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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549



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FORM 10-Q



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|x | QUARTERLY REPORT PURSUANT TO THE SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | -------------------------------------------------------------------------------------------

For the quarterly period ended September 30, 2007

OR



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------

For the transition period from  to

Commission file number: 1-07533



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FEDERAL
REALTY INVESTMENT TRUST

(Exact Name of Registrant as Specified in its Declaration of Trust)



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|                        |  |                                  
|----------------------- |  | ---------------------------------
|Maryland                |  | 52-0782497                       
|(State of Organization) |  | (IRS Employer Identification No.)



|                                                |  |           
|----------------------------------------------- |  | ----------
|1626 East Jefferson Street, Rockville, Maryland |  | 20852     
|(Address of Principal Executive Offices)        |  | (Zip Code)

(301) 998-8100

(Registrants Telephone Number, Including Area Code)



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

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule 12b-2
of the Exchange Act. (Check one):

Large Accelerated Filer  x    Accelerated Filer ̈Non-Accelerated Filer ̈

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

The number of Registrants common shares outstanding on October 29, 2007 was 56,626,861.



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##### Table of Contents

FEDERAL REALTY INVESTMENT TRUST

QUARTERLY REPORT ON FORM 10-Q

QUARTER ENDED SEPTEMBER 30, 2007

TABLE OF CONTENTS



|           |  |                                                                                                  |  |   
|---------- |  | ------------------------------------------------------------------------------------------------ |  | --
|PART I.    |  | FINANCIAL INFORMATION                                                                            |  |   
|Item 1.    |  | Financial Statements                                                                             |  | 3 
|           |  | Consolidated Balance Sheets September 30, 2007 (unaudited) and December 31, 2006                 |  | 4 
|           |  | Consolidated Statements of Operations (unaudited) nine months ended September 30, 2007 and 2006  |  | 5 
|           |  | Consolidated Statements of Operations (unaudited) three months ended September 30, 2007 and 2006 |  | 6 
|           |  | Consolidated Statement of Shareholders Equity (unaudited) nine months ended September 30, 2007  |  | 7 
|           |  | Consolidated Statements of Cash Flows (unaudited) nine months ended September 30, 2007 and 2006  |  | 8 
|           |  | Notes to Consolidated Financial Statements (unaudited)                                           |  | 9 
|Item 2.    |  | Managements Discussion and Analysis of Financial Condition and Results of Operations            |  | 19
|Item 3.    |  | Quantitative and Qualitative Disclosures about Market Risk                                       |  | 36
|Item 4.    |  | Controls and Procedures                                                                          |  | 36
|           |  |                                                                                                 
|PART II    |  | OTHER INFORMATION                                                                                |  |   
|Item 1.    |  | Legal Proceedings                                                                                |  | 37
|Item 1A.   |  | Risk Factors                                                                                     |  | 37
|Item 2.    |  | Unregistered Sales of Equity Securities and Use of Proceeds                                      |  | 38
|Item 3.    |  | Defaults Upon Senior Securities                                                                  |  | 38
|Item 4.    |  | Submission of Matters to a Vote of Security Holders                                              |  | 38
|Item 5.    |  | Other Information                                                                                |  | 38
|Item 6.    |  | Exhibits                                                                                         |  | 38
|           | 
|SIGNATURES |  | 38                                                                                              



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##### Table of Contents

PART 1FINANCIAL INFORMATION



|ITEM 1. | FINANCIAL STATEMENTS
|------- | --------------------

The following balance sheet
as of December 31, 2006, which has been derived from audited financial statements, and the unaudited interim financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain
information and note disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles (GAAP) have been omitted pursuant to those rules and regulations, although the company believes
that the disclosures made are adequate to make the information not misleading. It is suggested that these financial statements be read in conjunction with the financial statements and notes thereto included in the companys latest Annual Report
on Form 10-K. In the opinion of management, all adjustments (consisting of normal, recurring adjustments) necessary for a fair presentation for the periods presented have been included. The results of operations for the nine and three months ended
September 30, 2007 are not necessarily indicative of the results that may be expected for the full year.



