audited the accompanying consolidated balance sheets of       
Pennsylvania Real Estate Investment Trust (a Pennsylvania Trust) and            
Subsidiaries as of August 31, 1997 and 1996, and the related consolidated       
statements of income, shareholders' equity and cash flows for each of the three 
years in the period ended August 31, 1997. These financial statements are the   
responsibility of the Trust's management. Our responsibility is to express an   
opinion on these financial statements based on our audits. We did not audit the 
1997, 1996 and 1995 financial statements of Lehigh Valley Mall Associates, a    
partnership in which the Trust has a 50 percent interest which is reflected in  
the accompanying financial statements using the equity method of accounting.    
The equity in net income of Lehigh Valley Mall Associates represents 23         
percent, 31 percent and 32 percent of net income in 1997, 1996 and 1995,        
respectively. The financial statements of Lehigh Valley Mall Associates were    
audited by other auditors whose report has been furnished to us and our         
opinion, insofar as it relates to the amounts included for Lehigh Valley Mall   
Associates, is based solely on the report of the other auditors.                

We conducted our audits in accordance with generally accepted auditing
standards. 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 includes examining, on a test basis, evidence   
supporting the amounts and disclosures in the financial statements. An audit    
also includes assessing the accounting principles used and significant          
estimates made by management as well as evaluating the overall financial        
statement presentation. We believe that our audits provide a reasonable basis   
for our opinion.                                                                

    In our opinion, based upon our audit and the report of other auditors, the
financial statements referred to above present fairly, in all material          
respects, the financial position of Pennsylvania Real Estate Investment Trust   
and Subsidiaries as of August 31, 1997 and 1996, and the results of their       
operations and their cash flows for each of the three years in the period ended 
August 31, 1997 in conformity with generally accepted accounting principles.    

ARTHUR ANDERSEN LLP                 

Philadelphia, Pa.,                                                              
October 17, 1997                                                              

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PENNSYLVANIA REAL ESTATE INVESTMENT TRUST 

CONSOLIDATED BALANCE SHEETS 
AT AUGUST 31  

                                                        · Enlarge/Download Table

                                                                               1997              1996        
                                                                           ----------------  ----------------
                                                                                                             
Assets                                                                                                       
Investments in real estate, at cost (Notes 1 and 3):                                                         
Retail properties   ......................................................  $  37,398,000     $  37,362,000  
Multifamily properties ...................................................    159,967,000       156,102,000  
Industrial properties  ...................................................      5,078,000         5,078,000  
                                                                            -------------     -------------  
Total investments in real estate   .......................................    202,443,000       198,542,000  
   Less accumulated depreciation   .......................................     50,711,000        44,693,000  
                                                                            -------------     -------------  
                                                                              151,732,000       153,849,000  
Investments in partnerships and joint ventures, at equity (Notes 1 and 2)       1,039,000        16,995,000  
Notes receivable .........................................................             --         1,649,000  
                                                                            -------------     -------------  
                                                                              152,771,000       172,493,000  
   Less allowance for possible losses (Note 1) ...........................      1,831,000         2,042,000  
                                                                            -------------     -------------  
                                                                              150,940,000       170,451,000  
Other Assets:                                                                                                
   Cash and cash equivalents .............................................      1,399,000         1,030,000  
   Rents and sundry receivables ..........................................        590,000           608,000  
   Deferred costs, prepaid real estate taxes and expenses, net (Note 1)         7,393,000         5,636,000  
   Deposits on properties (Notes 1 and 10)  ..............................      5,335,000                --  
                                                                            -------------     -------------  
Total assets  ............................................................  $ 165,657,000     $ 177,725,000  
                                                                            =============     =============  
Liabilities and Shareholders' Equity                                                                         
Mortgage notes payable (Note 3) ..........................................  $  83,528,000     $  84,833,000  
Bank loans payable (Note 3)  .............................................     33,884,000        39,315,000  
Tenants' deposits and deferred rents  ....................................      1,346,000         1,422,000  
Accrued pension and retirement benefits (Notes 1 and 4) ..................      1,091,000         1,207,000  
Accrued expenses and other liabilities   .................................      4,369,000         3,901,000  
                                                                            -------------     -------------  
Total liabilities   ......................................................    124,218,000       130,678,000  
Minority interest in consolidated partnership (Note 1)  ..................        540,000           542,000  
Commitments and contingencies (Note 7)   .................................             --                --  
Shareholders' equity:                                                                                        
($4.71 and $5.36 per share at August 31, 1997 and 1996) (Notes 1 and 5):                                     
Shares of Beneficial Interest, $1 par; authorized, unlimited; issued and                                     
 outstanding 8,685,098 Shares in 1997 and 8,676,098 in 1996   ............      8,685,000         8,676,000  
Additional paid in capital   .............................................     53,599,000        53,133,000  
Distributions in excess of net income ....................................    (21,385,000)      (15,304,000) 
Total shareholders' equity   .............................................     40,899,000        46,505,000  
                                                                            -------------     -------------  
Total liabilities and shareholders' equity  ..............................  $ 165,657,000     $ 177,725,000  
                                                                            =============     =============  

The accompanying notes are an integral part of these statements.

