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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549




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Form 10-K/A

|           |  |                                                                                                                       
|---------- |  | ----------------------------------------------------------------------------------------------------------------------
|(Mark One) |  |                                                                                                                       
|þ          |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR
    15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934 [Fee Required]           
|          
|           |  | For the fiscal year ended December 31,
    2001                                                                       
|          
|or        
|          
|o          |  | TRANSITION REPORT PURSUANT TO SECTION 13
    OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934 [No Fee
    Required]
|          
|           |  | For the transition period
    from           to                                                                       

Commission File Number: 1-12588



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Center Trust, Inc.

(Exact name of registrant as specified in
charter)


|                                                                   |  |                                            
|------------------------------------------------------------------ |  | -------------------------------------------
|Maryland                                                           |  | 95-4444963                                 
|(State or other jurisdiction of
    incorporation or organization) |  | (I.R.S. Employer
    Identification Number)

3500 Sepulveda Boulevard, Manhattan Beach,
California 90266

(Address of principal executive offices) (Zip
Code)


Registrants telephone number, including
area code

(310) 546-4520


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

|                                       |  |                                          
|-------------------------------------- |  | -----------------------------------------
|Title of Each Class                    |  | Name of Each Exchange on Which Registered
|                                       |  |                                          
|Common Stock, Par Value $.01 Per Share |  | New York Stock Exchange                  

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

None Registered


(Title of Class)




---

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 at
least the past
90 days.     Yes þ          No o

Indicate by check mark if disclosure of
delinquent filers pursuant to Item 405 of Regulation S-K is
not contained herein, and will not be contained, to the best of
Registrants knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this
Form 10-K or any amendment to this
Form 10-K:     o

The aggregate market value of the voting stock
held by non-affiliates of the Registrant was approximately
$50,237,000 (computed on the basis of $4.57 per share), which
was the last sale price on the New York Stock Exchange on
March 15, 2002.

As of March 15, 2002, 27,656,405 shares of
common stock, Par Value $.01 per share of Center Trust, Inc.,
were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

None



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TABLE OF CONTENTS



|               |                                                                                               |                                                 |  |  |  |  |  | 
|-------------- | --------------------------------------------------------------------------------------------- | ----------------------------------------------- |  |  |  |  |  | 
|               | Item 6. Selected Financial Data                                                              
|               | Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
|               | Item 7A. Quantitative and Qualitative Disclosures About Market Risk                          
|               | Item 8. Financial Statements and Supplementary Data                                          
|               |                                                                                               | CONSOLIDATED BALANCE SHEETS                    
|               |                                                                                               | CONSOLIDATED STATEMENTS OF OPERATIONS          
|               |                                                                                               | CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
|               |                                                                                               | CONSOLIDATED STATEMENTS OF CASH FLOWS          
|               | Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K                    
|SIGNATURES    
|CERTIFICATIONS
|EXHIBIT 23.1  



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##### Table of Contents



TABLE OF CONTENTS

|               |     |  |     |                                                                                           |  |  |    | 
|-------------- | --- |  | --- | ----------------------------------------------------------------------------------------- |  |  | -- | 
|Item           |     |  |     | Page                                                                                     
|               |     |  |     |                                                                                          
|PART II       
|               | 6.  |  |     | SELECTED FINANCIAL DATA                                                                   |  |  | 2  | 
|               | 7.  |  |     | MANAGEMENTS DISCUSSION AND ANALYSIS OF
    FINANCIAL CONDITION AND RESULTS OF OPERATIONS |  |  | 3  | 
|               | 7A. |  |     | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
    MARKET RISK                            |  |  | 10 | 
|               | 8.  |  |     | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                                               |  |  | 12 | 
|SIGNATURES     |     |  | S-1 |                                                                                          
|CERTIFICATIONS |     |  |     |                                                                                          

1



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##### Table of Contents






Item
6.     Selected Financial
Data

The following table sets forth selected financial
data for the Company. The following data should be read in
conjunction with managements discussion and analysis of
financial condition and results of operations and all of the
financial statements and notes thereto included elsewhere in
this Form 10-K.

|                                                                        |                                   |                                                  |        |        |  |      |         |        |  |      |         |        |  |   |         |        |  |   |        |        | 
|----------------------------------------------------------------------- | --------------------------------- | ------------------------------------------------ | ------ | ------ |  | ---- | ------- | ------ |  | ---- | ------- | ------ |  | - | ------- | ------ |  | - | ------ | ------ | 
|                                                                        |                                   |                                                 
|                                                                        |                                   | Year Ended December 31,                         
|                                                                        |                                   |                                                 
|                                                                        |                                   | 2001                                             |        | 2000   |  | 1999 |         | 1998   |  | 1997
|                                                                        |                                   |                                                  |        |        |  |      |         |        |  |     
|                                                                        |                                   |                                                 
|                                                                        |                                   | (In thousands, except per share & property data)
|Statements of Operations Data:                                          |                                   |                                                  |        |        |  |      |         |        |  |      |         |        |  |   |         |        |  |   |        |       
|Total revenues                                                          |                                   | $                                                | 94,903 |        |  | $    | 131,637 |        |  | $    | 139,941 |        |  | $ | 125,573 |        |  | $ | 86,186 |       
|                                                                        |                                   |                                                  |        |        |  |      |         |        |  |      |         |        |  |   |         |        |  |   |        |       
|Expenses:                                                               |                                   |                                                  |        |        |  |      |         |        |  |      |         |        |  |   |         |        |  |   |        |       
|                                                                        | Interest                          |                                                  |        | 32,230 |  |      |         | 55,019 |  |      |         | 52,764 |  |   |         | 46,476 |  |   |        | 35,100 | 
|                                                                        | Property operating costs          |                                                  |        | 33,927 |  |      |         | 42,289 |  |      |         | 41,916 |  |   |         | 39,406 |  |   |        | 27,196 | 
|                                                                        | Depreciation and amortization     |                                                  |        | 19,797 |  |      |         | 24,065 |  |      |         | 24,041 |  |   |         | 23,580 |  |   |        | 17,894 | 
|                                                                        | Write-down of asset held for sale |                                                  |        |       |  |      |         | 4,770  |  |      |         |       |  |   |         | 21,685 |  |   |        |       | 
|                                                                        | Reorganization costs              |                                                  |        | 2,613  |  |      |         |       |  |      |         |       |  |   |         |       |  |   |        |       | 
|                                                                        | Non-recurring items               |                                                  |        |       |  |      |         |       |  |      |         |       |  |   |         |       |  |   |        | 9,355  | 
|                                                                        | General and administrative        |                                                  |        | 5,473  |  |      |         | 5,626  |  |      |         | 8,362  |  |   |         | 5,744  |  |   |        | 2,877  | 
|                                                                        |                                   |                                                  |        |        |  |      |         |        |  |      |         |        |  |   |         |        |  |   |        |       
|Total expenses                                                          |                                   |                                                  | 94,040 |        |  |      | 131,769 |        |  |      | 127,083 |        |  |   | 136,891 |        |  |   | 92,422 |       
|                                                                        |                                   |                                                  |        |        |  |      |         |        |  |      |         |        |  |   |         |        |  |   |        |       
|Income (loss) from continuing operations
    before other items         |                                   |                                                  | 863    |        |  |      | (132    | )      |  |      | 12,858  |        |  |   | (11,318 | )      |  |   | (6,236 | )     
|Equity in income of management company                                  |                                   |                                                  |       |        |  |      |        |        |  |      |        |        |  |   |        |        |  |   | 19     |       
|(Loss) Gain on sale of rental properties                                |                                   |                                                  | (2,379 | )      |  |      | 21,245  |        |  |      | 23,991  |        |  |   | 1,055   |        |  |   |       |       
|Minority interests                                                      |                                   |                                                  | (508   | )      |  |      | (602    | )      |  |      | (4,786  | )      |  |   | 1,055   |        |  |   | 1,229  |       
|                                                                        |                                   |                                                  |        |        |  |      |         |        |  |      |         |        |  |   |         |        |  |   |        |       
|(Loss) income from continuing operations                                |                                   |                                                  | (2,024 | )      |  |      | 20,511  |        |  |      | 32,063  |        |  |   | (9,208  | )      |  |   | (4,988 | )     
|Discontinued operations                                                 |                                   |                                                  | 1,595  |        |  |      | 776     |        |  |      | 1,077   |        |  |   | 1,095   |        |  |   | 765    |       
|                                                                        |                                   |                                                  |        |        |  |      |         |        |  |      |         |        |  |   |         |        |  |   |        |       
|(Loss) income before extraordinary item                                 |                                   |                                                  | (429   | )      |  |      | 21,287  |        |  |      | 33,140  |        |  |   | (8,113  | )      |  |   | (4,223 | )     
|Extraordinary items  early
    extinguishment of debt                  |                                   |                                                  | (1,768 | )      |  |      | (17,514 | )      |  |      | (6,483  | )      |  |   |        |        |  |   | (422   | )     
|                                                                        |                                   |                                                  |        |        |  |      |         |        |  |      |         |        |  |   |         |        |  |   |        |       
|Net (loss) income                                                       |                                   | $                                                | (2,197 | )      |  | $    | 3,773   |        |  | $    | 26,657  |        |  | $ | (8,113  | )      |  | $ | (4,645 | )     
|                                                                        |                                   |                                                  |        |        |  |      |         |        |  |      |         |        |  |   |         |        |  |   |        |       
|Income (loss) from continuing operations per
    share                  |                                   | $                                                | (0.08  | )      |  | $    | 0.77    |        |  | $    | 1.25    |        |  | $ | (0.43   | )      |  | $ | (0.38  | )     
|Discontinued operations per share                                       |                                   |                                                  | 0.06   |        |  |      | 0.03    |        |  |      | 0.04    |        |  |   | 0.05    |        |  |   | 0.06   |       
|Extraordinary items per share                                           |                                   |                                                  | (0.06  | )      |  |      | (0.66   | )      |  |      | (0.25   | )      |  |   |         |        |  |   | (0.03  | )     
|                                                                        |                                   |                                                  |        |        |  |      |         |        |  |      |         |        |  |   |         |        |  |   |        |       
|Net (loss) income per share, basic and
    diluted                      |                                   | $                                                | (0.08  | )      |  | $    | 0.14    |        |  | $    | 1.04    |        |  | $ | (0.38   | )      |  | $ | (0.35  | )     
|                                                                        |                                   |                                                  |        |        |  |      |         |        |  |      |         |        |  |   |         |        |  |   |        |       
|Dividends per share                                                     |                                   | $                                                | 0.16   |        |  | $    | 0.84    |        |  | $    | 1.44    |        |  | $ | 1.44    |        |  | $ | 1.44   |       
|                                                                        |                                   |                                                  |        |        |  |      |         |        |  |      |         |        |  |   |         |        |  |   |        |       
|Weighted average shares of common stock
    outstanding                 |                                   |                                                  | 27,435 |        |  |      | 26,677  |        |  |      | 25,697  |        |  |   | 21,519  |        |  |   | 13,312 |       
|                                                                        |                                   |                                                  |        |        |  |      |         |        |  |      |         |        |  |   |         |        |  |   |        |       
|Number of operating properties (at end of period)                       |                                   |                                                  | 35     |        |  |      | 41      |        |  |      | 56      |        |  |   | 63      |        |  |   | 46     |       
|Gross leasable area owned (thousands of
    sq. ft.) (at end of period) |                                   |                                                  | 6,412  |        |  |      | 7,117   |        |  |      | 9,398   |        |  |   | 10,185  |        |  |   | 7,217  |       

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|                                                  |  |                    |         |      |  |      |         |      |  |      |           |  |  |   |           |  |  |   |         | 
|------------------------------------------------- |  | ------------------ | ------- | ---- |  | ---- | ------- | ---- |  | ---- | --------- |  |  | - | --------- |  |  | - | ------- | 
|                                                  |  |                   
|                                                  |  | As of December 31,
|                                                  |  |                   
|                                                  |  | 2001               |         | 2000 |  | 1999 |         | 1998 |  | 1997
|                                                  |  |                    |         |      |  |      |         |      |  |     
|Balance Sheet Data:                               |  |                    |         |      |  |      |         |      |  |      |           |  |  |   |           |  |  |   |         | 
|Rental properties before accumulated depreciation |  | $                  | 732,818 |      |  | $    | 776,667 |      |  | $    | 1,030,689 |  |  | $ | 1,074,629 |  |  | $ | 783,279 | 
|Total assets                                      |  |                    | 637,073 |      |  |      | 694,579 |      |  |      | 951,820   |  |  |   | 987,021   |  |  |   | 710,713 | 
|Total debt and other liabilities                  |  |                    | 420,195 |      |  |      | 471,480 |      |  |      | 709,122   |  |  |   | 697,419   |  |  |   | 519,441 | 
|Minority interests                                |  |                    | 11,225  |      |  |      | 16,695  |      |  |      | 15,410    |  |  |   | 49,231    |  |  |   | 41,433  | 
|Redeemable common stock                           |  |                    |        |      |  |      |        |      |  |      |          |  |  |   | 9,903     |  |  |   | 8,385   | 
|Stockholders equity                              |  |                    | 205,653 |      |  |      | 206,404 |      |  |      | 227,288   |  |  |   | 230,468   |  |  |   | 141,454 | 

|                          |                      |                         |   |         |   |      |   |          |   |      |   |         |   |  |   |          |   |  |   |          |  
|------------------------- | -------------------- | ----------------------- | - | ------- | - | ---- | - | -------- | - | ---- | - | ------- | - |  | - | -------- | - |  | - | -------- | -
|                          |                      |                        
|                          |                      | Year Ended December 31,
|                          |                      |                        
|                          |                      | 2001                    |   | 2000    |   | 1999 |   | 1998     |   | 1997
|                          |                      |                         |   |         |   |      |   |          |   |     
|                          |                      |                        
|                          |                      | (In thousands)         
|Other Data:               |                      |                         |   |         |   |      |   |          |   |      |   |         |   |  |   |          |   |  |   |         
|Funds from Operations(1): |                      |                         |   |         |   |      |   |          |   |      |   |         |   |  |   |          |   |  |   |         
|                          | Basic                |                         | $ | 24,766  |   |      | $ | 30,860   |   |      | $ | 42,477  |   |  | $ | 36,301   |   |  | $ | 21,924   |  
|                          | Diluted              |                         |   | 24,766  |   |      |   | 30,860   |   |      |   | 55,943  |   |  |   | 50,169   |   |  |   | 35,793   |  
|Cash Flows From:          |                      |                         |   |         |   |      |   |          |   |      |   |         |   |  |   |          |   |  |   |         
|                          | Operating activities |                         | $ | 24,017  |   |      | $ | 16,912   |   |      | $ | 33,711  |   |  | $ | 32,528   |   |  | $ | 19,559   |  
|                          | Investing activities |                         |   | 36,974  |   |      |   | 244,225  |   |      |   | 39,793  |   |  |   | (219,430 | ) |  |   | (110,192 | )
|                          | Financing activities |                         |   | (60,339 | ) |      |   | (260,177 | ) |      |   | (74,936 | ) |  |   | 189,925  |   |  |   | 88,305   |  



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|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The Company computes funds from operations
    (FFO) on both a basic and a diluted basis and
    considers Operating Partnership Units as the equivalent of
    shares for the purpose of these computations. The diluted basis
    assumes the conversion of the Companys convertible and
    exchangeable debentures into shares of common stock as well as
    other common stock equivalents. On November 6, 2000, the
    Company repaid, in full, its 7 1/4% exchangeable debentures
    and on January 16, 2001 the Company repaid, in full, its
    7 1/2% convertible subordinated debentures. For further
    discussion of FFO, see Item 7  Managements
    Discussion and Analysis of Results of Operations.




Item
7.     Managements Discussion
and Analysis of Financial Condition and Results of
Operations

The Company adopted Statement of Financial
Accounting Standards No. 144 Accounting for the
Impairment or Disposal of Long-Lived Assets
(SFAS 144) on January 1, 2002. In
accordance with the implementation provisions of SFAS 144,
the operating results and gains on property sales of real estate
assets sold subsequent to December 31, 2001 are included in
discontinued operations in the consolidated statement of
operations. The Results of Operations discussion for years ended
December 31, 2001, 2000 and 1999 includes operating results
for properties disposed of prior to December 31, 2001, but
does not include operating results for properties disposed of
subsequent to December 31, 2001.

The following discussion should be read in
conjunction with the Selected Financial Data and the
Companys Consolidated Financial Statements and Notes
thereto appearing elsewhere in this Form 10-K/A.

