PENNSYLVANIA REAL ESTATE INVESTMENT TRUST - Quarter Report: 2021 June (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

☒	Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended June 30, 2021

☐	Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to

Commission File Number: 001-6300

PENNSYLVANIA REAL ESTATE INVESTMENT TRUST

(Exact name of Registrant as specified in its charter)


Pennsylvania		23-6216339
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

One Commerce Square 2005 Market Street, Suite 1000 Philadelphia, PA		19103
(Address of principal executive offices)		(Zip Code)

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

Securities registered pursuant to Section 12(b) of the Act:

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

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

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


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

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

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

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13, or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ☒ No ☐

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. On August 4, 2021, 80,205,329 shares of beneficial interest, par value $1.00 per share, of the Registrant were outstanding.

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PENNSYLVANIA REAL ESTATE INVESTMENT TRUST

CONTENTS


			Page
	PART I—FINANCIAL INFORMATION

Item 1.		Financial Statements (Unaudited):	1

		Consolidated Balance Sheets—June 30, 2021 and December 31, 2020	1

		Consolidated Statements of Operations—Three and Six Months Ended June 30, 2021 and 2020	2

		Consolidated Statements of Comprehensive Loss—Three and Six Months Ended June 30, 2021 and 2020	4

		Consolidated Statements of Equity—Three and Six Months Ended June 30, 2021 and 2020	5

		Consolidated Statements of Cash Flows—Three and Six Months Ended June 30, 2021 and 2020	6

		Notes to Unaudited Consolidated Financial Statements	7

Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations	23

Item 3.		Quantitative and Qualitative Disclosures About Market Risk	49

Item 4.		Controls and Procedures	50

		PART II—OTHER INFORMATION

Item 1.		Legal Proceedings	51

Item 1A.		Risk Factors	51

Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds	51

Item 3.		Defaults Upon Senior Securities	51

Item 4.		Not Applicable

Item 5.		Not Applicable

Item 6.		Exhibits	52

Signatures			54

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

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Item 1. FINANCIAL STATEMENTS

PENNSYLVANIA REAL ESTATE INVESTMENT TRUST

CONSOLIDATED BALANCE SHEETS

(Unaudited)

	June 30, 2021			December 31, 2020
(in thousands, except per share amounts)
ASSETS:
INVESTMENTS IN REAL ESTATE, at cost:
Operating properties	$	3,171,551		$	3,168,536
Construction in progress		43,571			46,285
Land held for development		5,516			5,516
Total investments in real estate		3,220,638			3,220,337
Accumulated depreciation		(1,361,137	)		(1,308,427	)
Net investments in real estate		1,859,501			1,911,910
INVESTMENTS IN PARTNERSHIPS, at equity:		23,576			27,066
OTHER ASSETS:
Cash and cash equivalents		38,794			43,309
Tenant and other receivables		37,846			54,532
Intangible assets (net of accumulated amortization of $19,896 and $19,187 at June 30, 2021 and December 31, 2020, respectively)		10,683			11,392
Deferred costs and other assets, net		124,732			127,593
Assets held for sale		4,925			1,384
Total assets	$	2,100,057		$	2,177,186
LIABILITIES:
Mortgage loans payable, net	$	861,899		$	884,503
Term Loans, net		934,588			908,473
Revolving Facilities		54,830			54,830
Tenants’ deposits and deferred rent		9,776			8,899
Distributions in excess of partnership investments		72,390			76,586
Fair value of derivative instruments		16,227			23,292
Accrued expenses and other liabilities		85,632			93,663
Total liabilities		2,035,342			2,050,246
COMMITMENTS AND CONTINGENCIES (Note 8)
EQUITY:
Series B Preferred Shares, $.01 par value per share; 25,000 shares authorized; 3,450 shares issued and outstanding; liquidation preference of $92,610 and $89,430 at June 30, 2021 and December 31, 2020, respectively		35			35
Series C Preferred Shares, $.01 par value per share; 25,000 shares authorized; 6,900 shares issued and outstanding; liquidation preference of $184,920 and $178,710 at June 30, 2021 and December 31, 2020, respectively		69			69
Series D Preferred Shares, $.01 par value per share; 25,000 shares authorized; 5,000 shares issued and outstanding; liquidation preference of $133,594 and $129,297 at June 30, 2021 and December 31, 2020, respectively		50			50
Shares of beneficial interest, $1.00 par value per share; 200,000 shares authorized; 79,260 and 79,537 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively		79,260			79,537
Capital contributed in excess of par		1,773,877			1,771,777
Accumulated other comprehensive loss		(15,475	)		(20,620	)
Distributions in excess of net income		(1,766,981	)		(1,699,638	)
Total equity – Pennsylvania Real Estate Investment Trust		70,835			131,210
Noncontrolling interest		(6,120	)		(4,270	)
Total equity		64,715			126,940
Total liabilities and equity	$	2,100,057		$	2,177,186

See accompanying notes to the unaudited consolidated financial statements.

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PENNSYLVANIA REAL ESTATE INVESTMENT TRUST

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
(in thousands of dollars)	2021			2020			2021			2020
REVENUE:
Real estate revenue:
Lease revenue	$	68,112		$	52,119		$	128,020		$	119,840
Expense reimbursements		3,887			2,976			7,786			7,280
Other real estate revenue		1,957			1,543			3,428			3,467
Total real estate revenue		73,956			56,638			139,234			130,587
Other income		162			131			288			424
Total revenue		74,118			56,769			139,522			131,011
EXPENSES:
Operating expenses:
Property operating expenses:
CAM and real estate taxes		(25,661	)		(25,213	)		(53,492	)		(52,730	)
Utilities		(2,860	)		(2,519	)		(5,824	)		(5,442	)
Other property operating expenses		(2,244	)		(1,775	)		(4,608	)		(3,872	)
Total property operating expenses		(30,765	)		(29,507	)		(63,924	)		(62,044	)
Depreciation and amortization		(29,686	)		(30,908	)		(59,525	)		(61,177	)
General and administrative expenses		(13,535	)		(10,569	)		(25,366	)		(21,264	)
Provision for employee separation expenses		(149	)		(1,040	)		(240	)		(1,113	)
Insurance recoveries, net		670			586			670			586
Project costs and other expenses		(77	)		(66	)		(179	)		(161	)
Total operating expenses		(73,542	)		(71,504	)		(148,564	)		(145,173	)
Interest expense, net		(31,978	)		(17,182	)		(62,709	)		(34,040	)
Gain on debt extinguishment, net		4,587			—			4,587			—
Impairment of assets		(1,302	)		—			(1,302	)		—
Reorganization expenses		(69	)		—			(267	)		—
Total expenses		(102,304	)		(88,686	)		(208,255	)		(179,213	)
Loss before equity in income (loss) of partnerships, gain on sales of real estate by equity method investee, (loss) gain on sales of real estate, net, and loss on sales of interests in non operating real estate		(28,186	)		(31,917	)		(68,733	)		(48,202	)
Equity in income (loss) of partnerships		2,433			(358	)		(1,000	)		461
Gain on sales of real estate by equity method investee		1,347			—			1,347			—
(Loss) gain on sales of real estate, net		(974	)		9,300			(974	)		11,263
Loss on sales of interests in non operating real estate		—			(144	)		—			(190	)
Net loss		(25,380	)		(23,119	)		(69,360	)		(36,668	)
Less: net loss attributable to noncontrolling interest		783			746			2,017			1,262
Net loss attributable to PREIT		(24,597	)		(22,373	)		(67,343	)		(35,406	)
Less: cumulative preferred share dividends		(6,844	)		(6,844	)		(13,688	)		(13,688	)
Net loss attributable to PREIT common shareholders	$	(31,441	)	$	(29,217	)	$	(81,031	)	$	(49,094	)

See accompanying notes to the unaudited consolidated financial statements.

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PENNSYLVANIA REAL ESTATE INVESTMENT TRUST

CONSOLIDATED STATEMENTS OF OPERATIONS (CONTINUED)

(Unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
(in thousands, except per share amounts)	2021			2020			2021			2020
Net loss	$	(25,380	)	$	(23,119	)	$	(69,360	)	$	(36,668	)
Noncontrolling interest		783			746			2,017			1,262
Cumulative preferred share dividends		(6,844	)		(6,844	)		(13,688	)		(13,688	)
Dividends on unvested restricted shares		—			(13	)		—			(363	)
Net loss used to calculate loss per share—basic and diluted	$	(31,441	)	$	(29,230	)	$	(81,031	)	$	(49,457	)
Basic and diluted loss per share:	$	(0.40	)	$	(0.38	)	$	(1.04	)	$	(0.64	)

(in thousands of shares)
Weighted average shares outstanding—basic		78,144			77,269			77,896			77,021
Effect of common share equivalents⁽¹⁾		—			—			—			—
Weighted average shares outstanding—diluted		78,144			77,269			77,896			77,021

⁽¹⁾	The Company had net losses used to calculate earnings per share for the three and six months ended June 30, 2021 and 2020. Therefore, the effects of common share equivalents are excluded from the calculation of diluted loss per share for these periods because they would be antidilutive.

See accompanying notes to the unaudited consolidated financial statements.

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PENNSYLVANIA REAL ESTATE INVESTMENT TRUST

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(Unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
(in thousands of dollars)	2021			2020			2021			2020
Comprehensive loss:
Net loss	$	(25,380	)	$	(23,119	)	$	(69,360	)	$	(36,668	)
Unrealized gain (loss) on derivatives		2,668			(52	)		5,269			(19,803	)
Amortization of settled swaps		2			65			5			70
Total comprehensive loss		(22,710	)		(23,106	)		(64,086	)		(56,401	)
Less: comprehensive loss attributable to noncontrolling interest		718			1,241			1,888			2,263
Comprehensive loss attributable to PREIT	$	(21,992	)	$	(21,865	)	$	(62,198	)	$	(54,138	)

See accompanying notes to the unaudited consolidated financial statements.

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PENNSYLVANIA REAL ESTATE INVESTMENT TRUST

CONSOLIDATED STATEMENTS OF EQUITY

Three and Six Months Ended

June 30, 2021 and 2020

(Unaudited)

				PREIT Shareholders
				Preferred Shares $.01 par						Shares of Beneficial			Capital Contributed			Accumulated Other			Distributions			Non-
(in thousands of dollars, except per share amounts)	Total Equity			Series B		Series C		Series D		Interest, $1.00 Par			in Excess of Par			Comprehensive Loss			in Excess of Net Income			controlling interest
Balance January 1, 2021	$	126,940		$	35	$	69	$	50	$	79,537		$	1,771,777		$	(20,620	)	$	(1,699,638	)	$	(4,270	)
Net loss		(43,980	)		—		—		—		—			—			—			(42,746	)		(1,234	)
Other comprehensive income		2,604			—		—		—		—			—			2,540			—			64
Shares issued under employee compensation plan, net of shares retired		(647	)		—		—		—		(277	)		(370	)		—			—			—
Amortization of deferred compensation		1,321			—		—		—		—			1,321			—			—			—
Balance March 31, 2021	$	86,238		$	35	$	69	$	50	$	79,260		$	1,772,728		$	(18,080	)	$	(1,742,384	)	$	(5,440	)
Net loss		(25,380	)		—		—		—		—			—			—			(24,597	)		(783	)
Other comprehensive income		2,670			—		—		—		—			—			2,605			—			65
Amortization of deferred compensation		1,149			—		—		—					1,149			—			—			—
Other changes in noncontrolling interest, net		38			—		—		—		—			—			—			—			38
Balance June 30, 2021	$	64,715		$	35	$	69	$	50	$	79,260		$	1,773,877		$	(15,475	)	$	(1,766,981	)	$	(6,120	)

				PREIT Shareholders
				Preferred Shares $.01 par						Shares of Beneficial		Capital Contributed			Accumulated Other			Distributions			Non-
(in thousands of dollars, except per share amounts)	Total Equity			Series B		Series C		Series D		Interest, $1.00 Par		in Excess of Par			Comprehensive Loss			in Excess of Net Income			controlling interest
Balance January 1, 2020	$	427,425		$	35	$	69	$	50	$	77,550	$	1,766,883		$	(12,556	)	$	(1,408,352	)	$	3,746
Net loss		(13,549	)		—		—		—		—		—			—			(13,033	)		(516	)
Other comprehensive loss		(19,746	)		—		—		—		—		—			(19,240	)		—			(506	)
Shares issued under employee compensation plans, net of shares retired		(42	)		—		—		—		1,290		(1,332	)		—			—			—
Amortization of deferred compensation		1,624			—		—		—		—		1,624			—			—			—
Dividends paid to common shareholders ($0.21 per share)		(16,492	)		—		—		—		—		—			—			(16,492	)		—
Dividends paid to Series B preferred shareholders ($0.4609 per share)		(1,591	)		—		—		—		—		—			—			(1,591	)		—
Dividends paid to Series C preferred shareholders ($0.45 per share)		(3,105	)		—		—		—		—		—			—			(3,105	)		—
Dividends paid to Series D preferred shareholders ($0.4297 per share)		(2,148	)		—		—		—		—		—			—			(2,148	)		—
Noncontrolling interests:
Distributions paid to Operating Partnership unit holders ($0.21 per unit)		(411	)		—		—		—		—		—			—			—			(411	)
Balance March 31, 2020	$	371,965		$	35	$	69	$	50	$	78,840	$	1,767,175		$	(31,796	)	$	(1,444,721	)	$	2,313
Net loss		(23,119	)		—		—		—		—		—			—			(22,374	)		(745	)
Other comprehensive income (loss)		12			—		—		—		—		—			508			—			(496	)
Shares issued under employee compensation plans, net of shares retired		114			—		—		—		620		(506	)		—			—			—
Amortization of deferred compensation		1,670			—		—		—		—		1,670			—			—			—
Dividends paid to common shareholders ($0.02 per share)		(1,589	)		—		—		—		—		—			—			(1,589	)		—
Dividends paid to Series B preferred shareholders ($0.4609 per share)		(1,591	)		—		—		—		—		—			—			(1,591	)		—
Dividends paid to Series C preferred shareholders ($0.45 per share)		(3,105	)		—		—		—		—		—			—			(3,105	)		—
Dividends paid to Series D preferred shareholders ($0.4297 per share)		(2,148	)		—		—		—		—		—			—			(2,148	)		—
Noncontrolling interests:
Distributions paid to Operating Partnership unit holders ($0.02 per unit)		(40	)		—		—		—		—		—			—			—			(40	)
Other changes in noncontrolling interest, net		—			—		—		—		—		—			—			—			—
Balance June 30, 2020	$	342,169		$	35	$	69	$	50	$	79,460	$	1,768,339		$	(31,288	)	$	(1,475,528	)	$	1,032

See accompanying notes to the unaudited consolidated financial statements.

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PENNSYLVANIA REAL ESTATE INVESTMENT TRUST

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Six Months Ended June 30,
(in thousands of dollars)	2021			2020
Cash flows from operating activities:
Net loss	$	(69,360	)	$	(36,668	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation		56,048			57,072
Amortization		4,475			6,084
Straight-line rent adjustments		74			(1,364	)
Amortization of deferred compensation		2,469			3,294
Gain on debt extinguishment, net		(4,587	)		—
Paid-in-kind interest		23,406			—
Gain on hedge ineffectiveness		(1,797	)		—
Loss (gain) on sales of interests in real estate and non-operating real estate, net		974			(11,073	)
Equity in loss (income) of partnerships		1,000			(461	)
Gain on sales of real estate by equity method investee		(1,347	)		—
Cash distributions from partnerships		—			845
Impairment of real estate assets		1,302			—
Change in assets and liabilities:
Net change in other assets		20,119			(18,859	)
Net change in other liabilities		1,904			(2,596	)
Net cash provided by (used in) operating activities		34,680			(3,726	)
Cash flows from investing activities:
Cash proceeds from sales of real estate		828			21,922
Investments in real estate improvements		(9,332	)		(15,941	)
Additions to construction in progress		(5,320	)		(29,670	)
Investments in partnerships		(557	)		(18,060	)
Capitalized leasing costs		(25	)		(150	)
Additions to leasehold improvements and corporate fixed assets		(30	)		(4,735	)
Net cash used in investing activities		(14,436	)		(46,634	)
Cash flows from financing activities:
Net borrowings under the Restructured Revolver		—			120,000
Net repayments to term loans		(826	)		(6,000	)
Repayments of finance lease liabilities		(341	)		(321	)
Proceeds from notes payable		—			4,536
Repayments of mortgage loans		(135,155	)		—
Proceeds from mortgage loans		127,685			—
Principal installments on mortgage loans		(14,689	)		(6,410	)
Payment of deferred financing costs		(902	)		(35	)
Value of shares of beneficial interest issued		—			538
Dividends paid to common shareholders		—			(18,081	)
Dividends paid to preferred shareholders		—			(13,688	)
Distributions paid to Operating Partnership unit holders and noncontrolling interest		—			(451	)
Value of shares retired under equity incentive plans, net of shares issued		(647	)		(466	)
Net cash (used in) provided by financing activities		(24,875	)		79,622
Net change in cash, cash equivalents, and restricted cash		(4,631	)		29,262
Cash, cash equivalents, and restricted cash, beginning of period		51,231			19,629
Cash, cash equivalents, and restricted cash, end of period	$	46,600		$	48,891

See accompanying notes to the unaudited consolidated financial statements.

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PENNSYLVANIA REAL ESTATE INVESTMENT TRUST

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2021

1. BASIS OF PRESENTATION

Nature of Operations

Pennsylvania Real Estate Investment Trust (“PREIT” or the “Company”) prepared the accompanying unaudited consolidated financial statements pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted pursuant to such rules and regulations, although we believe that the included disclosures are adequate to make the information presented not misleading. Our unaudited consolidated financial statements should be read in conjunction with the audited financial statements and the notes thereto included in PREIT’s Annual Report on Form 10-K for the year ended December 31, 2020. In our opinion, all adjustments, consisting only of normal recurring adjustments, necessary to present fairly our consolidated financial position, the consolidated results of our operations, consolidated statements of comprehensive loss, consolidated statements of equity and our consolidated statements of cash flows are included. The results of operations for the interim periods presented are not necessarily indicative of the results for the full year.

PREIT, a Pennsylvania business trust founded in 1960 and one of the first equity real estate investment trusts (“REITs”) in the United States, has a primary investment focus on retail shopping malls located in the eastern half of the United States, primarily in the Mid-Atlantic region. As of June 30, 2021, our portfolio consists of a total of 26 properties operating in nine states, including 20 shopping malls, five other retail properties and one development property. The property in our portfolio that is classified as under development does not currently have any activity occurring.

We hold our interest in our portfolio of properties through our operating partnership, PREIT Associates, L.P. (“PREIT Associates” or the “Operating Partnership”). We are the sole general partner of the Operating Partnership and, as of June 30, 2021, we held a 97.6% controlling interest in the Operating Partnership and consolidated it for reporting purposes. The presentation of consolidated financial statements does not itself imply that the assets of any consolidated entity (including any special-purpose entity formed for a particular project) are available to pay the liabilities of any other consolidated entity, or that the liabilities of any consolidated entity (including any special-purpose entity formed for a particular project) are obligations of any other consolidated entity.

Pursuant to the terms of the partnership agreement of the Operating Partnership, each of the limited partners has the right to redeem such partner’s units of limited partnership interest in the Operating Partnership (“OP Units”) for cash or, at our election, we may acquire such OP Units in exchange for our common shares on a one-for-one basis, in some cases beginning one year following the respective issue date of the OP Units and in other cases immediately. If all of the outstanding OP Units held by limited partners had been redeemed for cash as of June 30, 2021, the total amount that would have been distributed would have been $4.9 million, which is calculated using our June 30, 2021 closing share price on the New York Stock Exchange (the “NYSE”) of $2.49 multiplied by the number of outstanding OP Units held by limited partners, which was 1,975,927 as of June 30, 2021. The current terms of our credit agreements prohibit the Company from acquiring whole share OP Units for cash and, as such, any whole share OP Units presented for redemption will be redeemed for shares. Partial share OP Unit redemptions will be redeemed for cash. Subsequent to the quarter ended June 30, 2021, on July 20, 2021 we issued 945,417 common shares in exchange for a like number of OP Units and have 1,030,510 remaining outstanding OP Units.