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PENNSYLVANIA REAL ESTATE INVESTMENT TRUST 

CONSOLIDATED STATEMENTS OF INCOME 
FOR THE YEARS ENDED AUGUST 31 

                                                        · Enlarge/Download Table

                                                                1997              1996              1995        
                                                            ----------------  ----------------  ----------------
                                                                                                                
Revenues                                                                                                        
Gross revenues from real estate (Note 6) ..................  $ 40,231,000      $ 38,985,000      $ 36,978,000   
Interest and other income .................................       254,000           171,000           176,000   
                                                             ------------      ------------      ------------   
Total revenues   ..........................................    40,485,000        39,156,000        37,154,000   
                                                             ------------      ------------      ------------   
Expenses                                                                                                        
Property operating expenses  ..............................    16,289,000        16,102,000        14,859,000   
Depreciation and amortization (Note 1)   ..................     6,259,000         5,908,000         5,286,000   
General and administrative expenses (Notes 1 and 4)  ......     3,324,000         3,119,000         3,091,000   
Mortgage and bank loan interest ...........................     9,086,000         9,831,000         8,908,000   
Provisions for losses on investments (Note 1)  ............       500,000                --                --   
                                                             ------------      ------------      ------------   
Total expenses   ..........................................    35,458,000        34,960,000        32,144,000   
                                                             ------------      ------------      ------------   
Income before minority interest, equity in income of                                                            
 partnerships and joint ventures and gains on sales of                                                          
 interests in real estate .................................     5,027,000         4,196,000         5,010,000   
Minority interest   .......................................      (198,000)         (275,000)         (285,000)  
Equity in income of partnerships and joint ventures                                                             
 (Notes 1 and 2) ..........................................     4,337,000         6,258,000         6,381,000   
Gains on sales of interests in real estate  ...............     1,069,000           865,000           119,000   
                                                             ------------      ------------      ------------   
Net income ................................................  $ 10,235,000      $ 11,044,000      $ 11,225,000   
                                                             ============      ============      ============   
Net income per Share (Note 1)   ...........................  $       1.18      $       1.27      $       1.29   
                                                             ============      ============      ============   

The accompanying notes are an integral part of these statements.

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PENNSYLVANIA REAL ESTATE INVESTMENT TRUST 

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY 
FOR THE THREE YEARS ENDED AUGUST 31, 1997 

                                                        · Enlarge/Download Table

                                                               Shares                                       
                                                            of beneficial     Additional    Distributions   
                                                              interest         paid in       in excess of   
                                                               $1 par          capital       net income     
                                                            ---------------  -------------  ----------------
                                                                                                            
Balance, September 1, 1994   ..............................   $8,670,000      $53,039,000    $  (4,961,000) 
   Net income .............................................           --               --       11,225,000  
   Shares issued upon exercise of options (Note 5)   ......        6,000           94,000               --  
   Distributions paid to shareholders ($1.88 per share)   .           --               --      (16,302,000) 
                                                              ----------      -----------    -------------  
Balance, August 31, 1995  .................................    8,676,000       53,133,000      (10,038,000) 
   Net income .............................................           --               --       11,044,000  
   Distributions paid to shareholders ($1.88 per share)   .           --               --      (16,310,000) 
                                                              ----------      -----------    -------------  
Balance, August 31, 1996  .................................    8,676,000       53,133,000      (15,304,000) 
   Net income .............................................           --               --       10,235,000  
   Shares issued upon exercise of options (Note 5)   ......        9,000          166,000               --  
   Issuance of compensatory stock options (Note 5)   ......           --          300,000               --  
   Distributions paid to shareholders ($1.88 per share)   .           --               --      (16,316,000) 
                                                              ----------      -----------    -------------  
Balance, August 31, 1997  .................................   $8,685,000      $53,599,000    $ (21,385,000) 
                                                              ==========      ===========    =============  

The accompanying notes are an integral part of these statements.