This Annual Report on Form 10-K/A, including
the documents that we incorporate by reference, contains
forward-looking statements. Also, documents we subsequently file
with the SEC and incorporate by reference will contain
forward-looking statements. In particular, statements pertaining
to our capital resources, portfolio performance and our funds
from operation and anticipated market conditions, demographics
and results of operations are forward-looking statements.
Forward-looking statements involve numerous risks and
uncertainties and you should not rely on them as predictions of
future events. Forward-looking statements depend on assumptions,
data or methods which may be incorrect or imprecise and we may
not be able to realize them. We do not guarantee that the
transactions and events described will happen as described, or
that they will happen at all. You can identify forward-looking
statements by the use of forward-looking terminology

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such as believes,
expects, may, will,
should, would, seeks,
approximately, intends,
plans, pro forma estimates
or anticipates or the negative of these words and
phrases or similar words or phrases. You can also identify
forward-looking statements by discussions of strategy, plans or
intentions. The following factors, among others, could cause
actual results and future events to differ materially from those
set forth or contemplated in the forward-looking statements:




| |   |                                                                                     
| | - | ------------------------------------------------------------------------------------
| |  | defaults on or non-renewal of leases by tenants;                                    
|
| |  | increased interest rates and operations costs;                                      
|
| |  | our failure to obtain necessary outside financing;                                  
|
| |  | difficulties in identifying properties to acquire
    and completing acquisitions;  
|
| |  | difficulties in disposing of properties;                                            
|
| |  | our failure to successfully operate acquired
    properties and operations;         
|
| |  | our failure to successfully develop properties;                                     
|
| |  | our failure to maintain our status as a REIT;                                       
|
| |  | environmental uncertainties and risks related to
    natural disasters;             
|
| |  | financial market fluctuations; and                                                  
|
| |  | changes in real estate and zoning laws and
    increases in real property tax rates.

Our success also depends upon economic trends
generally, as well as income tax laws, governmental regulation,
legislation, population changes and other matters discussed
above in the section entitled Risk Factors.: We caution
you, however, that any list of risk factors may not be
exhaustive.

Recent Developments

During 2001 and early 2002, we completed a series
of steps designed to improve our financial and operating
flexibility, allow us to reduce our leverage level, and better
enable us to continue to pursue our fundamental strategy of
maximizing stockholder value. Those steps included the repayment
of $128 million of the 7 1/2% Convertible Subordinated
Debentures (Debentures), a reduction of our 2001
dividend, the refinancing of six properties with long-term fixed
rate debt and the extension of our Credit Facility (Credit
Facility) with General Electric Capital Corporation
(GECC). See additional discussion in Liquidity
Sources and Requirements.

The Board of Directors announced on
March 20, 2002, an increase in the quarterly dividend to
$0.06 per share for the first quarter of 2002, compared to $0.04
per share paid during each of the four quarters of 2001. This
revised dividend level is designed to enable us to continue to
strengthen our balance sheet and provide the funds necessary to
reposition and reinvest in our assets while also providing an
increase in the return to our shareholders.

Results of Operations



| |                                                                                            
| | -------------------------------------------------------------------------------------------
| | Comparison of the year ended
    December 31, 2001 to the year ended December 31,
    2000.

Rental revenues decreased by $25.6 million
to $65.6 million for the year ended December 31, 2001
from $91.2 million for the year ended December 31,
2000. A decrease of $25.8 million resulted from the sale of
16 community shopping centers, five single tenant
facilities and a freestanding theater in 2001 and 2000. Revenues
from the remaining held properties increased slightly in 2001
compared to 2000.

Expense reimbursements decreased
$6.4 million to $23.0 million for the year ended
December 31, 2001 from $29.4 million for the year
ended December 31, 2000. Of the decrease, $6.5 million
resulted from the sale of the properties previously discussed.
Similarly, property operating costs decreased by
$8.4 million to $33.9 million for the year ended
December 31, 2001 from $42.3 million for the year
ended December 31,

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2000. Approximately $7.1 million of the
decrease was related to the sold properties (excluding those
properties included in discontinued operations). The remaining
decrease is primarily due to a $1.3 million charge to
uncollectible accounts receivable expense in 2000 compared to a
$0.3 million charge recorded in 2001.


Interest expense decreased by $22.8 million
to $32.2 million for the year ended December 31, 2001
from $55.0 million for the year ended December 31,
2000. The decrease was due to a combination of a decrease in
average debt outstanding and lower effective interest rates in
2001 compared to 2000. Average debt outstanding was
$410 million in 2001 compared to $625 million in 2000.
The lower average debt outstanding was due to the repayment of
$128.5 million of 7 1/2% Convertible subordinated
Debentures with proceeds from the sale of 22 assets during
2000 and the first half of 2001. The effective weighted average
interest rate, excluding the debentures, was 8.0% in 2001
compared to 9.0% in 2000. See additional discussion in Liquidity
Sources and Requirements.

Depreciation and amortization expense decreased
by $4.3 million to $19.8 million for the year ended
December 31, 2001 from $24.1 million for the year
ended December 31, 2000. This is primarily due to
$4.8 million of lower expenses due to the sale of
properties, partially offset by a $.6 million increase in
depreciation on held properties.

General and administrative costs decreased
$0.1 million from $5.6 million for the year ended
December 31, 2000 to $5.5 million for the year ended
December 31, 2001. The decrease is due to the partial cost
savings related to the reorganization that occurred during the
second quarter of 2001. At the end of the second quarter of
2001, the Company recorded a non-recurring Reorganization
expense of $2.6 million. The expense consisted of employee
severance and other related costs. The Company anticipates
greater savings in 2002 from a full year of cost reductions as a
result of the reorganization.

The Company reported a net loss of
$2.2 million for the year ended December 31, 2001
compared to net income of $3.8 million for 2000. The
decrease in net income of $6.0 million in 2001 was
primarily due to lower net operating income of
$28.5 million from the sale of properties,
$2.6 million in reorganization costs, $2.4 million
loss on the sale of assets and $1.8 million extraordinary
loss related to the sale of properties. The 2001 decrease was
partially offset by lower interest expense of $23.5 million
and lower depreciation expense of $4.2 million. The net
income in 2000 included the gain on sale of assets, net of an
extraordinary loss, of $3.7 million and a $4.8 million
charge for the impairment of assets held for sale.



| |                                                                                            
| | -------------------------------------------------------------------------------------------
| | Comparison of the year ended
    December 31, 2000 to the year ended December 31,
    1999.

Total revenues decreased by $8.3 million to
$131.6 million for the year ended December 31, 2000
from $139.9 million for the year ended December 31,
1999. The decrease was primarily a result of the sale of
12 community shopping centers, three single tenant
facilities and a freestanding theater, for a total of
16 properties sold in 2000 compared to the sale of three
community shopping centers and five single tenant facilities,
for a total of 8 properties sold in 1999. The sold properties
account for approximately $11.2 million of the decrease in
revenues. This was partially offset by a $3.4 million lease
termination fee received from a tenant of one of our community
shopping centers.

Interest expense increased by $2.2 million
to $55.0 million for the year ended December 31, 2000
from $52.8 million for the year ended December 31,
1999. The increase is primarily due to approximately
$4.0 million from higher effective interest rates partially
offset by a decrease of approximately $1.8 million from
lower average debt outstanding in 2000.

Property operating costs increased
$0.4 million to $42.3 million for the year ended
December 31, 2000 from $41.9 million for the year
ended December 31, 1999. The activity for the year included
a provision for uncollectible accounts receivable of
$1.3 million and a charge of $0.7 million for the
adjustment of an outstanding receivable balance from a city
agency recorded in 2000, offset by a decrease of
$2.0 million in expenses related to the sold properties.

Depreciation and amortization expense increased
by $0.1 million to $24.1 million for the year ended
December 31, 2000 from $24.0 million for the year
ended December 31, 1999. This is primarily due to

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increased amortization of leasing costs of
$0.9 million and increased depreciation from additional
assets of $0.3 million, partially offset lower expenses
from the sale of properties in 2000 of $1.1 million.


General and administrative costs decreased
$2.8 million from $8.4 million for the year ended
December 31, 1999 to $5.6 million for the year ended
December 31, 2000. The decreases are primarily due to the
Companys reorganization in the 4th quarter of 1999 to
reduce its operating costs.

Income before other items for the year ended
December 31, 2000 was a loss of $0.1 million compared
to income of $12.9 million for the same period of 1999. The
decrease is due to lower income as a result of the sale of
assets, higher interest costs as previously discussed and a
$4.8 million charge for the impairment of assets held for
sale. At December 31, 2000, the Company was under agreement
to sell the Center of El Centro located in El Centro, California
and Madera Marketplace located in Madera, California for a
combined total of $19.7 million. Carrying value of these
assets, adjusted for anticipated closing and other costs, was
$24.5 at December 31, 2000.

As previously discussed, the Company sold a total
of 16 properties during the year ended 2000. As a result of the
sales, debt of $188 million was either repaid or assumed by
the buyer. Net proceeds of $127 million was used to reduce
the Companys outstanding balance on its Secured Credit
Facility (see additional discussion at Liquidity Sources and
Requirements). The Company recorded a net gain on the sale of
assets of $21.2 million. The Company also recorded an
extraordinary loss on the early extinguishment of debt of
$17.5 million related to the payment of certain prepayment
penalties and the write-off of unamortized deferred financing
costs and costs related to the defeasance of a loan with Nomura
Asset Capital Corporation.



| |                                            
| | -------------------------------------------
| | Selected Property Financial
    Information

Net Operating Income (defined as operating
revenues less property operating costs) for the Companys
Properties was as follows:

|                     |                   |                         |        |        |  |      |        |        |  |   |        |        | 
|-------------------- | ----------------- | ----------------------- | ------ | ------ |  | ---- | ------ | ------ |  | - | ------ | ------ | 
|                     |                   |                        
|                     |                   | Year Ended December 31,
|                     |                   |                        
|                     |                   | 2001                    |        | 2000   |  | 1999
|                     |                   |                         |        |        |  |     
|Rental Properties:   |                   |                         |        |        |  |      |        |        |  |   |        |       
|                     | Regional Malls    |                         | $      | 16,610 |  |      | $      | 16,226 |  |   | $      | 18,018 | 
|                     | Community Centers |                         |        | 42,329 |  |      |        | 68,858 |  |   |        | 74,067 | 
|                     | Single Tenants    |                         |        | 1,253  |  |      |        | 2,952  |  |   |        | 4,895  | 
|Other Income         |                   |                         | 784    |        |  |      | 1,312  |        |  |   | 1,045  |       
|                     |                   |                         |        |        |  |      |        |        |  |   |        |       
|Net Operating Income |                   | $                       | 60,976 |        |  | $    | 89,348 |        |  | $ | 98,025 |       
|                     |                   |                         |        |        |  |      |        |        |  |   |        |       

The following summarizes the percentage of leased
GLA (excluding non-owned GLA) as of:

|                    |                   |              |      |       |   |      |      |       |   |  |      |       |  
|------------------- | ----------------- | ------------ | ---- | ----- | - | ---- | ---- | ----- | - |  | ---- | ----- | -
|                    |                   |             
|                    |                   | December 31,
|                    |                   |             
|                    |                   | 2001         |      | 2000  |   | 1999
|                    |                   |              |      |       |   |     
|Rental Properties:  |                   |              |      |       |   |      |      |       |   |  |      |      
|                    | Regional Malls    |              |      | 94.4  | % |      |      | 92.1  | % |  |      | 90.9  | %
|                    | Community Centers |              |      | 91.8  |   |      |      | 93.1  |   |  |      | 95.0  |  
|                    | Single Tenants    |              |      | 100.0 |   |      |      | 100.0 |   |  |      | 100.0 |  
|Aggregate Portfolio |                   |              | 92.6 |       |   |      | 93.3 |       |   |  | 94.9 |      

During 2001, the Company signed leases for
approximately 163,693 square feet and renewed approximately
594,809 square feet of community centers leases. Such signed
leases resulted in an increase in the overall rent per square
foot of the Companys portfolio to $12.02 per square foot
at December 31, 2001 from $11.33 per square foot at
December 31, 2000.

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Liquidity Sources and Requirements

Through a series of asset sales and debt
financing transactions, as well as a modification of the
Companys Credit Facility, the Company was able to
successfully repay its Debentures that matured on
January 15, 2001. Subsequent to the repayment of the
Debentures in January 2001, the Company remained focused on
the strengthening of its financial stability and flexibility. To
aid in strengthening the Companys financial flexibility
and stability, on March 26, 2001, the Company announced a
revised dividend strategy designed to enable the Company to
maximize its retention of capital, reduce its leverage level,
and provide financial flexibility, while maintaining its status
as a real estate investment trust. Accordingly, the Company
decreased its annual dividend for 2001 to $0.16 per share.

With the Debentures repaid, the Companys
primary focus in 2002 is to continue to enhance our balance
sheet while executing our business plan. Our business plan
focuses on leasing our existing centers, stabilizing income,
enhancing value, and redevelopment. Our redevelopment plans
enable us to meet the changing needs of retailers in our markets
while creating value for our shareholders. On March 18,
2002, the Company increased its first quarter dividend to $0.06
per share from the $0.04 per share paid for each of the four
quarters of 2001.

On March 20, 2002, the Company extended its
Credit Facility with GECC that was to expire on April 1,
2002. Under the new terms, the Credit Facility will expire on
April 1, 2004 with the option of the Company to extend for
one additional year. The new agreement reduces the maximum
commitment from $170 million to $150 million. The
Company currently has availability of $13 million under the
Credit Facility.

In December 2001, the Company closed on six
separate mortgages with total proceeds of $68.7 million.
The mortgages have a 10-year term with 30-year principal
amortization. The weighted-average fixed interest rate on the
six mortgages is 6.94%. The mortgages are not
cross-collateralized or cross-defaulted. Three of the mortgages,
with combined loan proceeds of $25.1 million, secured by
Ross Plaza in Clackmamas, Oregon, Silverdale Shopping Center in
Silverdale, Washington and Vancouver Park Place in Vancouver,
Washington, closed on December 18, 2001. These assets were
previously pledged as collateral for the Companys Credit
Facility. The remaining three mortgages, with combined proceeds
of $43.6 million, are secured by Mountain Square in Upland,
California, Fire Mountain Shopping Center in Oceanside,
California and Randolph Plaza in Tucson, Arizona, closed on
December 19, 2001. These properties were previously
collateral for variable rate, cross-collateralized, mortgages
with a combined balance of $33.1 million that were to
mature on June 1, 2002. All proceeds, after repayment of
existing loans, were used to reduce the outstanding balance on
the Companys Credit Facility.

On July 6, 2001, the Company refinanced an
existing mortgage on North Mountain Village, located in Phoenix,
Arizona. The $7.1 million mortgage bears interest at 7.68%
and matures in 2011.

During the second quarter of 2001, the Company
sold one community shopping center and one single tenant
facility. The assets sold were K-Mart Rocklin, an 86,000 square
foot single tenant facility located in Rocklin, California and
Marshalls Plaza, a 79,000 square foot shopping center
located in Modesto, California. After repayment of debt of
$1.7 million, net proceeds of $6.7 million were used
to reduce the outstanding balance on the Companys Credit
Facility.

During the first quarter of 2001, the Company
sold three community shopping centers and one single tenant
facility for a combined sales price of $38.4 million. The
assets sold included Westgate North Shopping Center, a 104,000
square foot shopping center located in Tacoma, Washington,
Center of El Centro, a 179,000 square foot shopping center
located in El Centro, California, Madera Marketplace a 169,000
square foot shopping center located in Madera, California, and
K-Mart Madera, a 86,000 square foot single tenant facility,
located in Madera, California. After repayment of debt of
$7.2 million, net proceeds of $26.6 million were used
to reduce the outstanding balance of the Companys Credit
Facility.

During 2002, the Company has debt maturities of
$59.1 million. Of this balance, three mortgages totaling
$50.2 million each have three one-year extensions available
to the Company. The remaining balance of $8.9 million
represents one non-recourse mortgage secured by our Date Palm
Center located in Cathedral City, California. We are currently
negotiating with the lender to modify the terms of this
non-recourse

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agreement and anticipate that we will be able to
successfully execute an extension and amendment to this loan
before it matures.


The Company anticipates that its cash from
operations combined with the availability under the Credit
Facility will be sufficient to cover its capital and operating
cash requirements in the next twelve months. Certain elective
redevelopment projects will only be commenced if the Company is
successfully able to obtain separate financing for such
expenditures.



| |                      
| | ---------------------
| | Funds from Operations

The Company considers Funds From Operations
(FFO) to be an alternative measure of the
performance of an equity REIT since such measure does not
recognize depreciation and amortization expenses as operating
expenses. FFO is defined, as outlined in the October 1999 White
Paper, by the National Association of Real Estate Investment
Trusts (NAREIT) as net income plus depreciation and
amortization of real estate, less gains or losses on sales of
properties. Additionally, the definition also permits FFO to be
adjusted for significant non-recurring items. Funds from
operations do not represent cash flows from operations and net
income as defined by generally accepted accounting principles
and should not be considered as an alternative to net income or
cash flows from operations and should not be considered as an
alternative to those indicators in evaluating the Companys
operating performance or liquidity. Further, the methodology for
computing FFO utilized by the Company may differ from that
utilized by other equity REITs and, accordingly may not be
comparable to such other REITs.