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

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

Financial Restructuring

On October 7, 2020, the Company and certain of the Company’s wholly owned direct and indirect subsidiaries (collectively, the “Company Parties”) entered into a Restructuring Support Agreement (the “RSA”), which contemplated agreed-upon terms for a financial restructuring of the then-existing debt and certain other obligations of the Company Parties (collectively with the following events, the “Financial Restructuring”). The RSA was amended on October 16, 2020, and again on October 23, 2020, to, among other things, extend the date by which the Company Parties were required to commence the solicitation of votes on their joint prepackaged chapter 11 plan of reorganization (the “Plan”) and, thereafter, the voluntary chapter 11 cases. On November 1, 2020, the Company and the other Company Parties under the RSA (the “Debtors”) filed their respective voluntary petitions under chapter 11 of title 11 of the United States Code, 11 U.S.C. §§ 101-1532 (the

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“Bankruptcy Code”) in the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”), commencing the chapter 11 cases to confirm and consummate the Plan in order to effectuate the Debtors’ financial restructuring. The Debtors’ chapter 11 cases were jointly administered for procedural convenience under the caption In re Pennsylvania Real Estate Investment Trust, et al., Case No. 20-12737 (KBO). Under the Plan, the Debtors would be recapitalized and their debt maturities extended. The Debtors continued to operate their businesses as debtors in possession under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court. On November 30, 2020, the Bankruptcy Court entered an order (the “Confirmation Order”), confirming the Joint Prepackaged Chapter 11 Plan of Reorganization of Pennsylvania Real Estate Investment Trust and Certain of Its Direct and Indirect Subsidiaries (with Additional Technical Modifications As of November 20, 2020) (the “Confirmed Plan”). On December 10, 2020 (the “Effective Date”), each condition precedent to consummation of the Confirmed Plan, enumerated in Section 8.2 thereof, was satisfied or waived in accordance with the Confirmed Plan and the Confirmation Order, and therefore the Effective Date occurred and the Debtors emerged from bankruptcy. On the Effective Date, the Company entered into the credit agreements, which are described in Note 4. The final decree closing the bankruptcy case was entered by the Bankruptcy Court on March 11, 2021.

COVID-19 Related Risks and Uncertainties

The COVID-19 global pandemic that began in early 2020 has adversely impacted and continues to impact our business, financial condition, liquidity and operating results, as well as our tenants’ businesses. The prolonged and increased spread of COVID-19 has also led to unprecedented global economic disruption and volatility in financial markets. Some of our tenants’ financial health and business viability have been adversely impacted and their creditworthiness has deteriorated. We anticipate that our future business, financial condition, liquidity and results of operations, including in 2021 and potentially in future periods, will continue to be materially impacted by the COVID-19 pandemic. Significant uncertainty remains with regard to the duration and impact of the COVID-19 pandemic and its resulting impact on the economy and day-to-day life and business operations. In particular, the duration and impact of COVID-19 will depend on a variety of factors as conditions continue to fluctuate around the country, with vaccine administration increasing during the first half of the second quarter of 2021 and subsequently decreasing significantly, and spikes in infections (including the spread of variants) being experienced in certain regions in which our properties are located, which have resulted in a number of jurisdictions that previously relaxed restrictions implementing new or renewed restrictions. Given these factors, so long as the lingering effects of COVID-19 remain, the virus may continue to impact us or our tenants, or our ability or the ability of our tenants to resume more normal operations.

COVID-19 closures of our properties began on March 12, 2020 and continued through the reopening of our last property on July 3, 2020. These closures impacted most of our properties for the full second quarter of 2020 with traffic and tenant reopenings increasing through the third and fourth quarters of 2020. New or renewed restrictions in the jurisdictions where our properties are located may be implemented in response to evolving conditions and overall uncertainty about the timing and widespread availability, acceptance, and efficacy of vaccines, including in response to new, and potentially more aggressive, variants. As such, as the pandemic continues and potentially intensifies or we experience resurgences, it is possible that additional closures will occur. During the mall closure period in the second quarter of 2020, the Company furloughed a significant portion of its property and corporate employee base and later made permanent headcount reductions, which contributed to decreased personnel related general and administrative expenses in the third and fourth quarters of 2020.

All of our properties have remained open since July 3, 2020 and are employing safety and sanitation measures designed to address the risks posed by COVID-19. Despite the increased vaccination rates in the country, some of our tenants are still operating at reduced capacity. The significance of COVID-19 on our business, however, will continue to depend on, among other things, the extent and duration of the pandemic, the severity of the disease and the number of people infected with the virus, and certain variants thereof, the plateau in vaccine administration during the second quarter of 2021 and increased vaccine resistance in certain regions in which our properties are located, further effects on the economy of the pandemic and of the measures taken by governmental authorities and other third parties restricting daily activities and the length of time that such measures remain in place or are renewed, implementation of governmental programs to assist businesses and consumers impacted by the COVID-19 pandemic, and the effect of any changes to current restrictions or recommended protocols, all of which could vary by geographic region in which our properties are located. In the second quarter of 2021, we experienced continued uncertainty as to whether government authorities will maintain the relaxation of current restrictions on businesses in the regions in which our properties are located, and whether government authorities will issue recommendations or impose requirements on landlords like us to further enhance health and safety protocols, or whether we will voluntarily adopt any of these requirements ourselves, which could result in increased operating costs and demands on our property management teams to ensure compliance with any of these requirements.

Fair Value

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

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

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

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

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

Impairment of Assets

Real estate investments and related intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the property might not be recoverable, which is referred to as a “triggering event.” The ongoing impact of COVID-19 on the economy and market conditions, together with the resulting closures of our properties and the delayed and/or limited reopening of some tenants was deemed to be a triggering event as of June 30, 2020, September 30, 2020 and December 31, 2020, which led to impairment reviews and assessment of the undiscounted future cash flows for each of the respective quarters of 2020. During the six months ended June 30, 2021, certain of our properties had triggering events due to various indicators of impairment, but passed our undiscounted future cash flow assessment except for Valley View Center. Valley View Center is a retail property we own and is located adjacent to Valley View Mall. As a result of a reduced holding period assumption, we recorded an impairment on Valley View Center, which was classified as held for sale as of June 30, 2021. In connection with our review of our long-lived assets for impairment, we utilize qualitative and quantitative factors in order to estimate fair value. The significant qualitative factors that we use include age and condition of the property, market conditions in the property’s trade area, competition with other shopping centers within the property’s trade area and the creditworthiness and performance of the property’s tenants. The significant quantitative factors that we use include historical and forecasted financial and operating information relating to the property, such as net operating income, estimated holding periods, occupancy statistics, vacancy projections and tenants’ sales levels.

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

The determination of undiscounted cash flows requires significant estimates by our management, including the expected course of action at the balance sheet date that would lead to such cash flows. Subsequent changes in estimated undiscounted cash flows arising from changes in the anticipated action to be taken with respect to the property could affect the determination of whether an impairment exists, and the effects of such changes could materially affect our net income. If the estimated undiscounted cash flows are less than the carrying value of the property, the carrying value is written down to its fair value. We intend to hold and operate our properties long-term, which reduces the likelihood that our carrying value is not recoverable. A shortened holding period would increase the likelihood that the carrying value is not recoverable.

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

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

During the three months ended June 30, 2021 we recorded an impairment loss of $1.3 million in connection with our classification of Valley View Center as held for sale (see Note 2).

Share-Based Compensation

On March 31, 2021, the Compensation Committee approved the 2021-2023 Equity Award Program design (the “Program”) under which long term incentive awards may be made to certain key employees. Having approved the Program, the Company made long term incentive plan awards in the form of performance-based restricted share units (“PSUs”) and time-based restricted share units (“RSUs”). The grants of PSUs and RSUs were made pursuant to our Amended and Restated 2018 Equity Incentive Plan (as amended, the “2018 Equity Incentive Plan”), as amended by the Plan Amendment (defined below).

On March 31, 2021, the Board approved the first amendment to the 2018 Equity Incentive Plan to permit the grant of time-based RSUs (“Plan Amendment”), and as a result the Plan allows for settlement of RSUs or PSUs in cash or shares, as determined by the Compensation Committee. On March 31, 2021, we granted 1,406,123 RSUs and 1,523,432 PSUs to its employees. In June 2021, the Company granted an additional 11,290 RSUs and 21,189 PSUs.

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Under the Program, the number of common shares to be issued with respect to the PSUs, if any, depends on our achievement of certain specified operating performance measures and a modification based on total shareholder return (“TSR”) for the three-year period beginning January 1, 2021 and ending on the earlier of December 31, 2023 or the date of a change in control of the Company (the “Measurement Period”).

The preliminary number of common shares to be issued by the Company with respect to the PSUs awarded is based on a multiple determined by achievement of certain specified operating performance measures during the Measurement Period. These performance measures, the three-year core mall total occupancy and the three-year corporate debt yield, are each weighted 50%. The Committee approved minimum, target and maximum performance levels for both measures. For all participants, the minimum performance level will have a 0.5 multiplier, the target performance level will have a 1.0 multiplier and the maximum performance level will have a 2.0 multiplier. The preliminary number of common shares to be issued as determined under the operating performance goals will be adjusted, upwards or downwards, depending on the Company’s TSR performance over the Measurement Period relative to the TSR performance of other REITs comprising a leading index of REITs. Dividends, if any, on the Company’s common shares are deemed to be paid with respect to PSUs and credited to the PSU .

With respect to the portion of the long-term incentive awards made in the form of RSUs, the RSUs generally will vest in three equal annual installments for all grants except director grants and two equal installments for the directors commencing on March 31, 2022, subject to continued employment. During the period that the RSUs have not vested, the holder will have no rights as a shareholder with respect to the RSUs; however, dividends, if any, on the Company’s common shares are deemed to be paid with respect to RSUs and credited to the RSU.

On May 12, 2021, in connection with the entry into an Amended and Restated Employment Agreement, the Committee awarded a long term incentive award of cash-settled, time-based RSUs pursuant to a Restricted Share Unit and Outperformance Unit Award Agreement (the “Award Agreement”) to its Chief Executive Officer. The award consisted of 800,323 RSUs. The RSUs will vest in three equal installments commencing on March 31, 2022, subject to continued employment (and to accelerated vesting upon the occurrence of certain termination events). Vested RSUs will be settled in cash equal to the fair market value of a common share on the applicable vesting date multiplied by the number of RSUs that vest on that date.

The RSUs also include an “outperformance multiplier” that would entitle the recipient to the dollar value of an additional number of common shares (“Outperformance Units” or “OPUs”) tied to a multiple of the number of RSUs if the Company’s share price achieves certain outperformance goals. Achievement of the share price goals will be measured based on the average of the closing prices of a common share for the 60 days on which common shares were traded prior to and including the last day of a measurement period ending on December 31, 2023 (or upon the occurrence of certain earlier change in control events). If any amounts are earned in respect of the OPUs at the end of the measurement period, the OPUs will be settled in cash based on the fair market value of a common share on the last day of the measurement period. Unless amended, the award must be settled in cash.

On May 28, 2021, the Committee awarded the annual time-based equity compensation grant to the Company’s non-employee trustees. An aggregate of 371,070 RSUs were awarded. The RSUs vest on the one-year anniversary of the grant and will be settled in cash or shares at the discretion of the Committee.

The awards granted as discussed above were determined to be liability-based awards and are remeasured to fair value at each reporting period. The compensation expense recognized in relation to the 2021 grants described above was $0.9 million for the three and six months ended June 30, 2021.

New Accounting Developments

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting for contracts, hedging relationships, and other transactions that reference the London Interbank Offered Rate (“LIBOR”). Companies may generally elect to apply the guidance for periods that include March 12, 2020 through December 31, 2022. In January 2021, the FASB issued ASU 2021-01 to provide additional guidance around Topic 848 primarily as it relates to the ASU’s effect on derivative contracts. The Company is evaluating the anticipated impact of this standard on its condensed consolidated financial statements as well as timing of adoption.

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2. REAL ESTATE ACTIVITIES

Investments in real estate as of June 30, 2021 and December 31, 2020 were comprised of the following:

(in thousands of dollars)	June 30, 2021			December 31, 2020
Buildings, improvements and construction in progress	$	2,760,622		$	2,757,234
Land, including land held for development		460,016			463,103
Total investments in real estate		3,220,638			3,220,337
Accumulated depreciation		(1,361,137	)		(1,308,427	)
Net investments in real estate	$	1,859,501		$	1,911,910

Capitalization of Costs

The following table summarizes our capitalized interest, compensation, including commissions, and real estate taxes for the three and six months ended June 30, 2021 and 2020:

	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands of dollars)	2021		2020		2021		2020
Development/Redevelopment Activities:
Interest ⁽¹⁾	$	17	$	445	$	147	$	1,355
Compensation		25		47		62		391
Real estate taxes		29		226		58		423
Leasing Activities:
Compensation, including commissions ⁽²⁾		27		-		27		164

⁽¹⁾	Includes interest capitalized on investments in partnerships under development.

⁽²⁾	The definition of initial direct costs under ASC 842 includes only those incremental costs of a lease that would not have been incurred if the lease had not been obtained. Commissions paid for successful leasing transactions continue to be capitalized.

Impairment of Assets

During the three months ended June 30, 2021, we entered into a purchase and sale agreement to sell Valley View Center. In connection with this transaction, we recorded an impairment loss of $1.3 million due to excess carrying value over the sale price. The asset was classified as held for sale as we concluded that we will likely complete the sale transaction within one year. These assets are included in assets held for sale in the consolidated balance sheet and the impairment loss is included in impairment of assets in the consolidated statement of operations for the three and six months ended June 30, 2021.

Dispositions

Moorestown Mall Parcel Sale

In May 2021, the Company closed on the sale of a parcel of property at Moorestown Mall for $10.1 million. In connection with the sale, the Company paid a $9.0 million lease termination fee for a portion of the property that was under a lease agreement. The Company recorded a loss on sale of real estate of $1.0 million in connection with the sale. The Company used the net proceeds of $0.8 million from the sale to pay down its First Lien Term Loan, which is described in more detail in Note 4.

Valley View Mall Derecognition

In August 2020, a court order assigned a receiver to operate Valley View Mall in La Crosse, Wisconsin on behalf of the lender of the mortgage loan secured by the property. Although we have not yet conveyed the property because foreclosure proceedings are ongoing, we no longer control or operate the property as a result of a court order assigning the receiver. In September 2020, a court order was issued to conduct a foreclosure sale of the property and as a result we have no further operating liabilities from the property. As a result of our loss of control of the property, we derecognized the property and recorded an offsetting contract asset and recognized a gain on derecognition of property of $8.1 million in the consolidated statement of operations for the year ended December 31, 2020. The contract asset is included in deferred costs and other assets, net in the consolidated balance sheets as of June 30, 2021 and December 31, 2020. The mortgage principal balance was $27.2 million at June 30, 2021 and December 31, 2020, which we will continue to recognize until the foreclosure process is completed. The derecognition of Valley View Mall and its related assets was a non-cash conversion of assets, which had no impact on the Company’s cash flows.

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3. INVESTMENTS IN PARTNERSHIPS

The following table presents summarized financial information of the equity investments in our unconsolidated partnerships as of June 30, 2021 and December 31, 2020:

(in thousands of dollars)	June 30, 2021			December 31, 2020
ASSETS:
Investments in real estate, at cost:
Operating properties	$	816,963		$	824,328
Construction in progress		30,892			20,632
Total investments in real estate		847,855			844,960
Accumulated depreciation		(235,884	)		(224,641	)
Net investments in real estate		611,971			620,319
Cash and cash equivalents		53,056			28,060
Deferred costs and other assets, net		153,700			161,465
Total assets		818,727			809,844
LIABILITIES AND PARTNERS’ INVESTMENT:
Mortgage loans payable, net		497,427			491,119
FDP Term Loan, net		194,602			201,000
Partnership Loan		108,800			100,000
Other liabilities		130,705			132,715
Total liabilities		931,534			924,834
Net investment		(112,807	)		(114,990	)
Partners’ share		(57,541	)		(59,080	)
PREIT’s share		(55,266	)		(55,910	)
Excess investment ⁽¹⁾		6,452			6,390
Net investments and advances	$	(48,814	)	$	(49,520	)
Investment in partnerships, at equity	$	23,576		$	27,066
Distributions in excess of partnership investments		(72,390	)		(76,586	)
Net investments and advances	$	(48,814	)	$	(49,520	)

_____________________

⁽¹⁾

Excess investment represents the unamortized difference between our investment and our share of the equity in the underlying net investment in the unconsolidated partnerships. The excess investment is amortized over the life of the properties, and the amortization is included in “Equity in income (loss) of partnerships.”

We record distributions from our equity investments using the nature of the distribution approach.

The following table summarizes our share of equity in income (loss) of partnerships for the three and six months ended June 30, 2021 and 2020:

	Three Months Ended June 30,						Six Months Ended June 30,
(in thousands of dollars)	2021			2020			2021			2020
Real estate revenue	$	33,137		$	24,086		$	58,037		$	51,286
Expenses:
Property operating and other expenses		(10,142	)		(10,731	)		(23,881	)		(21,960	)
Interest expense ⁽¹⁾		(11,091	)		(5,610	)		(21,795	)		(11,970	)
Depreciation and amortization		(6,406	)		(7,778	)		(13,336	)		(15,395	)
Total expenses		(27,639	)		(24,119	)		(59,012	)		(49,325	)
Net income (loss)		5,498			(33	)		(975	)		1,961
Less: Partners’ share		(3,005	)		(121	)		91			(1,299	)
PREIT’s share		2,493			(154	)		(884	)		662
Amortization of excess investment		(60	)		(204	)		(116	)		(201	)
Equity in income (loss) of partnerships	$	2,433		$	(358	)	$	(1,000	)	$	461

⁽¹⁾ Net of capitalized interest expense of $143 and $836 for the three months ended June 30, 2021 and 2020, respectively, and $246 and $1,927 for the six months ended June 30, 2021 and 2020, respectively.

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Fashion District Philadelphia

Sale of 801 Market Street, Unit 202

In May 2021, PM Gallery LP, a Delaware limited partnership and joint venture entity owned indirectly by us and The Macerich Company (“Macerich”), sold, through a subsidiary, a portion of an asset at Fashion District Philadelphia (“FDP”) for $5.3 million. The sale resulted in a gain of $2.6 million for the joint venture, our share of which is $1.3 million at a 50% share. The gain is recorded in gain on sales of real estate by equity method investee in our consolidated statements of operations for the three and six months ended June 30, 2021.

FDP Loan Agreement

PM Gallery LP previously entered into a $250.0 million term loan in January 2018 (as amended in July 2019 to increase the total maximum potential borrowings to $350.0 million) to fund the ongoing redevelopment of Fashion District Philadelphia and to repay capital contributions to the venture previously made by the partners. A total of $51.0 million was drawn during the third quarter of 2019 and we received aggregate distributions of $25.0 million as our share of the draws. On December 10, 2020, PM Gallery LP, together with certain other subsidiaries owned indirectly by us and Macerich (including the fee and leasehold owners of the properties that are part of the Fashion District Philadelphia project), entered into an Amended and Restated Term Loan Agreement (the “FDP Loan Agreement”). In connection with the execution of the FDP Loan Agreement, a $100.0 million principal payment was made (and funded indirectly by Macerich, the “Partnership Loan”) to pay down the existing loan, reducing the outstanding principal under the FDP Loan Agreement from $301.0 million to $201.0 million. The joint venture must repay the Partnership Loan plus 15% accrued interest to Macerich, in its capacity as the lender, prior to the resumption of 50/50 cash distributions to the Company and its joint venture partner.

The FDP Loan Agreement provides for (i) a maturity date of January 22, 2023, with the potential for a one-year extension upon the borrowers’ satisfaction of certain conditions, (ii) an interest rate at the borrowers’ option with respect to each advance of either (A) the Base Rate (defined as the highest of (a) the Prime Rate, (b) the Federal Funds Rate plus 0.50%, and (c) the LIBOR Market Index Rate plus 1.00%) plus 2.50% or (B) LIBOR for the applicable period plus 3.50%, (iii) a full recourse guarantee of 50% of the borrowers’ obligations by PREIT Associates, L.P., on a several basis, (iv) a full recourse guarantee of certain of the borrowers’ obligations by The Macerich Partnership, L.P., up to a maximum of $50.0 million, on a several basis, (v) a pledge of the equity interests of certain indirect subsidiaries of PREIT and Macerich, as well as of PREIT-RUBIN, Inc. and one of its subsidiaries, that have a direct or indirect ownership interest in the borrowers, (vi) a non-recourse carve-out guaranty and a hazardous materials indemnity by each of PREIT Associates, L.P. and The Macerich Partnership, L.P., and (vii) mortgages of the borrowers’ fee and leasehold interests in the properties that are part of the Fashion District Philadelphia project and certain other properties. The FDP Loan Agreement contains certain covenants typical for loans of its type.

Joint Venture

In connection with the execution of the FDP Loan Agreement, the governing structure of PM Gallery LP was modified such that, effective as of January 1, 2021, Macerich is responsible for the entity’s operations and, subject to limited exceptions, controls major decisions. The Company considered the changes to the governing structure of PM Gallery LP and determined the investment qualifies as a variable interest entity and will continue to be accounted for under the equity method of accounting. Our maximum exposure to losses is limited to the extent of our investment, which is a 50% ownership.

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Mortgage Loan Activity

Pavilion at Market East

On May 25, 2021, the Company’s unconsolidated subsidiary completed a refinance of its mortgage loan securing its property at Pavilion at Market East. The $7.6 million mortgage has a 2-year term, maturing in May 2023. The loan has interest only payments until May 2022 at a variable rate of the greater of (a) one month LIBOR plus 3.5% or (b) 4.0%.