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PENNSYLVANIA REAL ESTATE INVESTMENT TRUST 
CONSOLIDATED STATEMENTS OF CASH FLOWS 
FOR THE YEARS ENDED AUGUST 31 

                                                        · Enlarge/Download Table

                                                                       1997             1996             1995       
                                                                   ---------------  ---------------  ---------------
                                                                                                                    
Cash Flows From Operating Activities                                                                                
Net income  ...................................................... $10,235,000      $11,044,000      $11,225,000    
Adjustments to reconcile net income to net cash provided by                                                         
 operating activities:                                                                                              
   Minority interest in income of consolidated partnership  ......     198,000          275,000          285,000    
   Depreciation and amortization .................................   6,259,000        5,908,000        5,286,000    
   Gains on sales of interests in real estate   ..................  (1,069,000)        (865,000)        (119,000)   
   Provision for losses on investments ...........................     500,000               --               --    
   Issuance of compensatory stock options ........................     300,000               --               --    
   Decrease in allowance for possible losses .....................    (710,000)        (734,000)        (460,000)   
Change in assets and liabilities:                                                                                   
   Rents and sundry receivables  .................................      18,000         (192,000)         (18,000)   
   Deferred costs, prepaid real estate taxes and expenses, net         (10,000)        (356,000)        (837,000)   
   Accrued pension and retirement benefits   .....................    (116,000)          (6,000)         130,000    
   Accrued expenses and other liabilities ........................    (310,000)         (54,000)       1,042,000    
   Tenants' deposits and deferred rents   ........................     (76,000)          70,000          138,000    
                                                                   -----------      -----------      -----------    
Net cash provided by operating activities ........................  15,219,000       15,090,000       16,672,000    
                                                                   -----------      -----------      -----------    
Cash Flows From Investing Activities                                                                                
Investments in wholly owned real estate   ........................  (3,901,000)      (3,685,000)     (38,058,000)   
Investments in partnerships and joint ventures  ..................  (2,326,000)        (517,000)        (983,000)   
Cash proceeds from sales of real estate investments   ............          --        5,163,000               --    
Cash proceeds from sales of interests in partnerships ............   2,069,000               --               --    
Increase in advances to partnerships and joint ventures  .........    (323,000)        (380,000)        (749,000)   
Cash distributions from partnerships and joint ventures in                                                          
 excess of (less than) equity in income   ........................  17,605,000          889,000         (127,000)   
Cash distributions to minority partners   ........................    (200,000)        (261,000)        (165,000)   
Decrease in notes receivable  ....................................   1,649,000               --               --    
Deposits on agreement to purchase   ..............................  (5,336,000)              --               --    
Deferred acquisition costs .......................................  (1,488,000)        (276,000)              --    
                                                                   -----------      -----------      -----------    
Net cash provided by (used in) investing activities   ............   7,749,000          933,000      (40,082,000)   
                                                                   -----------      -----------      -----------    
Cash Flows From Financing Activities                                                                                
Principal installments on mortgage notes payable   ...............  (1,305,000)      (1,123,000)        (821,000)   
Increase in mortgage notes payable  ..............................          --        8,800,000       35,000,000    
Prepayment of mortgage notes payable   ...........................          --       (1,749,000)              --    
Proceeds from bank loan payable  .................................          --               --       39,379,000    
Decrease in bank loan payable ....................................  (5,431,000)      (5,005,000)     (35,000,000)   
Decrease (increase) in deferred financing costs ..................     278,000         (704,000)              --    
Shares of beneficial interest issued   ...........................     175,000               --          100,000    
Distributions paid to shareholders  .............................. (16,316,000)     (16,310,000)     (16,302,000)   
                                                                   -----------      -----------      -----------    
Net cash (used in) provided by financing activities   ............ (22,599,000)     (16,091,000)      22,356,000    
                                                                   -----------      -----------      -----------    
Net increase (decrease) in cash and cash equivalents  ............     369,000          (68,000)      (1,054,000)   
Cash and cash equivalents, beginning of year .....................   1,030,000        1,098,000        2,152,000    
                                                                   -----------      -----------      -----------    
Cash and cash equivalents, end of year ........................... $ 1,399,000      $ 1,030,000      $ 1,098,000    
                                                                   ===========      ===========      ===========    
Supplemental disclosure of non-cash investing activities:                                                           
Net assets acquired  ............................................. $        --      $        --      $ 3,590,000    
Liabilities assumed (primarily bank loans payable) ...............          --               --       (3,804,000)   
                                                                   -----------      -----------      -----------    
                                                                   $        --      $        --      $  (214,000)   
                                                                   ===========      ===========      ===========    
Accrual of acquisition costs  .................................... $   778,000      $        --      $        --    
                                                                   ===========      ===========      ===========    

The accompanying notes are an integral part of these statements.