The Company computes FFO on both a basic and a
diluted basis. The diluted basis assumes the conversion of the
convertible and exchangeable debentures into shares of common
stock. The following table summarizes the Companys
computation of FFO (including discontinued operations) and
provides certain additional disclosures (dollars in thousands):

|                                                                |                                    |                         |        |        |  |      |         |        |  |   |         |        | 
|--------------------------------------------------------------- | ---------------------------------- | ----------------------- | ------ | ------ |  | ---- | ------- | ------ |  | - | ------- | ------ | 
|                                                                |                                    |                        
|                                                                |                                    | Year Ended December 31,
|                                                                |                                    |                        
|                                                                |                                    | 2001                    |        | 2000   |  | 1999
|                                                                |                                    |                         |        |        |  |     
|Net (Loss) Income                                               |                                    | $                       | (2,197 | )      |  | $    | 3,773   |        |  | $ | 26,657  |       
|Adjustments to reconcile net loss to funds from
    operations: |                                    |                         |        |        |  |      |         |        |  |   |         |       
|Depreciation and Amortization:                                  |                                    |                         |        |        |  |      |         |        |  |   |         |       
|                                                                | Buildings and improvements         |                         |        | 12,692 |  |      |         | 16,741 |  |   |         | 16,793 | 
|                                                                | Tenant improvements and allowances |                         |        | 4,568  |  |      |         | 5,173  |  |   |         | 5,470  | 
|                                                                | Leasing costs                      |                         |        | 2,617  |  |      |         | 2,540  |  |   |         | 2,392  | 
|Loss (Gain) on Sale of Assets                                   |                                    |                         | 2,379  |        |  |      | (21,245 | )      |  |   | (23,991 | )     
|Write-down of Asset Held for Sale                               |                                    |                         |       |        |  |      | 4,770   |        |  |   |        |       
|Reorganization Costs                                            |                                    |                         | 2,613  |        |  |      |        |        |  |   | 1,148   |       
|Minority Interests                                              |                                    |                         | (198   | )      |  |      | (65     | )      |  |   | 4,163   |       
|Extraordinary Loss on Early Extinguishment of Debt              |                                    |                         | 1,768  |        |  |      | 17,514  |        |  |   | 6,483   |       
|Other                                                           |                                    |                         | 524    |        |  |      | 1,659   |        |  |   | 3,362   |       
|                                                                |                                    |                         |        |        |  |      |         |        |  |   |         |       
|Funds from Operations, Basic and Diluted                        |                                    | $                       | 24,766 |        |  | $    | 30,860  |        |  | $ | 42,477  |       
|                                                                |                                    |                         |        |        |  |      |         |        |  |   |         |       

Funds from operations decreased to
$24.8 million for the year ended December 31, 2001, as
compared to $30.9 million for the same period in 2000. The
decrease in funds from operations is principally a function of
asset dispositions that occurred in 2000 and early 2001. During
2001, the Company incurred reorganization costs of
$2.6 million resulting from a restructuring of the
Companys organization. During 2000, the Company recorded
an impairment loss on assets held for sale of $4.8 million.
In addition, the Company recorded an extraordinary loss on the
early extinguishment of debt of $1.8 million, $17.5 and
$6.5 million in 2001, 2000 and 1999, respectively. Such
items were not included in the computation of FFO as the Company
considers these to be significant non-recurring events that, if
deducted, would materially distort the comparative measurement
of Company performance.

8



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##### Table of Contents





| |           
| | ----------
| | Cash Flows

Net cash provided by operations (including
discontinued operations) for the year ended December 31,
2001 was $24.0 million compared to $16.9 million for
the prior year, an increase of $7.1 million. The principal
reason for the increase in net cash from operations are lower
operating cash requirements partially offset by lower operating
revenues due to properties sold during 2001 and 2000, as
discussed in Results of Operations above.

Net cash provided by investing activities
decreased by $207.2 million to $37.0 million for the
year ended 2001 from $244.2 million for the year ended
2000. The decrease is due to fewer property sales in 2001
compared to 2000. Property sales totaled 6 in the year ended
2001 compared to 16 for 2000.

Net cash used by financing activities decreased
by $199.9 million to $60.3 million from
$260.2 million primarily due to lower repayments on the
Companys Credit Facility for the year ended 2001 compared
to 2000. The decrease is primarily due to fewer property sales
in 2001 compared to 2000, previously discussed. Activity for the
year ended 2001 includes the repayment of the Companys
7 1/2% Convertible Subordinated Debentures of
$128.5 million with proceeds from the Companys Credit
Facility. In addition, the dividend reduction in 2001 enabled
the Company to retain approximately $17.6 million in 2001.

Net cash provided by operations for the year
ended December 31, 2000 was $16.9 million compared to
$33.7 million for the prior year. The principal reasons for
the decrease in net cash from operations are discussed in
Results of Operations above.

Net cash provided by investing activities was
$244.2 million for the year ended December 31, 2000,
compared to $39.8 million for the prior year. The increase
is primarily the result of proceeds from the sale of 16
properties in 2000.

Net cash used by financing activities was
$260.2 million for the year ended December 31, 2000,
compared to $74.9 million from the prior year. The increase
is due to repayments on the Companys Credit Facility,
payments on mortgage financing and retirement of the
$30 million of 7 1/4% Exchangeable Subordinated
Debentures.



| |          
| | ---------
| | Inflation

The Companys long-term leases contain
provisions designed to mitigate the adverse impact of inflation
on its results from operations. Such provisions include clauses
enabling the Company to receive percentage rents based upon
tenants gross sales, which generally increase as prices
rise, and/or, in certain cases, escalation clauses, which
generally increase rental rates during the terms of the leases.
Such escalation clauses are often related to increases in the
CPI or similar inflation indices. In addition, many of the
Companys leases are for terms of less than ten years,
which permits the Company to seek to increase rents upon
re-rental at market rates if rents are below then-existing
market rates. Many of the Companys leases require the
tenants to pay a pro rata share of operating expenses, including
common area maintenance, real estate taxes, insurance and
utilities, thereby reducing the Companys exposure to
increases in costs and operating expenses resulting from
inflation.

Critical Accounting Policies

The Securities and Exchange Commission defines
critical accounting policies as those that are, in
managements view, most important to the portrayal of the
Companys financial condition and results of operations and
the most demanding in their call on judgement. The
Companys significant accounting policies that require a
higher degree of judgement relate to:



| |   |                                                
| | - | -----------------------------------------------
| |  | Property rental income and expense recognition;
|
| |  | Basis on presentation;                         
|
| |  | Asset valuation criteria; and                  
|
| |  | Legal and environmental obligations.           

9



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##### Table of Contents



See additional discussion of these accounting
policies in the Notes to the Consolidated Financial Statements.



| |                                 
| | --------------------------------
| | Adoption of Accounting Standards

New Accounting PronouncementsStatements of Financial Accounting
Standards (SFAS) No. 133, as amended, was effective
for the Company as of January 1, 2001. SFAS No. 133
established accounting and reporting standards requiring that
all derivative instruments, including certain derivative
instruments embedded in other contracts, be recorded in the
balance sheet as either assets or liabilities measured at fair
value. SFAS No. 133 requires that changes in the derivative
instruments fair value be recognized currently in
earnings, unless specific hedge accounting criteria are met. The
Companys derivative positions held at December 31,
2001 are considered immaterial. The adoption of this standard
does not have a material impact on the Companys results of
consolidated operations or its financial position.

In July 2001, the Financial Accounting Standards
Board issued SFAS No. 141, Business
Combinations and SFAS No. 142, Good will and
Other Intangible Assets. SFAS No. 141 prohibits the
use of the pooling of interest method after
June 30, 2001. SFAS No. 142 requires the cessation of
the amortization of goodwill subsequent to December 31,
2001. The new standards are not expected to have a significant
impact on our financial statements.

In October 2001, the FASB issued SFAS
No. 144, Accounting for the Impairment of Long-Lived
Assets. This Statement addressed financial accounting and
reporting for the impairment or disposal of long-lived assets
and supercedes FASB Statement No. 121, Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed of. Additionally, SFAS 144 expands the
scope of discontinued operations to include all components of an
entity with operations that (1) can be distinguished from
the rest of the entity and (2) will be eliminated from the
ongoing operations of the entity in a disposal transaction. The
provisions of this Statement are effective for financial
statements issued for fiscal years beginning after
December 15, 2001. The adoption of this standard is
expected to result in the reclassification of prior year
financial statements to conform to the presentation of assets
that are sold subsequent to December 31, 2001.




Item 7A.     Quantitative
and Qualitative Disclosures About Market Risk

The Company is exposed to market risk primarily
due to fluctuations in interest rates. Specifically, the risk
resulting from increasing LIBOR-based interest rates as interest
on the Companys Credit Facility of $114.5 million as
well as mortgage notes of $75.2 million are tied to various
LIBOR interest rates. The Credit Facility matures March 31,
2002. The Company is also subject to market risk resulting from
fluctuations in the general level of U.S. interest rates as
$176.6 million of the Companys debt is based on a
weighted average fixed rate of 8.04%. As a result, the Company
will be obligated to pay contractually agreed upon rates of
interest on its fixed rate debt, unless management refinances
its existing fixed rate debt and potentially incurs substantial
prepayment penalties. The $36 million of tax-exempt
certificates of participation are tied to a general index of
AAA-rated tax-free municipal bonds.

10



---



##### Table of Contents



The following table provides information about
the Companys interest rate sensitive financial
instruments, including, amounts due at maturity, principal
amortization, weighted average interest rates and fair market
values as of December 31, 2001 (in thousands):

|                        |                                |               |       |         |        |      |       |         |        |      |  |            |  |       |  |        |  |  |   |         |  |   |        |         |  |   |        |         |        |   |        |         |  | 
|----------------------- | ------------------------------ | ------------- | ----- | ------- | ------ | ---- | ----- | ------- | ------ | ---- |  | ---------- |  | ----- |  | ------ |  |  | - | ------- |  | - | ------ | ------- |  | - | ------ | ------- | ------ | - | ------ | ------- |  | 
|                        |                                |               |       |         |        |      |       |         |        |      |  |            |  |       |  | Fair  
|                        |                                |               |       |         |        |      |       |         |        |      |  |            |  |       |  | Market
|As of December 31, 2001 |                                | 2002          |       | 2003    |        | 2004 |       | 2005    |        | 2006 |  | Thereafter |  | Total |  | Value 
|                        |                                |               |       |         |        |      |       |         |        |      |  |            |  |       |  |       
|Interest Rate Sensitive |                                |               |       |         |        |      |       |         |        |      |  |            |  |       |  |        |  |  |   |         |  |   |        |         |  |   |        |         |        |   |        |        
|                        | Liabilities:                   |               |       |         |        |      |       |         |        |      |  |            |  |       |  |        |  |  |   |         |  |   |        |         |  |   |        |         |        |   |        |         | 
|                        | Credit Facility                |               | $     | 114,548 |        |      |       |         |        |      |  |            |  |       |  |        |  |  |   |         |  |   |        |         |  |   | $      | 114,548 |        |   | $      | 114,548 | 
|                        |                                | Interest Rate |       |         | LIBOR+ |      |       |         |        |      |  |            |  |       |  |        |  |  |   |         |  |   |        |         |  |   |        |         | LIBOR+ |   |        |         |  | 
|                        |                                |               | 2.50% |         |        |      |       |         |        |      |  |            |  |       |  |        |  |  |   |         |  |   |        |         |  |   | 2.50%  |         |        |   |        |        
|                        | Variable Rate Debt             |               | $     | 50,185  |        |      | $     | 25,000  |        |      |  |            |  |       |  |        |  |  |   |         |  |   |        |         |  |   | $      | 75,185  |        |   | $      | 75,185  | 
|                        |                                | Interest Rate |       |         | LIBOR+ |      |       |         | LIBOR+ |      |  |            |  |       |  |        |  |  |   |         |  |   |        |         |  |   |        |         | LIBOR+ |   |        |         |  | 
|                        |                                |               | 2.30% |         |        |      | 2.50% |         |        |      |  |            |  |       |  |        |  |  |   |         |  |   |        |         |  |   | 3.36%  |         |        |   |        |        
|                        | Fixed Rate Debt                |               | $     | 8,933   |        |      | $     | 14,865  |        |      |  |            |  |       |  |        |  |  | $ | 13,149  |  |   | $      | 139,697 |  |   | $      | 176,644 |        |   | $      | 203,288 | 
|                        | Weighted Average Interest Rate |               |       | 10.45%  |        |      |       | 10.375% |        |      |  |            |  |       |  |        |  |  |   | 10.635% |  |   |        | 7.393%  |  |   |        | 8.04%   |        |   |        |         | 
|Tax Exempt Certificates |                                |               |       |         |        |      |       |         |        |      |  |            |  |       |  |        |  |  |   |         |  | $ | 36,000 |         |  | $ | 36,000 |         |        | $ | 36,000 |        
|                        | Weighted Average Interest Rate |               |       |         |        |      |       |         |        |      |  |            |  |       |  |        |  |  |   |         |  |   |        | 4.173%  |  |   |        | 4.173%  |        |   |        |         | 

|                        |                                |               |   |       |  |      |       |        |        |      |       |            |        |       |  |        |  |  |  |  |  |   |        |        |  |   |        |         |        |   |        |         |  | 
|----------------------- | ------------------------------ | ------------- | - | ----- |  | ---- | ----- | ------ | ------ | ---- | ----- | ---------- | ------ | ----- |  | ------ |  |  |  |  |  | - | ------ | ------ |  | - | ------ | ------- | ------ | - | ------ | ------- |  | 
|                        |                                |               |   |       |  |      |       |        |        |      |       |            |        |       |  | Fair  
|                        |                                |               |   |       |  |      |       |        |        |      |       |            |        |       |  | Market
|As of December 31, 2000 |                                | 2001          |   | 2002  |  | 2003 |       | 2004   |        | 2005 |       | Thereafter |        | Total |  | Value 
|                        |                                |               |   |       |  |      |       |        |        |      |       |            |        |       |  |       
|Interest Rate Sensitive |                                |               |   |       |  |      |       |        |        |      |       |            |        |       |  |        |  |  |  |  |  |   |        |        |  |   |        |         |        |   |        |        
|                        | Liabilities:                   |               |   |       |  |      |       |        |        |      |       |            |        |       |  |        |  |  |  |  |  |   |        |        |  |   |        |         |        |   |        |         | 
|                        | Credit Facility                |               |   |       |  |      | $     | 53,344 |        |      |       |            |        |       |  |        |  |  |  |  |  |   |        |        |  |   | $      | 53,344  |        |   | $      | 53,344  | 
|                        | Average Interest Rate          |               |   |       |  |      |       | LIBOR+ |        |      |       |            |        |       |  |        |  |  |  |  |  |   |        |        |  |   |        | LIBOR+  |        |   |        |         | 
|                        |                                |               |   |       |  |      | 2.75% |        |        |      |       |            |        |       |  |        |  |  |  |  |  |   |        |        |  |   | 2.75%  |         |        |   |        |        
|                        | Variable Rate debt             |               |   |       |  |      | $     | 33,456 |        |      | $     | 75,185     |        |       |  |        |  |  |  |  |  |   |        |        |  |   | $      | 108,641 |        |   | $      | 108,641 | 
|                        |                                | Interest Rate |   |       |  |      |       |        | LIBOR+ |      |       |            | LIBOR+ |       |  |        |  |  |  |  |  |   |        |        |  |   |        |         | LIBOR+ |   |        |         |  | 
|                        |                                |               |   |       |  |      | 2.50% |        |        |      | 2.37% |            |        |       |  |        |  |  |  |  |  |   |        |        |  |   | 2.40%  |         |        |   |        |        
|                        | Fixed Rate Debt                |               | $ | 8,125 |  |      | $     | 9,102  |        |      | $     | 15,232     |        |       |  |        |  |  |  |  |  |   | $      | 87,608 |  |   | $      | 120,067 |        |   | $      | 124,063 | 
|                        | Weighted Average Interest Rate |               |   | 8.25% |  |      |       | 10.45% |        |      |       | 10.375%    |        |       |  |        |  |  |  |  |  |   |        | 8.48%  |  |   |        | 8.83%   |        |   |        |         | 
|Tax Exempt Certificates |                                |               |   |       |  |      |       |        |        |      |       |            |        |       |  |        |  |  |  |  |  | $ | 36,000 |        |  | $ | 36,000 |         |        | $ | 36,000 |        
|                        | Weighted Average Interest Rate |               |   |       |  |      |       |        |        |      |       |            |        |       |  |        |  |  |  |  |  |   |        | 5.110% |  |   |        | 5.110%  |        |   |        |         | 

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##### Table of Contents






Item
8.     Financial Statements and
Supplementary Data

INDEPENDENT AUDITORS REPORT

To the Board of Directors and

Stockholders of Center Trust, Inc.:


We have audited the accompanying consolidated
balance sheets of Center Trust, Inc. and subsidiaries (the
Company) as of December 31, 2001 and 2000, and
the related consolidated statements of operations,
stockholders equity, and cash flows for each of the three
years in the period ended December 31, 2001. Our audits
also included the financial statement schedules listed in the
Index at Item 14.A.2. These financial statements and
financial statement schedules are the responsibility of the
Companys management. Our responsibility is to express an
opinion on the financial statements and financial statement
schedules based on our audits.