The Court at Oxford Valley

On June 25, 2021, the Company’s unconsolidated subsidiary completed a refinance of its mortgage loan securing its property at the Court at Oxford Valley. The $55.0 million mortgage has a 10-year term, maturing on July 1, 2031. The loan has interest only payments until August 2024 at a fixed interest rate of 3.2%.

Red Rose Commons

On June 30, 2021, the Company’s unconsolidated subsidiary completed a refinance of its mortgage loan securing its property at Red Rose Commons. The $34.0 million mortgage has a 10-year term, maturing on July 6, 2031 at a fixed interest rate of 3.3%.

4. FINANCING ACTIVITY

Credit Agreements

On December 10, 2020 we entered into two secured credit agreements (collectively, as amended, the “Credit Agreements”): (a) an Amended and Restated First Lien Credit Agreement (the “First Lien Credit Agreement”) with Wells Fargo Bank, National Association (“Wells Fargo Bank”) and the other financial institutions signatory thereto and their assignees, for secured loan facilities consisting of: (i) a secured first lien revolving credit facility allowing for borrowings up to $130.0 million, including a sub-facility for letters of credit to be issued thereunder in an aggregate stated amount of up to $10.0 million (collectively, the “First Lien Revolving Facility”), and (ii) a $384.5 million secured first lien term loan facility (the “First Lien Term Loan Facility”), and (b) a Second Lien Credit Agreement (the “Second Lien Credit Agreement”), as amended February 8, 2021 with Wells Fargo Bank and the other financial institutions signatory thereto and their assignees for a $535.2 million secured second lien term loan facility (the “Second Lien Term Loan Facility”). The Credit Agreements mature in December 2022. The First Lien Term Loan Facility and the Second Lien Term Loan Facility are collectively referred to as the “Term Loans.” The Credit Agreements refinanced our previously existing secured term loan under the Credit Agreement dated as of August 11, 2020 (as amended, the “Bridge Credit Agreement”), our Seven-Year Term Loan Agreement entered into on January 8, 2014 (as amended, the “7-Year Term Loan”), and our 2018 Amended and Restated Credit Agreement entered into on May 24, 2018 (as amended, the “2018 Credit Agreement” and collectively with the Bridge Credit Agreement and the 7-Year Term Loan, the “Restructured Credit Agreements”). Upon our entry into the Credit Agreements, the Bridge Credit Agreement, the 7-Year Term Loan and the 2018 Credit Agreement were cancelled.

As of June 30, 2021, we had borrowed $944.7 million under the Term Loans and $54.8 million under the First Lien Revolving Facility. The carrying value of the Term Loans on our consolidated balance sheet as of June 30, 2021 is net of $10.1 million of unamortized debt issuance costs. The maximum amount that was available to us under the First Lien Revolving Facility as of June 30, 2021 was $75.2 million.

On April 13, 2021, we entered into Agency Resignation, Appointment, Acceptance and Waiver Agreements pursuant to which Wells Fargo Bank resigned as Administrative Agent and Wilmington Savings Fund Society, FSB was appointed successor Administrative Agent under the First Lien Credit Agreement, the Second Lien Credit Agreement and, in each case, the related loan documents. There is currently no successor letter of credit issuer under the First Lien Revolving Facility, accordingly, the Company cannot currently access the letters of credit sub-facility.

Interest expense and deferred financing fee amortization related to the Credit Agreements and the Restructured Credit Agreements for the three and six months ended June 30, 2021 and 2020 were as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands of dollars)	2021		2020		2021		2020
Revolving Facilities:
Interest expense	$	554	$	2,375	$	1,103	$	4,858
Deferred financing amortization		299		278		597		552
Term Loans:
Interest expense ⁽¹⁾		20,744		5,793		41,165		11,299
Deferred financing amortization		1,781		196		3,561		387

⁽¹⁾	For the three and six months ended June 30, 2021, $11.9 million and $23.4 million, respectively, in interest under the Second Lien Term Loan Facility was not paid in cash, but capitalized to the principal balance of the loan.

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Our obligations under the Credit Agreements are guaranteed by certain of our subsidiaries. Our obligations under the Credit Agreements and the guaranties are secured by mortgages and deeds of trust on a portfolio of 12 of our subsidiaries’ properties, including nine malls and three additional parcels. The obligations are further secured by a lien on substantially all of our personal property pursuant to collateral agreements and a pledge of substantially all of the equity interests held by us and the guarantors, pursuant to pledge agreements, in each case subject to limited exceptions.

The Credit Agreements each provide for a two-year maturity of December 2022 (the “Maturity Date”), subject to a one-year extension to December 2023 at the borrowers’ option, subject to (i) minimum liquidity of $35.0 million, (ii) a minimum corporate debt yield of 8.0%, (iii) a maximum loan-to-value ratio of 105% for the total first lien and second lien loans and letters of credit and the Borrowing Base Properties as determined by an appraisal and (iv) no default or event of default existing and our representations and warranties being true in all material respects. The loans under the Credit Agreements are repayable in full on the Maturity Date, subject to mandatory prepayment provisions in the event of certain events including asset sales, incurrence of indebtedness, issuances of equity and receipt of casualty insurance proceeds. The terms of our Credit Agreements place restrictions on, among other things, and subject to certain exceptions, our ability to make certain restricted payments (including payments of dividends), make certain types of investments and acquisitions, issue redeemable securities, incur additional indebtedness, incur liens on our assets, enter into agreements with a negative pledge, make certain intercompany transfers, merge, consolidate, or sell our assets or the equity interests in our subsidiaries, amend our organizational documents or material contracts, enter into certain transactions with affiliates, or enter into derivatives contracts. Additionally, if we receive net cash proceeds from certain capital events (including equity issuances), we are required to prepay loans under our Credit Agreements. In addition, the Credit Agreements contain cross-default provisions that trigger an event of default if we fail to make certain payments or otherwise fail to comply with our obligations with respect to certain of our other indebtedness.

First Lien Credit Agreement

Amounts borrowed under the First Lien Credit Agreement may be either Base Rate Loans or LIBOR Loans. Base Rate Loans bear interest at the highest of (a) the Prime Rate, (b) the Federal Funds Rate plus 0.50% and (c) the LIBOR Market Index Rate plus 1.0%, provided that the Base Rate will not be less than 1.50% per annum, in each case plus (w) for revolving loans, 2.50% per annum, and (x) for term loans, 4.74% per annum. LIBOR Loans bear interest at LIBOR plus (y) for revolving loans, 3.50% per annum, and (z) for term loans, 5.74% per annum, in each case, provided that LIBOR will not be less than 0.50% per annum. Interest is due to be paid in cash on the last day of each applicable interest period (with rolling 30-day interest periods) and on the Maturity Date. We are required to pay certain fees to the administrative agent for the account of the lenders in connection with the First Lien Credit Agreement, including an unused fee for the account of the revolving lenders, which will accrue (i) 0.35% per annum on the daily amount of the unused revolving commitments when that amount is greater than or equal to 50% of the aggregate amount of revolving commitments, and (ii) 0.25% when that amount is less than 50% of the aggregate amount of revolving commitments. Accrued and unpaid unused fees will be payable quarterly in arrears during the term of the First Lien Credit Agreement and on the Revolving Termination Date (or any earlier date of termination of the revolving commitments or reduction of the revolving commitments to zero).

Letters of credit and the proceeds of revolving loans may be used (i) to refinance existing indebtedness under the Bridge Credit Agreement, (ii) for working capital and general corporate purposes (subject to certain exceptions set forth in the First Lien Credit Agreement, including limitations on investments in non-Borrowing Base Properties), and (iii) to fund professional fee payments and other fees and expenses subject to the provisions of the Plan and related confirmation order and for other uses permitted by the provisions of the First Lien Credit Agreement, Plan and confirmation order, in each case consistent with an approved annual business plan. We may terminate or reduce the amount of the revolving commitments at any time and from time to time without penalty or premium, subject to the terms of the First Lien Credit Agreement.

The First Lien Credit Agreement contains, among other restrictions, certain additional affirmative and negative covenants and other terms, many of which substantially align with those in the Second Lien Credit Agreement and are summarized below under “Similar Terms of the Credit Agreements.”

Second Lien Credit Agreement

Amounts borrowed under the Second Lien Credit Agreement may be either Base Rate Loans or LIBOR Loans. Base Rate Loans bear interest at the highest of (a) the Prime Rate, (b) the Federal Funds Rate plus 0.50% and (c) the LIBOR Market Index Rate plus 1.0%, provided that the Base Rate will not be less than 1.50% per annum, in each case plus 7.00% per annum. LIBOR Loans bear interest at LIBOR plus 8.00% per annum, provided that LIBOR will not be less than 0.50% per annum. Interest is due to be paid in kind on the last day of each applicable interest period (with rolling 30-day interest periods) by adding the accrued and unpaid amount thereof to the principal balance of the loans under the Second Lien Credit Agreement and then accruing interest on the increased principal amount (provided that after the discharge of our Senior Debt Obligations, interest will be paid in cash). We are required to pay certain fees to the administrative agent for the account of the lenders in connection with the Second Lien Credit Agreement.

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The proceeds of loans under the Second Lien Credit Agreement may only be used to refinance existing indebtedness under the 2018 Credit Agreement and the 7-Year Term Loan.

The Second Lien Credit Agreement contains, among other restrictions, certain additional affirmative and negative covenants and other terms, many of which substantially align with those in the First Lien Credit Agreement and are summarized below under “Similar Terms of the Credit Agreements.”

On February 8, 2021, the Company entered into the first amendment to the Second Lien Credit Agreement (“First Amendment”). The First Amendment provided for elimination of approximately $5.3 million of the disputed default interest that was capitalized into the principal balance of the Second Lien Term Loan Facility on the effective date thereof, reducing the outstanding principal amount of loans outstanding under the Second Lien Credit Agreement, retroactively, as of December 10, 2020, to $535.2 million. The First Amendment also eliminated the disputed PIK interest that was capitalized through the date of the amendment.

Similar Terms of the Credit Agreements

Each of the Credit Agreements contains certain affirmative and negative covenants and other provisions, as described in detail below, which substantially align with those contained in the other Credit Agreements.

Covenants

Each of the Credit Agreements contains, among other restrictions, certain affirmative and negative covenants, including, without limitation, requirements that we:

•

maintain liquidity of at least $25.0 million, to be comprised of unrestricted cash held in certain deposit accounts subject to control agreements, up to $5.0 million held in a certain other deposit account excluded from the collateral, the unused revolving loan commitments under the First Lien Credit Agreement (to the extent available to be drawn), and amounts on deposit in a designated collateral proceeds account and amounts on deposit in a cash collateral account;

•	maintain a minimum senior debt yield of 11.35% from and after June 30, 2021;

•	maintain a minimum corporate debt yield of (a) 6.50% from June 30, 2021 through and including September 30, 2021 and (b) 7.25% from and after October 1, 2021;

•

provide to the administrative agent, among other things, PREIT and its subsidiaries’ quarterly and annual financial statements, annual budget, reports on projected sources and uses of cash, and an updated annual business plan, as well as quarterly and annual operating statements, rent rolls, and certain other collections and tenant reports and information as the administrative agent may reasonably request with respect to each Borrowing Base Property;

•	maintain PREIT’s status as a REIT;

•	use commercially reasonable efforts to obtain subordination, non-disturbance and attornment agreements from each tenant under certain Major leases as well as ground lease estoppel certificates from each ground lessor of a Borrowing Base Property;

•

comply with the requirements of the various security documents and, at the administrative agent’s request, promptly notify the administrative agent of any acquisition of any owned real property that is not subject to a mortgage and grant liens on such real property to secure our obligations under the applicable Credit Agreement;

•	not amend any existing sale agreements with respect to Borrowing Base Properties to result in a reduction of cash consideration by 20% or more; and

•	not retain more than $6.5 million of cash in property-level accounts held by our subsidiaries that are owners of real property (subject to certain exceptions).

Each of the Credit Agreements also limits our ability, subject to certain exceptions, to make certain restricted payments (including payments of dividends and voluntary prepayments of certain indebtedness which includes, with respect to the First Lien Credit Agreement, voluntary prepayments under the Second Lien Credit Agreement), make certain types of investments and acquisitions, issue redeemable securities, incur additional indebtedness, incur liens on our assets, enter into agreements with a negative pledge, make certain intercompany transfers, merge, consolidate or sell all or substantially all of our assets or the equity interests in our subsidiaries, amend our organizational documents or material contracts, enter into transactions with affiliates, or enter into derivatives contracts. We are also prohibited from selling certain properties unless certain conditions are satisfied with respect to the terms of the sale agreement for such property or, in the case of Borrowing Base Properties, payment of certain release prices.

The First Lien Credit Agreement and, after our Senior Debt Obligations are discharged, the Second Lien Credit Agreement, each prohibit us from (i) entering into Major Leases, (ii) assigning leases, (iii) discounting any rent under leases where the leased premises is at least 7,500 square feet at a Borrowing Base Property and the discounted amount is more than $750,000 and more than 25% of the aggregate contractual base rent payable over the initial term (not including any extension options), (iv) collecting rent in advance, (v) terminating or modifying the terms of any Major Lease or releasing or discharging tenants from any obligations thereunder, (vi) consenting to a tenant’s assignment or subletting of a Major Lease, or (vii) subordinating any lease to any other deed of trust, mortgage, deed to secure debt or encumbrance, other than the mortgages already encumbering the applicable Borrowing Base Property and the mortgages entered into in connection with the other Credit Agreement. Under the First Lien Credit Agreement, and under the Second Lien Credit Agreement after the First Lien Termination Date, any amounts equal to or greater than $2.5 million but less than $3.5 million received by or on behalf of a guarantor in consideration of any termination or modification of a lease (or the release or discharge of a tenant) are subject to restrictions on use, and such amounts that are equal to or greater than $3.5 million must be applied to reduce our outstanding obligations under the applicable Credit Agreement.

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As of June 30, 2021, we were in compliance with all financial covenants under the Credit Agreements.

Restructured Credit Agreements

Prior to completion of the Financial Restructuring, we had entered into three credit agreements: (1) the 2018 Credit Agreement, which included (a) the $375.0 million 2018 Revolving Facility (“Restructured Revolver”), and (b) the $300.0 million 2018 Term Loan Facility, (2) the $250.0 million 2014 7-Year Term Loan, and (3) the Bridge Credit Agreement. Throughout 2020, we entered into various amendments to the Restructured Credit Agreements. On August 11, 2020, we entered into the Bridge Credit Agreement which provided for up to $30.0 million of additional borrowings and an original maturity date of September 30, 2020. On September 30, 2020, we amended our Restructured Credit Agreements to, among other things, extend the maturity date of the Bridge Credit Agreement until October 31, 2020 and to provide for the ability to request additional commitments of up to $25.0 million under our Bridge Credit Agreement. The September 2020 amendments also eliminated the minimum liquidity requirement under each of the Restructured Credit Agreements. We also amended the Bridge Credit Agreement on October 16, 2020 to, among other things, increase the aggregate amount of commitments under the Bridge Credit Agreement by $25.0 million. As of November 1, 2020, we had borrowed $590.0 million available under the Restructured Credit Agreements, including $55.0 million under our Bridge Credit Agreement and the full $375.0 million under the 2018 Revolving Facility. The Restructured Credit Agreements contained certain affirmative and negative covenants, several of which were amended on March 30, 2020. Pursuant to amendments dated July 27, 2020, some of those covenants were suspended for the duration of the suspension period, as extended by the September 30, 2020 amendments. As such, the Restructured Credit Agreements, as amended, restricted our ability to declare and pay dividends on our common shares and preferred shares for the duration of the Suspension Period. The filing of the chapter 11 cases constituted an event of default under the Restructured Credit Agreements. Upon our entry into the Credit Agreements, the Bridge Credit Agreement, the 7-Year Term Loan and the 2018 Credit Agreement were cancelled.

Consolidated Mortgage Loans

The estimated fair values of our consolidated mortgage loans based on year-end interest rates and market conditions at June 30, 2021 and December 31, 2020 were as follows:

	June 30, 2021				December 31, 2020
(in millions of dollars)	Carrying Value		Fair Value		Carrying Value		Fair Value
Mortgage loans⁽¹⁾	$	861.9	$	845.4	$	884.5	$	873.2

⁽¹⁾	The carrying value of mortgage loans is net of unamortized debt issuance costs of $1.4 million and $1.0 million as of June 30, 2021 and December 31, 2020, respectively.

The consolidated mortgage loans contain various customary default provisions. As of June 30, 2021, we were not in default on any of the consolidated mortgage loans, except for our mortgage secured by Valley View Mall.

Mortgage Loan Activity

Francis Scott Key Mall

On June 25, 2021, certain of our consolidated subsidiaries entered into an amendment to our mortgage loan secured by our property at Francis Scott Key Mall, in Frederick, Maryland, which provided for a paydown to $60.5 million, an extension of the maturity date until June 25, 2024, with an option to extend an additional year if certain criteria are met. Among other things, the amendment also provides for a variable interest rate of one month LIBOR plus 3.6% with interest only payments. Also, the amendment provides for excess cash flow from the property to be deposited into a cash collateral account which will be used at the administrative agent’s discretion to pay down the mortgage loan balance. The Company capitalized $0.2 million of lender fees as additional debt issuance costs in connection with the amendment.

Viewmont Mall

On June 25, 2021, certain of our consolidated subsidiaries entered into an amendment to our $67.2 million mortgage loan secured by our property at Viewmont Mall in Scranton, Pennsylvania, which provides for an extension of the maturity date until June 25, 2024, with an option to extend an additional year if certain criteria are met. Among other things, the amendment also provides for a variable interest rate of one month LIBOR plus 3.6% with interest only payments. Also, the amendment provides for excess cash flow from the property to be deposited into a cash collateral account which will be used at the administrative agent’s discretion to pay down the mortgage loan balance. The Company capitalized $0.4 million of lender fees as additional debt issuance costs in connection with the amendment.

Woodland Amendment

On February 8, 2021, certain of our consolidated subsidiaries entered into an amendment to our mortgage loan secured by the Woodland Mall in Grand Rapids, Michigan, which provides for an extension of the maturity date until December 10, 2021, with an option to extend an additional year if certain criteria are met. Among other things, the amendment also (i) reduces the cap on guarantor liability for PREIT Associates, L.P. to $10.0 million; (ii) restricts the lenders from exercising their rights and remedies under the guaranty until December 10, 2022, unless there is a bankruptcy filing with respect to the borrowers or guarantor; (iii) adjusts the interest rate; (iv) provides for the pledge of additional collateral as security for the borrowers’ obligations (including the anchor parcel at Woodland Mall which was released as collateral from our senior secured credit facilities); and (v) requires the borrowers to pay to the lenders a $5.0 million remargin payment. The Company capitalized $0.3 million of lender fees as additional debt issuance costs in connection with the amendment.

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Forbearance Agreements

During 2020, we executed forbearance and loan modification agreements for Cherry Hill Mall, Cumberland Mall, Dartmouth Mall, Francis Scott Key Mall, Viewmont Mall, and Woodland Mall. These arrangements allowed us to defer principal payments, and in some cases interest as well, between May and August 2020 depending on the terms of each agreement. At the end of the deferral period, repayment of deferred amounts spanned from four to six months. The repayment periods ranged from August 2020 through February 2021 pursuant to the terms of the specific agreements. Certain of these forbearance and loan modification agreements also imposed certain additional informational reporting requirements during the applicable modification periods. As of June 30, 2021, we had repaid all principal and interest deferrals.

Valley View Mall

In the second quarter of 2020, we received a notice of transfer of servicing for the mortgage loan secured by Valley View Mall, which had a $27.3 million balance as of June 30, 2020. Subsequently, we failed to make the June 2020 monthly payment and our subsidiary that is the borrower under the mortgage also received a notice of default on the mortgage from the lender. Additionally, we did not pay the balloon payment of $27.3 million due at maturity on July 1, 2020. A foreclosure notice was filed and operations of the property were assigned to a receiver in August 2020. See Note 2 for further details.

Note Payable

In April 2020, in light of the impact of COVID-19 on our business and limited capital resources, we applied for and received proceeds from a potentially forgivable loan in the amount of $4.5 million under the Paycheck Protection Program (“PPP”) of the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act. We entered into a note payable with our lender bank (“Note Payable”). The Note Payable had a maturity date on April 15, 2022. Based on the CARES Act and the Note Payable, all payments of both principal and interest were deferred until at least August 2021. Interest on the Note Payable accrued at a rate of 1.0% per annum, and the interest accrued throughout the period the Note Payable was outstanding, until the forgiveness date. All or a portion of PPP loans are eligible for forgiveness pursuant to program guidelines to the extent the proceeds are used for qualifying purposes within a 24-week period following the loan funding. In April 2021 we submitted our loan forgiveness application. On June 10, 2021, we were notified that the full principal balance and accrued interest under our PPP loan were forgiven. As a result of the forgiveness, the Company recorded a gain on debt extinguishment of $4.6 million during the three and six months ended June 30, 2021.

5. CASH FLOW INFORMATION

Cash paid for interest was $34.6 million and $30.5 million for the six months ended June 30, 2021 and 2020, respectively, net of amounts capitalized of $0.1 million and $1.4 million, respectively.