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PENNSYLVANIA REAL ESTATE INVESTMENT TRUST 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  

YEARS ENDED AUGUST 31, 1997, 1996 AND 1995  

1. Summary of significant accounting policies                                   

Nature of Operations                                                            

Pennsylvania Real Estate Investment Trust (the "Company") is a        
self-administered equity real estate investment trust engaged, directly and     
through subsidiaries and joint ventures, in owning and managing income          
producing real estate, with an emphasis on shopping centers and apartment       
complexes. The Company primarily operates in the mid-Atlantic region from       
Pennsylvania to Virginia and in selected areas of Florida.                      

Consolidation                                                                   

   The consolidated financial statements of the Company include the accounts
of thirteen wholly owned subsidiaries, two are Delaware corporations, one is a  
Nebraska corporation, one is a Virginia corporation, one is a Maryland          
corporation and eight are Florida corporations. One partnership in which the    
Company is a 65% general partner, and has control as provided in the            
partnership agreement, has been consolidated for financial statement            
presentation. The minority partner's interest is 35%. All significant           
intercompany accounts and transactions have been eliminated in consolidation.   

Partnership and joint venture investments                                       

    In accordance with the American Institute of Certified Public Accountants'
Statement of Position 78-9, "Accounting for Investments in Real Estate          
Ventures," the Company accounts for its investment in partnerships and joint    
ventures which it does not control using the equity method of accounting. These 
investments, which represent 25-to-70% non-controlling ownership interests, are 
recorded initially at the Trust's cost and subsequently adjusted for the        
Company's net equity in income and cash contributions and distributions.        

Statements of cash flows                                                        

The Company considers all highly liquid short-term investments with an
original maturity of three months or less to be cash equivalents. Cash paid for 
interest was $8,963,000, $9,962,000, and $8,619,000, for the years ended August 
31, 1997, 1996 and 1995, respectively.                                          

Capitalization of costs                                                         

 It is the Company's policy to capitalize interest and real estate taxes
related to construction in progress and to depreciate these costs over the life 
of the related assets in order to more properly match revenues and expenses.    
These items are capitalized for income tax purposes and amortized or            
depreciated in accordance with the provisions of the Internal Revenue Code. For 
fiscal years 1997, 1996 and 1995 the Company did not capitalize any interest or 
real estate taxes.                                                              

    The Company has capitalized as deferred costs certain expenditures related
to the financing and leasing of certain properties. Capitalized loan fees are   
being amortized over the terms of the related loans and leasing commissions are 
being amortized over the term of the related leases.                            

   During 1997, the Company capitalized certain deposits associated with the
planned future purchase of two regional malls. These deposits were applied to   
the respective properties upon consummation of the transaction described in     
Note 10.                                                                        

Depreciation                                                                    

   The Company, for financial reporting purposes, depreciates its buildings,
equipment and leasehold improvements over their estimated useful lives of 10 to 
45 years, using the straight-line method of depreciation. For Federal income    
tax purposes, the Company currently uses the straight-line method of            
depreciation and the useful lives prescribed by the Internal Revenue Code.      

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PENNSYLVANIA REAL ESTATE INVESTMENT TRUST 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  -- (Continued)

YEARS ENDED AUGUST 31, 1997, 1996 AND 1995  

1. Summary of significant accounting policies  -- (Continued)                   

Allowance for possible losses                                                   

  On September 1, 1996, the Company adopted the provisions of Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of       
Long-Lived Assets and for Long-Lived Assets to be Disposed Of" ("SFAS No.       
121"). SFAS No. 121 requires long-lived assets to be held and used by the       
Company to be reviewed for impairment whenever events or changes in             
circumstances indicate that the carrying amount of an asset may not be          
recoverable. If the sum of the expected future cash flows (undiscounted and     
without interest charges) is less than the carrying amount of the asset, an     
impairment loss should be recognized. Measurement of an impairment loss for     
these assets should be based on the fair market value of the assets. Adoption   
of this statement had no impact on the Company's financial position or results  
of operations.                                                                  

During 1997, an impairment loss of approximately $500,000 was recorded
following the expiration of an option to sell certain land parcels held by a    
partnership in which the Company holds an equity interest.                      

