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Tax Indemnity Agreement

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Exhibit 10.18

This Tax Indemnity Agreement (this "Agreement") is made as of June 2, 2004 by and among PREIT Associates, L.P. ("PALP"), Ivyridge Investment Corp. ("Ivyridge"), Leonard B. Shore, Lewis M. Stone, Pan American Office Investments, LP ("Pan American Office"), George Rubin, Ronald Rubin, and the Non QTIP Marital Trust under the will of Richard I. Rubin (the "Trust," and together with Ivyridge, Pan American Office, Messrs. Shore and Stone, George Rubin, and Ronald Rubin, the "Limited Partners").

WHEREAS, reference is made to (i) that certain Call and Put Option Agreement dated April 28, 2003 by and among PR New Castle LLC (the "General Partner"), PALP, Ivyridge, and Pan American (the "Option Agreement") and (ii) that certain Contribution Agreement dated April 22, 2003 by and among PALP, Ivyridge, Pan American, certain prior limited partners of New Castle Associates, and Pennsylvania Real Estate Investment Trust (the "Contribution Agreement"); and

WHEREAS, pursuant to Section 2(a) of the Option Agreement, PALP has delivered to the Ivyridge and Pan American written notice of its election to exercise the Call (as defined in the Option Agreement); and

WHEREAS, PALP is required to deliver this Agreement in connection with the closing effecting the consummation of the Call.

NOW, THEREFORE, in consideration of the foregoing, and intending to be legally bound, the parties hereby agree as follows:

1. PALP, as the sole member of the General Partner, shall not permit the
Replacement Property (as defined in the Contribution Agreement) or the
Retained Interests (as defined in the Option Agreement) to be disposed
of for a period of eight years following April 28, 2003 (the "Period")
in such a manner that may cause the Limited Partners to recognize
taxable income, and if PALP, as the sole member of the General Partner,
disposes of the Replacement Property or the Retained Interests within
the Period, such disposition shall be pursuant to a tax-free exchange
under Section 1031 of the Internal Revenue Code (the "C
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