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##### Table of Contents

Federal Realty Investment Trust

Consolidated Balance Sheets



|                                                                                                                                                                                                                               |  |                                   |           |   |                  |   |           |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | --------------------------------- | --------- | - | ---------------- | - | --------- | -
|                                                                                                                                                                                                                               |  | September 30,2007                 |           |   | December 31,2006 |  
|                                                                                                                                                                                                                               |  | (In thousands, except share data) |          
|                                                                                                                                                                                                                               |  | (Unaudited)                       |           |   |                  |  
|ASSETS                                                                                                                                                                                                                         |  |                                   |           |   |                  |   |           |  
|Real estate, at cost                                                                                                                                                                                                           |  |                                   |           |   |                  |   |           |  
|Operating                                                                                                                                                                                                                      |  | $                                 | 3,331,957 |   |                  | $ | 3,025,210 |  
|Construction-in-progress                                                                                                                                                                                                       |  |                                   | 132,450   |   |                  |   | 99,774    |  
|Assets held for sale (discontinued operations)                                                                                                                                                                                 |  |                                   | 15,987    |   |                  |   | 79,274    |  
|                                                                                                                                                                                                                               |  |                                   |           |   |                  |   |           |  
|                                                                                                                                                                                                                               |  |                                   | 3,480,394 |   |                  |   | 3,204,258 |  
|Less accumulated depreciation and amortization                                                                                                                                                                                 |  |                                   | (805,610  | ) |                  |   | (740,507  | )
|                                                                                                                                                                                                                               |  |                                   |           |   |                  |   |           |  
|Net real estate                                                                                                                                                                                                                |  |                                   | 2,674,784 |   |                  |   | 2,463,751 |  
|Cash and cash equivalents                                                                                                                                                                                                      |  |                                   | 10,281    |   |                  |   | 11,495    |  
|Accounts and notes receivable                                                                                                                                                                                                  |  |                                   | 59,964    |   |                  |   | 47,493    |  
|Mortgage notes receivable                                                                                                                                                                                                      |  |                                   | 40,630    |   |                  |   | 40,756    |  
|Investment in real estate partnership                                                                                                                                                                                          |  |                                   | 30,198    |   |                  |   | 10,322    |  
|Prepaid expenses and other assets                                                                                                                                                                                              |  |                                   | 106,550   |   |                  |   | 106,172   |  
|Debt issuance costs, net of accumulated amortization of $6,307 and $4,986, respectively                                                                                                                                        |  |                                   | 7,452     |   |                  |   | 8,617     |  
|                                                                                                                                                                                                                               |  |                                   |           |   |                  |   |           |  
|TOTAL ASSETS                                                                                                                                                                                                                   |  | $                                 | 2,929,859 |   |                  | $ | 2,688,606 |  
|                                                                                                                                                                                                                               |  |                                   |           |   |                  |   |           |  
|                                                                                                                                                                                                                               |  |                                  
|LIABILITIES AND SHAREHOLDERS EQUITY                                                                                                                                                                                           |  |                                   |           |   |                  |   |           |  
|Liabilities                                                                                                                                                                                                                    |  |                                   |           |   |                  |   |           |  
|Mortgages payable                                                                                                                                                                                                              |  | $                                 | 375,601   |   |                  | $ | 311,037   |  
|Obligations under capital leases                                                                                                                                                                                               |  |                                   | 152,862   |   |                  |   | 149,361   |  
|Notes payable, including revolving credit facility                                                                                                                                                                             |  |                                   | 178,873   |   |                  |   | 109,024   |  
|Senior notes and debentures                                                                                                                                                                                                    |  |                                   | 1,127,567 |   |                  |   | 1,127,508 |  
|Accounts payable and accrued expenses                                                                                                                                                                                          |  |                                   | 99,461    |   |                  |   | 97,727    |  
|Dividends payable                                                                                                                                                                                                              |  |                                   | 34,891    |   |                  |   | 31,809    |  
|Security deposits payable                                                                                                                                                                                                      |  |                                   | 11,259    |   |                  |   | 10,126    |  
|Other liabilities and deferred credits                                                                                                                                                                                         |  |                                   | 53,068    |   |                  |   | 45,745    |  
|                                                                                                                                                                                                                               |  |                                   |           |   |                  |   |           |  
|Total liabilities                                                                                                                                                                                                              |  |                                   | 2,033,582 |   |                  |   | 1,882,337 |  
|Minority interests                                                                                                                                                                                                             |  |                                   | 34,354    |   |                  |   | 22,191    |  
|Commitments and contingencies (Note E)                                                                                                                                                                                         |  |                                   |           |   |                  |   |           |  
|Shareholders equity                                                                                                                                                                                                           |  |                                   |           |   |                  |   |           |  
|Preferred stock, authorized 15,000,000 shares, $.01 par: 5.417% Series 1 Cumulative Convertible Preferred Shares, (stated at liquidation
preference $25 per share), 399,896 and 0 shares, respectively, issued and outstanding |  |                                   | 9,997     |   |                  |   |          |  
|Common shares of beneficial interest, $.01 par, 100,000,000 shares authorized, 58,091,319 and 56,805,816 issued, respectively                                                                                                  |  |                                   | 581       |   |                  |   | 568       |  
|Additional paid-in capital                                                                                                                                                                                                     |  |                                   | 1,374,590 |   |                  |   | 1,281,217 |  
|Accumulated dividends in excess of net income                                                                                                                                                                                  |  |                                   | (493,635  | ) |                  |   | (467,369  | )
|Treasury shares at cost, 1,487,407 and 1,485,279 shares, respectively                                                                                                                                                          |  |                                   | (28,807   | ) |                  |   | (28,807   | )
|Notes receivable from issuance of common shares                                                                                                                                                                                |  |                                   | (803      | ) |                  |   | (1,531    | )
|                                                                                                                                                                                                                               |  |                                   |           |   |                  |   |           |  
|Total shareholders equity                                                                                                                                                                                                     |  |                                   | 861,923   |   |                  |   | 784,078   |  
|                                                                                                                                                                                                                               |  |                                   |           |   |                  |   |           |  
|TOTAL LIABILITIES AND SHAREHOLDERS EQUITY                                                                                                                                                                                     |  | $                                 | 2,929,859 |   |                  | $ | 2,688,606 |  
|                                                                                                                                                                                                                               |  |                                   |           |   |                  |   |           |  

The accompanying notes are integral part of these consolidated statements.