In our statement of cash flows, we report cash flows on our revolving facilities on a net basis. We had no borrowings or repayments on our First Lien Revolving Facility for the six months ended June 30, 2021. Aggregate borrowings on our Restructured Revolver were $120.0 million for the six months ended June 30, 2020 with no paydowns.

Accrued construction costs decreased by $4.2 million and $14.3 million for the six months ended June 30, 2021 and 2020, respectively, representing non-cash changes in investment in real estate and construction in progress.

The following table provides a summary of cash, cash equivalents, and restricted cash reported within the statement of cash flows as of June 30, 2021 and 2020.

	June 30,
(in thousands of dollars)	2021		2020
Cash and cash equivalents	$	38,794	$	41,418
Restricted cash included in other assets		7,806		7,473
Total cash, cash equivalents, and restricted cash shown in the statement of cash flows	$	46,600	$	48,891

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

6. DERIVATIVES

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

Cash Flow Hedges of Interest Rate Risk

For derivatives that have been designated and that qualify as cash flow hedges of interest rate risk, the gain or loss on the derivative is recorded in “Accumulated other comprehensive (loss) income” and subsequently reclassified into “Interest expense, net” in the same periods during which the hedged transaction affects earnings. Through December 10, 2020, all of our derivatives were designated and qualified as cash flow hedges of interest rate risk.

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On December 10, 2020 as a result of the Financial Restructuring, we de-designated seven of our interest rate swaps which were previously designated cash flow hedges against the 2018 Credit Facility and 7-year Term Loan, as the occurrence of the hedged forecasted transactions was no longer probable during the hedged time period due to the Financial Restructuring as described in Note 1. As such, the Company accelerated the reclassification of a portion of the amounts in other comprehensive (loss) income to earnings which resulted in a loss of $2.8 million that was recorded within interest expense, net in the consolidated statement of operations. Additionally, on December 10, 2020, the Company voluntarily de-designated the remaining thirteen interest swaps that were also previously designated as cash flow hedges against the 2018 Credit Facility and 7-year Term Loan. Upon de-designation, the accumulated other comprehensive (loss) income balance of each of these de-designated derivatives will be separately reclassified to earnings as the originally hedged forecasted transactions affect earnings. Through December 10, 2020, the changes in fair value of the derivatives were recorded to accumulated other comprehensive (loss) income in the consolidated balance sheets.

On December 22, 2020, we re-designated nine interest rate swaps with a notional amount of $375.0 million as cash flow hedges of interest rate risk against the First Lien Term Loan Facility. These interest rate swaps qualified for hedge accounting treatment with changes in the fair value of the derivatives recorded through accumulated other comprehensive (loss) income.

During the six months ended June 30, 2021, we had three designated swaps mature. As of June 30, 2021, we had ten total derivatives which were designated as cash flow hedges.

Over the next twelve months we estimate that $9.4 million will be reclassified as an increase to interest expense. The recognition of these amounts could be accelerated in the event that we repay amounts outstanding on the debt instruments and do not replace them with new borrowings.

Non-designated Hedges

Derivatives not designated as hedges are not speculative; they are also used to manage the Company’s exposure to interest rate movements and other identified risks but do not meet the strict hedge accounting requirements. For swaps that were not re-designated subsequent to December 10, 2020, changes in the fair value of derivatives are recorded directly in earnings as interest expense in the consolidated statement of operations. During the six months ended June 30, 2021, we had four non-designated swaps mature. As of June 30, 2021, we had seven total derivatives which were not designated in hedging relationships.

Interest Rate Swaps

As of June 30, 2021, we had interest rate swap agreements designated in qualifying hedging relationships outstanding with a weighted average base interest rate of 2.57% on a notional amount of $439.8 million, maturing on various dates through May 2023. As of June 30, 2021, our non-designated swaps outstanding with a weighted average base interest rate of 1.85% on a notional amount of $175.0 million, maturing in December 2021. We originally entered into these interest rate swap agreements in order to hedge the interest payments associated with our issuances of variable interest rate long term debt. The interest rate swap agreements are net settled monthly.

The following table summarizes the terms and estimated fair values of our interest rate swap derivative instruments as of June 30, 2021 and December 31, 2020 based on the year they mature. The notional values provide an indication of the extent of our involvement in these instruments, but do not represent exposure to credit, interest rate or market risks.

Maturity Date	Aggregate Notional Value at June 30, 2021 (in millions of dollars)		Aggregate Fair Value at June 30, 2021 (1) (in millions of dollars)			Aggregate Fair Value at December 31, 2020 (1) (in millions of dollars)			Weighted Average Interest Rate
Derivatives in Cash Flow Hedging Relationships
Interest Rate Swaps
2021	$	139.8	$	(1.4	)	$	(3.0	)		2.29	%
2023		300.0		(13.3	)		(17.2	)		2.70	%
Non-designated Hedges
Interest Rate Swaps
2021		175.0		(1.5	)		(3.1	)		1.85	%
Total	$	614.8	$	(16.2	)	$	(23.3	)		2.36	%

(1)	As of June 30, 2021 and December 31, 2020, derivative valuations in their entirety were classified in Level 2 of the fair value hierarchy and we did not have any significant recurring fair value measurements related to derivative instruments using significant unobservable inputs (Level 3).

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The tables below present the effect of derivative financial instruments on accumulated other comprehensive (loss) income and on our consolidated statements of operations for the three and six months ended June 30, 2021 and 2020:

	Three Months Ended June 30,										Six Months Ended June 30,
	Amount of Gain or (Loss) Recognized in Other Comprehensive Income on Derivative Instruments						Amount of Gain or (Loss) Reclassified from Accumulated Other Comprehensive Income into Interest Expense				Amount of Gain or (Loss) Recognized in Other Comprehensive Income on Derivative Instruments						Amount of Gain or (Loss) Reclassified from Accumulated Other Comprehensive Income into Interest Expense
(in millions of dollars)	2021			2020			2021		2020		2021			2020			2021		2020
Derivatives in Cash Flow Hedging Relationships
Interest rate products	$	(0.3	)	$	(2.3	)	$	3.0	$	2.3	$	(0.3	)	$	(22.4	)	$	5.6	$	2.6

	Three Months Ended June 30,						Six Months Ended June 30,
(in millions of dollars)	2021			2020			2021			2020
Total interest expense presented in the consolidated statements of operations in which the effects of cash flow hedges are recorded	$	(32.0	)	$	(17.2	)	$	(62.7	)	$	(34.0	)
Amount of (loss) gain reclassified from accumulated other comprehensive income into interest expense	$	3.0		$	2.3		$	5.6		$	2.6

The impact of our non-designated swaps resulted in a loss of approximately $58 thousand and $94 thousand for the three and six months ended June 30, 2021, respectively, which is recognized in interest expense, net in the consolidated statement of operations.

Credit-Risk-Related Contingent Features

We have agreements with some of our derivative counterparties that contain a provision pursuant to which, if our entity that originated such derivative instruments defaults on any of its indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, then we could also be declared to be in default on our derivative obligations. As of June 30, 2021, we were not in default on any of our derivative obligations.

We have an agreement with a derivative counterparty that incorporates the loan covenant provisions of our loan agreement with a lender affiliated with the derivative counterparty. Failure to comply with the loan covenant provisions would result in our being in default on any derivative instrument obligations covered by the agreement.

As of June 30, 2021, the fair value of derivatives in a liability position, which excludes accrued interest but includes any adjustment for nonperformance risk related to these agreements, was $16.2 million. If we had breached any of the default provisions in these agreements as of June 30, 2021, we might have been required to settle our obligations under the agreements at their termination value (including accrued interest) of $18.2 million. We had not breached any of these provisions as of June 30, 2021.

7. LEASES

As Lessee

We have entered into ground leases for portions of the land at Springfield Town Center and Plymouth Meeting Mall. We have also entered into an office lease for our headquarters location, as well as vehicle, solar panel and equipment leases as a lessee. The initial terms of these agreements generally range from three to 40 years, with certain agreements containing extension options for up to an additional 60 years. Upon lease execution, the Company measures a liability for the present value of future lease payments over the noncancelable period of the lease and any renewal option period we are reasonably certain of exercising. Certain agreements require that we pay a portion of reimbursable expenses such as CAM, utilities, insurance and real estate taxes. These payments are not included in the calculation of the lease liability and are presented as variable lease costs.

Our leases do not provide a readily determinable implicit interest rate; therefore, we estimate our incremental borrowing rate to calculate the present value of remaining lease payments. In determining our incremental borrowing rate, we considered the lease term, market interest rates and estimates regarding our implied credit rating using market data with adjustments to determine an appropriate incremental borrowing rate.

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The following tables present additional information pertaining to the Company’s leases:

	Three Months Ended June 30,
	2021								2020
(in thousands of dollars)	Solar Panel Leases		Ground Leases		Office, equipment, and vehicle leases		Total		Solar Panel Leases		Ground Leases		Office, equipment, and vehicle leases		Total
Finance lease cost:
Amortization of right-of-use assets	$	203	$	—	$	—	$	203	$	208	$	—	$	—	$	208
Interest on lease liabilities		62		—		—		62		68		—		—		68
Operating lease costs		—		437		327		764		—		437		333		770
Variable lease costs		—		45		107		152		—		42		39		81
Total lease costs	$	265	$	482	$	434	$	1,181	$	276	$	479	$	372	$	1,127

	Six Months Ended June 30,
	2021								2020
(in thousands of dollars)	Solar Panel Leases		Ground Leases		Office, equipment, and vehicle leases		Total		Solar Panel Leases		Ground Leases		Office, equipment, and vehicle leases		Total
Finance lease cost:
Amortization of right-of-use assets	$	405	$	—	$	—	$	405	$	412	$	—	$	—	$	412
Interest on lease liabilities		125		—		—		125		147		—		—		147
Operating lease costs		—		873		638		1,511		—		873		675		1,548
Variable lease costs		—		90		170		260		—		85		82		167
Total lease costs	$	530	$	963	$	808	$	2,301	$	559	$	958	$	757	$	2,274

Other information related to leases as of and for the six months ended June 30, 2021 and 2020 are as follows:

(in thousands of dollars)	2021			2020
Cash paid for the amounts included in the measurement of lease liabilities
Operating cash flows used for finance leases	$	125		$	139
Operating cash flows used for operating leases	$	1,290		$	972
Financing cash flows used for finance leases	$	372		$	347
Weighted average remaining lease term-finance leases (months)		80			92
Weighted average remaining lease term-operating leases (months)		293			304
Weighted average discount rate-finance leases		4.35	%		4.37	%
Weighted average discount rate-operating leases		6.43	%		6.43	%

Future payments against lease liabilities as of June 30, 2021 are as follows:

(in thousands of dollars)	Finance leases			Operating leases			Total
July 1 to December 31, 2021	$	494		$	1,494		$	1,988
2022		988			2,605			3,593
2023		983			2,556			3,539
2024		949			2,471			3,420
2025		929			2,362			3,291
Thereafter		2,072			51,153			53,225
Total undiscounted lease payments		6,415			62,641			69,056
Less imputed interest		(858	)		(32,590	)		(33,448	)
Total lease liabilities	$	5,557		$	30,051		$	35,608

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As Lessor

As of June 30, 2021, the fixed contractual lease payments, including minimum rents and fixed CAM amounts, to be received over the next five years pursuant to the terms of noncancelable operating leases with initial terms greater than one year are included in the table below. The amounts presented assume that no leases are renewed and no renewal options are exercised. Additionally, the table does not include variable lease payments that may be received under certain leases for percentage rents or the reimbursement of operating costs, such as common area expenses, utilities, insurance and real estate taxes. These variable lease payments are recognized in the period when the applicable expenditures are incurred or, in the case of percentage rents, when the sales data is made available.

(in thousands of dollars)
July 1 to December 31, 2021	$	96,350
2022		179,391
2023		158,933
2024		135,936
2025		108,510
Thereafter		313,232
	$	992,352

8. COMMITMENTS AND CONTINGENCIES

Contractual Obligations

As of June 30, 2021, we had unaccrued contractual and other commitments related to our capital improvement projects and development projects of $8.5 million, including $4.6 million of commitments related to the redevelopment of Fashion District Philadelphia, in the form of tenant allowances and contracts with general service providers and other professional service providers. For purposes of this disclosure, the contractual obligations and other commitments related to Fashion District Philadelphia are included at 100% of the obligation and not at our 50% ownership share.

Preferred Dividend Arrearages

Dividends on the Series B, Series C and Series D preferred shares are cumulative and therefore will continue to accrue at an annual rate of $1.8436 per share, $1.80 per share and $1.7188 per share, respectively. As of June 30, 2021, the cumulative amount of unpaid dividends on our issued and outstanding preferred shares totaled $27.4 million. This consisted of unpaid dividends per share on the Series B, Series C and Series D preferred shares of $1.84 per share, $1.80 per share and $1.72 per share, respectively.

Property Damage from Natural and Other Disasters

During the three and six months ended June 30, 2021, we recorded net insurance recoveries of $0.7 million as a result of recoveries received to repair damages that occurred in 2020.

During the six months ended June 30, 2020, Cherry Hill Mall in Cherry Hill, New Jersey experienced a power outage due to the failure of an underground high voltage cable, which required the use of backup generator power. We recorded net costs of approximately $0.6 million during the six months ended June 30, 2020 as a result of the power outage, and received recoveries of $0.6 million in April 2020.

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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following analysis of our consolidated financial condition and results of operations should be read in conjunction with our unaudited consolidated financial statements and the notes thereto included elsewhere in this report. The disclosures in this report are complementary to those made in our Annual Report on Form 10-K for the year ended December 31, 2020.

OVERVIEW

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

We currently own interests in 26 retail properties, of which 25 are operating properties and one is a development property. The 25 operating properties include 20 shopping malls and five other retail properties, have a total of 19.8 million square feet and are located in nine states. We and partnerships in which we hold an interest own 15.3 million square feet at these properties (excluding space owned by anchors or third parties).

There are 18 operating retail properties in our portfolio that we consolidate for financial reporting purposes. These consolidated properties have a total of 14.9 million square feet, of which we own 11.7 million square feet. The seven operating retail properties that are owned by unconsolidated partnerships with third parties have a total of 4.9 million square feet of which 3.6 million square feet are owned by such partnerships. When we refer to “Same Store” properties, we are referring to properties that have been owned for the full periods presented and exclude properties acquired or disposed of, under redevelopment or designated as a non-core property during the periods presented. Core properties include all operating retail properties except for Exton Square Mall and Fashion District Philadelphia. Valley View Mall was previously designated as a non-core property. As discussed further in Notes 2 and 4 to our consolidated financial statements, a foreclosure sale judgment with respect to Valley View Mall was ordered by the court after the property operations were assumed by a receiver on behalf of the lender under the mortgage loan secured by Valley View Mall and we no longer operate the property. “Core Malls” also excludes these properties as well as power centers and Gloucester Premium Outlets.

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

Our primary business is owning, operating and redeveloping shopping malls, which we do primarily through our operating partnership, PREIT Associates, L.P. (“PREIT Associates” or the “Operating Partnership”). We believe our distinctive real estate is at the forefront of enabling communities to flourish through the built environment by providing opportunities to create vibrant multi-use destinations. In general, our malls include carefully curated retail and lifestyle offerings, including national and regional department stores, large format retailers and other anchors, mixed with destination dining and entertainment experiences. In recent years, we have increased the portion of our mall properties that are leased to non-traditional mall tenants, including life sciences, healthcare, supermarkets and self-storage facilities.

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

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

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response to new, and potentially more aggressive, variants. As such, as the pandemic continues and potentially intensifies or we experience resurgences, it is possible that additional closures will occur.

All of our properties have remained open since the third quarter of 2020 and are employing safety and sanitation measures designed to address the risks posed by COVID-19, with some of our tenants still operating at reduced capacity. Following the pandemic-related closures, approximately 4% of our tenants failed to re-open (inclusive of tenants that filed for bankruptcy protection in the aftermath). As a result of the challenging environment created by COVID-19, primarily beginning in the second quarter of 2020, many of our tenants have sought rent relief and deferral and several have failed to pay rent due. Although we continue to make progress in collecting COVID-19-period rents, we have also initiated legal proceedings against certain tenants for failure to pay. As of June 30, 2021, we had cash receipts of 88% of billed second quarter 2021 rents, an increase from cash receipts of 81% and 73% of billed rents as of March 31, 2021 and December 31, 2020, respectively. Including collections of other months’ rents, we collected 127% of our billed second quarter 2021 rents. We believe that our rent collections are probable, but expect that collections will continue to be below our tenants’ rent obligations as long as the effects of COVID-19 affect the financial strength of our tenants. The significance of COVID-19 on our business, however, will continue to depend on, among other things, the extent and duration of the pandemic, the severity of the disease and the number of people infected with the virus, and certain variants thereof, the plateau in vaccine administration during the second quarter of 2021 and increased vaccine resistance in certain regions in which our properties are located, further effects on the economy of the pandemic and of the measures taken by governmental authorities and other third parties restricting daily activities and the length of time that such measures remain in place or are renewed, implementation of governmental programs to assist businesses and consumers impacted by the COVID-19 pandemic, and the effect of any changes to current restrictions or recommended protocols, all of which could vary by geographic region in which our properties are located. In the first and second quarters of 2021, we experienced further uncertainty as to whether government authorities will maintain the relaxation of current restrictions on businesses in the regions in which our properties are located, if these restrictions have been relaxed at all, and whether government authorities will issue recommendations or impose requirements on landlords like us to further enhance health and safety protocols, or whether we will voluntarily adopt any of these requirements ourselves, which could result in increased operating costs and demands on our property management teams to ensure compliance with any of these requirements.

Net loss for the three months ended June 30, 2021 was $25.4 million compared to net loss of $23.1 million for the three months ended June 30, 2020. This $2.3 million increase in net loss was primarily due to: (a) an increase in general and administrative expenses of $3.0 million; (b) an increase in property operating expenses of $1.3 million; (c) an increase in interest expense of $14.8 million driven by higher overall outstanding debt balances and higher interest rates in connection with our debt modifications in 2020; (d) an impairment of assets of $1.3 million; and (e) a decrease in gain on sale of real estate, net of $8.9 million as a result of one time property sales in the second quarter 2020. These decreases were partially offset by an increase in real estate revenue of $17.3 million, an increase in equity in income of partnerships of $2.8 million, and forgiveness of the full principal balance and accrued interest under our Paycheck Protection Program (PPP) loan due to which we recorded a gain on debt extinguishment of $4.6 million.

Net loss for the six months ended June 30, 2021 was $69.4 million compared to net loss of $36.7 million for the six months ended June 30, 2020. This $32.7 million increase in net loss was primarily due to: (a) higher property operating expenses of $1.9 million; (b) an increase in general and administrative expenses of $4.1 million; (c) an increase in interest expense of $28.7 million driven by higher overall outstanding debt balances and higher interest rates in connection with our debt modifications in 2020; (d) a decrease in equity in income of partnerships of $1.5 million; and (e) a decrease in gain on sale of real estate, net of $10.9 million as a result of one time property sales in 2020. These decreases were partially offset by an increase in real estate revenue of $8.6 million and forgiveness of the full principal balance and accrued interest under our PPP loan due to which we recorded a gain on debt extinguishment of $4.6 million.

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

Current Economic and Industry Conditions and Impact of COVID-19

Conditions in the economy have caused fluctuations and variations in business and consumer confidence, retail sales, and consumer spending on retail goods, destination dining and entertainment. Further, traditional mall tenants, including department store anchors and smaller format retail tenants face significant challenges resulting from changing consumer expectations, the convenience of e-commerce shopping, competition from fast fashion retailers, the expansion of outlet centers, and declining mall traffic, among other factors. In recent years, there has been an increased level of tenant bankruptcies and store closings by tenants who have been significantly impacted by these factors. All of these factors have been exacerbated by the impact of the COVID-19 pandemic beginning in early 2020 and continuing in 2021.

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

	Pre-bankruptcy								Units Closed
Year	Number of Tenants⁽¹⁾		Number of locations impacted		GLA⁽²⁾		PREIT’s Share of Annualized Gross Rent⁽³⁾ (in thousands)		Number of locations closed		GLA⁽²⁾		PREIT’s Share of Annualized Gross Rent⁽³⁾ (in thousands)
2021 (through June 30, 2021)
Consolidated properties		4		9		330,729	$	1,579		4		17,759	$	370
Unconsolidated properties		1		1		4,046		57		1		4,046		57
Total		4		10		334,775	$	1,636		5		21,805	$	427
2020 (Full Year)
Consolidated properties		17		91		2,068,153	$	18,604		39		389,696	$	6,771
Unconsolidated properties		18		31		468,164		3,747		13		162,378		2,093
Total		23		122		2,536,317	$	22,351		52		552,074	$	8,865

⁽¹⁾	Total represents unique tenants and includes both tenant-owned and landlord-owned stores. As a result, amounts may not total.

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

⁽³⁾	Includes our share of tenant gross rent from partnership properties based on PREIT’s ownership percentage in the respective equity method investments as of June 30, 2021.

