Pennsylvania Real Estate Investment Trust
2006 Incentive Compensation Opportunity Award
Chairman and Chief Executive Officer

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      2006 Incentive Opportunity3                       2006 Incentive Range4 -
% of Salary                     Threshold5 Target5 Outperformance5 2006 Base
Salary1                          $_______

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2005 Incentive Compensation2     $_______ 35%  70% 105%                      
Performance Measurement Allocation6                       Corporate      
Individual      

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      80%       20%       CORPORATE – 80%       Measure7   Threshold   Target  
Outperformance   FFO Per Share8                               TOTAL 2006
CORPORATE
OPPORTUNITY:   $ ___   $ ___   $ ___                       INDIVIDUAL – 20%    
  Measure   Threshold   Target   Outperformance   Compensation Committee
Discretion9   Committee
Discretion   Committee
Discretion   Committee
Discretion                   TOTAL 2006 INDIVIDUAL
OPPORTUNITY:   $ ___   $ ___   $ ___                   *   *   *   *            
      TOTAL 2006 INCENTIVE
OPPORTUNITY:*   $ ___   $ ___   $ ___                   * The amount payable
under this award will be paid in cash on February 15, 2007.

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CHAIRMAN AND CHIEF EXECUTIVE OFFICER

(1) “2006 Base Salary” means your regular, basic compensation from PREIT and/or
PREIT Services, LLC for 2006, not including bonuses or other additional
compensation, but including contributions made by PREIT and/or PREIT Services,
LLC on your behalf, by salary reduction pursuant to your election, (i) to an
arrangement described in section 401(k) of the Internal Revenue Code of 1986, as
amended (the “Code”), (ii) to a “cafeteria plan” (as defined in section 125(d)
of the Code), and (iii) for a “qualified transportation fringe” (as defined in
section 132(f) of the Code).

 

(2) “2005 Incentive Compensation” means the total amount of incentive
compensation that you earned in 2005 pursuant to your 2005 Incentive
Compensation Opportunity Award.

 

(3)  “2006 Incentive Opportunity” means the opportunity to earn incentive
compensation for 2006, up to 105% of your Base Salary, in the event certain
corporate and individual performances are achieved (your “potential 2006
incentive compensation”). Corporate performance relates to PREIT’s cumulative
performance with respect to one measure of its financial results for 2006, while
individual performance relates to your performance within the scope of your
responsibilities as an employee of PREIT and/or PREIT Services, LLC.

 

(4)  “2006 Incentive Range” means, depending on the level of corporate and
individual performance achieved (i.e., Threshold, Target or Outperformance), the
percentage of your Base Salary that you may earn under this 2006 Incentive
Compensation Opportunity Award. If the corporate performance is between the
Target and the Threshold level, or between the Threshold and the Outperformance
level, the percentage will be interpolated accordingly.

 

(5) With respect to corporate performance, “Threshold” signifies a solid
achievement, but which may fall short of expectations, and which is expected to
have a reasonably high probability of achievement. Threshold performance
represents the level of performance that has to be achieved before any of your
potential 2006 incentive compensation is earned. The Executive Compensation and
Human Resources Committee of PREIT’s Board of Trustees (the “Committee”) will
decide whether you have met what the Committee determines to be the “Threshold”
level for purposes of your individual performance. If the Threshold performance
level is achieved with respect to corporate or individual performance, as
applicable, you will earn 35% of your potential 2006 Incentive Compensation
allocated to such performance (see note 6). If the Threshold performance level
is not met with respect to corporate performance or your individual performance,
you will not receive any of your potential 2006 incentive compensation allocated
to such corporate or individual performance, as applicable.

  With respect to corporate performance, “Target” generally signifies that the
business objectives for the year have been met and is expected to have a
reasonable probability of achievement. In many situations, this represents
approximately the budgeted level of performance. The Committee will decide
whether you have met what the Committee determines to be the “Target” level for
purposes of your individual performance. If the Target performance level is
achieved with respect to corporate or individual performance, as applicable, you
will earn 70% of your potential 2006 incentive compensation allocated to such
performance (see note 6).

With respect to corporate performance, “Outperformance” signifies an outstanding
achievement, an extraordinary performance by industry standards, and which is
expected to have a modest probability of achievement. The Committee will decide
whether you have met what the Committee determines to be the “Outperformance”
level for purposes of your individual performance. If the Outperformance level
is achieved with respect to corporate or individual performance, as applicable,
you will earn 105% of your potential 2006 incentive compensation allocated to
such performance (see note 6).

 

(6) “Performance Measurement Allocation” means the percent by which your
potential 2006 incentive compensation is allocated between corporate and
individual performance. For example, if your base salary is $400,000, and 80% of
your potential 2006 incentive compensation is allocated to corporate performance
and 20% is allocated to your individual performance, you will earn $336,000
(105% of 80% of $400,000) of your potential 2006 incentive compensation if the
Outperformance level of the corporate performance is achieved and $84,000 (105%
of 20% of $400,000) of your potential 2006 incentive compensation if the
Outperformance level of your individual performance is achieved.

 

(7) The “Measure” is a business criterion on which performance is based.

 

(8)  “FFO Per Share” means, with respect to each diluted share of beneficial
interest in PREIT (a “Share”), “funds from operations” of PREIT, as reported to
the public by PREIT for 2006. However, the Threshold, Target and Outperformance
levels set forth in this award with respect to the achievement of specified
levels of FFO Per Share may be modified by the Committee, after consultation
with an independent compensation consultant selected by the Committee, in the
event that PREIT acquires, directly or indirectly, by purchase or business
combination, properties or businesses to a greater extent than contemplated in
PREIT’s 2006 business plan.

 

(9) The Committee has the sole discretion to set the Measure(s) for your
individual performance for 2006 and to determine the level of individual
performance that you have achieved. However, regardless of your individual
performance, no 2006 incentive compensation based on your individual performance
will be paid if FFO Per Share (see note 8) is less than $___.

  In the event of a business combination or other transaction or event giving
rise to a change of control of PREIT (as defined in your employment agreement),
the Committee shall have the authority to adjust the corporate performances in
such manner as it may deem appropriate in its sole discretion. (As noted above,
the Committee already has the discretion to determine the level of your
individual performance.)

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