Benefit plans                                                                   

 The Company has provided pension benefits since 1970 for all employees,
excluding the Chairman, for whom retirement benefits are provided in an         
employment contract. With regard to the Chairman's employment contract, no      
provision was required for fiscal years ended August 31, 1997, 1996 and 1995,   
respectively.                                                                   

Derivative Financial Instruments                                                

In managing interest rate exposure on certain floating rate debt, the 
Company at times enters into interest rate swap and cap agreements. When        
interest rates change, the differential to be paid or received is accrued as    
interest expense and is recognized over the life of the swap agreements. The    
costs of cap transactions are deferred and amortized over the contract period.  
The amortized costs of cap transactions and interest income and interest        
expense on swap transactions are included in mortgage and bank loan interest.   

Income taxes                                                                    

    The Company has elected to qualify as a real estate investment trust under
Sections 856-860 of the Internal Revenue Code and intends to remain so          
qualified. Accordingly, no provision has been made for Federal income taxes on  
income resulting from those sales of real estate investments which have or will 
be distributed to shareholders within the prescribed time limits. However,      
taxes are provided for those gains which are not anticipated to be distributed  
to shareholders.                                                                

The Company is subject to a Federal excise tax computed on a calendar 
year. The excise tax equals 4% of the excess, if any, of 85% of the Company's   
ordinary income plus 95% of the Company's capital gain net income for the       
calendar year over cash distributions during the calendar year, as defined. The 
Company has in the past distributed a substantial portion of its taxable income 
in the subsequent fiscal year and may also follow this policy in the future.    

   No provision for excise tax was made for fiscal years 1997, 1996 and 1995
as no tax was due.                                                              

  The tax status of distributions paid to shareholders was composed of the
following for the calendar years ended December 31, 1996 and 1995.              

   1996       1995
   --------   ------
Ordinary income  ......   $1.72      $1.88                        
Capital gains .........     .16         --                        
  -----      -----
  $1.88      $1.88
  =====      =====

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PENNSYLVANIA REAL ESTATE INVESTMENT TRUST 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  -- (Continued)

YEARS ENDED AUGUST 31, 1997, 1996 AND 1995  

1. Summary of significant accounting policies  -- (Continued)                   

    The tax status of distributions paid to shareholders for the calendar year
ending December 31, 1997 will be determined upon preparation of the Company's   
federal income tax return. Management expects such distributions to consist of  
ordinary income and capital gains.                                              

Net income per share                                                            

Earnings per share are based on the weighted average number of shares 
outstanding which were 8,678,560 in 1997, 8,676,098 in 1996, and 8,670,810 in   
1995.                                                                           

Use of Estimates                                                                

The preparation of financial statements in conformity with generally  
accepted accounting principles requires management to make estimates and        
assumptions that affect the reported amount of assets and liabilities and       
disclosure of contingent assets and liabilities at the date of the financial    
statements and the reported amounts of revenue and expenses during the          
reporting period. Actual results could differ from those estimates.             

Reclassifications                                                               

Certain prior year amounts have been reclassified to conform with the 
current year presentation.                                                      

2. Investments in partnerships and joint ventures                               

   The following presents summarized financial information for the Company's
investments in 22 and 26 partnerships and joint ventures at August 31, 1997 and 
1996, respectively, and the Company's equity in income for the years ended      
August 31, 1997, 1996 and 1995.                                                 

                                                        · Enlarge/Download Table

                                                                     At August 31            
                                                          -----------------------------------
                                                              1997               1996        
                                                          ----------------   ----------------
                                                                                             
Assets                                                                                       
Investments in Real Estate at Cost:                                                          
   Retail properties ....................................  $120,660,000       $ 128,936,000  
   Multifamily properties  ..............................   107,604,000         105,480,000  
   Industrial property  .................................     1,264,000           1,264,000  
   Land  ................................................     4,446,000           4,446,000  
                                                           ------------       -------------  
   Total investments in real estate .....................   233,974,000         240,126,000  
   Less accumulated depreciation ........................    71,838,000          73,989,000  
                                                           ------------       -------------  
                                                            162,136,000         166,137,000  
Cash and cash equivalents  ..............................     6,031,000           5,589,000  
Other assets   ..........................................     5,728,000           6,020,000  
                                                           ------------       -------------  
Total assets   ..........................................   173,895,000         177,746,000  
                                                           ------------       -------------  
Liabilities and Partners' Equity                                                             
Mortgage notes payable  .................................   162,097,000         133,578,000  
Bank loans payable   ....................................     8,770,000           9,124,000  
Due to the Company   ....................................     3,118,000           2,795,000  
Other liabilities .......................................     4,341,000           4,436,000  
                                                           ------------       -------------  
   Total liabilities ....................................   178,326,000         149,933,000  
                                                           ------------       -------------  
   Net equity (deficit) .................................    (4,431,000)         27,813,000  
   Partners' share   ....................................    (5,470,000)        (10,818,000) 
                                                           ------------       -------------  
   Investments in partnerships and joint ventures  ......  $  1,039,000       $  16,995,000  
                                                           ============       =============  