Anchor Replacements

In recent years, through property dispositions, proactive store recaptures, lease terminations and other activities, we have made efforts to reduce our risks associated with certain department store concentrations. In the first quarter of 2020, Dick’s Sporting Goods at Valley Mall opened. At Plymouth Meeting Mall, we opened Michael’s in 2020 and Shake Shack and Ideal Image in 2021. In the second quarter of 2021, we opened Power Warehouse at Cumberland Mall.

In response to anchor store closings and other trends in the retail space, we have been changing the mix of tenants at our properties. We believe our distinctive real estate is at the forefront of enabling communities to flourish through the built environment by providing opportunities to create vibrant multi-use destinations. In general, our malls include carefully curated retail and lifestyle offerings, including national and regional department stores, large format retailers and other anchors, mixed with destination dining and entertainment experiences. In recent years, we have been reducing the percentage of traditional mall tenants and increasing the share of space dedicated to non-traditional mall tenants, including life sciences, healthcare, supermarkets and self-storage facilities. Approximately 31% of our mall space is committed to non-traditional tenants offering services such as dining and entertainment, health and wellness, off-price retail and fast fashion. This initiative has slowed down due to the impacts of the COVID-19 pandemic. Some of these changes may result in the redevelopment of all or a portion of our properties. See “— Capital Improvements, Redevelopment and Development Projects.”

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

Capital Improvements, Redevelopment and Development Projects

We might engage in various types of capital improvement projects at our operating properties. Such projects vary in cost and complexity, and can include building out new or existing space for individual tenants, upgrading common areas or exterior areas such as parking lots, or redeveloping the entire property, among other projects. Project costs are accumulated in “Construction in progress” on our consolidated balance sheet until the asset is placed into service, and amounted to $43.6 million as of June 30, 2021.

As of June 30, 2021, we had unaccrued contractual and other commitments related to our capital improvement projects and development projects at our consolidated and unconsolidated properties of $8.5 million, including $4.6 million of commitments related to the redevelopment of Fashion District Philadelphia, in the form of tenant allowances and contracts with general service providers and other professional service providers.

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

In January 2018, we and Macerich entered into a $250.0 million term loan (as amended in July 2019 to increase the total maximum potential borrowings to $350.0 million) to fund the ongoing redevelopment of Fashion District Philadelphia and to repay capital contributions to the

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venture previously made by the partners. A total of $51.0 million was drawn during the third quarter of 2019 and we received aggregate distributions of $25.0 million as our share of the draws. On December 10, 2020, PM Gallery LP, together with certain other subsidiaries owned indirectly by us and Macerich (including the fee and leasehold owners of the properties that are part of the Fashion District Philadelphia project), entered into an Amended and Restated Term Loan Agreement (the “FDP Loan Agreement”). In connection with the execution of the FDP Loan Agreement, a $100.0 million principal payment was made (and funded indirectly by Macerich, the “Partnership Loan”) to pay down the existing loan, reducing the outstanding principal under the FDP Loan Agreement from $301.0 million to $201.0 million. The joint venture must repay the Partnership Loan plus 15% accrued interest to Macerich, in its capacity as the lender, prior to the resumption of 50/50 cash distributions to us and Macerich. In connection with the execution of the FDP Loan Agreement, the governing structure of PM Gallery LP was modified such that, effective as of January 1, 2021, Macerich is responsible for the entity’s operations and, subject to limited exceptions, controls major decisions. The Company considered the changes to the governing structure of PM Gallery LP and determined the investment qualifies as a variable interest entity and would continue to be accounted for under the equity method of accounting.

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

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Critical Accounting Policies are those that require the application of management’s most difficult, subjective, or complex judgments, often because of the need to make estimates about the effect of matters that are inherently uncertain and that might change in subsequent periods. In preparing the unaudited consolidated financial statements, management has made estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenue and expenses during the reporting periods. In preparing the unaudited consolidated financial statements, management has utilized available information, including our past history, industry standards and the current economic environment, among other factors, in forming its estimates and judgments, giving due consideration to materiality. Management has also considered events and changes in property, market and economic conditions, estimated future cash flows from property operations and the risk of loss on specific accounts or amounts in determining its estimates and judgments. Actual results may differ from these estimates. In addition, other companies may utilize different estimates, which may affect comparability of our results of operations to those of companies in a similar business. The estimates and assumptions made by management in applying critical accounting policies have not changed materially during 2021 and 2020, except as otherwise noted, and none of these estimates or assumptions have proven to be materially incorrect or resulted in our recording any significant adjustments relating to prior periods. We will continue to monitor the key factors underlying our estimates and judgments, but no change is currently expected.

For additional information regarding our Critical Accounting Policies, see “Critical Accounting Policies and Estimates” in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2020.

Asset Impairment

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

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

The determination of undiscounted cash flows requires significant estimates by management, including the expected course of action at the balance sheet date that would lead to such cash flows. Subsequent changes in estimated undiscounted cash flows arising from changes in the anticipated action to be taken with respect to the property could impact the determination of whether an impairment exists and whether the effects could materially affect our net income. To the extent estimated undiscounted cash flows are less than the carrying value of the property, the loss will be measured as the excess of the carrying amount of the property over the estimated fair value of the property. Our intent is to hold and operate our properties long-term, which reduces the likelihood that our carrying value is not recoverable. A shortened holding period would increase the likelihood that the carrying value is not recoverable.

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

During the three months ended June 30, 2021, we recorded an impairment loss of $1.3 million in connection with our classification of Valley View Center as held for sale (see Note 2 to our unaudited consolidated financial statements for details). Valley View Center is a retail property we own and is located adjacent to Valley View Mall. The impairment loss is included in impairment of assets in the consolidated statement of operations for the three and six months ended June 30, 2021.

Revenue and Receivables

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

We accrue revenue under leases, provided that it is probable that we will collect substantially all of the lease revenue that is due under the terms of the lease both at inception and on an ongoing basis. When collectability of lease revenue is not probable, leases are prospectively accounted for on a cash basis and any difference between the revenue that has been accrued and the cash collected from the tenant over the life of the lease is recognized as a current period adjustment to lease revenue. We review the collectability of our tenant receivables related to tenant rent including base rent, straight-line rent, expense reimbursements and other revenue or income by specifically analyzing billed and unbilled revenues, including straight-line rent receivable, and considering historical collection issues, tenant creditworthiness and current economic and industry trends. Our revenue recognition and receivables collectability analysis places particular emphasis on past-due accounts and considers the nature and age of the receivables, the payment history and financial condition of the payor, the basis for any disputes or negotiations with the payor, and other information that could affect collectability.

We record base rent on a straight-line basis, which means that the monthly base rent revenue according to the terms of our leases with our tenants is adjusted so that an average monthly rent is recorded for each tenant over the term of its lease. When tenants vacate prior to the end of their lease, we accelerate amortization of any related unamortized straight-line rent balances, and unamortized above-market and below-market intangible balances are amortized as a decrease or increase to real estate revenue, respectively.

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

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

In addition to base rent, certain lease agreements contain provisions that require tenants to reimburse a fixed or pro rata share of certain CAM costs, real estate taxes and utilities. Tenants generally make monthly expense reimbursement payments based on a budgeted amount determined at the beginning of the year. We recognize fixed CAM revenue prospectively on a straight-line basis.

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

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

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

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

Revenue from the reimbursement of marketing expenses is generated through tenant leases that require tenants to reimburse a defined amount of property marketing expenses. Our contractual performance obligations are fulfilled as marketing expenditures are made. Tenant payments are received monthly as required by the respective lease terms. We defer income recognition if the reimbursements exceed the aggregate marketing expenditures made through that date. Deferred marketing reimbursement revenue is recorded in tenants’ deposits and deferred rent on the consolidated balance sheet. The marketing reimbursements are recognized as revenue at the time that the marketing expenditures occur.

Property management revenue from management and development activities is generated through contracts with third party owners of real estate properties or with certain of our joint ventures, and is recorded in other income in the consolidated statements of operations. In the case

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of management fees, our performance obligations are fulfilled over time as the management services are performed and the associated revenues are recognized on a monthly basis when the customer is billed. In the case of development fees, our performance obligations are fulfilled over time as we perform certain stipulated development activities as set forth in the respective development agreements and the associated revenues are recognized on a monthly basis when the customer is billed.

Derivatives

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

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

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

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

We recognize all derivatives at fair value as either assets or liabilities in the accompanying consolidated balance sheets. Our derivative assets are recorded in “Deferred costs and other assets” and our derivative liabilities are recorded in “Fair value of derivative instruments.” Derivatives not designated as hedges are not speculative and are also used to manage the Company’s exposure to interest rate movements and other identified risks but do not meet the strict hedge accounting requirements. For certain interest rate swaps that were not re-designated subsequent to December 10, 2020, changes in the fair value of derivatives are recorded directly in earnings as interest expense in the consolidated statement of operations.

We incorporate credit valuation adjustments to appropriately reflect both our own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of our derivative contracts for the effect of nonperformance risk, we have considered the impact of netting and any applicable credit enhancements. Although we have determined that the majority of the inputs used to value our derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with our derivatives utilize Level 3 inputs, such as estimates of current credit spreads, to evaluate the likelihood of default by us and our counterparties. As of June 30, 2021, we have assessed the significance of the effect of the credit valuation adjustments on the overall valuation of our derivative positions and have determined that the credit valuation adjustments are not significant to the overall valuation of our derivatives. As a result, we have determined that our derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy.

New Accounting Developments

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

OFF BALANCE SHEET ARRANGEMENTS

We have no material off-balance sheet items other than (i) the partnerships described in Note 3 to our unaudited consolidated financial statements and in the “Overview” section above, (ii) unaccrued contractual commitments related to our capital improvement and development projects at our consolidated and unconsolidated properties, and (iii) specifically with respect to our joint venture formed with Macerich, our operating partnership, PREIT Associates, has jointly and severally guaranteed its 50% share of the FDP Term Loan (see Note 3 to our unaudited consolidated financial statements), which currently has $194.6 million outstanding (our share of which is $97.3 million). If our Fashion District Philadelphia joint venture were unable to satisfy its obligations under the FDP Term Loan and we were required to satisfy its payment obligations under the guarantee, this could have a material impact on our liquidity and available capital resources. The FDP Term Loan balance will become due in 2023.

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RESULTS OF OPERATIONS

Overview

Occupancy

The table below sets forth certain occupancy statistics for our properties as of June 30, 2021 and 2020:

	Occupancy⁽¹⁾ at June 30,
	Consolidated Properties						Unconsolidated Properties						Combined⁽²⁾
	2021			2020			2021			2020			2021			2020
Retail portfolio weighted average: ⁽³⁾
Total excluding anchors		86.5	%		88.0	%		80.8	%		81.9	%		84.8	%		86.3	%
Total including anchors		89.0	%		89.8	%		84.4	%		85.3	%		87.9	%		88.8	%
Core Malls weighted average:⁽⁴⁾
Total excluding anchors		88.5	%		90.0	%		82.0	%		84.9	%		87.8	%		89.5	%
Total including anchors		90.5	%		92.7	%		87.6	%		89.7	%		90.2	%		92.4	%

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

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

⁽³⁾	Retail portfolio includes all retail properties including Fashion District Philadelphia.

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

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Leasing Activity

The table below sets forth summary leasing activity information with respect to our consolidated and unconsolidated properties for the three months ended June 30, 2021:

	Number		GLA		Term		Initial Rent per square foot ("psf")		Previous Rent psf		Initial Gross Rent Renewal Spread⁽¹⁾						Average Rent Renewal Spread⁽²⁾			Annualized Tenant Improvements psf⁽³⁾
											$			%			%
Non Anchor
New Leases
Under 10k square feet ("sf")		55		131,835		4.3	$	39.75	N/A		N/A			N/A			N/A			$	4.02
Over 10k sf		2		57,431		12.6		16.54	N/A		N/A			N/A			N/A				2.57
Total New Leases		57		189,266		6.8	$	32.70	N/A		N/A			N/A			N/A			$	3.21

Renewal Leases
Under 10k sf		34		74,386		2.8	$	53.65	$	60.28	$	(6.63	)		(11.0	%)		(13.5	%)	$	-
Over 10k sf		6		264,466		4.7		21.99		20.21		1.78			8.8	%		11.3	%		-
Total Fixed Rent		40		338,852		4.3		28.94		29.01		(0.07	)		(0.2	%)		(0.4	%)		-
Total Percentage in Lieu		16		91,277		1.4		23.15		28.92		(5.77	)		(20.0	%)	N/A				-
Total Renewal Leases		56		430,129		3.7	$	27.71	$	28.99	$	(1.28	)		(4.4	%)	N/A			$	-
Total Non Anchor (4)		113		619,395		4.6	$	29.23

Anchor
New Leases		1		80,983		2.0	$	1.63	$	-	$	-		N/A			N/A			$	-
Renewal Leases		2		168,043		5.0		5.88	$	5.73	$	0.15			2.6	%	N/A				-
Total		3		249,026		4.0	$	4.50

⁽¹⁾

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

⁽²⁾

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

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

⁽⁴⁾

Includes 9 leases and 35,757 square feet of GLA with respect to our unconsolidated partnerships. We own a 25% to 50% interest in each of our unconsolidated properties and do not control such properties. Our percentage ownership is not necessarily indicative of the legal and economic implications of our ownership interest. See “— Non-GAAP Supplemental Financial Measures” for further details on our ownership interests in our unconsolidated properties.

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The table below sets forth summary leasing activity information with respect to our consolidated and unconsolidated properties for the six months ended June 30, 2021:

	Number		GLA		Term		Initial Rent per square foot ("psf")		Previous Rent psf		Initial Gross Rent Renewal Spread⁽¹⁾						Average Rent Renewal Spread⁽²⁾			Annualized Tenant Improvements psf⁽³⁾
											$			%			%
Non Anchor
New Leases
Under 10k square feet ("sf")		81		196,249		5.0	$	41.42	N/A		N/A			N/A			N/A			$	4.36
Over 10k sf		5		187,455		20.3		9.31	N/A		N/A			N/A			N/A				1.13
Total New Leases		86		383,704		12.5	$	25.73	N/A		N/A			N/A			N/A			$	1.79

Renewal Leases
Under 10k sf		106		196,727		3.7	$	63.30	$	69.48	$	(6.17	)		(8.9	%)		(5.7	%)	$	-
Over 10k sf		8		302,597		4.7		21.23		19.68		1.55			7.9	%		10.1	%		-
Total Fixed Rent		114		499,324		4.3	$	37.81	$	39.30	$	(1.49	)		(3.8	%)		(1.0	%)	$	-
Total Percentage in Lieu		53		242,553		1.5		23.40		25.99		(2.59	)		(10.0	%)	N/A				-
Total Renewal Leases (4)		167		741,877		3.4	$	33.10	$	34.95	$	(1.85	)		(5.3	%)	N/A			$	-
Total Non Anchor		253		1,125,581		6.5	$	30.59

Anchor
New Leases		2		185,090		6.5	$	2.06	N/A		N/A			N/A			N/A			$	0.42
Renewal Leases		5		650,518		4.6		4.42	$	4.41	$	0.01			0.2	%	N/A				-
Total		7		835,608		5.0	$	3.90

⁽¹⁾

⁽²⁾

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

⁽⁴⁾

Includes 20 leases and 79,954 square feet of GLA with respect to our unconsolidated partnerships. We own a 25% to 50% interest in each of our unconsolidated properties and do not control such properties. Our percentage ownership is not necessarily indicative of the legal and economic implications of our ownership interest. See “— Non-GAAP Supplemental Financial Measures” for further details on our ownership interests in our unconsolidated properties.

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The following table sets forth our results of operations for the three and six months ended June 30, 2021 and 2020.

	Three Months Ended June 30,						% Change 2020 to 2021				Six Months Ended June 30,						% Change 2020 to 2021
(in thousands of dollars)	2021			2020							2021			2020
Real estate revenue	$	73,956		$	56,638			30.6		%	$	139,234		$	130,587			6.6		%
Property operating expenses		(30,765	)		(29,507	)		4.3		%		(63,924	)		(62,044	)		3.0		%
Other income		162			131			23.7		%		288			424			(32.1	)	%
Depreciation and amortization		(29,686	)		(30,908	)		(4.0	)	%		(59,525	)		(61,177	)		(2.7	)	%
General and administrative expenses		(13,535	)		(10,569	)		28.1		%		(25,366	)		(21,264	)		19.3		%
Provision for employee separation expenses		(149	)		(1,040	)		(85.7	)	%		(240	)		(1,113	)		(78.4	)	%
Insurance recoveries, net		670			586			14.3		%		670			586			14.3		%
Project costs and other expenses		(77	)		(66	)		16.7		%		(179	)		(161	)		11.2		%
Interest expense, net		(31,978	)		(17,182	)		86.1		%		(62,709	)		(34,040	)		84.2		%
Reorganization expenses		(69	)		—			100.0		%		(267	)		—			100.0		%
Gain on debt extinguishment, net		4,587			—			100.0		%		4,587			—			100.0		%
Impairment of assets		(1,302	)		—			100.0		%		(1,302	)		—			100.0		%
Equity in income (loss) of partnerships		2,433			(358	)		779.6		%		(1,000	)		461			(316.9	)	%
Gain on sales of real estate by equity method investee		1,347			—			100.0		%		1,347			—			100.0		%
(Loss) gain on sales of real estate, net		(974	)		9,300			(110.5	)	%		(974	)		11,263			(108.6	)	%
Loss on sales of interests in non operating real estate		—			(144	)		(100.0	)	%		—			(190	)		(100.0	)	%
Net loss	$	(25,380	)	$	(23,119	)		9.8		%	$	(69,360	)	$	(36,668	)		89.2		%

The amounts in the preceding tables reflect our consolidated properties and our unconsolidated properties. Our unconsolidated properties are presented under the equity method of accounting in the line item “Equity in income (loss) of partnerships.”

Real Estate Revenue

We include all rental income earned pursuant to tenant leases under the “Lease revenue” line item in the consolidated statements of operations. Utility reimbursements are presented separately in “Expense reimbursements.” We review the collectability of both billed and unbilled lease revenues each reporting period, taking into consideration the tenant’s payment history, credit profile and other factors, including the tenant’s operating performance. For any tenant receivable balance deemed to be uncollectible, we record an offset for credit losses directly to Lease revenue in the consolidated statements of operations.

The following table reports the breakdown of real estate revenues based on the terms of the lease contracts for the three and six months ended June 30, 2021 and 2020:

	Three Months Ended June 30,					Six Months Ended June 30,
(in thousands of dollars)	2021		2020			2021		2020
Contractual lease payments:
Base rent	$	49,613	$	37,777		$	95,530	$	88,825
CAM reimbursement income		8,301		9,902			16,660		20,069
Real estate tax income		6,677		8,520			13,621		17,017
Percentage rent		217		(20	)		205		(1	)
Lease termination revenue		622		217			659		226
		65,430		56,396			126,675		126,136
Less: credit losses		2,682		(4,277	)		1,345		(6,296	)
Lease revenue		68,112		52,119			128,020		119,840
Expense reimbursements		3,887		2,976			7,786		7,280
Other real estate revenue		1,957		1,543			3,428		3,467
Total real estate revenue	$	73,956	$	56,638		$	139,234	$	130,587

Real Estate Revenue

Real estate revenue increased by $17.3 million, or 30.6%, for the three months ended June 30, 2021 compared to the three months ended June 30, 2020, primarily due to:

•

an increase of $12.2 million in same store base rent resulting from a $14.2 million increase due to the COVID-19 related mall closures and associated rent abatements and reduced percent of sales revenue in the three months ended June 30, 2020, partially offset by a decrease of $1.0 million from net new store openings and lease modifications over the previous twelve months and a decrease of $1.0

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million related to tenant bankruptcies in 2020 and 2021;

•

a decrease of $6.3 million in same store credit losses due to the collection of receivables from the resolution of COVID-19 related issues with tenants across our portfolio in comparison to substantial credit losses due to non-payment of charges for the three months ended June 30, 2020;

•

an increase of $0.9 million in same store utility reimbursements related to the increase in same store utility expense (see “-Property Operating Expenses”) due to mall closures during the three months ended June 30, 2020;

•

an increase of $0.4 million in same store lease termination revenue, including $0.6 million from the termination of leases with four tenants during 2021, partially offset by $0.2 million received from two tenants during 2020;

•

an increase of $0.3 million in same store other real estate revenue due to promotional revenues in the common areas and parking lots; and

•

an increase of $0.1 million in same store percentage rent; partially offset by

•

a decrease of $1.8 million in same store real estate tax reimbursements due to bankruptcy and COVID-related store closings and rental concessions to some tenants whereby the terms of the leases were modified to no longer require expense reimbursements, and a decrease in same store real estate tax expense (see “-Property Operating Expenses”); and

•

a decrease of $1.3 million in same store common area expense reimbursements, including a decrease in same store common area reimbursements of $1.1 million due to bankruptcy and COVID-related store closings and rental concessions no longer requiring expense reimbursements, as well as a decrease of $0.2 million associated with the straight lining of fixed common area expense reimbursements.