We conducted our audits in accordance with
auditing standards generally accepted in the United States of
America. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.

In our opinion, such consolidated financial
statements present fairly, in all material respects, the
financial position of the Company as of December 31, 2001
and 2000, and the results of its operations and its cash flows
for each of the three years in the period ended
December 31, 2001 in conformity with accounting principles
generally accepted in the United States of America. Also, in our
opinion, such financial statement schedules, when considered in
relation to the basic consolidated financial statements taken as
a whole, present fairly in all material respects the information
set forth therein.

DELOITTE & TOUCHE LLP

Los Angeles, California


March 26, 2002, except for Note 13,


as to which the date is November 20, 2002


12



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##### Table of Contents



CENTER TRUST






CONSOLIDATED BALANCE SHEETS

December 31, 2001 and 2000


|                                         |                                                                                                                                                                           |                            |         |          |         |   |         |          |         | 
|---------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------- | ------- | -------- | ------- | - | ------- | -------- | ------- | 
|                                         |                                                                                                                                                                           | 2001                       |         | 2000    
|                                         |                                                                                                                                                                           |                            |         |         
|                                         |                                                                                                                                                                           |                           
|                                         |                                                                                                                                                                           | (In thousands,            
|                                         |                                                                                                                                                                           | except share data)        
|ASSETS                                  
|Rental properties (Notes 2, 3, and 4)    |                                                                                                                                                                           | $                          | 732,818 |          |         | $ | 776,667 |         
|                                         | Accumulated depreciation and amortization                                                                                                                                 |                            |         | (149,185 | )       |   |         | (136,828 | )      
|                                         |                                                                                                                                                                           |                            |         |          |         |   |         |         
|Rental properties, net                   |                                                                                                                                                                           |                            | 583,633 |          |         |   | 639,839 |         
|Cash and cash equivalents (Note 2)       |                                                                                                                                                                           |                            | 6,816   |          |         |   | 6,164   |         
|Tenant receivables, net (Note 2)         |                                                                                                                                                                           |                            | 7,668   |          |         |   | 11,920  |         
|Other receivables (Note 2)               |                                                                                                                                                                           |                            | 5,161   |          |         |   | 5,603   |         
|Restricted cash (Note 4)                 |                                                                                                                                                                           |                            | 13,282  |          |         |   | 9,531   |         
|Deferred charges, net (Note 2)           |                                                                                                                                                                           |                            | 16,636  |          |         |   | 18,030  |         
|Other assets                             |                                                                                                                                                                           |                            | 3,877   |          |         |   | 3,492   |         
|                                         |                                                                                                                                                                           |                            |         |          |         |   |         |         
|                                         |                                                                                                                                                                           | TOTAL                      |         | $        | 637,073 |   |         | $        | 694,579 | 
|                                         |                                                                                                                                                                           |                            |         |          |         |   |         |         
|LIABILITIES AND STOCKHOLDERS
    EQUITY
|LIABILITIES:                             |                                                                                                                                                                           |                            |         |          |         |   |         |         
|                                         | Secured Debt (Notes 4 and 9)                                                                                                                                              |                            | $       | 402,377  |         |   | $       | 318,052  |        
|                                         | 7 1/2% Convertible subordinated debentures
    (Note 5)                                                                                                                   |                            |         |         |         |   |         | 128,548  |        
|                                         | Accrued dividends and distributions (Note 6)                                                                                                                              |                            |         | 1,160    |         |   |         | 6,035    |        
|                                         | Accrued interest                                                                                                                                                          |                            |         | 2,057    |         |   |         | 5,827    |        
|                                         | Accounts payable and other accrued expenses                                                                                                                               |                            |         | 11,309   |         |   |         | 10,161   |        
|                                         | Accrued construction costs                                                                                                                                                |                            |         | 1,059    |         |   |         | 1,060    |        
|                                         | Tenant security and other deposits                                                                                                                                        |                            |         | 2,233    |         |   |         | 1,797    |        
|                                         |                                                                                                                                                                           |                            |         |          |         |   |         |         
|                                         |                                                                                                                                                                           | Total liabilities          |         |          | 420,195 |   |         |          | 471,480 | 
|                                         |                                                                                                                                                                           |                            |         |          |         |   |         |         
|MINORITY INTERESTS (Notes 1 and 2):      |                                                                                                                                                                           |                            |         |          |         |   |         |         
|                                         | Operating Partnership (1,338,644 and 2,015,692
    units issued as of December 31, 2001 and 2000, respectively)                                                           |                            |         | 9,696    |         |   |         | 15,075   |        
|                                         | Other minority interests                                                                                                                                                  |                            |         | 1,529    |         |   |         | 1,620    |        
|                                         |                                                                                                                                                                           |                            |         |          |         |   |         |         
|                                         |                                                                                                                                                                           | Total minority interests   |         |          | 11,225  |   |         |          | 16,695  | 
|                                         |                                                                                                                                                                           |                            |         |          |         |   |         |         
|COMMITMENTS AND CONTINGENCIES (Note 10)  |                                                                                                                                                                           |                            |         |          |         |   |         |         
|STOCKHOLDERS EQUITY (Notes 6 and 7):    |                                                                                                                                                                           |                            |         |          |         |   |         |         
|                                         | Common stock ($.01 par value, 100,000,000 shares
    authorized; 27,656,405 and 26,721,226 shares issued and
    outstanding at December 31, 2001 and 2000, respectively) |                            |         | 276      |         |   |         | 266      |        
|                                         | Additional paid-in capital                                                                                                                                                |                            |         | 365,474  |         |   |         | 359,419  |        
|                                         | Accumulated distributions and deficit                                                                                                                                     |                            |         | (160,097 | )       |   |         | (153,281 | )      
|                                         |                                                                                                                                                                           |                            |         |          |         |   |         |         
|                                         |                                                                                                                                                                           | Total stockholders equity |         |          | 205,653 |   |         |          | 206,404 | 
|                                         |                                                                                                                                                                           |                            |         |          |         |   |         |         
|                                         |                                                                                                                                                                           | TOTAL                      |         | $        | 637,073 |   |         | $        | 694,579 | 
|                                         |                                                                                                                                                                           |                            |         |          |         |   |         |         

See Notes to Consolidated Financial Statements.

13



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##### Table of Contents



CENTER TRUST






CONSOLIDATED STATEMENTS OF
OPERATIONS

Three Years Ended December 31,
2001


|                                                                |                                                                 |                                          |                |        |        |        |         |        |        |         |        |         |        |         | 
|--------------------------------------------------------------- | --------------------------------------------------------------- | ---------------------------------------- | -------------- | ------ | ------ | ------ | ------- | ------ | ------ | ------- | ------ | ------- | ------ | ------- | 
|                                                                |                                                                 | 2001                                     |                | 2000   |        | 1999  
|                                                                |                                                                 |                                          |                |        |        |       
|                                                                |                                                                 |                                         
|                                                                |                                                                 | (In thousands, except per share amounts)
|REVENUES (Note 2):                                              |                                                                 |                                          |                |        |        |        |         |        |        |         |        |        
|                                                                | Rental revenues                                                 |                                          | $              | 65,577 |        |        | $       | 91,214 |        |         | $      | 101,634 |       
|                                                                | Expense reimbursements                                          |                                          |                | 22,977 |        |        |         | 29,362 |        |         |        | 31,322  |       
|                                                                | Percentage rents                                                |                                          |                | 1,451  |        |        |         | 1,801  |        |         |        | 2,029   |       
|                                                                | Other income (Note 2)                                           |                                          |                | 4,898  |        |        |         | 9,260  |        |         |        | 4,956   |       
|                                                                |                                                                 |                                          |                |        |        |        |         |        |        |         |        |        
|                                                                |                                                                 |                                          | Total revenues |        |        | 94,903 |         |        |        | 131,637 |        |         |        | 139,941 | 
|                                                                |                                                                 |                                          |                |        |        |        |         |        |        |         |        |        
|EXPENSES:                                                       |                                                                 |                                          |                |        |        |        |         |        |        |         |        |        
|                                                                | Interest (Notes 2, 4 and 5)                                     |                                          |                | 32,230 |        |        |         | 55,019 |        |         |        | 52,764  |       
|                                                                | Property operating costs:                                       |                                          |                |        |        |        |         |        |        |         |        |         |       
|                                                                |                                                                 | Common area                              |                |        | 17,631 |        |         |        | 20,245 |         |        |         | 20,540 |        
|                                                                |                                                                 | Property taxes                           |                |        | 9,111  |        |         |        | 12,635 |         |        |         | 14,100 |        
|                                                                |                                                                 | Leasehold rentals (Note 10)              |                |        | 1,090  |        |         |        | 1,295  |         |        |         | 1,681  |        
|                                                                |                                                                 | Marketing                                |                |        | 1,262  |        |         |        | 1,454  |         |        |         | 1,188  |        
|                                                                |                                                                 | Other operating                          |                |        | 4,833  |        |         |        | 6,660  |         |        |         | 4,407  |        
|                                                                | Depreciation and amortization (Note 2)                          |                                          |                | 19,797 |        |        |         | 24,065 |        |         |        | 24,041  |       
|                                                                | Impairment of assets held for sale (Note 3)                     |                                          |                |       |        |        |         | 4,770  |        |         |        |        |       
|                                                                | Reorganization costs (Note 1)                                   |                                          |                | 2,613  |        |        |         |       |        |         |        |        |       
|                                                                | General and administrative                                      |                                          |                | 5,473  |        |        |         | 5,626  |        |         |        | 8,362   |       
|                                                                |                                                                 |                                          |                |        |        |        |         |        |        |         |        |        
|                                                                |                                                                 |                                          | Total expenses |        |        | 94,040 |         |        |        | 131,769 |        |         |        | 127,083 | 
|                                                                |                                                                 |                                          |                |        |        |        |         |        |        |         |        |        
|INCOME (LOSS) FROM CONTINUING OPERATIONS
    BEFORE OTHER ITEMS |                                                                 |                                          | 863            |        |        |        | (132    | )      |        |         | 12,858 |        
|NET (LOSS) GAIN ON SALE OF RENTAL PROPERTIES
    (Note 3)       |                                                                 |                                          | (2,379         | )      |        |        | 21,245  |        |        |         | 23,991 |        
|MINORITY INTERESTS (Note 2):                                    |                                                                 |                                          |                |        |        |        |         |        |        |         |        |        
|                                                                | Operating partnership                                           |                                          |                | (177   | )      |        |         | (301   | )      |         |        | (4,497  | )     
|                                                                | Other minority interests                                        |                                          |                | (331   | )      |        |         | (301   | )      |         |        | (289    | )     
|                                                                |                                                                 |                                          |                |        |        |        |         |        |        |         |        |        
|(LOSS) INCOME FROM CONTINUING OPERATIONS                        |                                                                 |                                          | (2,024         | )      |        |        | 20,511  |        |        |         | 32,063 |        
|INCOME FROM DISCONTINUED OPERATIONS                             |                                                                 |                                          | 1,595          |        |        |        | 776     |        |        |         | 1,077  |        
|                                                                |                                                                 |                                          |                |        |        |        |         |        |        |         |        |        
|(LOSS) INCOME BEFORE EXTRAORDINARY ITEM                         |                                                                 |                                          | (429           | )      |        |        | 21,287  |        |        |         | 33,140 |        
|EXTRAORDINARY LOSS ON EARLY EXTINGUISHMENT OF
    DEBT (Note 4) |                                                                 |                                          | (1,768         | )      |        |        | (17,514 | )      |        |         | (6,483 | )      
|                                                                |                                                                 |                                          |                |        |        |        |         |        |        |         |        |        
|NET (LOSS) INCOME                                               |                                                                 | $                                        | (2,197         | )      |        | $      | 3,773   |        |        | $       | 26,657 |        
|                                                                |                                                                 |                                          |                |        |        |        |         |        |        |         |        |        
|BASIC AND DILUTED (LOSS) INCOME PER SHARE
    (Note 2):         |                                                                 |                                          |                |        |        |        |         |        |        |         |        |        
|                                                                | (LOSS) INCOME BEFORE EXTRAORDINARY ITEM                         |                                          | $              | (0.08  | )      |        | $       | 0.77   |        |         | $      | 1.25    |       
|                                                                | DISCONTINUED OPERATIONS                                         |                                          |                | 0.06   |        |        |         | 0.03   |        |         |        | 0.04    |       
|                                                                | EXTRAORDINARY LOSS ON EARLY EXTINGUISHMENT OF
    DEBT (Note 4) |                                          |                | (0.06  | )      |        |         | (0.66  | )      |         |        | (0.25   | )     
|                                                                |                                                                 |                                          |                |        |        |        |         |        |        |         |        |        
|                                                                | NET (LOSS) INCOME                                               |                                          | $              | (0.08  | )      |        | $       | 0.14   |        |         | $      | 1.04    |       
|                                                                |                                                                 |                                          |                |        |        |        |         |        |        |         |        |        

See Notes to Consolidated Financial Statements.