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##### Table of Contents

Federal Realty Investment Trust

Consolidated Statements of Operations

(Unaudited)



|                                                                |  |                                       |         |   |      |   |         |  
|--------------------------------------------------------------- |  | ------------------------------------- | ------- | - | ---- | - | ------- | -
|                                                                |  | Nine Months EndedSeptember 30,        |        
|                                                                |  | 2007                                  |         |   | 2006 |  
|                                                                |  | (In thousands, except per share data) |        
|REVENUE                                                         |  |                                       |         |   |      |   |         |  
|Rental income                                                   |  | $                                     | 360,655 |   |      | $ | 319,673 |  
|Other property income                                           |  |                                       | 9,645   |   |      |   | 5,747   |  
|Mortgage interest income                                        |  |                                       | 3,386   |   |      |   | 3,778   |  
|                                                                |  |                                       |         |   |      |   |         |  
|Total revenue                                                   |  |                                       | 373,686 |   |      |   | 329,198 |  
|EXPENSES                                                        |  |                                       |         |   |      |   |         |  
|Rental                                                          |  |                                       | 76,002  |   |      |   | 63,242  |  
|Real estate taxes                                               |  |                                       | 36,320  |   |      |   | 32,651  |  
|General and administrative                                      |  |                                       | 18,271  |   |      |   | 15,747  |  
|Depreciation and amortization                                   |  |                                       | 78,543  |   |      |   | 71,808  |  
|                                                                |  |                                       |         |   |      |   |         |  
|Total operating expense                                         |  |                                       | 209,136 |   |      |   | 183,448 |  
|                                                                |  |                                       |         |   |      |   |         |  
|OPERATING INCOME                                                |  |                                       | 164,550 |   |      |   | 145,750 |  
|Other interest income                                           |  |                                       | 994     |   |      |   | 2,088   |  
|Interest expense                                                |  |                                       | (89,577 | ) |      |   | (75,110 | )
|Income from real estate partnership                             |  |                                       | 1,120   |   |      |   | 533     |  
|                                                                |  |                                       |         |   |      |   |         |  
|INCOME FROM CONTINUING OPERATIONS BEFORE MINORITY INTERESTS     |  |                                       | 77,087  |   |      |   | 73,261  |  
|Minority interests                                              |  |                                       | (4,309  | ) |      |   | (3,483  | )
|                                                                |  |                                       |         |   |      |   |         |  
|INCOME FROM CONTINUING OPERATIONS                               |  |                                       | 72,778  |   |      |   | 69,778  |  
|DISCONTINUED OPERATIONS                                         |  |                                       |         |   |      |   |         |  
|Income from discontinued operations                             |  |                                       | 1,642   |   |      |   | 627     |  
|(Loss) gain on sale of real estate from discontinued operations |  |                                       | (1,051  | ) |      |   | 16,425  |  
|                                                                |  |                                       |         |   |      |   |         |  
|Results from discontinued operations                            |  |                                       | 591     |   |      |   | 17,052  |  
|                                                                |  |                                       |         |   |      |   |         |  
|INCOME BEFORE GAIN ON SALE OF REAL ESTATE                       |  |                                       | 73,369  |   |      |   | 86,830  |  
|Gain on sale of real estate                                     |  |                                       |        |   |      |   | 7,441   |  
|                                                                |  |                                       |         |   |      |   |         |  
|NET INCOME                                                      |  |                                       | 73,369  |   |      |   | 94,271  |  
|Dividends on preferred stock                                    |  |                                       | (307    | ) |      |   | (8,607  | )
|                                                                |  |                                       |         |   |      |   |         |  
|NET INCOME AVAILABLE FOR COMMON SHAREHOLDERS                    |  | $                                     | 73,062  |   |      | $ | 85,664  |  
|                                                                |  |                                       |         |   |      |   |         |  
|EARNINGS PER COMMON SHARE, BASIC                                |  |                                       |         |   |      |   |         |  
|Continuing operations                                           |  | $                                     | 1.30    |   |      | $ | 1.16    |  
|Discontinued operations                                         |  |                                       | 0.01    |   |      |   | 0.32    |  
|Gain on sale of real estate                                     |  |                                       |        |   |      |   | 0.14    |  
|                                                                |  |                                       |         |   |      |   |         |  
|                                                                |  | $                                     | 1.31    |   |      | $ | 1.62    |  
|                                                                |  |                                       |         |   |      |   |         |  
|EARNINGS PER COMMON SHARE, DILUTED                              |  |                                       |         |   |      |   |         |  
|Continuing operations                                           |  | $                                     | 1.29    |   |      | $ | 1.14    |  
|Discontinued operations                                         |  |                                       | 0.01    |   |      |   | 0.32    |  
|Gain on sale of real estate                                     |  |                                       |        |   |      |   | 0.14    |  
|                                                                |  |                                       |         |   |      |   |         |  
|                                                                |  | $                                     | 1.30    |   |      | $ | 1.60    |  
|                                                                |  |                                       |         |   |      |   |         |  

The accompanying notes are an integral part of these consolidated statements.