Real estate revenue increased by $8.6 million, or 6.6%, in the six months ended June 30, 2021 compared to the six months ended June 30, 2020, primarily due to:

•

an increase of $8.5 million in same store base rent due to a $14.2 million increase related to the COVID-19 mall closures and associated rent abatements and reduced percent of sales revenue in the six months ended June 30, 2020, partially offset by a decrease of $3.1 million from net new store openings and lease modifications over the previous twelve months and a decrease of $2.6 million resulting from tenant bankruptcies in 2020 and 2021;

•

a decrease of $7.0 million in same store credit losses due to the collection of receivables from the resolution of COVID-19 related issues with tenants across our portfolio in comparison to substantial credit losses due to non-payment of charges for the six months ended June 30, 2020;

•

an increase of $0.6 million from an increase in same store utility expense (see “-Property Operating Expenses”) as stores were closed due to COVID-19 during the six months ended June 30, 2020;

•

an increase of $0.4 million in same store lease termination revenue, including $0.6 million from the termination of leases with seven tenants during 2021, partially offset by $0.2 million received from four tenants during 2020; and

•

an increase of $0.1 million in same store percentage rent; partially offset by

•

a decrease of $3.2 million in same store real estate tax reimbursements due to bankruptcy and COVID-related store closings and rental concessions to some tenants whereby the terms of the leases were modified such that expense reimbursements were no longer required, and a decrease in same store real estate tax expense (see “-Property Operating Expenses”);

•

a decrease of $2.8 million in same store common area expense reimbursements, including a decrease in same store common area reimbursements of $2.4 million due to bankruptcy and COVID-related store closings and rental concessions to some tenants under which the terms of their leases were modified and no longer need to pay expense reimbursements, as well as a decrease of $0.4 million associated with the straight lining of fixed common area expense reimbursements;

•

a decrease of $2.1 million at non-same store properties Valley View Mall and Exton Square Mall due to the derecognition of assets at Valley View Mall during the third quarter of 2020 as a result of a receiver being assigned to manage the property and COVID-19 related store closures and lease modifications at Exton Square Mall; and

•

a decrease of $0.1 million in same store other real estate revenue including $0.3 million in partnership marketing revenues partially offset by promotional revenues in the common areas and parking lots.

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Property Operating Expenses

Property operating expenses increased by $1.3 million, or 4.3%, for the three months ended June 30, 2021 compared to the three months ended June 30, 2020, primarily due to:

•

an increase of $1.9 million in same store common area maintenance expense, including a $0.8 million increase in cleaning expense and a $0.6 million increase in security expense, since we had negotiated credits with our vendors for the three months ended June 30, 2020 while properties were closed;

•

an increase of $0.4 million in same store tenant utility expense due to higher electricity usage in comparison to when our properties were closed during the three months ended June 30, 2020; and

•

an increase of $0.4 million in same store other property operating expenses including a $0.2 million increase in property legal expense; partially offset by

•

a decrease of $0.9 million in same store real estate tax expense due to a decrease in real estate tax assessments at some properties; and

•

a decrease of $0.5 million at non-same store properties Valley View Mall and Exton Square Mall.

Property operating expenses increased by $1.9 million, or 3.0%, for the six months ended June 30, 2021 compared to the six months ended June 30, 2020, primarily due to:

•

an increase of $3.2 million in same store common area maintenance expense, including a $1.1 million increase in snow removal expense due to higher snowfall amounts during the six months ended June 30, 2021 across the Mid-Atlantic States, where many of our properties are located, and a $0.9 million increase in cleaning expense and a $0.5 million increase in security expense due to negotiated credits with our vendors for the six months ended June 30, 2020 while properties were closed;

•

an increase of $0.7 million in same store other property operating expenses including a $0.2 million increase in property legal expense; and

•

an increase of $0.5 million in same store tenant utility expense due to higher electricity usage in comparison to when our properties were closed during the six months ended June 30, 2020; partially offset by

•

a decrease of $1.3 million in same store real estate tax expense due to a decrease in the real estate tax assessment value at some properties; and

•

a decrease of $1.1 million at non-same store properties Valley View Mall and Exton Square Mall.

Depreciation and amortization expense decreased by $1.2 million, or 4.0%, for the three months ended June 30, 2021 compared to the three months ended June 30, 2020, primarily due to:

•

a decrease of $0.9 million resulting from accelerated amortization of capital improvements associated with store closings during the three months ended June 30, 2020, partially offset by a higher asset base from capital improvements related to new tenants at our same store properties; and

a decrease of $0.3 million at non-same store properties Exton Square Mall and Valley View Mall.

Depreciation and amortization expense decreased by $1.7 million, or 2.7%, for the six months ended June 30, 2021 compared to the six months ended June 30, 2020, primarily due to:

•

a decrease of $0.9 million from accelerated amortization of capital improvements associated with store closings during the six months ended June 30, 2020, partially offset by a higher asset base resulting from capital improvements related to new tenants at our same store properties; and

•

a decrease of $0.8 million at non-same store properties Exton Square Mall and Valley View Mall.

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General and Administrative Expenses

General and administrative expenses increased by $3.0 million, or 28.1%, for the three months ended June 30, 2021 compared to the three months ended June 30, 2020 primarily due to higher professional fees incurred and incentive compensation expenses related to increased costs for equity compensation plans.

General and administrative expenses increased by $4.1 million, or 19.3%, for the six months ended June 30, 2021 compared to the six months ended June 30, 2020 primarily due to the same factors driving the variance for the three months ended June 30 comparison.

Interest Expense

Interest expense increased by $14.8 million, or 86.1%, for the three months ended June 30, 2021 compared to the three months ended June 30, 2020. This increase was primarily due to higher weighted average debt balances and higher weighted average interest rates. Our weighted average effective borrowing rate was 5.90% for the three months ended June 30, 2021 compared to 3.97% for the three months ended June 30, 2020. Our weighted average debt balance was $1,856.8 million for the three months ended June 30, 2021, compared to $1,775.3 million for the three months ended June 30, 2020.

Interest expense increased by $28.7 million, or 84.2%, for the six months ended June 30, 2021 compared to the six months ended June 30, 2020. This increase was primarily due to higher weighted average debt balances and higher weighted average interest rates. Our weighted average effective borrowing rate was 6.28% for the six months ended June 30, 2021 compared to 4.05% for the six months ended June 30, 2020. Our weighted average debt balance was $1,855.5 million for the six months ended June 30, 2021, compared to $1,746.3 million for the six months ended June 30, 2020.

Gain on Debt Extinguishment

On June 10, 2021, we were notified that the full principal balance and accrued interest on our loan under the Paycheck Protection Program (PPP) of the Coronavirus Aid, Relief, and Economic Security (CARES) Act was forgiven. As a result of the forgiveness, we recorded a gain on debt extinguishment of $4.6 million during the three and six months ended June 30, 2021.

Impairment of Assets

Reorganization Expenses

For the three and six months ended June 30, 2021, we incurred costs of $0.1 million and $0.3 million, respectively, in connection with our efforts to finalize our Financial Restructuring that were directly attributable to our bankruptcy proceedings, which we classified within reorganization expenses in the consolidated statements of operations.

Equity in Income (Loss) of Partnerships

Equity in income of partnerships was $2.4 million in the three months ended June 30, 2021 compared to a loss in the prior year period, reflecting a change of $2.8 million, or 779.6%, primarily due to higher real estate revenues across our partnership properties.

Equity in loss of partnerships was $1.0 million in the six months ended June 30, 2021 compared to income in the prior year period, reflecting a change of $1.4 million, or 316.9%, primarily resulting from lower real estate revenues across all of our partnership properties due to COVID-19, and higher property operating expenses and interest expense primarily at Fashion District Philadelphia.

(Loss) Gain on Sales of Real Estate

In May 2021, we closed on the sale of a parcel of property at Moorestown Mall for $10.1 million. In connection with the sale, we paid a $9.0 million lease termination fee for a portion of the property that was under a lease agreement for net proceeds of $0.8 million. We recorded a loss on sale of real estate of $1.0 million in connection with the sale.

In January 2020, we completed the sale of an outparcel at Woodland Mall in Grand Rapids, Michigan for total consideration of $5.2 million. In March 2020, we completed the sale of two outparcels at Magnolia Mall in Florence, South Carolina for total consideration of $2.9 million. In connection with the March sale, we recorded a gain of $2.0 million. There were no gains on sales of real estate in the three months ended June 30, 2021.

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NON-GAAP SUPPLEMENTAL FINANCIAL MEASURES

Overview

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

•

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

•

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

•

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

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

Unconsolidated Properties and Proportionate Financial Information

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

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

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

•

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

•

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

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•

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

•

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

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

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

Net Operating Income (“NOI”)

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

Same Store NOI is calculated using retail properties owned for the full periods presented and excludes properties acquired or disposed of, under redevelopment, or designated as non-core during the periods presented. Non Same Store NOI is calculated using the retail properties excluded from the calculation of Same Store NOI.

The table below reconciles net loss to NOI of our consolidated properties for the three and six months ended June 30, 2021 and 2020:

	Three Months Ended June 30,						Six Months Ended June 30,
(in thousands of dollars)	2021			2020			2021			2020
Net loss	$	(25,380	)	$	(23,119	)	$	(69,360	)	$	(36,668	)
Other income		(162	)		(131	)		(288	)		(424	)
Depreciation and amortization		29,686			30,908			59,525			61,177
General and administrative expenses		13,535			10,569			25,366			21,264
Insurance recoveries, net		(670	)		(586	)		(670	)		(586	)
Provision for employee separation expenses		149			1,040			240			1,113
Project costs and other expenses		77			66			179			161
Interest expense, net		31,978			17,182			62,709			34,040
Reorganization expenses		69			—			267			—
Impairment of assets		1,302			—			1,302			—
Equity in (income) loss of partnerships		(2,433	)		358			1,000			(461	)
Gain on extinguishment of debt		(4,587	)		—			(4,587	)		—
Gain on sales of real estate by equity method investee		(1,347	)		—			(1,347	)		—
Loss (gain) on sales of real estate, net		974			(9,300	)		974			(11,263	)
Loss on sales of non-operating real estate		—			144			—			190
NOI from consolidated properties	$	43,191		$	27,131		$	75,310		$	68,543

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The table below reconciles equity in income (loss) of partnerships to NOI of our share of unconsolidated properties for the three and six months ended June 30, 2021 and 2020:

	Three Months Ended June 30,					Six Months Ended June 30,
(in thousands of dollars)	2021		2020			2021			2020
Equity in income (loss) of partnerships	$	2,433	$	(358	)	$	(1,000	)	$	461
Other income		—		(12	)		—			(26	)
Depreciation and amortization		2,974		3,691			6,162			7,302
Impairment of assets		265		—			265			—
Interest and other expenses		5,531		2,764			10,818			5,792
NOI from equity method investments at ownership share	$	11,203	$	6,085		$	16,245		$	13,529

The table below presents total NOI and total NOI excluding lease termination revenue for the three months ended June 30, 2021 and 2020:

	Same Store				Non Same Store				Total (non-GAAP)
(in thousands of dollars)	2021		2020		2021		2020		2021		2020
NOI from consolidated properties	$	42,617	$	27,077	$	574	$	54	$	43,191	$	27,131
NOI from equity method investments at ownership share		11,196		6,078		7		6		11,203		6,085
Total NOI		53,813		33,155		581		60		54,394		33,216
Less: lease termination revenue		3,135		217		—		—		3,135		217
Total NOI excluding lease termination revenue	$	50,678	$	32,938	$	581	$	60	$	51,259	$	32,999

Total NOI increased by $21.2 million in the three months ended June 30, 2021 compared to the three months ended June 30, 2020 due to the same increase in Same Store NOI. This increase in Same Store NOI is primarily due the reasons described in “— Real Estate Revenue” and “— Property Operating Expenses.” See “— Real Estate Revenue” and “— Property Operating Expenses” above for further information about the factors affecting NOI from our consolidated properties.

The table below presents total NOI and total NOI excluding lease termination revenue for the six months ended June 30, 2021 and 2020:

	Same Store				Non Same Store					Total (non-GAAP)
(in thousands of dollars)	2021		2020		2021			2020		2021		2020
NOI from consolidated properties	$	75,323	$	67,507	$	(13	)	$	1,036	$	75,310	$	68,543
NOI from equity method investments at ownership share		16,255		13,513		(10	)		15		16,245		13,529
Total NOI		91,578		81,020		(23	)		1,051		91,555		82,072
Less: lease termination revenue		3,170		226		—			—		3,170		226
Total NOI excluding lease termination revenue	$	88,408	$	80,794	$	(23	)	$	1,051	$	88,385	$	81,846

Total NOI increased by $9.4 million in the six months ended June 30, 2021 compared to the six months ended June 30, 2020 due to a $10.6 million increase in Same Store NOI offset by a decrease of $1.1 million in Non Same Store NOI. The increase in Same Store NOI is primarily due the reasons described in “— Real Estate Revenue” and “— Property Operating Expenses”. The decrease in NOI from Non Same Store properties is due to the conveyance of Wyoming Valley Mall and derecognition of Valley View Mall in the third quarter of 2020. See “— Real Estate Revenue” and “— Property Operating Expenses” above for further information about the factors affecting NOI from our consolidated properties.

Funds From Operations (“FFO”)

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

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

FFO does not include gains and losses on sales of operating real estate assets or impairment write downs of depreciable real estate (including development land parcels), which are included in the determination of net loss in accordance with GAAP. Accordingly, FFO is not a

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comprehensive measure of our operating cash flows. In addition, since FFO does not include depreciation on real estate assets, FFO may not be a useful performance measure when comparing our operating performance to that of other non-real estate commercial enterprises. We compensate for these limitations by using FFO in conjunction with other GAAP financial performance measures, such as net loss and net cash used in operating activities, and other non-GAAP financial performance measures, such as NOI. FFO does not represent cash generated from operating activities in accordance with GAAP and should not be considered to be an alternative to net loss (determined in accordance with GAAP) as an indication of our financial performance or to be an alternative to cash flow from operating activities (determined in accordance with GAAP) as a measure of our liquidity, nor is it indicative of funds available for our cash needs, including our ability to make cash distributions. We believe that net loss is the most directly comparable GAAP measurement to FFO.

When applicable, we also present FFO, as adjusted, and FFO per diluted share and OP Unit, as adjusted, which are non-GAAP measures, for the three and six months ended June 30, 2021 and 2020, to show the effect of such items as gain or loss on debt extinguishment (including accelerated amortization of financing costs), impairment of assets, provision for employee separation expense, insurance recoveries or losses, net, gain on derecognition of property, gain or loss on hedge ineffectiveness and reorganization expenses which had an effect on our results of operations, but are not, in our opinion, indicative of our ongoing operating performance.

We believe that FFO is helpful to management and investors as a measure of operating performance because it excludes various items included in net loss that do not relate to or are not indicative of operating performance, such as gains on sales of operating real estate and depreciation and amortization of real estate, among others. We believe that Funds From Operations, as adjusted, is helpful to management and investors as a measure of operating performance because it adjusts FFO to exclude items that management does not believe are indicative of our operating performance, such as provision for employee separation expense, gain on hedge ineffectiveness and reorganization expenses.

The following table presents a reconciliation of net loss determined in accordance with GAAP to FFO attributable to common shareholders and OP Unit holders, FFO attributable to common shareholders and OP Unit holders per diluted share and OP Unit, FFO attributable to common shareholders and OP Unit holders, as adjusted and FFO attributable to common shareholders and OP Unit holders, as adjusted per diluted share and OP Unit, for the three and six months ended June 30, 2021 and 2020:

	Three Months Ended June 30,						Six Months Ended June 30,
(in thousands, except per share amounts)	2021			2020			2021			2020
Net loss	$	(25,380	)	$	(23,119	)	$	(69,360	)	$	(36,668	)
Depreciation and amortization on real estate:
Consolidated properties		29,349			30,541			58,840			60,485
PREIT’s share of equity method investments		2,974			3,796			6,162			7,407
Gain on sales of real estate by equity method investee		(1,347	)		—			(1,347	)		—
Loss (gain) on sales of real estate, net		974			(9,301	)		974			(11,263	)
Impairment of Assets:
Consolidated properties		1,302			—			1,302			—
PREIT’s share of equity method investments		265			—			265			—
Preferred share dividends declared and paid ⁽¹⁾		—			(6,844	)		—			(13,688	)
Funds from operations attributable to common shareholders and OP Unit holders		8,137			(4,927	)		(3,164	)		6,273
Provision for employee separation expense		149			1,040			240			1,113
Gain on hedge ineffectiveness		(494	)		—			(1,797	)		—
Gain on debt extinguishment		(4,587	)		—			(4,587	)		—
Insurance recoveries, net		(670	)		(586	)		(670	)		(586	)
Reorganization expenses		69			—			267			—
Funds from operations, as adjusted, attributable to common shareholders and OP Unit holders	$	2,604		$	(4,473	)	$	(9,711	)	$	6,800
Funds from operations attributable to common shareholders and OP Unit holders per diluted share and OP Unit ⁽¹⁾	$	0.10		$	(0.06	)	$	(0.04	)	$	0.08
Funds from operations, as adjusted, attributable to common shareholders and OP Unit holders per diluted share and OP Unit ⁽¹⁾	$	0.03		$	(0.06	)	$	(0.12	)	$	0.09
Weighted average number of shares outstanding		78,144			77,269			77,896			77,021
Weighted average effect of full conversion of OP Units		1,976			2,023			1,976			2,023
Effect of common share equivalents		919			357			805			439
Total weighted average shares outstanding, including OP Units		81,039			79,649			80,677			79,483

⁽¹⁾ Does not include the impact of $6.8 million and $13.7 million of accrued, undeclared and unpaid preferred share dividends for the three and six month ended June 30, 2021, respectively. The Company cannot declare and pay cash dividends on common shares while there exists a preferred dividend arrearage.

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FFO attributable to common shareholders and OP Unit holders was $8.1 million for the three months ended June 30, 2021, an increase of $13.1 million, or 265.2%, compared to a loss of $4.9 million for the three months ended June 30, 2020.

FFO attributable to common shareholders and OP Unit holders per diluted share and OP Unit was $0.10 and $(0.06) for the three months ended June 30, 2021 and 2020, respectively.

FFO, as adjusted, attributable to common shareholders and OP Unit holders per diluted share and OP Unit was $0.03 and $(0.06) for the three months ended June 30, 2021 and 2020, respectively.

FFO attributable to common shareholders and OP Unit holders was a loss of 3.2 million for the six months ended June 30, 2021, a decrease of $9.4 million, or 150.4%, compared to $6.2 million for the six months ended June 30, 2020.

FFO attributable to common shareholders and OP Unit holders per diluted share and OP Unit was $(0.04) and $0.08 for the six months ended June 30, 2021 and 2020, respectively.

FFO, as adjusted, attributable to common shareholders and OP Unit holders per diluted share and OP Unit was $(0.12) and $0.09 for the six months ended June 30, 2021 and 2020, respectively.

LIQUIDITY AND CAPITAL RESOURCES

This “Liquidity and Capital Resources” section contains certain “forward-looking statements” that relate to expectations and projections that are not historical facts. These forward-looking statements reflect our current views about our future liquidity and capital resources, and are subject to risks and uncertainties that might cause our actual liquidity and capital resources to differ materially from the forward-looking statements. Additional factors that might affect our liquidity and capital resources include those discussed herein and in the section entitled “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2020 filed with the SEC. We do not intend to update or revise any forward-looking statements about our liquidity and capital resources to reflect new information, future events or otherwise.

Capital Resources

We currently expect to meet certain of our short-term liquidity requirements, including operating expenses, recurring capital expenditures, tenant improvements and leasing commissions, generally through our available working capital and our First Lien Revolving Facility, subject to the terms and conditions of our First Lien Credit Agreement. See “Credit Agreements—Similar terms of the Credit Agreements” below for covenant information. We expect to spend approximately $8.5 million related to our unaccrued contractual obligations for capital improvements and development projects in 2021 and 2022. We believe that our net cash provided by operations will be sufficient to allow us to make any distributions necessary to enable us to continue to qualify as a REIT under the Internal Revenue Code of 1986, as amended. Our Credit Agreements limit our ability to declare and pay dividends on our common and preferred shares, subject to certain exceptions. We have deferred payments on our preferred shares and suspended payments on our common shares since the third quarter of 2020. Other than as may be required to maintain our status as a REIT, we do not anticipate that we will pay any cash dividends to holders of our common or preferred shares for the foreseeable future.

As a result of the existing cumulative unpaid dividends on our preferred shares and our bankruptcy filing, we are no longer able to register the offer and sale of securities on Form S-3. This creates additional limitations on our ability to raise capital in the capital markets, potentially increasing our costs of raising capital in the future. Our ability to raise capital in the capital markets may also be impacted by market fluctuations more generally, including as a result of the COVID-19 pandemic and related economic downturn.