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##### Table of Contents



CENTER TRUST






CONSOLIDATED STATEMENTS OF STOCKHOLDERS
EQUITY

Three Years Ended December 31,
2001


|                                                                                                                               |  |                                   |            |            |  |             |     |               |  |               |         |   |  |   |          |   |  |   |         |  
|------------------------------------------------------------------------------------------------------------------------------ |  | --------------------------------- | ---------- | ---------- |  | ----------- | --- | ------------- |  | ------------- | ------- | - |  | - | -------- | - |  | - | ------- | -
|                                                                                                                               |  |                                   |            |            |  |             |     |              
|                                                                                                                               |  | Common Stock                      |            |            |  |             |     |              
|                                                                                                                               |  |                                   |            | Additional |  | Accumulated |     | Total        
|                                                                                                                               |  | Number of                         |            |            |  | Paid-In     |     | Distributions |  | Stockholders
|                                                                                                                               |  | Shares                            |            | Amount     |  | Capital     |     | and Deficit   |  | Equity       
|                                                                                                                               |  |                                   |            |            |  |             |     |               |  |              
|                                                                                                                               |  |                                  
|                                                                                                                               |  | (In thousands, except share data)
|January 1, 1999                                                                                                                |  |                                   | 24,756,693 |            |  | $           | 248 |               |  | $             | 354,281 |   |  | $ | (124,061 | ) |  | $ | 230,468 |  
|Issuance of Common Stock                                                                                                       |  |                                   | 2,260,232  |            |  |             | 22  |               |  |               | 33,881  |   |  |   |         |   |  |   | 33,903  |  
|Conversion of OP Units and Convertible Debentures
    into Common Stock and Adjustment to Minority Interest in OP
    (Note 2) |  |                                   | 62,597     |            |  |             | 1   |               |  |               | (19,717 | ) |  |   |         |   |  |   | (19,716 | )
|Restricted Stock Grants (Note 7)                                                                                               |  |                                   | 547,446    |            |  |             | 5   |               |  |               | 3,042   |   |  |   |         |   |  |   | 3,047   |  
|Common Stock Repurchased                                                                                                       |  |                                   | (979,000   | )          |  |             | (10 | )             |  |               | (10,075 | ) |  |   |         |   |  |   | (10,085 | )
|Net Income                                                                                                                     |  |                                   |           |            |  |             |    |               |  |               |        |   |  |   | 26,657   |   |  |   | 26,657  |  
|Dividends declared (Note 6)                                                                                                    |  |                                   |           |            |  |             |    |               |  |               |        |   |  |   | (36,986  | ) |  |   | (36,986 | )
|                                                                                                                               |  |                                   |            |            |  |             |     |               |  |               |         |   |  |   |          |   |  |   |         |  
|DECEMBER 31, 1999                                                                                                              |  |                                   | 26,647,968 |            |  |             | 266 |               |  |               | 361,412 |   |  |   | (134,390 | ) |  |   | 227,288 |  
|Adjustment to Minority Interest in OP (Note 2)                                                                                 |  |                                   |           |            |  |             |    |               |  |               | (3,654  | ) |  |   |         |   |  |   | (3,654  | )
|Restricted Stock Grants (Note 7)                                                                                               |  |                                   | 73,258     |            |  |             |    |               |  |               | 1,661   |   |  |   |         |   |  |   | 1,661   |  
|Net Income                                                                                                                     |  |                                   |           |            |  |             |    |               |  |               |        |   |  |   | 3,773    |   |  |   | 3,773   |  
|Dividends declared (Note 6)                                                                                                    |  |                                   |           |            |  |             |    |               |  |               |        |   |  |   | (22,664  | ) |  |   | (22,664 | )
|                                                                                                                               |  |                                   |            |            |  |             |     |               |  |               |         |   |  |   |          |   |  |   |         |  
|DECEMBER 31, 2000                                                                                                              |  |                                   | 26,721,226 |            |  |             | 266 |               |  |               | 359,419 |   |  |   | (153,281 | ) |  |   | 206,404 |  
|Conversion of OP Units into Common Stock                                                                                       |  |                                   | 677,881    |            |  |             | 7   |               |  |               | 5,531   |   |  |   |         |   |  |   | 5,538   |  
|Restricted Stock Grants (Note 7)                                                                                               |  |                                   | 257,298    |            |  |             | 3   |               |  |               | 524     |   |  |   |         |   |  |   | 527     |  
|Net Loss                                                                                                                       |  |                                   |           |            |  |             |    |               |  |               |        |   |  |   | (2,197   | ) |  |   | (2,197  | )
|Dividends declared (Note 6)                                                                                                    |  |                                   |           |            |  |             |    |               |  |               |        |   |  |   | (4,619   | ) |  |   | (4,619  | )
|                                                                                                                               |  |                                   |            |            |  |             |     |               |  |               |         |   |  |   |          |   |  |   |         |  
|DECEMBER 31, 2001                                                                                                              |  |                                   | 27,656,405 |            |  | $           | 276 |               |  | $             | 365,474 |   |  | $ | (160,097 | ) |  | $ | 205,653 |  
|                                                                                                                               |  |                                   |            |            |  |             |     |               |  |               |         |   |  |   |          |   |  |   |         |  

See Notes to Consolidated Financial Statements.

15



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##### Table of Contents



CENTER TRUST






CONSOLIDATED STATEMENTS OF CASH
FLOWS


Three Years Ended December 31,
2001


|                                                         |                                                                         |                                                    |                                           |          |        |         |       |          |         |          |        |          |         |         |  
|-------------------------------------------------------- | ----------------------------------------------------------------------- | -------------------------------------------------- | ----------------------------------------- | -------- | ------ | ------- | ----- | -------- | ------- | -------- | ------ | -------- | ------- | ------- | -
|                                                         |                                                                         | 2001                                               |                                           | 2000     |        | 1999   
|                                                         |                                                                         |                                                    |                                           |          |        |        
|                                                         |                                                                         |                                                   
|                                                         |                                                                         | (In thousands)                                    
|CASH FLOWS FROM OPERATING ACTIVITIES:                    |                                                                         |                                                    |                                           |          |        |         |       |          |         |          |        |         
|                                                         | Net (Loss) Income                                                       |                                                    | $                                         | (2,197   | )      |         | $     | 3,773    |         |          | $      | 26,657   |        
|                                                         | Adjustments to reconcile net (loss) income
    to net cash              |                                                    |                                           |          |        |         |       |          |         |          |        |          |        
|                                                         | Provided by operating activities including
    discontinued operations: |                                                    |                                           |          |        |         |       |          |         |          |        |          |        
|                                                         |                                                                         | Depreciation and amortization of rental properties |                                           |          | 20,717 |         |       |          | 24,959  |          |        |          | 24,854  |        
|                                                         |                                                                         | Amortization of deferred financing costs           |                                           |          | 4,087  |         |       |          | 2,644   |          |        |          | 3,158   |        
|                                                         |                                                                         | Amortization of deferred expenses                  |                                           |          | 588    |         |       |          | 710     |          |        |          | 3,362   |        
|                                                         |                                                                         | Net loss (gain) on sale of rental properties       |                                           |          | 2,379  |         |       |          | (21,245 | )        |        |          | (23,991 | )      
|                                                         |                                                                         | Impairment of asset held for sale                  |                                           |          |       |         |       |          | 4,770   |          |        |          |        |        
|                                                         |                                                                         | Loss on early extinguishment of debt               |                                           |          | 1,768  |         |       |          | 17,514  |          |        |          | 6,483   |        
|                                                         |                                                                         | Minority interests in operations                   |                                           |          | 508    |         |       |          | 602     |          |        |          | 4,786   |        
|                                                         | Net changes in operating assets and liabilities                         |                                                    |                                           | (3,833   | )      |         |       | (16,815  | )       |          |        | (11,598  | )      
|                                                         |                                                                         |                                                    |                                           |          |        |         |       |          |         |          |        |         
|                                                         |                                                                         |                                                    | Net cash provided by operating activities |          |        | 24,017  |       |          |         | 16,912   |        |          |         | 33,711  |  
|                                                         |                                                                         |                                                    |                                           |          |        |         |       |          |         |          |        |         
|CASH FLOWS FROM INVESTING ACTIVITIES:                    |                                                                         |                                                    |                                           |          |        |         |       |          |         |          |        |         
|                                                         | Proceeds from sale of rental properties                                 |                                                    |                                           | 45,074   |        |         |       | 257,430  |         |          |        | 76,101   |        
|                                                         | Construction and development costs                                      |                                                    |                                           | (8,100   | )      |         |       | (13,205  | )       |          |        | (17,333  | )      
|                                                         | Acquisition of rental properties                                        |                                                    |                                           |         |        |         |       |         |         |          |        | (18,975  | )      
|                                                         |                                                                         |                                                    |                                           |          |        |         |       |          |         |          |        |         
|                                                         |                                                                         |                                                    | Net cash provided by investing activities |          |        | 36,974  |       |          |         | 244,225  |        |          |         | 39,793  |  
|                                                         |                                                                         |                                                    |                                           |          |        |         |       |          |         |          |        |         
|CASH FLOWS FROM FINANCING ACTIVITIES:                    |                                                                         |                                                    |                                           |          |        |         |       |          |         |          |        |         
|                                                         | Principal amortization on mortgage financing                            |                                                    |                                           | (6,000   | )      |         |       | (3,940   | )       |          |        | (4,304   | )      
|                                                         | Principal payments on mortgage financing                                |                                                    |                                           | (39,530  | )      |         |       | (189,472 | )       |          |        | (90,451  | )      
|                                                         | Proceeds from mortgage financing                                        |                                                    |                                           | 68,650   |        |         |       | 92,575   |         |          |        | 165,144  |        
|                                                         | Borrowings on secured line of credit                                    |                                                    |                                           | 133,369  |        |         |       | 207,778  |         |          |        | 147,336  |        
|                                                         | Repayments of secured line of credit                                    |                                                    |                                           | (72,164  | )      |         |       | (312,509 | )       |          |        | (190,156 | )      
|                                                         | Repurchase of common stock                                              |                                                    |                                           |         |        |         |       |         |         |          |        | (20,115  | )      
|                                                         | Proceeds from sale of common stock                                      |                                                    |                                           |         |        |         |       |         |         |          |        | 33,903   |        
|                                                         | Repurchase of OP Units                                                  |                                                    |                                           |         |        |         |       |         |         |          |        | (48,142  | )      
|                                                         | Purchase of debentures                                                  |                                                    |                                           | (128,548 | )      |         |       | (30,000  | )       |          |        | (9,561   | )      
|                                                         | Costs of obtaining financing                                            |                                                    |                                           | (2,558   | )      |         |       | (6,092   | )       |          |        | (1,302   | )      
|                                                         | (Increase) decrease in restricted cash                                  |                                                    |                                           | (3,751   | )      |         |       | 11,046   |         |          |        | (15,140  | )      
|                                                         | Dividends to shareholders                                               |                                                    |                                           | (8,834   | )      |         |       | (26,399  | )       |          |        | (36,778  | )      
|                                                         | Distributions to minority interests                                     |                                                    |                                           | (973     | )      |         |       | (3,164   | )       |          |        | (5,370   | )      
|                                                         |                                                                         |                                                    |                                           |          |        |         |       |          |         |          |        |         
|                                                         |                                                                         |                                                    | Net cash used in financing activities     |          |        | (60,339 | )     |          |         | (260,177 | )      |          |         | (74,936 | )
|                                                         |                                                                         |                                                    |                                           |          |        |         |       |          |         |          |        |         
|NET INCREASE (DECREASE) IN CASH AND CASH
    EQUIVALENTS |                                                                         |                                                    | 652                                       |          |        |         | 960   |          |         |          | (1,432 | )       
|CASH AND CASH EQUIVALENTS, AT BEGINNING OF YEAR          |                                                                         |                                                    | 6,164                                     |          |        |         | 5,204 |          |         |          | 6,636  |         
|                                                         |                                                                         |                                                    |                                           |          |        |         |       |          |         |          |        |         
|CASH AND CASH EQUIVALENTS, AT END OF YEAR                |                                                                         | $                                                  | 6,816                                     |          |        | $       | 6,164 |          |         | $        | 5,204  |         
|                                                         |                                                                         |                                                    |                                           |          |        |         |       |          |         |          |        |         
|NON-CASH TRANSACTIONS:                                   |                                                                         |                                                    |                                           |          |        |         |       |          |         |          |        |         
|                                                         | Issuance of operating partnership units to
    acquire properties       |                                                    |                                           |         |        |         |       |         |         |          | $      | (1,999   | )      
|                                                         |                                                                         |                                                    |                                           |          |        |         |       |          |         |          |        |         

See Notes to Consolidated Financial Statements.

16



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##### Table of Contents



CENTER TRUST

NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

Three Years Ended December 31,
2001


1.     Organization
and Business

Center Trust, Inc. (the Company), a
Maryland corporation is a self-administered and self-managed
real estate investment trust. The Company engages in the
ownership, management, leasing, redevelopment, acquisition and
development of retail shopping centers in the western United
States.

As of December 31, 2001, the Company owned a
portfolio comprised of interests in 35 retail shopping centers
(the Properties). The Companys ownership
interest in the Properties is held through various partnership
interests. The Company is the sole general partner of CT
Operating Partnership, L.P., a California limited partnership
(the Operating Partnership or OP) and
owns a 94.9% interest therein. Of the 35 Properties, 33 are
wholly and directly owned by the Operating Partnership. Two of
the Properties are owned by partnerships in which the OP has a
general partner interest, including a 75% interest in
Willowbrook Center Partnership and a 34% effective interest in
Vermont Slauson Shopping Center, LTD each of which own one
asset. For purposes of securing various mortgages, the OP has
created a series of single purpose entities. Of the
33 properties owned by the OP, ownership of 18 of these
properties are held in 15 separate wholly-owned single purpose
entities, all of which are consolidated into the accompanying
financial statements.

The Company conducts substantially all of its
operations through the Operating Partnership and has full,
exclusive and complete responsibility and discretion in the
management and control of the Operating Partnership. As the
general partner of Kenneth Hahn Plaza and the Vermont-Slauson
Shopping Center, the Operating Partnership has sole
responsibility and control over the partnerships and cannot be
removed by the limited partners without cause.

During the year 2001, the Company sold 6
properties, including 4 community shopping centers and two
single tenant facilities. The net proceeds from these sales were
used to reduce the amount outstanding under the Companys
secured line of credit. In January 2001, the Company repaid, in
full, its 7 1/2% Convertible Subordinated Debentures. In
the second quarter of 2001, the Company recorded a non-recurring
Reorganization expense of $2.6 million. The expense
consisted of employee severance and other related costs.
Substantially all amounts have been paid as of December 31,
2001.

On June 1, 1997 the Company entered into a
Stock Purchase Agreement (the Agreement) with
LF Strategic Realty Investors, L.P. and Prometheus Western
Retail, LLC, affiliates of Lazard Freres Real Estate Investors,
LLC (together LFREI). Pursuant to the Agreement,
LFREI purchased 15,666,666 shares of Common Stock of the Company
at a price of $15.00 per share, for an aggregate purchase price
of $235 million. The stockholders of the Company approved
the Agreement on August 14, 1997. As of December 31,
2001, LFREI owned 56.7% of the outstanding common stock of the
Company.

In connection with the Stock Purchase Agreement,
the Company and LFREI entered into a Stockholders Agreement (the
Stockholders Agreement) providing that until
August 14, 2002 (the Standstill Period) LFREI
and its affiliates may not (i) acquire beneficial ownership
of more than 49.9% of the outstanding shares of Common Stock, on
an Adjusted Fully Diluted Basis (as defined below),
(ii) sell, transfer or otherwise dispose of any shares of
Common Stock except in accordance with certain specified
limitations (including a requirement that the Company, in its
sole and absolute discretion, approve any transfer in a
negotiated transaction that would result in the transferee
beneficially owning more than 9.8% of the Companys capital
stock), (iii) solicit, encourage or propose to effect or
negotiate certain business combination transactions,
(iv) solicit, encourage, initiate or participate in any
solicitation of proxies or become a participant in any election
contest, (v) seek board representation or a change in the
composition or size of the board, except as specifically
permitted, or (vi) assist or encourage any person or entity
with respect to any of the foregoing (collectively, the
Standstill Provisions). As used herein, the term
Adjusted Fully Diluted Basis shall mean on a diluted
basis, except that shares of common stock of the Company
issuable upon exercise of options granted under management
benefit plans shall not be included. In addition, during the

17



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##### Table of Contents



CENTER TRUST


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Standstill Period, LFREI and its affiliates have
agreed to vote all shares of Company common stock owned by them
that represent aggregate ownership in excess of 40% of the
outstanding shares of Company common stock either (i) in
accordance with the recommendation of our board of directors or
(ii) proportionally in accordance with the votes of the
other holders of Company common stock.

As of December 31, 2001, LFREI owned 54.0%
of the common stock of the Company on an Adjusted Fully Diluted
Basis. Under the terms of the Stockholders Agreement,
LFREIs right to freely vote at its discretion was limited
to 74.0% of its total holdings. LFREI and its affiliates must
vote the remainder of their holdings either (i) in
accordance with the recommendation of our board of directors or
(ii) proportionally in accordance with the votes of the
other holders of Company common stock. In the event that the
number of outstanding shares were to increase for any reason
(including as a result of issuance of common stock of the
Company upon exercise of management stock options), then LFREI
would be allowed to acquire additional shares of common stock of
the Company, up to 49.9% on an Adjusted Fully Diluted Basis. In
addition to the above, LFREI has the right to nominate four
members to the Companys board of directors. Although LFREI
will not be able to take action on behalf of the Company without
the concurrence of at least one of the other members of the
Companys board of directors, they may be able to exert
substantial influence over the Companys affairs. Further,
LFREI is entitled to receive access to certain operating
statements and other financial reports used in operating the
Company on a monthly basis.

On March 12, 2001, the Company granted LFREI
a limited waiver of some of the Standstill Provisions. The
waiver is to permit LFREI, under the control of the board of
directors, to initiate and engage in discussions with third
parties concerning certain change of control-type transactions
involving the Company. The limited waiver will stay in effect
until the expiration of the standstill period on August 14,
2002.

2.     Significant
Accounting Policies

The Companys significant accounting
policies are as follows:

Basis of Presentation The accompanying financial statements
include the accounts of the Company and the OP on a consolidated
basis. All significant intercompany transactions and balances
have been eliminated in the consolidated presentation.

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

The Company adopted Statement of Financial
Accounting Standards No. 144 Accounting for the
Impairment or Disposal of Long-Lived Assets
(SFAS 144) effective January 1, 2002. In
accordance with the implementation provisions of SFAS 144,
the operating results and gains on property sales sold
subsequent to December 31, 2001 are included in
discontinued operations in the consolidated statement of
operations. The Consolidated Statements of Operations for the
years ended December 31, 2001, 2000 and 1999 include
operating results for properties disposed of prior to
December 31, 2001 in income (loss) from continuing
operations.