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PENNSYLVANIA REAL ESTATE INVESTMENT TRUST 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  -- (Continued)

YEARS ENDED AUGUST 31, 1997, 1996 AND 1995  

2. Investments in partnerships and joint ventures  -- (Continued)               

                                                        · Enlarge/Download Table

                                                                 For the years ended August 31           
                                                         1997              1996              1995        
                                                      ---------------   ---------------   ---------------
                                                                                                         
Gross revenues from real estate .....................  $ 52,446,000      $ 53,209,000      $ 52,339,000  
                                                       ------------      ------------      ------------  
Expenses:                                                                                                
   Property operating expenses  .....................    20,774,000        21,724,000        20,477,000  
   Mortgage and bank loan interest ..................    14,908,000        11,984,000        12,463,000  
   Depreciation and amortization   ..................     6,978,000         6,833,000         6,502,000  
                                                       ------------      ------------      ------------  
     Total expenses .................................    42,660,000        40,541,000        39,442,000  
                                                       ------------      ------------      ------------  
Net income ..........................................     9,786,000        12,668,000        12,897,000  
   Partners' share  .................................    (5,449,000)       (6,410,000)       (6,516,000) 
                                                       ------------      ------------      ------------  
Equity in income of partnerships and joint ventures .  $  4,337,000      $  6,258,000      $  6,381,000  
                                                       ============      ============      ============  

    Mortgage notes payable which are secured by the related properties are due
in installments over various terms extending to the year 2013 with interest     
rates ranging from 6.6% to 10.4% with an average interest rate of 7.9%.         
Principal payments are due as follows:                                          

Fiscal year ending                                                              
-------------------------------------------                                     
1998   ....................................    $  6,062,000                     
1999   ....................................       8,268,000                     
2000   ....................................       9,147,000                     
2001   ....................................      18,705,000                     
2002   ....................................       3,913,000                     
2003 and thereafter   .....................     116,002,000                     
                          ------------
                          $162,097,000
                          ============

The liability under each mortgage note is limited to the particular   
property except for two loans in the amount of $7,234,000 which are guaranteed  
by the partners of the respective partnerships, including the Company. In       
addition, one bank loan in the amount of $2,911,000 has been guaranteed by the  
partners of the partnership including the Company.                              

The Company's investments in certain partnerships and joint ventures  
reflect cash distributions in excess of the Company's net investments totaling  
$5,999,000 and $5,876,000 at August 31, 1997 and 1996, respectively. The        
Company is generally entitled to a priority return on these investments.        

The Company has a 50% partnership interest in Lehigh Valley Mall      
Associates which is included in the amounts above. Summarized financial         
information for this investment which is accounted for by the equity method     
follows:                                                                        

                                                        · Enlarge/Download Table

                                                            For the years ended             
                                                --------------------------------------------
                                                  8/31/97         8/31/96         8/31/95   
                                                -------------   -------------   ------------
                                                                                            
Total assets  .................................  $24,645,000     $23,552,000     $20,858,000
Mortgages payable and construction loan  ......   53,406,000      22,489,000      22,227,000
Revenues   ....................................   14,840,000      13,823,000      13,667,000
Property operating expenses  ..................    4,657,000       4,198,000       3,412,000
Interest expense ..............................    4,638,000       1,998,000       2,040,000
Net income ....................................    4,660,000       6,915,000       7,548,000
Equity in income of partnership ...............    2,330,000       3,458,000       3,774,000

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PENNSYLVANIA REAL ESTATE INVESTMENT TRUST 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  -- (Continued)

YEARS ENDED AUGUST 31, 1997, 1996 AND 1995  

3. Mortgage notes and bank loans payable                                        

    Mortgage notes payable which are secured by the related properties are due
in installments over various terms extending to the year 2008 with interest at  
rates ranging from 5.90% to 9.50% with an average interest rate of 7.94%.       
Principal payments are due as follows:                                          

Fiscal year ending                                                              
-------------------------------------------                                     
1998   ....................................    $ 1,408,000                      
1999   ....................................      1,504,000                      
2000   ....................................     33,969,000                      
2001   ....................................      1,129,000                      
2002   ....................................      1,217,000                      
2003 and thereafter   .....................     44,301,000                      
                         -----------
                         $83,528,000
                         ===========

   In August 1996, the Company modified its existing $75.0 million unsecured
revolving line of credit to a $20.0 million revolving line of credit and a      
$55.0 million unsecured term loan. The term loan is divided into two tranches,  
a $30.0 million ten year term and a $25.0 million seven year term. The Company  
has the option of selecting fixed or floating rates on the term loan.           