We have availability under our revolving facility of $75.2 million as of June 30, 2021. We are actively seeking to raise additional capital, including through asset dispositions identified through our portfolio property reviews. Disposing of these properties can enable us to redeploy or recycle our capital to other uses. In many cases, we are marketing land parcels for development for a variety of different nontraditional, non-retail uses, including hotel, multifamily residential and healthcare uses, which we believe can also help position our portfolio within differentiated mixed-use environments. During 2020 and through the second quarter of 2021, we executed agreements of sale for five land parcels for anticipated multifamily development, two land parcels for anticipated hotel development and an asset at a property, which are expected to provide an aggregate of up to approximately $87.2 million in proceeds through 2023. We also closed on the sale of a parcel of property during the second quarter of 2021. The proceeds from our anticipated property sales will primarily be used to repay amounts outstanding under our Credit Agreements. Each of the transactions is subject to numerous closing conditions, including the completion of due diligence and securing of entitlements, which in several cases has been delayed due to the effects of COVID-19 on business operations and availability of financing. Closing of the transactions cannot be assured or the timing of the completion yet estimated with certainty.

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

•

adverse changes or prolonged downturns in general, local or retail industry economic, financial, credit or capital market or competitive conditions, as a result of the COVID-19 pandemic or otherwise, leading to a reduction in real estate revenue or cash flows or an increase in expenses;

•

continued deterioration in our tenants’ business operations and financial stability, particularly in light of the COVID-19 pandemic, and unsettled recovery, including anchor or non-anchor tenant bankruptcies, leasing delays or terminations, or lower sales, causing deferrals or declines in rent, percentage rent and cash flows;

•

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

•

increases in operating costs, including those related to improved health and safety protocols, and increases that cannot be passed on to tenants, resulting in reduced operating income and cash flows; and

•

increases in interest rates, resulting in higher borrowing costs.

In addition, we are continuing to monitor the COVID-19 pandemic and the related restrictions and changes to behavior intended to reduce its spread, and its impact on our tenants, their supply chains and customers and the retail industry. Thus far, the pandemic and the actions taken to address it and the related overall worsening of economic conditions have had an adverse effect on our business, operations, liquidity and financial condition.

As of June 30, 2021, all of our malls had re-opened while adhering to social distancing and sanitation and safety protocols designed to address the risks posed by COVID-19, however, many of our tenants continue to operate at reduced capacity. The pandemic’s effect, primarily beginning in the second quarter of 2020, had a significant impact on our operations, financial condition, liquidity and results of operations in 2020 and the early part of 2021 and its impact is expected to continue through future periods. As of June 30, 2021, we had cash receipts of 88% of billed second quarter 2021 rents, an increase from cash receipts of 81% and 73% of billed rents as of March 31, 2021 and December 31, 2020, respectively. Including collections of other months’ rents, we collected 127% of our billed second quarter 2021 rents. We believe that our rent collections are probable, but expect that collections will continue to be below our tenants’ rent obligations as long as lingering effects of COVID-19, including new or renewed restrictions and business closures, affect the return of customers to malls and the financial strength of our tenants. While we continue to record rental revenue, the reduced collection levels have impacted our liquidity position and may continue to do so. The extent and duration of such effects are uncertain, and continue to evolve and remain difficult to predict. Additionally, the future outbreak of any other highly infectious or contagious diseases may materially and adversely affect our business, financial condition, liquidity and operating results.

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

LIBOR Alternative

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

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

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

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

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Credit Agreements

We have entered into two secured credit agreements (collectively, as amended, the “Credit Agreements”): (a) the First Lien Credit Agreement, which, as described in more detail below, includes (i) the $130.0 million First Lien Revolving Facility, and (ii) the $384.5 million First Lien Term Loan Facility, and (b) the Second Lien Credit Agreement, which, as described in more detail below, includes the $535.2 million Second Lien Term Loan Facility. The First Lien Term Loan Facility and the Second Lien Term Loan Facility are collectively referred to as the “Term Loans.” The Credit Agreements refinanced our previously existing credit agreements in effect prior to the effective date, including our secured term loan under the Credit Agreement dated as of August 11, 2020 (as amended, the “Bridge Credit Agreement”), our Seven-Year Term Loan Agreement entered into on January 8, 2014 (as amended, the “7-Year Term Loan”), and our 2018 Amended and Restated Credit Agreement entered into on May 24, 2018 (as amended, the “2018 Credit Agreement”).

As of June 30, 2021, we had borrowed $944.7 million under the Term Loans and $54.8 million under the First Lien Revolving Facility. The carrying value of the Term Loans on our consolidated balance sheet as of June 30, 2021 is net of $10.1 million of unamortized debt issuance costs. The maximum amount that was available to be borrowed by us under the First Lien Revolving Facility as of December 31, 2020 was $75.2 million.

The maturity date of the Credit Agreements is December 10, 2022 (or such earlier date that the obligations under the applicable Credit Agreement have been accelerated), unless extended by one year until December 10, 2023 at our option (the “Maturity Date”). Any such extension would be subject to our fulfillment of certain conditions including maintaining minimum liquidity of $35.0 million, a minimum corporate debt yield of 8.0% and a maximum loan-to-value ratio of 105% for the total first lien and second lien loans and letters of credit and the Borrowing Base Properties as determined by an appraisal (provided that we may obtain a second appraisal of each Borrowing Base Property prepared by a nationally recognized appraisal firm and use the highest appraised value), and provided that no default or event of default exists and our representations and warranties are true in all material respects.

First Lien Credit Agreement

On December 10, 2020, we entered into an Amended and Restated First Lien Credit Agreement (the “First Lien Credit Agreement”) with Wells Fargo Bank, National Association (“Wells Fargo Bank”) and the other financial institutions signatory thereto and their assignees, for secured loan facilities consisting of: (i) a secured first lien revolving credit facility allowing for borrowings up to $130.0 million, including a sub-facility for letters of credit to be issued thereunder in an aggregate stated amount of up to $10.0 million (collectively, the “First Lien Revolving Facility”), and (ii) a $384.5 million secured first lien term loan facility (the “First Lien Term Loan Facility”).

Amounts borrowed under the First Lien Credit Agreement may be either Base Rate Loans or LIBOR Loans. Base Rate Loans bear interest at the highest of (a) the Prime Rate, (b) the Federal Funds Rate plus 0.50% and (c) the LIBOR Market Index Rate plus 1.0%, provided that the Base Rate will not be less than 1.50% per annum, in each case plus (w) for revolving loans, 2.50% per annum, and (x) for term loans, 4.74% per annum. LIBOR Loans bear interest at LIBOR plus (y) for revolving loans, 3.50% per annum, and (z) for term loans, 5.74% per annum, in each case, provided that LIBOR will not be less than 0.50% per annum. Interest is due to be paid in cash on the last day of each applicable interest period (with rolling 30-day interest periods) and on the Maturity Date. We must pay certain fees to the administrative agent for the account of the lenders in connection with the First Lien Credit Agreement, including an unused fee for the account of the revolving lenders, which will accrue (i) 0.35% per annum on the daily amount of the unused revolving commitments when that amount is greater than or equal to 50% of the aggregate amount of revolving commitments, and (ii) 0.25% when that amount is less than 50% of the aggregate amount of revolving commitments. Accrued and unpaid unused fees will be payable quarterly in arrears during the term of the First Lien Credit Agreement and on the Revolving Termination Date (or any earlier date of termination of the revolving commitments or reduction of the revolving commitments to zero).

Letters of credit and the proceeds of revolving loans may be used (i) to refinance existing indebtedness under the Bridge Credit Agreement, (ii) for working capital and general corporate purposes (subject to certain exceptions set forth in the First Lien Credit Agreement, including limitations on investments in non-Borrowing Base Properties), and (iii) to fund professional fee payments and other fees and expenses subject to the provisions of the Plan and related confirmation order and for other uses permitted by the provisions of the First Lien Credit Agreement, Plan and confirmation order, in each case consistent with an approved annual business plan. The proceeds of term loans may only be used to refinance existing indebtedness under the 2018 Credit Agreement and the 7-Year Term Loan. We may terminate or reduce the amount of the revolving commitments at any time and from time to time without penalty or premium, subject to the terms of the First Lien Credit Agreement.

Second Lien Credit Agreement

On December 10, 2020, we also entered into a Second Lien Credit Agreement (the “Second Lien Credit Agreement”) with Wells Fargo Bank and the other financial institutions signatory thereto and their assignees for a $535.2 million secured second lien term loan facility (the “Second Lien Term Loan Facility”).

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Amounts borrowed under the Second Lien Credit Agreement may be either Base Rate Loans or LIBOR Loans. Base Rate Loans bear interest at the highest of (a) the Prime Rate, (b) the Federal Funds Rate plus 0.50% and (c) the LIBOR Market Index Rate plus 1.0%, provided that the Base Rate will not be less than 1.50% per annum, in each case plus 7.00% per annum. LIBOR Loans bear interest at LIBOR plus 8.00% per annum, provided that LIBOR will not be less than 0.50% per annum. Interest is due to be paid in kind on the last day of each applicable interest period (with rolling 30-day interest periods) by adding the accrued and unpaid amount thereof to the principal balance of the loans under the Second Lien Credit Agreement and then accruing interest on the increased principal amount (provided that after the discharge of our Senior Debt Obligations, interest will be paid in cash). We must pay certain fees to the administrative agent for the account of the lenders in connection with the Second Lien Credit Agreement.

The proceeds of loans under the Second Lien Credit Agreement may only be used to refinance existing indebtedness under the 2018 Credit Agreement and the 7-Year Term Loan.

On February 8, 2021, the Company entered into the first amendment to the Second Lien Credit Agreement (“First Amendment”). The First Amendment provided for elimination of approximately $5.3 million of the disputed default interest that was capitalized into the principal balance of the Second Lien Term Loan Facility, reducing the outstanding principal amount of loans outstanding under the Second Lien Credit Agreement, retroactively as of December 10, 2020, to $535.2 million. The First Amendment also eliminated the disputed PIK interest that was capitalized through the date of the amendment.

See our Annual Report on Form 10-K for the year ended December 31, 2020 for additional information on the Credit Agreements.

FDP Loan Agreement

As described in note 4 of our consolidated financial statements, PM Gallery LP, a Delaware limited partnership and joint venture entity owned indirectly by us and The Macerich Company (“Macerich”), previously entered into a $250.0 million term loan in January 2018 (as amended in July 2019 to increase the total maximum potential borrowings to $350.0 million) to fund the ongoing redevelopment of Fashion District Philadelphia and to repay capital contributions to the venture previously made by the partners. On December 10, 2020, PM Gallery LP, together with certain other subsidiaries owned indirectly by us and Macerich (including the fee and leasehold owners of the properties that are part of the Fashion District Philadelphia project), entered into an Amended and Restated Term Loan Agreement (the “FDP Loan Agreement”). In connection with the execution of the FDP Loan Agreement, a $100.0 million principal payment was made (and funded indirectly by Macerich) to pay down the existing loan, reducing the outstanding principal under the FDP Loan Agreement from $301.0 million to $201.0 million. In connection with the execution of the FDP Loan Agreement, the governing structure of PM Gallery LP was modified such that, effective as of January 1, 2021, Macerich is responsible for the entity’s operations and, subject to limited exceptions, controls major decisions.

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Preferred Shares

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

In 2020, the Company suspended payment of its preferred share dividends. Dividends on the Series B, Series C and Series D preferred shares are cumulative and therefore will continue to accrue at an annual rate of $1.8436 per share, $1.80 per share and $1.7188 per share, respectively. As of June 30, 2021, the cumulative amount of unpaid dividends on our issued and outstanding preferred shares totaled $27.3 million. This consisted of unpaid dividends per share on the Series B, Series C and Series D preferred shares of $1.84 per share, $1.80 per share and $1.72 per share, respectively.

Both the First Lien Credit Agreement and the Second Lien Credit Agreement prohibit any redemption of preferred shares so long as such agreements remain in effect.

Mortgage Loan Activity—Consolidated Properties

Francis Scott Key Mall

On June 25, 2021, certain of our consolidated subsidiaries entered into an amendment to our mortgage loan secured by our property at Francis Scott Key Mall, in Frederick, Maryland, which provided for a paydown to $60.5 million, an extension of the maturity date until June 25, 2024, with an option to extend an additional year if certain criteria are met. Among other things, the amendment also provides for a variable interest rate of one month LIBOR plus 3.6% with interest only payments. Also, the amendment provides for excess cash flow from the property to be deposited into a cash collateral account which will be used at the administrative agent’s discretion to pay down the loan balance. The Company capitalized $0.1 million of lender fees as additional debt issuance costs in connection with the amendment.

Viewmont Mall

On June 25, 2021, certain of our consolidated subsidiaries entered into an amendment to our $67.2 million mortgage loan secured by our property at Viewmont Mall in Scranton, Pennsylvania, which provides for an extension of the maturity date until June 25, 2024, with an option to extend an additional year if certain criteria are met. Among other things, the amendment also provides for a variable interest rate of one month LIBOR plus 3.6% with interest only payments. Also, the amendment provides for excess cash flow from the property to be deposited into a cash collateral account which will be used at the administrative agent’s discretion to pay down the loan balance. The Company capitalized $0.4 million of lender fees as additional debt issuance costs in connection with the amendment.

Woodland Amendment

On February 8, 2021, certain of our consolidated subsidiaries entered into an amendment to our mortgage loan secured by the Woodland Mall in Grand Rapids, Michigan, which provides for an extension of the maturity date until December 10, 2021, with an option to extend an additional year if certain criteria are met. Among other things, the amendment also (i) reduces the cap on guarantor liability for PREIT Associates, L.P. to $10.0 million; (ii) restricts the lenders from exercising their rights and remedies under the guaranty until December 10, 2022, unless there is a bankruptcy filing with respect to the borrowers or guarantor; (iii) adjusts the interest rate; (iv) provides for the pledge of additional collateral as security for the borrowers’ obligations (including the anchor parcel at Woodland Mall which was released as collateral from our senior secured credit facilities); and (v) requires the borrowers to pay to the lenders a $5.0 million remargin payment. We capitalized $0.3 million of lender fees as additional debt issuance costs in connection with the amendment.

Forbearance Agreements

During the year ended December 31, 2020, we entered into forbearance and loan modification agreements for our consolidated properties Cherry Hill Mall, Cumberland Mall, Dartmouth Mall, Francis Scott Key Mall, Viewmont Mall, and Woodland Mall and for our unconsolidated partnership properties Metroplex and Springfield Mall. These arrangements allowed us to defer principal payments, and in some cases interest as well, on the mortgages between May and August of 2020 depending on the terms of the contract. At the end of each deferment period, the repayment period spans from four to six months to pay back the deferred amounts. The repayment periods ranged from August 2020 through February 2021 depending on the terms of the specific agreements. As of June 30, 2021, we had repaid all principal and interest deferrals.

Valley View Mall

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In the second quarter of 2020, we defaulted on the mortgage loan secured by Valley View Mall due to a missed payment on June 1, 2020, and not paying the balloon payment of $27.3 million. In the third quarter of 2020, the operations of the property were transferred to a receiver and foreclosure was filed. We recorded a gain on derecognition of property during the third quarter 2020 and have recorded the mortgage balance and an offsetting contract asset on our consolidated balance sheets as of June 30, 2021 and December 31, 2020, both of which will be eliminated when the property foreclosure sale is completed.

Mortgage Loans

Our mortgage loans, which are secured by nine of our consolidated properties, are due in installments over various terms extending to the year 2025. Our nine properties include Valley View Mall, which was assigned to a receiver in the third quarter 2020. Although we have not yet conveyed Valley View Mall because foreclosure proceedings are ongoing, we no longer control or operate the property as a result of a court order assigning the receiver. The mortgage principal balance of Valley View Mall was $27.2 million at June 30, 2021 and December 31, 2020, which we will continue to recognize until the foreclosure process is completed. Six of these mortgage loans bear interest at fixed interest rates that range from 3.88% to 5.95% and had a weighted average interest rate of 4.09% at June 30, 2021. Three of our mortgage loans bear interest at variable rates and had a weighted average interest rate of 3.72% at June 30, 2021. The weighted average interest rate of all consolidated mortgage loans was 3.98% at June 30, 2021. Mortgage loans for properties owned by unconsolidated partnerships are accounted for in “Investments in partnerships, at equity” and “Distributions in excess of partnership investments,” and are not included in the table below.

The following table outlines the timing of principal payments and balloon payments pursuant to the terms of our mortgage loans on our consolidated properties as of June 30, 2021:

(in thousands of dollars)	Total		Remainder of 2021		2022-2023		2024-2025
Principal payments	$	40,360	$	9,691	$	19,858	$	10,811
Balloon payments		822,970		141,362		342,577		339,031
Total		863,330	$	151,053	$	362,435	$	349,842
Less: unamortized debt issuance costs		1,431
Carrying value of mortgage notes payable	$	861,899

Contractual Obligations

The following table presents our aggregate contractual obligations as of June 30, 2021 for the periods presented:

(in thousands of dollars)	Total		Remainder of 2021			2022-2023			2024-2025		Thereafter
Mortgage loans	$	863,330	$	151,053	⁽¹⁾	$	362,435		$	349,842	$	—
Term Loans		944,699		—			944,699	⁽²⁾		—		—
First Lien Revolving Facility		54,830		—			54,830			—		—
Interest on indebtedness⁽³⁾		121,901		33,327			70,894			17,680		—
Operating leases		10,240		634			1,993			1,730		5,883
Ground leases		52,401		860			3,168			3,103		45,270
Finance leases		6,415		494			1,971			1,878		2,072
Development and redevelopment commitments⁽⁴⁾		8,457		7,168			1,289			—		—
Total	$	2,062,273	$	193,536		$	1,441,279		$	374,233	$	53,225

⁽¹⁾	The 2021 balance includes $27.2 million for our mortgage loan secured by Valley View Mall, which was in default as of June 30, 2021. We do not expect to pay the principal balance remaining.

⁽²⁾	Includes our First Lien Term Loan of $383.3 million and the anticipated maturity date balance of our Second Lien Term Loan Facility of $561.4 million, which includes estimated capitalized PIK interest based on current interest rates.

⁽³⁾	Includes interest payments expected to be made on consolidated debt, including those in connection with interest rate swap agreements.

⁽⁴⁾

The timing of the payments of these amounts is uncertain. We expect that a significant majority of such payments (of which we include 100% of our obligations related to Fashion District Philadelphia, which opened in September 2019) will be made prior to December 31, 2021, but cannot provide any assurance that changed circumstances at these projects will not delay the settlement of these obligations.

Interest Rate Derivative Agreements

As of June 30, 2021, we had interest rate swap agreements designated in qualifying hedging relationships outstanding with a weighted average base interest rate of 2.57% on a notional amount of $439.8 million, maturing on various dates through May 2023. As of June 30, 2021, our non-designated swaps outstanding with a weighted average base interest rate of 1.85% on a notional amount of $175.0 million, maturing on various dates through December 2021. We originally entered into these interest rate swap agreements in order to hedge the interest payments associated with our issuances of variable interest rate long term debt. The interest rate swap agreements are net settled monthly.

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On December 10, 2020 as a result of the Financial Restructuring, we de-designated seven of our interest rate swaps which were previously designated cash flow hedges against the 2018 Credit Facility and 7-year Term Loan, as the hedged forecasted transactions were no longer probable to occur during the hedged time period due to the Financial Restructuring as described in Note 1. As such, the Company accelerated the reclassification of a portion of the amounts in other comprehensive (loss) income to earnings which resulted in a loss of $2.8 million that was recorded within interest expense, net in the consolidated statement of operations. Additionally, on December 10, 2020, the Company voluntarily de-designated the remaining thirteen interest swaps that were also previously designated as cash flow hedges against the 2018 Credit Facility and 7-year Term Loan. Upon de-designation, the accumulated other comprehensive (loss) income balance of each of these de-designated derivatives will be separately reclassified to earnings as the originally hedged forecasted transactions affect earnings. Through December 10, 2020, the changes in fair value of the derivatives were recorded to accumulated other comprehensive (loss) income in the consolidated balance sheets.

During the six months ended June 30, 2021, we had three designated swaps mature. As of June 30, 2021, we had 10 total derivatives which were designated as cash flow hedges.

Over the next twelve months we estimate that $9.4 million will be reclassified as an increase to interest expense in connection with our designated derivatives. The recognition of these amounts could be accelerated in the event that we repay amounts outstanding on the debt instruments and do not replace them with new borrowings.

Derivatives not designated as hedges are not speculative and are also used to manage the Company’s exposure to interest rate movements and other identified risks but do not meet the strict hedge accounting requirements. For swaps that were not re-designated subsequent to December 10, 2020, changes in the fair value of derivatives are recorded directly in earnings as interest expense in the consolidated statement of operations. During the six months ended June 30, 2021, we had four non-designated swaps mature. As of June 30, 2021, we had seven total derivatives which were non-designated.

CASH FLOWS

Net cash provided by operating activities totaled $34.7 million for the six months ended June 30, 2021 compared to net cash used in operating activities of $3.7 million for the six months ended June 30, 2020. This increase in cash provided by operating activities was due to changes in working capital between periods primarily as a result of strong collection efforts of our outstanding accounts receivable in the first half of the current year, which are included in change in other assets in our statement of cash flows.