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##### Table of Contents

Federal Realty Investment Trust

Consolidated Statements of Operations

(Unaudited)



|                                                                |  |                                       |         |   |      |   |         |  
|--------------------------------------------------------------- |  | ------------------------------------- | ------- | - | ---- | - | ------- | -
|                                                                |  | Three Months EndedSeptember 30,       |        
|                                                                |  | 2007                                  |         |   | 2006 |  
|                                                                |  | (In thousands, except per share data) |        
|REVENUE                                                         |  |                                       |         |   |      |   |         |  
|Rental income                                                   |  | $                                     | 123,559 |   |      | $ | 109,371 |  
|Other property income                                           |  |                                       | 4,650   |   |      |   | 1,787   |  
|Mortgage interest income                                        |  |                                       | 1,129   |   |      |   | 1,107   |  
|                                                                |  |                                       |         |   |      |   |         |  
|Total revenue                                                   |  |                                       | 129,338 |   |      |   | 112,265 |  
|EXPENSES                                                        |  |                                       |         |   |      |   |         |  
|Rental                                                          |  |                                       | 26,502  |   |      |   | 20,768  |  
|Real estate taxes                                               |  |                                       | 12,985  |   |      |   | 11,602  |  
|General and administrative                                      |  |                                       | 6,631   |   |      |   | 6,265   |  
|Depreciation and amortization                                   |  |                                       | 26,071  |   |      |   | 23,722  |  
|                                                                |  |                                       |         |   |      |   |         |  
|Total operating expense                                         |  |                                       | 72,189  |   |      |   | 62,357  |  
|                                                                |  |                                       |         |   |      |   |         |  
|OPERATING INCOME                                                |  |                                       | 57,149  |   |      |   | 49,908  |  
|Other interest income                                           |  |                                       | 313     |   |      |   | 1,495   |  
|Interest expense                                                |  |                                       | (30,533 | ) |      |   | (26,076 | )
|Income from real estate partnership                             |  |                                       | 473     |   |      |   | 196     |  
|                                                                |  |                                       |         |   |      |   |         |  
|INCOME FROM CONTINUING OPERATIONS BEFORE MINORITY INTERESTS     |  |                                       | 27,402  |   |      |   | 25,523  |  
|Minority interests                                              |  |                                       | (1,629  | ) |      |   | (1,086  | )
|                                                                |  |                                       |         |   |      |   |         |  
|INCOME FROM CONTINUING OPERATIONS                               |  |                                       | 25,773  |   |      |   | 24,437  |  
|DISCONTINUED OPERATIONS                                         |  |                                       |         |   |      |   |         |  
|Income from discontinued operations                             |  |                                       | 642     |   |      |   | 452     |  
|(Loss) gain on sale of real estate from discontinued operations |  |                                       | (2,900  | ) |      |   | 95      |  
|                                                                |  |                                       |         |   |      |   |         |  
|Results from discontinued operations                            |  |                                       | (2,258  | ) |      |   | 547     |  
|                                                                |  |                                       |         |   |      |   |         |  
|NET INCOME                                                      |  |                                       | 23,515  |   |      |   | 24,984  |  
|Dividends on preferred stock                                    |  |                                       | (136    | ) |      |   | (2,869  | )
|                                                                |  |                                       |         |   |      |   |         |  
|NET INCOME AVAILABLE FOR COMMON SHAREHOLDERS                    |  | $                                     | 23,379  |   |      | $ | 22,115  |  
|                                                                |  |                                       |         |   |      |   |         |  
|EARNINGS PER COMMON SHARE, BASIC                                |  |                                       |         |   |      |   |         |  
|Continuing operations                                           |  | $                                     | 0.46    |   |      | $ | 0.41    |  
|Discontinued operations                                         |  |                                       | (0.04   | ) |      |   | 0.01    |  
|                                                                |  |                                       |         |   |      |   |         |  
|                                                                |  | $                                     | 0.42    |   |      | $ | 0.42    |  
|                                                                |  |                                       |         |   |      |   |         |  
|EARNINGS PER COMMON SHARE, DILUTED                              |  |                                       |         |   |      |   |         |  
|Continuing operations                                           |  | $                                     | 0.45    |   |      | $ | 0.40    |  
|Discontinued operations                                         |  |                                       | (0.04   | ) |      |   | 0.01    |  
|                                                                |  |                                       |         |   |      |   |         |  
|                                                                |  | $                                     | 0.41    |   |      | $ | 0.41    |  
|                                                                |  |                                       |         |   |      |   |         |  

The accompanying notes are an integral part of these consolidated statements.



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##### Table of Contents

Federal Realty Investment Trust

Consolidated Statement of Shareholders Equity

(Unaudited)