Minority Interests Included in minority interest for the
years ended December 31, 2001, 2000 and 1999 is the 5.1%,
6.8% and 5.8% interests, respectively, in the results of the OP
which are owned by various third parties. At December 31,
2001, 2000 and 1999, 1,338,644, 2,015,692 and 1,654,725 OP Units
were held by the limited partners, respectively. The OP Units
are exchangeable, subject to maintaining the Companys
status as a REIT, on a one-for-one basis for shares of the
Companys common stock.

Adjustments have been made to the minority
interest balance in the OP to properly reflect their ownership
interests in the Company. During 2001, 2000 and 1999,
adjustments of $5,531,000, $3,654,000 and

18



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##### Table of Contents



CENTER TRUST


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

$19,716,000 were recorded, respectively. The
adjustments are a result of the purchase or issuance of
additional shares of common stock and OP Units and the
conversion of OP Units into common stock.

Other minority interests include the limited
partners share of equity in two properties. The two
properties in which the OP has a general partner interest are
Kenneth Hahn Plaza (75% interest) and Vermont-Slauson Shopping
Center (34% interest). Consolidation accounting is applied to
both of the above partnerships as the OP has full control over
the operations of the properties.

Rental Properties Rental properties are stated at cost
less accumulated depreciation. Costs incurred for the
acquisition, renovation and betterment of the properties are
capitalized. Recurring maintenance and repairs are charged to
expense as incurred.

The Company regularly reviews long-lived assets
for impairment whenever events or changes in circumstances
indicate that the carrying amount of the asset may not be
recoverable. If the sum of expected future cash flows is less
than the carrying amount of the asset, the Company recognizes an
impairment loss equal to the difference between the estimated
fair value and the carrying amount of the asset.

Interest costs incurred with respect to qualified
expenditures relating to the construction of assets are
capitalized during the construction period. Interest capitalized
during the years ended December 31, 2001, 2000, and 1999
amounted to $433,000, $836,000, and $735,000, respectively. Cash
paid for interest, net of capitalized interest costs, was
$33,310,000, $56,791,000, and $52,479,000 for the years ended
December 31, 2001, 2000 and 1999, respectively.

Depreciation and Amortization The cost of buildings and improvements
is depreciated on the straight-line method over estimated useful
lives, as follows:

Buildings  40 years

Leasehold interests  shorter of lease
term or useful life of the related property

Improvements  shorter of lease term or
useful life ranging from 10 to 20 years

Cash and Cash Equivalents Cash and cash equivalents include
highly liquid investments with original maturities of three
months or less.

Deferred Charges Deferred charges include deferred
leasing costs and loan fees. Leasing costs include an allocation
of internal costs directly associated with the execution of
leases and third-party leasing commissions. Such costs are
amortized on the straight-line basis over the initial lives of
the leases, which range from 5 to 20 years. Deferred
financing fees are amortized over the terms of the respective
loans.

|                         |  |                |         |      |  |   |         |  
|------------------------ |  | -------------- | ------- | ---- |  | - | ------- | -
|                         |  |               
|                         |  | December 31,  
|                         |  |               
|                         |  | 2001           |         | 2000
|                         |  |                |         |     
|                         |  |               
|                         |  | (In thousands)
|Deferred financing costs |  | $              | 11,061  |      |  | $ | 18,346  |  
|Deferred leasing costs   |  |                | 20,705  |      |  |   | 18,189  |  
|                         |  |                |         |      |  |   |         |  
|Total deferred charges   |  |                | 31,766  |      |  |   | 36,535  |  
|Accumulated amortization |  |                | (15,130 | )    |  |   | (18,505 | )
|                         |  |                |         |      |  |   |         |  
|Deferred charges, net    |  | $              | 16,636  |      |  | $ | 18,030  |  
|                         |  |                |         |      |  |   |         |  

Revenue Recognition and Tenant
Receivables Leases with
tenants are accounted for as operating leases. Minimum annual
rentals are recognized on a straight-line basis over the lease
term. Unbilled deferred rent represents the amount by which
expected straight-line rental income exceeds rents currently due
under

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##### Table of Contents



CENTER TRUST


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

the lease agreement. The Company continually
evaluates its reserve for unbilled deferred rent and may adjust
its reserve in the future for changes in the retail environment.
Total rents receivable consist of the following:

|                                     |  |                |        |      |  |   |        |  
|------------------------------------ |  | -------------- | ------ | ---- |  | - | ------ | -
|                                     |  |               
|                                     |  | December 31,  
|                                     |  |               
|                                     |  | 2001           |        | 2000
|                                     |  |                |        |     
|                                     |  |               
|                                     |  | (In thousands)
|Billed tenant receivables            |  | $              | 5,978  |      |  | $ | 10,964 |  
|Allowance for uncollectible rent     |  |                | (2,071 | )    |  |   | (2,592 | )
|                                     |  |                |        |      |  |   |        |  
|Net billed tenant receivables        |  |                | 3,907  |      |  |   | 8,372  |  
|                                     |  |                |        |      |  |   |        |  
|Unbilled deferred rent               |  |                | 6,422  |      |  |   | 6,014  |  
|Allowance for unbilled deferred rent |  |                | (2,661 | )    |  |   | (2,466 | )
|                                     |  |                |        |      |  |   |        |  
|Net unbilled deferred rent           |  | $              | 3,761  |      |  | $ | 3,548  |  
|                                     |  |                |        |      |  |   |        |  
|Total tenant receivables, net        |  | $              | 7,668  |      |  | $ | 11,920 |  
|                                     |  |                |        |      |  |   |        |  

Included in billed tenant receivables are
additional rentals based on common area maintenance expenses and
certain other expenses which are accrued in the period in which
the related expense is incurred and percentage rents which are
accrued on the basis of reported tenant sales.

Other Income In connection with the original
development of the Media City Center, commitments in the form of
notes receivable (terminating in 2016) were received from the
Community Redevelopment Agency of the City of Burbank (the
Burbank Agency) aggregating $51,500,000. Such
commitments are repayable by the Burbank Agency out of
incremental sales and property taxes associated with certain
defined parcels within the property. Management considers
amounts receivable under these notes to be contingent in nature
and accordingly has not recorded the notes receivable. Upon
separation, any repaid principal and accrued interest will be
forgiven. Other income has been recorded with respect to these
commitments generally in proportion to the recording of property
tax expense. Included in other income in connection with such
commitments for the years ended December 31, 2001, 2000 and
1999 is $2,713,000, $2,713,000 and $2,721,000, respectively. At
December 31, 2001 and 2000, other receivables with respect
to such commitments from the Burbank Agency were $3,008,000 and
$2,987,000, respectively.

Under similar commitments from the Community
Redevelopment Agencies of the Cities of Fullerton, Chino, and
Upland, other income was recognized for the years ended
December 31, 2001, 2000 and 1999 of $518,000, $493,000 and
$493,000, respectively.

Income Taxes The Company has elected to be taxed as
a REIT under the Internal Revenue Code of 1986, as amended (the
Code), commencing with the taxable year ended
December 31, 1993. As a result, the Company generally will
not be subject to federal and state income taxation at the
corporate level to the extent it distributes annually at least
90% of its REIT taxable income, as defined in the Code, to its
stockholders and satisfies certain other requirements.
Accordingly, no provision has been made for federal and state
income taxes in the accompanying consolidated financial
statements.

As of December 31, 2001 and 2000, the net
tax basis of the Properties was approximately $60,847,000 and
$56,852,000 respectively, less than the net book basis of such
assets.

Earnings Per Share Basic earnings per share is based on
the weighted average number of shares of common stock
outstanding during the period and diluted earnings per share is
based on the weighted average number of shares of common stock
outstanding combined with the incremental weighted average
shares that would have been outstanding if all dilutive
potential common shares had been issued. The basic and diluted
weighted average number of shares of common stock used in the
computation for the years ended December 31, 2001, 2000 and
1999 were 27,435,129, 26,676,641 and 25,696,646, respectively.
Units held by

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CENTER TRUST


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

limited partners in the Operating Partnership may
be exchanged for shares of common stock of the Company on a
one-for-one basis and therefore are not dilutive. Accordingly,
the increase in weighted average shares outstanding under the
diluted method over the basic method in every period presented
would be entirely a result of outstanding options issued under
the Companys Amended and Restated 1993 Stock Option and
Incentive Plan and the conversion of the Debentures. If the
shares were dilutive, the weighted average shares outstanding
for the years ended December 31, 2001, 2000, and 1999 would
increase by 663,842, 8,468,652 and 9,120,523 shares,
respectively. Basic and diluted earnings per share were the same
for all periods presented.

Segment Information The Company operates in one segment,
retail operating properties.

Reclassifications Certain amounts have been reclassified
in the 2000 and 1999 financial statements to conform to the 2001
financial statement presentation.

New Accounting Pronouncements Statement of Financial Accounting
Standards (SFAS) No. 133, as amended, was effective
for the Company as of January 1, 2001. SFAS No. 133
established accounting and reporting standards requiring that
all derivative instruments, including certain derivative
instruments embedded in other contracts, be recorded in the
balance sheet as either assets or liabilities measured at fair
value. SFAS No. 133 requires that changes in the derivative
instruments fair value be recognized currently in
earnings, unless specific hedge accounting criteria are met. The
Companys derivative positions held at December 31,
2001 are considered immaterial. The adoption of this standard
does not have a material impact on the Companys results of
consolidated operations or its financial position.

In July 2001, the Financial Accounting Standards
Board issued SFAS No. 141, Business
Combinations and SFAS No. 142, Good will and
Other Intangible Assets. SFAS No. 141 prohibits the
use of the pooling of interest method. SFAS
No. 142 requires the cessation of the amortization of
goodwill subsequent to December 31, 2001. The new standards
are not expected to have a significant impact on our financial
statements.

In October 2001, the FASB issued SFAS
No. 144, Accounting for the Impairment of Long-Lived
Assets. This Statement addressed financial accounting and
reporting for the impairment or disposal of long-lived assets
and supercedes FASB Statement No. 121, Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed of. Additionally, SFAS 144 expands the
scope of discontinued operations to include all components of an
entity with operations that (1) can be distinguished from
the rest of the entity and (2) will be eliminated from the
ongoing operations of the entity in a disposal transaction. The
provisions of this Statement are effective for financial
statements issued for fiscal years beginning after
December 15, 2001, and interim periods within those fiscal
years. The adoption of this standard is expected to result in
the reclassification of prior year financial statements to
conform to the presentation of assets that are sold subsequent
to December 31, 2001.

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##### Table of Contents



CENTER TRUST


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

3.     Rental
Properties

Rental properties consist of the following:

|                                                |  |                |          |      |  |   |          |  
|----------------------------------------------- |  | -------------- | -------- | ---- |  | - | -------- | -
|                                                |  |               
|                                                |  | December 31,  
|                                                |  |               
|                                                |  | 2001           |          | 2000
|                                                |  |                |          |     
|                                                |  |               
|                                                |  | (In thousands)
|Land                                            |  | $              | 162,047  |      |  | $ | 176,338  |  
|Leasehold interests                             |  |                | 15,920   |      |  |   | 15,920   |  
|Site improvements                               |  |                | 43,299   |      |  |   | 42,885   |  
|Buildings and improvements                      |  |                | 503,182  |      |  |   | 535,499  |  
|Construction in process                         |  |                | 8,370    |      |  |   | 6,025    |  
|                                                |  |                |          |      |  |   |          |  
|Rental Properties, at cost                      |  |                | 732,818  |      |  |   | 776,667  |  
|Less: Accumulated depreciation and amortization |  |                | (149,185 | )    |  |   | (136,828 | )
|                                                |  |                |          |      |  |   |          |  
|Rental Properties, net                          |  | $              | 583,633  |      |  | $ | 639,839  |  
|                                                |  |                |          |      |  |   |          |  

During 2001, the Company sold four community
shopping centers and two single tenant facilities. Gross
proceeds from the sales were $49.2 million. Net proceeds
used to reduce the outstanding balance on the Companys
Credit Facility totaled $33.4 million and mortgage debt
repaid to the lender was approximately $9 million. The net
loss on the sale of assets recognized during the year was
$2.4 million.

Combined revenues from the sold properties of
$2.2 million represented 2% of total revenues for the
year-ended December 31, 2001. Net operating income
(NOI) from the sold properties of $1.7 million
represents 3% of total Company NOI for the year.

As of December 31, 2000, the Company
recorded an impairment of assets held for sale of
$4.8 million. The write-down resulted from the
Companys decision to sell the Center of El Centro
located in El Centro, California and Madera Marketplace
located in Madera, California for a combined total of
approximately $20 million. The carrying value of these
assets, adjusted for anticipated closing and other costs was
$24.5 million at December 31, 2000.

On June 2, 2000, the Company completed a
sale-leaseback transaction on its corporate office building in
Manhattan Beach, California. The sale of the office building
generated approximately $5 million of cash. The Company
entered into a long-term lease with the buyer of the property.

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##### Table of Contents



CENTER TRUST


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

4.     Secured
Debt

|                                                                                                                                                                                                    |  |                |         |      |  |   |         | 
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------- | ------- | ---- |  | - | ------- | 
|                                                                                                                                                                                                    |  |               
|                                                                                                                                                                                                    |  | December 31,  
|                                                                                                                                                                                                    |  |               
|                                                                                                                                                                                                    |  | 2001           |         | 2000
|                                                                                                                                                                                                    |  |                |         |     
|                                                                                                                                                                                                    |  |               
|                                                                                                                                                                                                    |  | (In thousands)
|Credit Facility                                                                                                                                                                                     |  | $              | 114,548 |      |  | $ | 53,344  | 
|Notes payable to life insurance
    companies  interest only and interest plus principal;
    rates ranging from 10.375% to 10.45%; maturing July 2002 through
    January 2003; non- recourse     |  |                | 23,798  |      |  |   | 29,944  | 
|Notes payable to financial
    institutions  principal and interest paid monthly, at
    interest rates ranging from 5.50% to 9.68%; maturing December
    2002 through January 2012; non-recourse |  |                | 218,363 |      |  |   | 184,772 | 
|Notes payable to pension funds 
    principal and interest paid monthly at 10.90% and 11.45%;
    maturing October 2006; non-recourse                                                              |  |                | 9,668   |      |  |   | 13,992  | 
|Floating rate tax-exempt certificates of
    participation  interest only at effective rate of
    4.08%; maturing December 2014 through November 2015; non-recourse                               |  |                | 36,000  |      |  |   | 36,000  | 
|                                                                                                                                                                                                    |  |                |         |      |  |   |         | 
|                                                                                                                                                                                                    |  | $              | 402,377 |      |  | $ | 318,052 | 
|                                                                                                                                                                                                    |  |                |         |      |  |   |         | 

Borrowings under the Credit Facility are secured
by first mortgage liens on Media City Center, Medford Shopping
Center, Sunrise Place, Frontier Village, Rheem Valley, Southern
Palms, Rosedale Village and Walmart-Baldwin Hills. As properties
are acquired, they may be added to the security of the Credit
Facility, thereby increasing the amount available to the
Company. The Credit Facility is subject to certain conditions,
the violation of which may affect its terms.

Subsequent to December 31, 2001, the Company
extended its Credit Facility with GECC that was to expire on
April 1, 2002. The Credit Facility had a one-year extension
option. Under the new terms, the Credit Facility will expire on
April 1, 2004 with the option to extend for one additional
year. The new agreement reduces the maximum commitment from
$170 million to $150 million.

In December 2001, the Company closed on six
separate mortgages with total proceeds of $68.7 million.
The mortgages have a 10-year term with 30-year principal
amortization. The weighted-average fixed interest rate on the
six mortgages is 6.94%. The mortgages are not
cross-collateralized or cross-defaulted. Three of the mortgages,
with combined loan proceeds of $25.1 million, secured by
Ross Plaza in Clackmamas, Oregon, Silverdale Shopping Center in
Silverdale, Washington and Vancouver Park Place in Vancouver,
Washington, closed on December 18, 2001. These assets were
previously pledged as collateral for the Companys variable
rate secured credit facility. The remaining three mortgages,
with combined proceeds of $43.6 million, secured by
Mountain Square in Upland, California, Fire Mountain Shopping
Center in Oceanside, California and Randolph Plaza in Tucson,
Arizona, closed on December 19, 2001. Theses properties
were previously collateral for variable rate,
cross-collateralized, mortgages with a combined balance of
$33.1 million that were to mature on June 1, 2002. All
proceeds, after repayment of existing loans, were used to reduce
the outstanding balance on the Companys secured credit
facility.

On July 6, 2001, the Company refinanced an
existing mortgage on North Mountain Village, located in Phoenix,
Arizona. The $7.1 million mortgage bears interest at 7.68%
and matures in 2011. The Company had no other debt maturities in
2001.