 As of August 31, 1997, $13.0 million of the unsecured revolving line of
credit was outstanding ($7.3 million directly by the Trust and $5.7 million     
through partnerships and joint ventures) and $26.7 million of the term loan     
($20.0 million for ten years due August 2006 and $7 million for seven years due 
August 2003). The line of credit and term loans bear interest at LIBOR plus 185 
basis points. Under the credit facility, the Company must maintain minimum net  
worth and operating income levels as defined in the loan documents.             

   The weighted average interest rates based on amounts borrowed were 7.43%,
7.51% and 7.98% for fiscal years ended August 31, 1997, 1996 and 1995,          
respectively. Subsequent to year end, the Company entered into a new $150       
million credit facility (see Note 10).                                          

  During 1995, the Company purchased interest rate protection at a cost of
$250,000 on $15,000,000 of outstanding debt limiting the 30-day LIBOR rate to   
7.5% for three years. The Company also limited its exposure to increases in     
LIBOR on $20,000,000 of its floating rate debt by entering into a swap          
agreement which fixes a rate of 6.12% versus 30-day LIBOR through June 2001.    

  The Company is exposed to credit loss in the event of non-performance by
counterparties to the interest rate protection agreements; however, the Company 
does not anticipate non-performance by the counterparties.                      

    At August 31, 1997, the Company was in compliance with all debt covenants.

    The carrying values of the mortgage notes and bank loans payable at August
31, 1997 and 1996 were approximately equal to their respective fair values, as  
determined by using year-end interest rates and market conditions. At August    
31, 1997, the fair values of the interest rate protection and swap agreements   
referred to above were approximately $0 and $85,000, respectively.              

4. Benefit Plans                                                                

During 1995 the Company adopted a 401(k) Plan (the "Plan") in which   
substantially all of the officers and employees are eligible to participate.    
The Plan permits eligible participants, as defined in the Plan agreement, to    
defer up to 15% of their compensation, and the Trust, at its discretion, may    
match a percentage of the employees' contributions. The employees'              
contributions are fully vested and contributions from the Trust vest in         
accordance with an employee's years of service as defined in the plan           
agreement. The Company's contributions to the Plan for the years ended August   
31, 1997, 1996 and 1995 were $41,000, $39,000 and $1,000, respectively.         

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PENNSYLVANIA REAL ESTATE INVESTMENT TRUST 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  -- (Continued)

YEARS ENDED AUGUST 31, 1997, 1996 AND 1995  

4. Benefit Plans  -- (Continued)                                                

   During 1995, the Company also adopted a Supplemental Retirement Plan (the
"Supplemental Plan") covering certain senior management employees. The          
Supplemental Plan provides eligible employees through normal retirement date,   
as defined in the plan agreement, a benefit amount similar to that which would  
have been received under the provisions of a pension plan which was terminated  
in 1994. The Company has recorded $92,000, $160,000 and $168,000 of             
contributions due under the provisions of this plan for the years ended August  
31, 1997, 1996 and 1995, respectively,                                          

5. Stock Option Plans                                                           

    In December 1990, the shareholders approved an incentive stock option plan
for key employees and a stock option plan for non-employee trustees, covering   
200,000 and 100,000 shares of beneficial interest, respectively. Under the      
terms of the plan, the purchase price of shares subject to each option granted  
will be at least equal to the fair market value of the shares on the date of    
grant. Options under the incentive stock option plan may be exercised as        
determined by the Company, but in no event later than 10 years from the date of 
grant. In December 1993, the Board of Trustees amended the incentive stock      
option plan for key employees, to increase the number of shares subject to      
option to 400,000 shares, to change the name of the plan to "1990 Incentive and 
Non Qualifying Stock Option Plan" and to expand some provisions of the plan.    
The stock option plan for non-employee trustees provides for annual grants of   
1,000 options (becoming exercisable in four equal installments). The options    
expire 10 years after the date of grant.                                        

In December 1993, the Board of Trustees adopted a non-qualifying stock
option plan covering 100,000 shares. The Company granted options on February 1, 
1994 having a term of 10 years and subject to the other terms and conditions    
set forth in the plan. All 100,000 shares are outstanding at August 31, 1997.   