|                                                                         |  |                                              |  |               |       |                          |            |                                            |   |     |                 |        |           |                                              |        |          |                          |  |            |   |  |   |         |   |  |   |        |   |  |   |         |  
|------------------------------------------------------------------------ |  | -------------------------------------------- |  | ------------- | ----- | ------------------------ | ---------- | ------------------------------------------ | - | --- | --------------- | ------ | --------- | -------------------------------------------- | ------ | -------- | ------------------------ |  | ---------- | - |  | - | ------- | - |  | - | ------ | - |  | - | ------- | -
|                                                                         |  | For the Nine Months Ended September 30, 2007 | 
|                                                                         |  | Preferred Stock                              |  | Common Shares |       | AdditionalPaid-inCapital |            | AccumulatedDividends InExcess of NetIncome |   |     | Treasury Shares |        |           | Notes Receivablefrom Issuance ofCommonShares |        |          | TotalShareholdersEquity | 
|                                                                         |  | Shares                                       |  | Amount        |       | Shares                   |            | Amount                                     |   |     |                 | Shares |           |                                              | Amount |          |                          | 
|                                                                         |  | (In thousands, except share data)            | 
|BALANCE AT DECEMBER 31, 2006                                             |  |                                             |  | $             |      |                          | 56,805,816 |                                            | $ | 568 |                 | $      | 1,281,217 |                                              | $      | (467,369 | )                        |  | (1,485,279 | ) |  | $ | (28,807 | ) |  | $ | (1,531 | ) |  | $ | 784,078 |  
|Net income                                                               |  |                                             |  |               |      |                          |           |                                            |   |    |                 |        |          |                                              |        | 73,369   |                          |  |           |   |  |   |        |   |  |   |       |   |  |   | 73,369  |  
|Dividends declared to common shareholders                                |  |                                             |  |               |      |                          |           |                                            |   |    |                 |        |          |                                              |        | (99,328  | )                        |  |           |   |  |   |        |   |  |   |       |   |  |   | (99,328 | )
|Dividends declared to preferred shareholders                             |  |                                             |  |               |      |                          |           |                                            |   |    |                 |        |          |                                              |        | (307     | )                        |  |           |   |  |   |        |   |  |   |       |   |  |   | (307    | )
|Exercise of stock options                                                |  |                                             |  |               |      |                          | 91,546     |                                            |   | 1   |                 |        | 4,190     |                                              |        |         |                          |  |           |   |  |   |        |   |  |   |       |   |  |   | 4,191   |  
|Shares issued under dividend reinvestment plan                           |  |                                             |  |               |      |                          | 25,051     |                                            |   |    |                 |        | 2,132     |                                              |        |         |                          |  |           |   |  |   |        |   |  |   |       |   |  |   | 2,132   |  
|Share-based compensation expense                                         |  |                                             |  |               |      |                          | 108,084    |                                            |   | 1   |                 |        | 5,393     |                                              |        |         |                          |  |           |   |  |   |        |   |  |   |       |   |  |   | 5,394   |  
|Conversions and cash redemptions of downREIT operating partnership units |  |                                             |  |               |      |                          | 176,756    |                                            |   | 2   |                 |        | 3,715     |                                              |        |         |                          |  |           |   |  |   |        |   |  |   |       |   |  |   | 3,717   |  
|Common shares issued                                                     |  |                                             |  |               |      |                          | 884,066    |                                            |   | 9   |                 |        | 77,943    |                                              |        |         |                          |  |           |   |  |   |        |   |  |   |       |   |  |   | 77,952  |  
|Preferred shares issued                                                  |  | 399,896                                      |  |               | 9,997 |                          |           |                                            |   |    |                 |        |          |                                              |        |         |                          |  |           |   |  |   |        |   |  |   |       |   |  |   | 9,997   |  
|Unvested shares forfeited                                                |  |                                             |  |               |      |                          |           |                                            |   |    |                 |        |          |                                              |        |         |                          |  | (2,128     | ) |  |   |        |   |  |   |       |   |  |   |        |  
|Loans paid                                                               |  |                                             |  |               |      |                          |           |                                            |   |    |                 |        |          |                                              |        |         |                          |  |           |   |  |   |        |   |  |   | 728    |   |  |   | 728     |  
|                                                                         |  |                                              |  |               |       |                          |            |                                            |   |     |                 |        |           |                                              |        |          |                          |  |            |   |  |   |         |   |  |   |        |   |  |   |         |  
|BALANCE AT SEPTEMBER 30, 2007                                            |  | 399,896                                      |  | $             | 9,997 |                          | 58,091,319 |                                            | $ | 581 |                 | $      | 1,374,590 |                                              | $      | (493,635 | )                        |  | (1,487,407 | ) |  | $ | (28,807 | ) |  | $ | (803   | ) |  | $ | 861,923 |  
|                                                                         |  |                                              |  |               |       |                          |            |                                            |   |     |                 |        |           |                                              |        |          |                          |  |            |   |  |   |         |   |  |   |        |   |  |   |         |  

The accompanying notes are an integral part of these consolidated statements.



7



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##### Table of Contents

Federal Realty Investment Trust

Consolidated Statements of Cash Flows

(Unaudited)