The Company recorded an extraordinary loss on the
early extinguishment of debt of $1.8 million in 2001
related to the payment of certain prepayment penalties and the
write-off of unamortized deferred financing costs. In 2000, the
Company recorded an extraordinary loss on the early
extinguishment of debt of $17.5 million related to the
payment of certain prepayment penalties, the write-off of
unamortized deferred financing costs and costs related to the
defeasance of a loan with Nomura Asset Capital Corporation.

23



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CENTER TRUST


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The remaining notes payable are secured by deeds
of trust and the assignment of rents and leases associated with
29 properties. Certain of the non-recourse notes payable
are subject to certain conditions, the violation of which may
result in additional recourse being available to the lenders.
Certain of the loans are subject to substantial prepayment
penalties, as defined in the respective loan agreements (See
Note 9).

Aggregate future principal payments as of
December 31, 2001 are as follows:

|                          |       |                |         |         | 
|------------------------- | ----- | -------------- | ------- | ------- | 
|Years Ending December 31, |       |               
|                          |       | (In thousands)
|2002                      |       | $              | 176,136 | (1)    
|2003                      |       |                | 41,742  |        
|2004                      |       |                | 2,442   |        
|2005                      |       |                | 2,650   |        
|2006                      |       |                | 11,113  |        
|Thereafter                |       |                | 168,294 |        
|                          |       |                |         |        
|                          | Total |                | $       | 402,377 | 
|                          |       |                |         |        



---



|    |                                                                                                                                                                    
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Includes amount outstanding on the Companys
    Credit Facility which was amended subsequent to
    December 31, 2001 to extend the maturity to April 1,
    2004.

Restricted cash at December 31, 2001 and
2000 includes reserve funds established in connection with the
tax exempt financing. In addition, restricted cash includes
funds restricted for leasing costs and the completion of certain
construction projects required as conditions to existing
mortgages. Interest income on such funds accrues to the benefit
of the Company. Restricted cash disbursements require the
approval of the respective lenders. The floating rate tax-exempt
certificate of participation requires the Company to maintain
letters of credit equal to the balance outstanding. The cost of
such is factored into the effective rate on such notes.

5.     Subordinated
Debentures

In conjunction with the Companys formation,
the Company issued 7 1/2% Convertible Subordinated
Debentures, Series A and Series B which matured on
January 15, 2001. The Convertible Debentures were
convertible at any time after issuance and prior to maturity,
into shares of Common Stock of the Company at a conversion price
of $18.00 per share. On January 16, 2001, the Company
repaid in full its 7 1/2% Convertible Subordinated
Debentures. The outstanding balance of $128.5 million was
repaid with proceeds from the Companys Credit Facility.

Also in conjunction with the Companys
formation, the OP issued $30 million of 7 1/4%
Exchangeable Subordinated Debentures which matured on
December 27, 2003 and were secured by one of the
Companys properties. The Exchangeable Debentures were
exchangeable at any time for Common Stock of the Company at an
exchange price of $18.00 per share. On November 6, 2000,
the Company repaid its 7 1/4% Exchangeable Debentures at
par, pursuant to the Companys optional redemption rights.



|   |                     
|-- | --------------------
|6. | Stockholders Equity

In addition to Common Stock, the Companys
Charter authorizes the issuance of 10,000,000 shares of
Preferred Stock, par value $.01 per share. No such shares were
issued or outstanding as of December 31, 2001 and 2000. The
authorized shares of Common Stock outstanding are
100 million at December 31, 2001.

During the year ended December 31, 2001, the
Company declared four quarterly distributions of $0.04 per
share. During the year ended December 31, 2000, the Company
declared four quarterly distributions of $0.21 per share. During
the year ended December 31, 1999, the Company declared four
quarterly distributions of $0.36 per share.

24



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##### Table of Contents



CENTER TRUST


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



|   |                                
|-- | -------------------------------
|7. | Stock Option and Incentive Plan

The 1993 Stock Option and Incentive Plan, as
amended, (the Option Plan) enables executive
officers, key employees and directors of the Company to
participate in the ownership of the Company. The Option Plan
provides for the award of a broad variety of stock-based
compensation alternatives such as non-qualified stock options,
incentive stock options, and restricted stock, and provides for
the grant to Independent Directors of non-qualified stock
options. Options are granted at prices which are not less than
market at date of grant, expire ten years from the date of
grant, and are generally exercisable 25% per year over four
years. The Option Plan is administered by the Compensation
Committee of the Board of Directors, which is authorized to
determine the number of shares to be subject thereto and the
terms and conditions thereof. Pursuant to the Option Plan,
2,750,000 shares of Common Stock were reserved for issuance to
eligible participants.

Following is a summary of the stock option
activity for the three years ended December 31, 2000:

|                  |           |               |           |                  |   |   |        |        | 
|----------------- | --------- | ------------- | --------- | ---------------- | - | - | ------ | ------ | 
|                  |           | Shares        |           | Weighted Average
|                  |           | Under Options |           | Exercise Price  
|                  |           |               |           |                 
|January 1, 1999.  |           |               | 1,811,767 |                  |   | $ | 15.284 |       
|                  | Granted   |               |           | 530,000          |   |   | $      | 10.011 | 
|                  | Cancelled |               |           | (1,014,058       | ) |   | $      | 15.608 | 
|                  |           |               |           |                  |   |   |        |       
|December 31, 1999 |           |               | 1,327,709 |                  |   | $ | 13.149 |       
|                  | Cancelled |               |           | (612             | ) |   | $      | 11.668 | 
|                  |           |               |           |                  |   |   |        |       
|December 31, 2000 |           |               | 1,327,097 |                  |   | $ | 13.150 |       
|                  | Cancelled |               |           | (663,255         | ) |   | $      | 11.777 | 
|                  |           |               |           |                  |   |   |        |       
|December 31, 2001 |           |               | 663,842   |                  |   | $ | 13.375 |       
|                  |           |               |           |                  |   |   |        |       

As of December 31, 2001, 2000 and 1999
options exercisable totaled 515,842, 799,739 and 547,168,
respectively.

The following table summarizes information about
stock options outstanding at December 31, 2000:

|                         |  |             |         |                  |  |                  |        |                |  |                  |     |  |  |  |         |  |  |   |        | 
|------------------------ |  | ----------- | ------- | ---------------- |  | ---------------- | ------ | -------------- |  | ---------------- | --- |  |  |  | ------- |  |  | - | ------ | 
|                         |  | Number      |         |                  |  | Weighted Average |        | Number         |  |                 
|                         |  | Outstanding |         | Weighted Average |  | Remaining        |        | Exercisable    |  | Weighted Average
|Range of Exercise Prices |  | At 12/31/01 |         | Exercise Price   |  | Contractual Life |        | As of 12/31/01 |  | Exercise Price  
|                         |  |             |         |                  |  |                  |        |                |  |                 
|$10.000                  |  |             | 250,000 |                  |  | $                | 10.000 |                |  |                  | 7.9 |  |  |  | 125,000 |  |  | $ | 10.000 | 
|$10.800-$14.400          |  |             | 108,442 |                  |  | $                | 11.805 |                |  |                  | 4.2 |  |  |  | 103,442 |  |  | $ | 11.811 | 
|$14.401-$18.000          |  |             | 305,400 |                  |  | $                | 16.695 |                |  |                  | 4.0 |  |  |  | 287,400 |  |  | $ | 16.797 | 
|                         |  |             |         |                  |  |                  |        |                |  |                  |     |  |  |  |         |  |  |   |        | 
|                         |  |             | 663,842 |                  |  | $                | 13.375 |                |  |                  | 5.5 |  |  |  | 515,842 |  |  | $ | 14.150 | 
|                         |  |             |         |                  |  |                  |        |                |  |                  |     |  |  |  |         |  |  |   |        | 

The weighted average fair value of the stock
options granted during 1999 was $0.62. There were no options
granted by the Company in 2001 and 2000. The Company applies
Accounting Principles Board Opinion No. 25 and related
Interpretations in accounting for its stock option and incentive
plan. Accordingly, no compensation cost has been recognized as a
result of its initial granting of Stock Options. Had
compensation cost for the Companys Option Plan been
determined based on the fair value at the grant dates for awards
during the three years ended December 31, 2001, consistent
with the method of Statement of Financial Accounting Standards
No. 123, Accounting for Stock Based
Compensation (SFAS No. 123),

25



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##### Table of Contents



CENTER TRUST


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

the Companys net income (loss) and income
(loss) per share for each of the periods would have been equal
to the pro forma amounts indicated below:

|                                    |             |                           |   |        |   |      |   |       |  |  |   |        | 
|----------------------------------- | ----------- | ------------------------- | - | ------ | - | ---- | - | ----- |  |  | - | ------ | 
|                                    |             |                          
|                                    |             | Year Ended December 31,  
|                                    |             |                          
|                                    |             | 2001                      |   | 2000   |   | 1999
|                                    |             |                           |   |        |   |     
|                                    |             |                          
|                                    |             | (In thousands,           
|                                    |             | except per share amounts)
|Net income (loss):                  |             |                           |   |        |   |      |   |       |  |  |   |       
|                                    | As reported |                           | $ | (2,197 | ) |      | $ | 3,773 |  |  | $ | 26,657 | 
|                                    | Pro forma   |                           | $ | (2,318 | ) |      | $ | 3,546 |  |  | $ | 26,369 | 
|Net income (loss) per share, basic: |             |                           |   |        |   |      |   |       |  |  |   |       
|                                    | As reported |                           | $ | (0.08  | ) |      | $ | 0.14  |  |  | $ | 1.04   | 
|                                    | Pro forma   |                           | $ | (0.08  | ) |      | $ | 0.13  |  |  | $ | 1.03   | 

The fair value of options granted under the
Companys Stock Option Plan was estimated on the date of
grant using the Black-Scholes option-pricing model with the
following weighted-average assumptions used for 2001, 2000, and
1999, respectively: expected life of five years; risk free
interest rate of 4.38%, 6.71% and 6.34%; expected dividend yield
of 5.4%, 17.9% and 13.3%; and expected volatility of 46.7%%,
26.5% and 37.3%.

The Company granted 257,298, 73,258 and 547,446
shares for 2001 through 1999, respectively, of restricted shares
of Common Stock to certain Key Employees. As holders of
restricted stock have all the rights of other stockholders,
subject to certain restrictions and forfeiture provisions, such
restricted stock is considered to be issued and outstanding.
Restrictions on 200,000 shares will expire after six years. The
expiration of the restrictions can be accelerated under certain
circumstances at the direction of the Compensation Committee of
the Board of Directors. Unamortized compensation expense related
to Unearned restricted stock of $663,000, $2.3 million and
$1.5 million was recorded as of December 31, 2001
through 1999, respectively, based on the market value of the
shares on the date issuance and is reflected in
Stockholders Equity. Restrictions of the remaining 300,000
shares of restricted stock can be lifted by the Compensation
committee based on the achievement of certain performance goals.
Compensation expense will be recognized at the point in time
that the restrictions are lifted based on the stock price on
such date. During 2001, 2000 and 1999, the Company recorded
compensation expense of $524,000, $1,660,000 and $3,362,000,
respectively, related to the amortization of deferred
compensation.



|   |                    
|-- | -------------------
|8. | Future Minimum Rent

The Company has operating leases with tenants
that expire at various dates through 2037 and are either subject
to scheduled fixed increases or adjustments based on the
Consumer Price Index. Generally, the leases grant tenants
renewal options and provide certain potential allowances during
the initial lease-up period. Leases also provide for additional
or contingent rents based on certain operating expenses as well
as tenants

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CENTER TRUST


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

sales volume. Future minimum rent under operating
leases on a cash basis, excluding tenant reimbursements of
certain costs, as of December 31, 2001 is summarized as
follows:

|                          |       |                |         |         | 
|------------------------- | ----- | -------------- | ------- | ------- | 
|Years Ending December 31, |       |               
|                          |       | (In thousands)
|2002                      |       | $              | 65,369  |        
|2003                      |       |                | 59,749  |        
|2004                      |       |                | 53,267  |        
|2005                      |       |                | 45,994  |        
|2006                      |       |                | 37,777  |        
|Thereafter                |       |                | 158,734 |        
|                          |       |                |         |        
|                          | Total |                | $       | 420,890 | 
|                          |       |                |         |        

The Properties are located throughout the western
United States. More than one-half of our properties are located
in Southern California. As of December 31, 2001, these
properties represented approximately 64% of the aggregate square
footage of all our properties. The ability of the tenants to
honor the terms of their respective leases is dependent upon the
economic, regulatory and social factors affecting the
communities and industries in which the tenants operate.

9.     Fair Value
Disclosure of Financial Instruments

The following disclosure of estimated fair value
was determined by the Company using available market information
and appropriate valuation methodologies. However, considerable
judgment is necessary to interpret market data and develop the
related estimates of fair value. Accordingly, the estimates
presented herein are not necessarily indicative of the amounts
that could be realized upon disposition of the financial
instruments. The use of different market assumptions and/or
estimation methodologies may have a material effect on the
estimated fair value amounts.

Billed tenant and other receivables, accounts
payable and other liabilities are carried at amounts which
reasonably approximate their fair value.

The fixed rate mortgage notes payable totaling
$176,644,000 and $120,067,000 as of December 31, 2001 and
2000, respectively, have fair values of $203,288,000 and
$124,063,000, respectively (excluding prepayment penalties) as
estimated based upon current interest rates available for the
issuance of debt with similar terms and remaining maturities.
These notes were subject to estimated prepayment penalties of
$27,175,000 and $19,107,000 at December 31, 2001 and 2000,
respectively, which would be required to retire these notes
prior to maturity. The fair value of the outstanding balance on
the Credit Facility at December 31, 2001 is equal to its
carrying value of $114,548,000. The carrying value of floating
rate tax-exempt certificates of participation and the secured
line of credit at December 31, 2001 and 2000 approximates
their fair value. The fair market value of the Convertible
Debentures at December 31, 2000 was $128,548,000, based on
the trading price of the Series A Convertible Debentures as
of December 31, 2000.

The fair value estimates presented herein are
based on information available to management as of
December 31, 2001 and 2000. Although management is not
aware of any factors that would significantly affect the
estimated fair value amounts, such amounts have not been
comprehensively revalued for purposes of these financial
statements since those dates, and current estimates of fair
value may differ significantly from the amounts presented herein.

10.     Commitments
and Contingencies

Operating Leases The Company leases certain of its
Properties under long-term ground leases which are accounted for
as operating leases and which generally provide for contingent
rents based on the Companys

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CENTER TRUST


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

tenants sales volume and renewal options.
Five leases expire between 2009 and 2018 and provide for options
to renew for additional periods of 20 to 25 years. Three
additional leases expire between 2047 and 2059. Future minimum
rental payments required during noncancelable lease terms as of
December 31, 2001 are summarized as follows:

|                          |       |                |       |        | 
|------------------------- | ----- | -------------- | ----- | ------ | 
|Years Ending December 31, |       |               
|                          |       |               
|                          |       | (In thousands)
|2002                      |       | $              | 996   |       
|2003                      |       |                | 997   |       
|2004                      |       |                | 1,000 |       
|2005                      |       |                | 1,000 |       
|2006                      |       |                | 1,000 |       
|Thereafter                |       |                | 9,507 |       
|                          |       |                |       |       
|                          | Total |                | $     | 14,500 | 
|                          |       |                |       |       

Assuming exercise of all renewal options,
aggregate future rental payments as of December 31, 2001
are $32.4 million. Certain of the Companys ground
leases contain participation features. Participation rents paid
in accordance with such terms were $101,000, $88,000, and
$68,000 for the years ended December 31, 2001, 2000, and
1999, respectively.

Litigation The Company is subject to various
legal proceedings and claims that arise in the ordinary course
of business. These matters are generally covered by insurance.
While the resolution of these matters cannot be predicted with
certainty, management believes, based on currently available
information, that the final outcome of such matters will not
have a material adverse effect on the financial statements of
the Company.