Changes in options outstanding are as follows:                        

                                                        Plan For
                                          Employees     Non-Employee
                                          Plan          Trustees
                                           -----------   -------------
Options outstanding at 8/31/95  ......     244,625        35,250  
Options granted  .....................      50,500         6,000  
Options exercised   ..................           0             0  
                                         -------        ------
Options outstanding at 8/31/96  ......     295,125        41,250  
Options granted  .....................      45,000         6,000  
Options exercised   ..................           0        (9,000) 
                                         -------        ------
Options outstanding at 8/31/97  ......     340,125        38,250  
                                         -------        ------

As of August 31, 1997, options for 377,500 shares had been granted    
pursuant to the incentive stock option plan of which 340,125 remain outstanding 
at $16.00 to $24.625 per share and options for 48,000 shares had been granted,  
pursuant to the stock option plan for non-employee trustees of which 38,250     
shares remain outstanding at $15.75 to $25.375 per share. At August 31, 1997,   
options for 223,286 shares of beneficial interest with an aggregate purchase    
price of $4,853,000 (average of $21.73 per share) were exercisable.             

During the fourth quarter of 1997, the Board of Trustees extended the 
exercise dates for 62,500 options previously granted to an officer of the       
Company and two retiring trustees. As a result, the Company recorded            
compensation expense of $300,000 relating to this change in terms.              

  During 1997, the Company adopted an accounting standard, "Accounting for
Stock-Based Compensation" ("SFAS No. 123"). SFAS No 123 encourages a fair value 
method of accounting for employee stock options and similar equity instruments. 
The statement also allows an entity to continue to account for stock-based      
compensation using the intrinsic value method in APB Opinion No. 25. As         
provided for in the statement, the                                              

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PENNSYLVANIA REAL ESTATE INVESTMENT TRUST 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  -- (Continued)

YEARS ENDED AUGUST 31, 1997, 1996 AND 1995  

5. Stock Option Plans  -- (Continued)                                           

Company elected to continue the intrinsic value method of expense recognition.  
If compensation cost for these plans had been determined using the fair value   
method prescribed by SFAS No. 123, the Company's net income would have          
reflected the pro forma amounts indicated below.                                

                       1997           1996
                     -------------  ------------
Net income   ...............   $10,212,000    $11,033,000         
Net income per share  ......   $      1.18    $      1.27         

The pro forma effect on the results may not be representative of the  
impact in future years because the fair value method was not applied to options 
granted before 1996.                                                            

 The fair value of each option was estimated on the grant date using the
Black-Scholes option pricing model and the assumptions presented below.         

                         1997         1996
                         ----------   ----------
Expected life in years   ......         5            5            
Risk-free interest rate  ......      6.10%        5.58%           
Volatility   ..................     17.31%       18.12%           
Dividend yield  ...............      7.28%        8.90%           

    The weighted average fair value of options granted was $2.05 per option in
1997 and $1.29 per option in 1996.                                              

  In March 1997, the Financial Accounting Standards Board issued Statement
No. 128, "Earnings per Share". The new statement is effective for fiscal years  
ending after December 15, 1997. When adopted, the statement will require        
implementing a new definition of earnings per share including restatement of    
prior year amounts. Management has determined there will be no significant      
impact upon adoption of the statement.                                          

6. Operating Leases                                                             

The Company's multifamily properties are typically leased to residents
under operating leases for a period of one year. The Company's shopping centers 
are leased to tenants under operating leases with expiration dates extending to 
the year 2008.                                                                  

    Future minimum rentals under non-cancelable operating leases at August 31,
1997 are as follows:                                                            

1998   ...........................    $ 4,911,000                               
1999   ...........................      4,574,000                               
2000   ...........................      4,340,000                               
2001   ...........................      4,005,000                               
2002   ...........................      3,438,000                               
Thereafter   .....................     12,189,000                               
       -----------
       $33,457,000
       ===========

7. Commitments and Contingencies                                                

  During 1995 certain environmental matters arose at certain properties in
which the Company has an interest. The Company retained environmental           
consultants in order to investigate these matters. At one property, in which    
the Trust has a 50% ownership interest, groundwater contamination exists which  
the Trust alleges was caused by the former tenant. Estimates to remediate this  
property, which are subject to the length of monitoring and the extent of       
remediation required, range in total from $100,000 to $1,000,000. In addition,  
above normal radon levels have been detected at two wholly owned properties.    
The estimated remaining cost to remediate these properties is approximately     
$115,000, which costs were received as a credit from the sellers as part of the 
initial acquisitions.                                                           

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NOTES