|                                                                                   |  |                                |          |   |      |   |          |  
|---------------------------------------------------------------------------------- |  | ------------------------------ | -------- | - | ---- | - | -------- | -
|                                                                                   |  | Nine Months EndedSeptember 30, |         
|                                                                                   |  | 2007                           |          |   | 2006 |  
|                                                                                   |  | (In thousands)                 |         
|OPERATING ACTIVITIES                                                               |  |                                |          |   |      |   |          |  
|Net income                                                                         |  | $                              | 73,369   |   |      | $ | 94,271   |  
|Adjustment to reconcile net income to net cash provided by operating activities    |  |                                |          |   |      |   |          |  
|Depreciation and amortization, including discontinued operations                   |  |                                | 79,457   |   |      |   | 72,318   |  
|Loss (gain) on sale of real estate                                                 |  |                                | 1,051    |   |      |   | (23,866  | )
|Equity in income from real estate partnership                                      |  |                                | (1,120   | ) |      |   | (533     | )
|Minority interests                                                                 |  |                                | 4,309    |   |      |   | 3,483    |  
|Other, net                                                                         |  |                                | (2,461   | ) |      |   | (1,582   | )
|Changes in assets and liabilities net of effects of acquisitions and dispositions: |  |                                |          |   |      |   |          |  
|Increase in accounts receivable                                                    |  |                                | (4,989   | ) |      |   | (2,457   | )
|Decrease (increase) in prepaid expenses and other assets                           |  |                                | 2,267    |   |      |   | (7,034   | )
|Increase (decrease) in accounts payable, security deposits and prepaid rent        |  |                                | 4,909    |   |      |   | (472     | )
|Increase in accrued expenses                                                       |  |                                | 1,942    |   |      |   | 6,327    |  
|                                                                                   |  |                                |          |   |      |   |          |  
|Net cash provided by operating activities                                          |  |                                | 158,734  |   |      |   | 140,455  |  
|INVESTING ACTIVITIES                                                               |  |                                |          |   |      |   |          |  
|Acquisition of real estate                                                         |  |                                | (49,573  | ) |      |   | (224,274 | )
|Capital expendituresdevelopment and redevelopment                                 |  |                                | (91,410  | ) |      |   | (62,450  | )
|Capital expendituresother                                                         |  |                                | (14,487  | ) |      |   | (17,408  | )
|Proceeds from sale of real estate                                                  |  |                                | 51,857   |   |      |   | 82,345   |  
|Investment in real estate partnership                                              |  |                                | (20,418  | ) |      |   | (4,958   | )
|Distribution from real estate partnership in excess of earnings                    |  |                                | 405      |   |      |   |         |  
|Leasing costs                                                                      |  |                                | (6,975   | ) |      |   | (6,155   | )
|Repayment (issuance) of mortgage and other notes receivable, net                   |  |                                | 538      |   |      |   | (382     | )
|                                                                                   |  |                                |          |   |      |   |          |  
|Net cash used in investing activities                                              |  |                                | (130,063 | ) |      |   | (233,282 | )
|FINANCING ACTIVITIES                                                               |  |                                |          |   |      |   |          |  
|Net borrowings under revolving credit facility, net of costs                       |  |                                | 70,000   |   |      |   | 20,460   |  
|Issuance of senior debentures                                                      |  |                                |         |   |      |   | 376,214  |  
|Repayment of senior debentures                                                     |  |                                |         |   |      |   | (40,500  | )
|Repayment of mortgages, capital leases and notes payable                           |  |                                | (5,639   | ) |      |   | (254,022 | )
|Issuance of common shares                                                          |  |                                | 7,051    |   |      |   | 159,326  |  
|Dividends paid to common and preferred shareholders                                |  |                                | (96,785  | ) |      |   | (107,450 | )
|Distributions to minority interests                                                |  |                                | (4,512   | ) |      |   | (3,416   | )
|                                                                                   |  |                                |          |   |      |   |          |  
|Net cash (used in) provided by financing activities                                |  |                                | (29,885  | ) |      |   | 150,612  |  
|                                                                                   |  |                                |          |   |      |   |          |  
|(Decrease) increase in cash and cash equivalents                                   |  |                                | (1,214   | ) |      |   | 57,785   |  
|Cash and cash equivalents at beginning of year                                     |  |                                | 11,495   |   |      |   | 8,639    |  
|                                                                                   |  |                                |          |   |      |   |          |  
|Cash and cash equivalents at end of period                                         |  | $                              | 10,281   |   |      | $ | 66,424   |  
|                                                                                   |  |                                |          |   |      |   |          |  

The accompanying notes are an integral part of these consolidated statements.



8



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##### Table of Contents

Federal Realty Investment Trust

Notes to Consolidated Financial Statements

September 30, 2007

(Unaudited)

NOTE ASUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Business and Organization

Federal Realty Investment Trust (the Trust) is an equity real estate investment trust specializing in
the ownership, management, development and redevelopment of retail and mixed-use properties. Our properties are located primarily in densely populated and affluent communities in strategic metropolitan markets in the Mid-Atlantic and Northeast
regions of the United States, as well as in California.

We operate in a manner intended to enable us to qualify as a real estate investment trust (or
REIT) for federal income tax purposes. A REIT that distributes at least 90% of its taxable income to its shareholders each year and meets certain other conditions is not taxed on that portion of its taxable income which is distributed to its
shareholders. Therefore, federal income taxes on our REIT taxable income have been and are generally expected to be immaterial. We are obligated to pay state taxes, generally consisting of franchise or gross receipts taxes in certain states. Such
state taxes also have not been material.

We have elected to treat certain of our subsidiaries as taxable REIT subsidiaries, each of which we refer to as a
TRS. In general, a TRS may engage in any real estate business and certain non-real estate businesses, subject to certain limitations under the Internal Revenue Code of 1986, as amended (the Code). A TRS is subject to federal and state
income taxes. The sales of condominiums at Santana Row, which occurred between August 2005 and August 2006, and the sales of Bath Shopping Center, Key Road Plaza and Riverside Plaza in 2007 were conducted through a TRS. Other than these sales, our
TRS activities have not been material.