Cash flows used in investing activities were $14.4 million for the six months ended June 30, 2021 compared to cash flows used in investing activities of $46.6 million for the six months ended June 30, 2020. Cash flows used in investing activities for the six months ended June 30, 2021 included $5.3 million of additions to construction in progress and $9.3 million of investments in real estate improvements.

Cash flows used in investing activities for the six months ended June 30, 2020 included $21.9 million of proceeds from asset sales including the sale of three outparcels. Cash flows used in investing activities included additions to construction in progress of $29.7 million, investments in partnerships of $18.1 million (primarily at Fashion District Philadelphia), and real estate improvements of $15.9 million (primarily related to ongoing improvements at our properties).

Cash flows used in financing activities were $24.9 million for the six months ended June 30, 2021 compared to cash flows provided by financing activities of $79.6 million for the six months ended June 30, 2020. Cash flows used in financing activities for the six months ended June 30, 2021 included $14.7 million of principal payments on mortgage loans, $135.2 million in paydowns of Francis Scott Key and Viewmont Malls’ mortgages, along with $0.9 million of deferred financing costs paid for our Woodland Mall, Francis Scott Key Mall, and Viewmont Mall mortgage extensions. These were offset by $127.7 million proceeds from refinancing of the Francis Scott Key and Viewmont Malls mortgages. We also had $0.6 million of shares retired under our equity compensation plan, net of shares issued.

Cash flows provided by financing activities were $79.6 million for the first six months of 2020 and included $120.0 in net borrowings under our 2018 Revolving Facility. These were offset by aggregate dividends and distributions of $32.2 million, principal installments on mortgage loans of $6.4 million, and net repayments of term loans of $6.0 million.

ENVIRONMENTAL

We are aware of certain environmental matters at some of our properties. We have, in the past, performed remediation of such environmental matters, and we are not aware of any significant remaining potential liability relating to these environmental matters or of any obligation to

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satisfy requirements for further remediation. We may be required in the future to perform testing relating to these matters. We have insurance coverage for certain environmental claims up to $10.0 million per occurrence and up to $10.0 million in the aggregate over our two year policy term. See our Annual Report on Form 10-K for the year ended December 31, 2020, in the section entitled “Item 1A. Risk Factors— Risks Related to Our Business and Our Properties—We might incur costs to comply with environmental laws, which could have an adverse effect on our results of operations.”

COMPETITION AND TENANT CREDIT RISK

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

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

If we seek to make acquisitions, competitors (such as institutional investors, other REITs and other owner-operators of retail properties) might drive up the price we must pay for properties, parcels, other assets or other companies or might themselves succeed in acquiring those properties, parcels, assets or companies. In addition, our potential acquisition targets might find our competitors to be more attractive suitors if they have greater resources, are willing to pay more, or have a more compatible operating philosophy. We might not succeed in acquiring retail properties or development sites that we seek, or, if we pay a higher price for a property and/or generate lower cash flow from an acquired property than we expect, our investment returns will be reduced, which will adversely affect the value of our securities.

We receive a substantial portion of our operating income as rent under leases with tenants. At any time, any tenant having space in one or more of our properties could experience a downturn in its business that might weaken its financial condition. Such tenants might enter into or renew leases with relatively shorter terms. Such tenants might also defer or fail to make rental payments when due, delay or defer lease commencement, voluntarily vacate the premises or declare bankruptcy, which could result in the termination of the tenant’s lease or preclude the collection of rent in connection with the space for a period of time, and could result in material losses to us and harm to our results of operations. Also, it might take time to terminate leases of underperforming or nonperforming tenants and we might incur costs to remove such tenants. Some of our tenants occupy stores at multiple locations in our portfolio, and so the effect of any bankruptcy or store closings of those tenants might be more significant to us than the bankruptcy or store closings of other tenants. In addition, under many of our leases, our tenants pay rent based, in whole or in part, on a percentage of their sales. Accordingly, declines in these tenants’ sales directly affect our results of operations. Also, if tenants are unable to comply with the terms of their leases, or otherwise seek changes to the terms, including changes to the amount of rent, we might modify lease terms in ways that are less favorable to us. Given current conditions in the economy, certain industries and the capital markets, in some instances retailers that have sought protection from creditors under bankruptcy law have had difficulty in obtaining debtor-in-possession financing, which has decreased the likelihood that such retailers will emerge from bankruptcy protection and has limited their alternatives. All of these factors have been exacerbated by the impact of the COVID-19 pandemic in 2020 and 2021.

SEASONALITY

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

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INFLATION

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

FORWARD LOOKING STATEMENTS

This Quarterly Report on Form 10-Q for the quarter ended June 30, 2021 , together with other statements and information publicly disseminated by us, contain certain forward-looking statements that can be identified by the use of words such as “anticipate,” “believe,” “estimate,” “expect,” “project,” “intend,” “may” or similar expressions. Forward-looking statements relate to expectations, beliefs, projections, future plans, strategies, anticipated events, trends and other matters, including our expectations regarding the impact of COVID-19 on our business, that are not historical facts. These forward-looking statements reflect our current views about future events, achievements, results, cost reductions, dividend payments and the impact of COVID-19 and are subject to risks, uncertainties and changes in circumstances that might cause future events, achievements or results to differ materially from those expressed or implied by the forward-looking statements. In particular, our business might be materially and adversely affected by the following:

•

the effectiveness of our financial restructuring and any additional strategies that we may employ to address our liquidity and capital resources in the future;

•

our ability to achieve forecasted revenue and pro forma leverage ratio and generate free cash flow to further reduce indebtedness;

•

the COVID-19 global pandemic and the public health and governmental response, which have and may continue to exacerbate many of the risks listed herein;

•

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

•

current economic conditions, including current high rates of unemployment and its effects on consumer confidence and spending, and the corresponding effects on tenant business performance, prospects, solvency and leasing decisions;

•

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

•

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

•

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

•

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

•

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

•

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

•

the frequency, severity and potential impact of extreme weather events at or near our properties, including potential property damage, some or all of which may not be covered by insurance, the potential effect on traffic and sales, and the potential increased costs of insurance coverage;

•

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

•

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

•

our substantial debt and our ability to remain in compliance with our financial covenants under our debt facilities;

•

our ability to raise capital, including through sales of properties or interests in properties, subject to the terms of our Credit Agreements; and

•

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

Additional factors that might cause future events, achievements or results to differ materially from those expressed or implied by our forward-looking statements include those discussed herein and in our Annual Report on Form 10-K for the year ended December 31, 2020 in the section entitled “Item 1A. Risk Factors” and any subsequent reports we file with the SEC. We do not intend to update or revise any forward-looking statements to reflect new information, future events or otherwise.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

The analysis below presents the sensitivity of the market value of our financial instruments to selected changes in market interest rates. As of June 30, 2021, our consolidated debt portfolio consisted of $861.9 million of fixed and variable rate mortgage loans (net of debt issuance costs), $54.8 million outstanding under our First Lien Revolver, which bore interest at a rate of 4.0%, $383.3 million borrowed under our First Lien Term Loan Facility, which bore interest at a rate of 6.2%, and $561.4 million borrowed under our Second Lien Term Loan Facility, which bore interest at a rate of 8.5%.

Our mortgage loans, which are secured by nine of our consolidated properties, are due in installments over various terms extending to October 2025. Our nine properties include Valley View Mall, which was assigned to a receiver in the third quarter 2020. Although we have not yet conveyed Valley View Mall because foreclosure proceedings are ongoing, we no longer control or operate the property as a result of a court order assigning the receiver. The mortgage principal balance of Valley View Mall was $27.2 million at June 30, 2021 and December 31, 2020, which we will continue to recognize until the foreclosure process is completed. Six of our mortgage loans bear interest at fixed interest rates that range from 3.88% to 5.95%, and had a weighted average interest rate of 4.09% at June 30, 2021. Three of our mortgage loans bear interest at variable rates, a portion of which has been swapped to fixed rates, and had a weighted average interest rate of 3.72% at June 30, 2021. The weighted average interest rate of all consolidated mortgage loans was 3.98% at June 30, 2021. Mortgage loans for properties owned by unconsolidated partnerships are accounted for in “Investments in partnerships, at equity” and “Distributions in excess of partnership investments” on the consolidated balance sheets and are not included in the table below.

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

	Fixed Rate Debt					Variable Rate Debt
(in thousands of dollars) For the Year Ending December 31,	Principal Payments		Weighted Average Interest Rate⁽¹⁾			Principal Payments			Weighted Average Interest Rate⁽¹⁾
2021	$	35,153		4.01	%	$	115,900			3.75	%
2022		302,548		3.96	%		999,530	⁽²⁾		7.39	%
2023		59,887		3.99	%		—			—
2024		6,405		4.04	%		127,685			3.69	%
2025 and thereafter		215,752		4.02	%		—			—

⁽¹⁾	Based on the weighted average interest rates in effect as of June 30, 2021 and does not include the effect of our interest rate swap derivative instruments as described below.

⁽²⁾	Includes term loan debt of $944.7 million under our First Lien Term Loan Facility and Second Lien Term Loan Facility with a weighted average interest rate of 7.58% as of June 30, 2021.

As of June 30, 2021, we had $1,243.1 million of variable rate debt. To manage interest rate risk and limit overall interest cost, we may employ interest rate swaps, options, forwards, caps and floors, or a combination thereof, depending on the underlying exposure. Interest rate differentials that arise under swap contracts are recognized in interest expense over the life of the contracts. If interest rates rise, the resulting cost of funds is expected to be lower than that which would have been available if debt with matching characteristics was issued directly. Conversely, if interest rates fall, the resulting costs would be expected to be, and in some cases have been, higher. We may also employ forwards or purchased options to hedge qualifying anticipated transactions. Gains and losses are deferred and recognized in net loss in the same period that the underlying transaction occurs, expires or is otherwise terminated. See Note 6 of the notes to our unaudited consolidated financial statements for further information.

As of June 30, 2021, we had interest rate swap agreements outstanding with a weighted average base interest rate of 2.36% on a notional amount of $614.8 million, maturing on various dates through May 2023. See Item 2. Management’s Discussion and Analysis—Liquidity and Capital Resources—Interest Rate Derivative Agreements for a discussion of changes to the designation of certain of our interest rate swap agreements in 2021.

Changes in market interest rates have different effects on the fixed and variable rate portions of our debt portfolio. A change in market interest rates applicable to the fixed portion of our debt portfolio affects the fair value, but it has no effect on interest incurred or cash flows. A change in market interest rates applicable to the variable portion of our debt portfolio affects the interest incurred and cash flows, but does not affect the fair value. The following sensitivity analysis related to our debt portfolio, which includes the effects of our interest rate swap agreements, assumes an immediate 100 basis point change in interest rates from their actual June 30, 2021 levels, with all other variables held constant.

A 100 basis point increase in market interest rates would have resulted in a decrease in our net financial instrument position of $28.7 million at June 30, 2021. A 100 basis point decrease in market interest rates would have resulted in an increase in our net financial instrument position of $12.9 million at June 30, 2021. Based on the variable rate debt included in our debt portfolio at June 30, 2021, a 100 basis point increase in interest

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rates would have resulted in an additional $6.3 million in interest expense annually. A 100 basis point decrease would have reduced interest incurred by $6.3 million annually.

Because the information presented above includes only those exposures that existed as of June 30, 2021, it does not consider changes, exposures or positions which have arisen or could arise after that date. The information presented herein has limited predictive value. As a result, the ultimate realized gain or loss or expense with respect to interest rate fluctuations will depend on the exposures that arise during the period, our hedging strategies at the time and interest rates.

ITEM 4. CONTROLS AND PROCEDURES.

We are committed to providing accurate and timely disclosure in satisfaction of our SEC reporting obligations. In 2002, we established a Disclosure Committee to formalize our disclosure controls and procedures. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that:

•

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

•

material information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management, including our principal executive and principal financial officers, as appropriate, to allow timely decisions regarding required disclosure.

Our Chief Executive Officer and Chief Financial Officer evaluated our disclosure controls and procedures as of the end of the period covered by this quarterly report on Form 10-Q. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that as of June 30, 2021, our disclosure controls and procedures were not effective due to a material weakness in our internal control over financial reporting.

The ineffectiveness of our internal control over financial reporting was due to the following material weakness in our internal control over financial reporting which we identified and previously reported in Item 9A of our Annual Report on Form 10-K for the year ended December 31, 2020: (i) attracting and retaining sufficient personnel with requisite financial expertise, (ii) the assessment of the risk of fraud, including risks of management override of controls and proper segregation of duties, and (iii) assessing changes in the external environment and the potential impact of those changes on the design, operating effectiveness and monitoring of internal controls over financial reporting.

Management’s Remediation Plan

The Company and its Board of Trustees are committed to maintaining a strong internal control environment. In order to remediate the material weakness described above, we intend to implement additional policies and procedures and take necessary actions, which are expected to include:

•

Implementing policies and procedures to enhance independent review and documentation of journal entries, including segregation of duties;

•

Enhancing our procedures in certain management review controls, including the thresholds utilized for review and the response to outliers;

•

Hiring additional finance and accounting staff;

•

Developing policies and procedures to enhance the precision of management review of financial statement information and control impact of changes in the external environment; and

•

Reevaluating our monitoring activities for relevant controls.

Management is continuing the process of implementing and monitoring the effectiveness of these and other processes, procedures and controls and will make any further changes deemed appropriate. Management believes our planned remedial efforts will effectively remediate the identified material weakness, but remediation will only be deemed complete after the applicable remedial controls operate for a sufficient period of time and management is able to conclude, through testing, that the controls are operating effectively. As we continue to evaluate and work to improve our internal control over financial reporting, management may determine it is necessary to take additional measures to address control deficiencies or determine it necessary to modify the remediation plan described above.

Changes in Internal Control over Financial Reporting

Other than the material weakness identified in the fourth quarter of 2020, and designing changes intended to remediate the material weakness, there were no changes in our internal control over financial reporting during the quarter ended June 30, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II—OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

In the normal course of business, we have become and might in the future become involved in legal actions relating to our business, including but not limited to commercial disputes, rent collection actions and other matters related to the ownership and operation of our properties and the properties that we manage for third parties. In management’s opinion, the resolution of any such pending legal actions is not expected to have a material adverse effect on our consolidated financial position or results of operations.

On November 1, 2020, we and certain of our wholly owned subsidiaries commenced voluntary cases under chapter 11 of title 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware under the caption In re Pennsylvania Real Estate Investment Trust, et al. and filed our prepackaged chapter 11 plan of reorganization with the Bankruptcy Court. On November 30, 2020, the Bankruptcy Court entered an order confirming the Plan. The Plan became effective and we subsequently emerged from bankruptcy on December 10, 2020. The final decree closing the bankruptcy case was entered by the Bankruptcy Court on March 11, 2021. Refer to Note 1 to our unaudited consolidated financial statements —Financial Restructuring for a detailed description of these matters.

ITEM 1A. RISK FACTORS.

In addition to the other information set forth in this report, you should carefully consider the risks that could materially affect our business, financial condition or results of operations, which are discussed under the caption “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2020.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

Issuer Purchases of Equity Securities

We did not acquire any shares in the three months ended June 30, 2021.

Limitations upon the Payment of Dividends

The Credit Agreements provide generally that we may only make dividend payments in the minimum amount necessary to maintain our status as a REIT. We must maintain our status as a REIT at all times.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

Preferred Dividend Arrearage

Dividends on the Series B, Series C and Series D preferred shares are cumulative and therefore will continue to accrue at an annual rate of $0.4609 per share, $0.45 per share and $0.4297 per share, respectively. As of August 6, 2021, the cumulative amount of unpaid dividends on our issued and outstanding preferred shares totaled $27.4 million. This consisted of unpaid dividends per share on the Series B, Series C and Series D preferred shares of $1.84 per share, $1.80 per share and $1.72 per share, respectively.

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ITEM 6. EXHIBITS.

3.1	Amended and Restated Trust Agreement dated December 18, 2008, filed as Exhibit 3.1 to PREIT’s Current Report on Form 8-K filed on December 23, 2008, is incorporated herein by reference.

3.2	Amendment, dated June 7, 2012, to Amended and Restated Trust Agreement of Pennsylvania Real Estate Investment Trust dated December 18, 2008, as amended, filed as Exhibit 3.1 to PREIT’s Current Report on Form 8-K filed on June 12, 2012, is incorporated herein by reference.

3.3	Amendment to Amended and Restated Trust Agreement dated December 18, 2008, as amended, dated as of June 30, 2020, filed as Exhibit 3.1 to PREIT’s Current Report on Form 8-K filed on March 31, 2020, is incorporated herein by reference.

3.4	By-Laws of PREIT (as amended through March 31, 2020), filed as Exhibit 3.2 to PREIT’s Current Report on Form 8-K filed on March 31, 2020, is incorporated herein by reference.

3.5	Designating Amendment to Trust Agreement, designating the rights, preferences, privileges, qualifications, limitations and restrictions of PREIT’s 8.25% Series A Cumulative Redeemable Perpetual Preferred Shares, liquidation preference $25.00 per share, par value $0.01 per share, filed as Exhibit 3.2 to PREIT’s Form 8-A filed on April 20, 2012, is incorporated herein by reference.

3.6	Second Designating Amendment to Trust Agreement, designating the rights, preferences, privileges, qualifications, limitations and restrictions of PREIT’s 7.375% Series B Cumulative Redeemable Perpetual Preferred Shares, liquidation preference $25.00 per share, par value $0.01 per share, filed as Exhibit 3.2 to PREIT’s Form 8-A filed on October 11, 2012, is incorporated herein by reference.

3.7	Third Designating Amendment to Trust Agreement, designating the rights, preferences, privileges, qualifications, limitations and restrictions of PREIT’s 7.20% Series C Cumulative Redeemable Perpetual Preferred Shares, liquidation preference $25.00 per share, par value $0.01 per share, filed as Exhibit 3.4 to PREIT’s Form 8-A filed on January 27, 2017, is incorporated herein by reference.

3.8	Fourth Designating Amendment to Trust Agreement, designating the rights, preferences, privileges, qualifications, limitations and restrictions of PREIT’s 6.875% Series D Cumulative Redeemable Perpetual Preferred Shares, liquidation preference $25.00 per share, par value $0.01 per share, filed as Exhibit 3.5 to PREIT’s Form 8-A filed on September 11, 2017, is incorporated herein by reference.

10.1	Agency Resignation, Appointment, Acceptance and Waiver Agreement, dated as of April 13, 2021, among Wells Fargo Bank, National Association, Wilmington Savings Fund Society, FSB, PREIT Associates, L.P., PREIT-RUBIN, Inc., PREIT, and certain other financial institutions party thereto, relating to the First Lien Credit Agreement, filed as Exhibit 10.2 to PREIT’s Quarterly Report on Form 10-Q filed on May 7, 2021, is incorporated herein by reference.

10.2	Agency Resignation, Appointment, Acceptance and Waiver Agreement, dated as of April 13, 2021, among Wells Fargo Bank, National Association, Wilmington Savings Fund Society, FSB, PREIT Associates, L.P., PREIT-RUBIN, Inc., PREIT, and certain other financial institutions party thereto, relating to the Second Lien Credit Agreement, filed as Exhibit 10.3 to PREIT’s Quarterly Report on Form 10-Q filed on May 7, 2021, is incorporated herein by reference.

10.3+	Amended and Restated Employment Agreement with Joseph F. Coradino, dated as of May 12, 2021, filed as Exhibit 10.1 to PREIT’s Current Report on Form 8-K filed on May 14, 2021, is incorporated herein by reference.
10.4+	Restricted Share Unit and Outperformance Unit Award Agreement with Joseph F. Coradino, dated as of May 12, 2021, filed as Exhibit 10.2 to PREIT’s Current Report on Form 8-K filed on May 14, 2021, is incorporated herein by reference.
10.5+	Form of Restricted Share Unit and Dividend Equivalent Rights Award Agreement, filed as Exhibit 10.1 to PREIT’s Current Report on Form 8-K filed on June 3, 2021, is incorporated herein by reference.
31.1*	Certification pursuant to Exchange Act Rules 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2*	Certification pursuant to Exchange Act Rules 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1**	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2**	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS*	Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH*	Inline XBRL Taxonomy Extension Schema Document.

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101.CAL*	Inline XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF*	Inline XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB*	Inline XBRL Taxonomy Extension Label Linkbase Document.

101.PRE*	Inline XBRL Taxonomy Extension Presentation Linkbase Document.

104*	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101.INS).

*	Filed herewith

**	Furnished herewith

+	Management contract or compensatory plan or arrangement.

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SIGNATURE OF REGISTRANT

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
Date:	August 6, 2021
		By:	/s/ Joseph F. Coradino
			Joseph F. Coradino
			Chairman and Chief Executive Officer

		By:	/s/ Mario C. Ventresca, Jr.
			Mario C. Ventresca, Jr.
			Executive Vice President and Chief Financial Officer

		By:	/s/ Sathana Semonsky
			Sathana Semonsky
			Vice President and Chief Accounting Officer