Rumors of a merger between Chattanooga, Tenn.-based CBL & Associates Properties Inc. and Philadelphia-based Pennsylvania Real Estate Investment Trust appear to be just that.

However, industry observers believe a deal between the two would be logical given their matching portfolios.

PREIT has denied that any merger or acquisition with CBL is cooking, while CBL declined to comment on the reports.

“PREIT has come right out and said that they're not for sale,” notes Rich Moore, a REIT analyst with RBC Capital Markets Inc. “But, if they were, CBL would be a logical buyer because they both own dominant malls in smaller markets.”

Founded in 1960, PREIT's portfolio consists of 38 malls and 11 lifestyle centers, as well as 7 properties under development. PREIT's 34.4-million-square-foot portfolio, which is scattered across the Eastern seaboard, primarily in the 14 Mid-Atlantic states, is 86 percent occupied and achieves sales of $354 per square foot. Currently, PREIT's portfolio itself is undergoing significant redevelopment: it has 15 projects being redeveloped for a total investment of $547 million.

CBL, for its part, plans to invest $50 million in redevelopment projects this year and is set to debut four lifestyle centers' expansions, although most of its investments are in new construction, according to its 2006 annual report. The REIT has 3.1 million square feet of new developments and expansions, which represent $507.4 million of investment, scheduled to open by 2009. Currently, the portfolio consists of 72 regional malls, 27 adjacent to mall centers and 4 community centers. It is 94 percent occupied and boasts sales of $341 per square foot.

Moore says, “Even with the rumors, I don't think any of PREIT's shareholders are thinking buyout.”