Basis of Presentation

Our consolidated financial statements include the accounts of the Trust, its corporate subsidiaries, and all entities in which the Trust has a controlling interest or has been determined to be the primary beneficiary of a variable interest
entity. The equity interests of other investors are reflected as minority interests. All significant intercompany transactions and balances are eliminated in consolidation. We account for our interests in joint ventures, which we do not control,
using the equity method of accounting. Certain amounts in the 2006 consolidated financial statements have been reclassified to conform to current period presentation.

In June 2006, we sold Greenlawn Plaza to our unconsolidated real estate partnership resulting in a gain of $7.4 million. In our 2006 Form 10-K, the operations of the property prior to June 2006 and the gain on sale of
real estate were included in discontinued operations. However, due to our continuing involvement in the property, Greenlawn Plaza does not qualify for discontinued operations classification under SFAS No.144, Accounting for the Impairment or
Disposal of Long-Lived Assets. Accordingly, we have reclassified the results of operations through the date of sale to continuing operations and reclassified the gain on sale from gain on sale of real estate from discontinued
operations to gain on sale of real estate. This reclassification does not impact net income.

The preparation of financial statements in
conformity with accounting principles generally accepted in the United States of America, referred to as GAAP, requires management to make estimates and assumptions that in certain circumstances affect the reported amounts of assets and
liabilities, disclosure of contingent assets and liabilities, and revenues and expenses. These estimates are prepared using managements best judgment, after considering past, current and expected events and economic conditions. Actual results
could differ from these estimates.

Revenue Recognition and Accounts Receivable

Our leases with tenants are classified as operating leases. Substantially all such leases contain fixed escalations which occur at specified times during the term of the lease. Base rents are recognized on a
straight-line basis from when the tenant controls the space through the term of the related lease, net of valuation adjustments, based on managements assessment of credit, collection and other business risk. Percentage rents, which represent
additional rents based upon the level of sales achieved by certain tenants, are recognized at the end of the lease year or earlier if we have determined the required sales level is achieved and the percentage rents are collectible. Real estate tax
and other cost reimbursements are recognized on an accrual basis over the periods in which the related expenditures are incurred. We make estimates of the collectibility of our accounts receivable related to minimum rents, straight-line rents,
expense reimbursements and other revenue or income. In some cases, primarily relating to straight-line rents, the collection of these amounts extends beyond one year. Our experience



9



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##### Table of Contents

relative to unbilled straight-line rents is that a certain portion of the amounts otherwise recognizable as revenue is never billed to or collected from
tenants due to early lease terminations, lease modifications, bankruptcies and other factors. Accordingly, the extended collection period for straight-line rents along with our evaluation of tenant credit risk may result in the non-recognition of a
portion of straight-line rental income until the collection of such income is reasonably assured. If our evaluation of tenant credit risk changes indicating more straight-line revenue is reasonably collectible than previously estimated and realized,
the additional straight-line rental income is recognized as revenue. If our evaluation of tenant credit risk changes indicating a portion of realized straight-line rental income is no longer collectible, a reserve and bad debt expense is recorded.
At September 30, 2007 and December 31, 2006, accounts receivable include approximately $31.2 million and $24.8 million, respectively, related to straight-line rents. At September 30, 2007 and December 31, 2006, our allowance for
doubtful accounts was $6.9 million and $6.2 million, respectively.

Consolidated Statements of Cash FlowsSupplemental Disclosures

The following table provides supplemental disclosures related to the Consolidated Statements of Cash Flows:



|                                                             |  |                                 |        |   |      |   |        |    
|------------------------------------------------------------ |  | ------------------------------- | ------ | - | ---- | - | ------ | ---
|                                                             |  | Nine Months Ended September 30, |       
|                                                             |  | 2007                            |        |   | 2006 |  
|                                                             |  | (In thousands)                  |       
|SUPPLEMENTAL DISCLOSURES:                                    |  |                                 |        |   |      |   |        |    
|Total interest costs incurred                                |  | $                               | 95,778 |   |      | $ | 77,560 |    
|Interest capitalized                                         |  |                                 | (6,026 | ) |      |   | (2,377 | )  
|Interest expense related to discontinued operations          |  |                                 | (175   | ) |      |   | (73    | )  
|                                                             |  |                                 |        |   |      |   |        |    
|Interest expense                                             |  | $                               | 89,577 |   |      | $ | 75,110 |    
|                                                             |  |                                 |        |   |      |   |        |    
|Cash paid for interest                                       |  | $                               | 92,776 |   |      | $ | 68,022 |    
|Cash paid for income taxes                                   |  | $                               | 1,742  |   |      | $ | 3,836  | (1)
|NON-CASH FINANCING AND INVESTING TRANSACTIONS:               |  |                                 |        |   |      |   |        |    
|Mortgage loans assumed with acquisitions                     |  | $                               | 79,987 |   |      | $ |       |    
|Common shares issued with acquisition                        |  | $                               | 77,957 |   |      | $ |       |    
|Preferred shares issued with acquisition                     |  | $                               | 9,997  |   |      | $ |       |    
|DownREIT operating partnership units issued with acquisition |  | $                               | 16,358 |   |      | $ |       |    

---

|(1) | Cash paid for income taxes for the nine months ended September 30, 2006 includes $3.2 million related to the sales of condominiums at Santana Row which were conducted through a
TRS.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Accounting for Income Taxes

In
July 2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation No. 48 (FIN 48), Accounting for Uncertainty in Income Taxesan interpretation of FASB Statement No. 109,
Accounting for Income Taxes. FIN 48 was issued to reduce the diversity in practice associated with certain aspects of recognition, disclosure and measurement related to accounting for uncertain income tax positions. We adopted FIN 48
effective January 1, 2007. The adoption of FIN 48 did not have a material impact on our financial position, results of operations, or cash flows. We recognize penalties and interest accrued related to unrecognized tax benefits as income tax
expense. With few exceptions, we are no longer subject to U.S. federal, state, and local tax examinations by tax authorities for years before 2003. As of September 30, 2007, we had no material unrecognized tax benefits.