11.     Selected
Quarterly Financial Data (Unaudited)

The following table sets forth the selected
quarterly financial data for the Company for the years ended
December 31, 2001 and 2000 (in thousands, except per share
data):

|                                                                                                    |  |                    |        |              |  |         |        |          |  |   |        |   |  |   |        | 
|--------------------------------------------------------------------------------------------------- |  | ------------------ | ------ | ------------ |  | ------- | ------ | -------- |  | - | ------ | - |  | - | ------ | 
|                                                                                                    |  |                   
|                                                                                                    |  | 2001 Quarter Ended
|                                                                                                    |  |                   
|                                                                                                    |  | December 31        |        | September 30 |  | June 30 |        | March 31
|                                                                                                    |  |                    |        |              |  |         |        |         
|Total Operating Revenues                                                                            |  | $                  | 23,881 |              |  | $       | 23,501 |          |  | $ | 23,196 |   |  | $ | 24,325 | 
|Income (loss) before extraordinary item                                                             |  | $                  | 1,451  |              |  | $       | 915    |          |  | $ | (5,611 | ) |  | $ | 1,221  | 
|Income from discontinued operations                                                                 |  | $                  | 392    |              |  | $       | 351    |          |  | $ | 433    |   |  | $ | 419    | 
|Net income (loss)                                                                                   |  | $                  | 1,460  |              |  | $       | 1,266  |          |  | $ | (5,744 | ) |  | $ | 821    | 
|Basic and diluted income (loss) before
    extraordinary item and discontinued operations per share |  | $                  | 0.05   |              |  | $       | 0.04   |          |  | $ | (0.20  | ) |  | $ | 0.04   | 
|Basic and diluted income from discontinued
    operations per share                                 |  | $                  | 0.01   |              |  | $       | 0.01   |          |  | $ | 0.01   |   |  | $ | 0.02   | 
|Basic and diluted income (loss) per share                                                           |  | $                  | 0.05   |              |  | $       | 0.05   |          |  | $ | (0.21  | ) |  | $ | 0.03   | 

28



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CENTER TRUST


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

|                                                                                                    |  |                    |         |              |  |         |        |          |  |   |        |  |  |   |        | 
|--------------------------------------------------------------------------------------------------- |  | ------------------ | ------- | ------------ |  | ------- | ------ | -------- |  | - | ------ |  |  | - | ------ | 
|                                                                                                    |  |                   
|                                                                                                    |  | 2000 Quarter Ended
|                                                                                                    |  |                   
|                                                                                                    |  | December 31        |         | September 30 |  | June 30 |        | March 31
|                                                                                                    |  |                    |         |              |  |         |        |         
|Total Operating Revenues                                                                            |  | $                  | 32,244  |              |  | $       | 32,739 |          |  | $ | 33,056 |  |  | $ | 33,598 | 
|Income before extraordinary item                                                                    |  | $                  | 3,062   |              |  | $       | 3,164  |          |  | $ | 9,869  |  |  | $ | 4,416  | 
|Income from discontinued operations                                                                 |  | $                  | 158     |              |  | $       | 227    |          |  | $ | 223    |  |  | $ | 168    | 
|Net income (loss)                                                                                   |  | $                  | (11,841 | )            |  | $       | 2,802  |          |  | $ | 10,092 |  |  | $ | 2,720  | 
|Basic and diluted income (loss) before
    extraordinary item and discontinued operations per share |  | $                  | 0.11    |              |  | $       | 0.12   |          |  | $ | 0.36   |  |  | $ | 0.16   | 
|Basic and diluted income from discontinued
    operations per share                                 |  | $                  | 0.01    |              |  | $       | 0.01   |          |  | $ | 0.01   |  |  | $ | 0.01   | 
|Basic and diluted income (loss) per share                                                           |  | $                  | (0.44   | )            |  | $       | 0.11   |          |  | $ | 0.38   |  |  | $ | 0.10   | 

12.     Subsequent
Events

On March 20, 2002, the Company extended its
Credit Facility with GECC that was to expire on April 1,
2002. Under the new terms, the Credit Facility will expire on
April 1, 2004 with the option to extend for one additional
year. The new agreement reduces the maximum commitment from
$170 million to $150 million (See Note 4).

On March 20, 2002, the Company declared a
dividend of $0.06 for the first quarter of 2002 to shareholders
of record at March 29, 2002 and payable on April 22,
2002.

13.     Subsequent
Sale of Properties

On January 1, 2002, the Company adopted the
provisions of SFAS 144 Accounting for the Impairment
or Disposal of Long-Lived Assets
(SFAS 144). SFAS 144 addresses financial
accounting and reporting for the disposal of long-lived assets
and supersedes FAS 121 Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of. In accordance with SFAS 144, the operating
results and the net gain on disposition of operating properties
sold subsequent to December 31, 2001 must be reflected in
the Consolidated Statements of Operations as discontinued
operations for all periods presented. The net income and the net
gain on dispositions of operating properties sold prior to
December 31, 2001 will be included in continuing operations
for all periods presented. The adoption of this statement did
not have a material effect on the Companys results of
operations or financial condition.

During the third quarter of 2002, the Company
sold three open-air centers for a combined sales price of
$38.8 million, and recognized a net gain on sale of
approximately $2.7 million. The assets sold included Ross
Center, a 135,000 square foot center located in Portland,
Oregon, Vancouver Park Place, a 78,000 square foot center
located in Vancouver, Washington and Rosedale Village Shopping
Center, a 128,000 square foot center located in Bakersfield,
California. After repayment of debt of $19.3 million.

In accordance with the SFAS 144, the
operating results and the net gain on disposition of operating
properties sold subsequent to December 31, 2001 are
reflected in the consolidated statement of operations as
discontinued operations for all periods presented. For years
ended December 31, 2001, 2000 and 1999, discontinued
operations relates to the three open-air centers sold during the
third quarter of 2002. In connection with this disposition, the
Company repaid approximately $19.3 million in principal of
existing mortgage loans and repaid approximately
$19.5 million of the Credit Facility. The related interest
expense was allocated to discontinued operations.

On November 6, 2002, the Company and Pan
Pacific Retail Properties, Inc. announced that they have entered
into a definitive agreement in which Pan Pacific will acquire
Center Trust. The tax-free merger will convert each share of
Center Trust common stock into the right to receive 0.218 newly
issued shares of Pan Pacific common stock. The transaction has
been unanimously approved by each companys board of
directors and is expected to be completed in the first quarter
of 2003, subject to approval by a two-thirds vote of the Center
Trust stockholders and other customary conditions.

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CENTER TRUST


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The following table summarizes the income and
expense components that comprise discontinued operations:

|                                                   |                                           |                |       |       |  |      |       |     |  |   |       |       | 
|-------------------------------------------------- | ----------------------------------------- | -------------- | ----- | ----- |  | ---- | ----- | --- |  | - | ----- | ----- | 
|                                                   |                                           |               
|                                                   |                                           | Year Ended    
|                                                   |                                           | December 31,  
|                                                   |                                           |               
|                                                   |                                           | 2001           |       | 2000  |  | 1999
|                                                   |                                           |                |       |       |  |     
|                                                   |                                           |               
|                                                   |                                           | (in thousands)
|Total revenues                                     |                                           | $              | 5,202 |       |  | $    | 5,136 |     |  | $ | 4,945 |      
|Total expenses                                     |                                           |                | 3,607 |       |  |      | 4,360 |     |  |   | 3,868 |      
|                                                   |                                           |                |       |       |  |      |       |     |  |   |       |      
|Net income from discontinued operations            |                                           |                | 1,595 |       |  |      | 776   |     |  |   | 1,077 |      
|Net gain on disposition of discontinued operations |                                           |                | 2,379 |       |  |      |      |     |  |   |      |      
|                                                   |                                           |                |       |       |  |      |       |     |  |   |       |      
|                                                   | Total income from discontinued operations |                | $     | 3,974 |  |      | $     | 776 |  |   | $     | 1,077 | 
|                                                   |                                           |                |       |       |  |      |       |     |  |   |       |      

Total assets related to the three open-air
centers sold during the third quarter of 2002 were
$34.4 million and $35.2 million as of
December 31, 2001 and 2000, respectively. Included in total
assets are $33.5 million and $34.2 million of rental
properties, net of depreciation as of December 31, 2001 and
2000, respectively.

Total liabilities related to the three open-air
centers sold during the third quarter of 2002 were
$24.2 million as of December 31, 2001 and 2000 which
primarily consists of secured debt.

30



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##### Table of Contents



PART IV






|         |                                                                     
|-------- | --------------------------------------------------------------------
|Item 14. | Exhibits, Financial Statement Schedules,
    and Reports on Form 8-K

Exhibit 23.1

31



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##### Table of Contents






SIGNATURES

Pursuant to the requirements of Section 13
or 15(d) of the Securities Act of 1934, the Registrant has duly
caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Manhattan
Beach, State of California, on the 20th day of November, 2002.



| |                   
| | ------------------
| | CENTER TRUST, INC.



| |     |                  
| | --- | -----------------
| | By: | /s/ EDWARD D. FOX

| |                           
| | --------------------------
| |                           
| | Edward D. Fox             
| | Chairman of the Board, and
| | Chief Executive Officer   

S-1



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##### Table of Contents






CERTIFICATIONS

I, Edward D. Fox, certify that:



| |                                                                                    
| | -----------------------------------------------------------------------------------
| | 1.     I have reviewed
    this annual report on form 10-K/A of Center Trust, Inc.;



| |    |                                                                                                                                                                                                                                                                                                                                             
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 2. | Based on my knowledge, this annual report does
    not contain any untrue statement of a material fact or omit to
    state a material fact necessary to make the statements made, in
    light of the circumstances under which such statements were
    made, not misleading with respect to the period covered by this
    annual report;
|
| | 3. | Based on my knowledge, the financial statements,
    and other financial information included in this annual report,
    fairly present in all material respects the financial condition,
    results of operations and cash flows of the registrant as of,
    and for, the periods presented in this annual report;                       
|
| | 4. | The registrants other certifying officers
    and I are responsible for establishing and maintaining
    disclosure controls and procedures (as defined in Exchange Act
    Rules 13a-14 and 15d-14) for the registrant and we
    have:                                                                                                   



| |    |                                                                                                                                                                                                                                                                                                             
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) | designed such disclosure controls and procedures
    to ensure that material information relating to the registrant,
    including its consolidated subsidiaries, is made known to us by
    others within those entities, particularly during the period in
    which this annual report is being prepared;
|
| | b) | evaluated the effectiveness of the
    registrants disclosure controls and procedures as of a
    date within 90 days prior to the filing date of this annual
    report (the Evaluation Date); and                                                                                                      
|
| | c) | presented in this annual report our conclusions
    about the effectiveness of the disclosure controls and
    procedures based on our evaluation as of the Evaluation Date;                                                                                                                                



| |    |                                                                                                                                                                                                                                                               
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 5. | The registrants other certifying officers
    and I have disclosed, based on our most recent evaluation, to
    the registrants auditors and the audit committee of
    registrants board of directors (or persons performing the
    equivalent function):



| |    |                                                                                                                                                                                                                                                                                                                   
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) | all significant deficiencies in the design or
    operation of internal controls which could adversely affect the
    registrants ability to record, process, summarize and
    report financial data and have identified for the
    registrants auditors any material weaknesses in internal
    controls; and
|
| | b) | any fraud, whether or not material, that involves
    management or other employees who have a significant role in the
    registrants internal controls; and                                                                                                                                                    



| |    |                                                                                                                                                                                                                                                                                                                                                                                                               
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 6. | The registrants other certifying officers
    and I have indicated in this annual report whether or not there
    were significant changes in internal controls or in other
    factors that could significantly affect internal controls
    subsequent to the date of our most recent evaluation, including
    any corrective actions with regard to significant deficiencies
    and material weaknesses.

Date: November 20, 2002



| |                                     
| | ------------------------------------
| | /s/ EDWARD D. FOX                   
| |                                     
| | Edward D. Fox                       
| | Chairman and Chief Executive Officer



---



##### Table of Contents



I, Stuart J. S. Gulland, certify that:



| |    |                                                                                                                                                                                                                                                                                                                                             
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 1. | I have reviewed this annual report on
    form 10-K/A of Center Trust, Inc.;                                                                                                                                                                                                                                                                
|
| | 2. | Based on my knowledge, this annual report does
    not contain any untrue statement of a material fact or omit to
    state a material fact necessary to make the statements made, in
    light of the circumstances under which such statements were
    made, not misleading with respect to the period covered by this
    annual report;
|
| | 3. | Based on my knowledge, the financial statements,
    and other financial information included in this annual report,
    fairly present in all material respects the financial condition,
    results of operations and cash flows of the registrant as of,
    and for, the periods presented in this annual report;                       
|
| | 4. | The registrants other certifying officers
    and I are responsible for establishing and maintaining
    disclosure controls and procedures (as defined in Exchange Act
    Rules 13a-14 and 15d-14) for the registrant and we
    have:                                                                                                   



| |    |                                                                                                                                                                                                                                                                                                             
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) | designed such disclosure controls and procedures
    to ensure that material information relating to the registrant,
    including its consolidated subsidiaries, is made known to us by
    others within those entities, particularly during the period in
    which this annual report is being prepared;
|
| | b) | evaluated the effectiveness of the
    registrants disclosure controls and procedures as of a
    date within 90 days prior to the filing date of this annual
    report (the Evaluation Date); and                                                                                                      
|
| | c) | presented in this annual report our conclusions
    about the effectiveness of the disclosure controls and
    procedures based on our evaluation as of the Evaluation Date;                                                                                                                                



| |    |                                                                                                                                                                                                                                                               
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 5. | The registrants other certifying officers
    and I have disclosed, based on our most recent evaluation, to
    the registrants auditors and the audit committee of
    registrants board of directors (or persons performing the
    equivalent function):



| |    |                                                                                                                                                                                                                                                                                                                   
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) | all significant deficiencies in the design or
    operation of internal controls which could adversely affect the
    registrants ability to record, process, summarize and
    report financial data and have identified for the
    registrants auditors any material weaknesses in internal
    controls; and
|
| | b) | any fraud, whether or not material, that involves
    management or other employees who have a significant role in the
    registrants internal controls; and                                                                                                                                                    



| |    |                                                                                                                                                                                                                                                                                                                                                                                                               
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 6. | The registrants other certifying officers
    and I have indicated in this annual report whether or not there
    were significant changes in internal controls or in other
    factors that could significantly affect internal controls
    subsequent to the date of our most recent evaluation, including
    any corrective actions with regard to significant deficiencies
    and material weaknesses.

Date: November 20, 2002



| |                                          
| | -----------------------------------------
| | /s/ STUART J. S. GULLAND                 
| |                                          
| | Stuart J. S. Gulland                     
| | President and Chief Operating
    Officer



---



##### Table of Contents



I, Edward A. Stokx, certify that:



| |                                                                                    
| | -----------------------------------------------------------------------------------
| | 1.     I have reviewed
    this annual report on form 10-K/A of Center Trust, Inc.;



| |    |                                                                                                                                                                                                                                                                                                                                             
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 2. | Based on my knowledge, this annual report does
    not contain any untrue statement of a material fact or omit to
    state a material fact necessary to make the statements made, in
    light of the circumstances under which such statements were
    made, not misleading with respect to the period covered by this
    annual report;
|
| | 3. | Based on my knowledge, the financial statements,
    and other financial information included in this annual report,
    fairly present in all material respects the financial condition,
    results of operations and cash flows of the registrant as of,
    and for, the periods presented in this annual report;                       
|
| | 4. | The registrants other certifying officers
    and I are responsible for establishing and maintaining
    disclosure controls and procedures (as defined in Exchange Act
    Rules 13a-14 and 15d-14) for the registrant and we
    have:                                                                                                   



| |    |                                                                                                                                                                                                                                                                                                             
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) | designed such disclosure controls and procedures
    to ensure that material information relating to the registrant,
    including its consolidated subsidiaries, is made known to us by
    others within those entities, particularly during the period in
    which this annual report is being prepared;
|
| | b) | evaluated the effectiveness of the
    registrants disclosure controls and procedures as of a
    date within 90 days prior to the filing date of this annual
    report (the Evaluation Date); and                                                                                                      
|
| | c) | presented in this annual report our conclusions
    about the effectiveness of the disclosure controls and
    procedures based on our evaluation as of the Evaluation Date;                                                                                                                                



| |    |                                                                                                                                                                                                                                                               
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 5. | The registrants other certifying officers
    and I have disclosed, based on our most recent evaluation, to
    the registrants auditors and the audit committee of
    registrants board of directors (or persons performing the
    equivalent function):



| |    |                                                                                                                                                                                                                                                                                                                   
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) | all significant deficiencies in the design or
    operation of internal controls which could adversely affect the
    registrants ability to record, process, summarize and
    report financial data and have identified for the
    registrants auditors any material weaknesses in internal
    controls; and
|
| | b) | any fraud, whether or not material, that involves
    management or other employees who have a significant role in the
    registrants internal controls; and                                                                                                                                                    



| |    |                                                                                                                                                                                                                                                                                                                                                                                                               
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 6. | The registrants other certifying officers
    and I have indicated in this annual report whether or not there
    were significant changes in internal controls or in other
    factors that could significantly affect internal controls
    subsequent to the date of our most recent evaluation, including
    any corrective actions with regard to significant deficiencies
    and material weaknesses.

Date: November 20, 2002



| |                        
| | -----------------------
| | /s/ EDWARD A. STOKX    
| |                        
| | Edward A. Stokx        
| | Chief Financial Officer