New Accounting Pronouncements

In September 2006, the FASB issued
SFAS No. 157 Fair Value Measurement (SFAS No. 157). SFAS No. 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about
fair value measurements. SFAS No. 157 applies to accounting pronouncements that require or permit fair value measurements, except for share-based payments under SFAS No. 123(R). We are required to adopt SFAS No. 157 effective
January 1, 2008. We do not believe the adoption of SFAS No. 157 will have a material impact on our financial position, results of operations or cash flows.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities Including an Amendment of FASB Statement No. 115 (SFAS
No. 159). This standard permits entities to choose to measure many financial instruments and certain other items at fair value and is effective for the first fiscal year beginning after November 15, 2007. We do not expect SFAS
No. 159 to have a material impact on our financial statements.



10



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NOTE BREAL ESTATE

The following table provides a summary of significant acquisitions made by us and our consolidated affiliates during the nine months ended September 30, 2007:



|                  |  |                                  |  |                     |  |                     |  |                |       |       
|----------------- |  | -------------------------------- |  | ------------------- |  | ------------------- |  | -------------- | ----- | ------
|Date              |  | Property                         |  | City, State         |  | Gross Leasable Area |  | Purchase Price |      
|                  |  |                                  |  |                     |  | (In square feet)    |  | (In millions)  |      
|February 28, 2007 |  | Crow Canyon Crest                |  | San Ramon, CA       |  | 17,000              |  | $              | 10.9  | (1)   
|March 8, 2007     |  | The White Marsh Portfolio: (2)   |  | White Marsh, MD     |  |                     |  |                | 189.4 | (3)   
|                  |  | THE AVENUE at White Marsh        |  |                     |  | 296,000             |  |                |       |       
|                  |  | White Marsh Plaza                |  |                     |  | 79,000              |  |                |       |       
|                  |  | The Shoppes at Nottingham Square |  |                     |  | 186,000             |  |                |       |       
|                  |  | White Marsh Other                |  |                     |  | 53,000              |  |                |       |       
|May 30, 2007      |  | Shoppers World                  |  | Charlottesville, VA |  | 169,000             |  |                | 27.2  | (4)(5)
|                  |  |                                  |  |                     |  |                     |  |                |       |       
|                  |  | Total                            |  |                     |  | 800,000             |  | $              | 227.5 |       
|                  |  |                                  |  |                     |  |                     |  |                |       |       

---

|(1) | Approximately $0.4 million and $1.8 million of the net assets acquired were allocated to other assets for above market leases and liabilities for below market
leases, respectively.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | The White Marsh Portfolio was purchased using $11.5 million of cash plus a combination of common stock and convertible preferred stock, downREIT operating partnership units, and the
assumption of mortgage loans through a merger with Nottingham Properties, Inc. The acquisition also included ground leases covering 50,000 square feet of office space and a hotel which are not included in gross leasable area.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Approximately $3.6 million and $9.3 million of the net assets acquired were allocated to other assets for above market leases and liabilities for below market
leases, respectively.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | As part of the preliminary purchase price allocation, approximately $1.3 million and $1.6 million of the net assets acquired were allocated to other assets for above market
leases and liabilities for below market leases, respectively.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | On May 30, 2007, we entered into a Section 1031 like-kind exchange agreement with a third party intermediary related to the acquisition of Shoppers World. The
exchange agreement is for a maximum of 180 days and allows us to defer gains on sale of other properties sold within this period. Until the termination of this exchange agreement, the third party intermediary is the legal owner of the property,
although we control the property and retain all of the economic benefits and risks associated with the property. This property is held in a variable interest entity for which we are the primary beneficiary. Accordingly, commencing on May 30,
2007, we consolidate the property and its operations. On October 11, 2007, we sold two properties located in Forest Hills, New York which completes the Section 1031 exchange. We now own this property directly.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The following table provides a summary of significant dispositions made by us and our consolidated affiliates during the nine months ended September 30, 2007. All
three properties were acquired in August 2006 by a TRS as part of a larger portfolio. The properties are classified as held for sale as of December 31, 2006, and their operations are included in discontinued operations for all periods
presented.



|              |  |                      |  |             |  |                     |  |               |      |      |   |     |    
|------------- |  | -------------------- |  | ----------- |  | ------------------- |  | ------------- | ---- | ---- | - | --- | ---
|Date          |  | Property             |  | City, State |  | Gross Leasable Area |  | Sales Price   |      | Gain |  
|              |  |                      |  |             |  | (In square feet)    |  | (In millions) |     
|April 5, 2007 |  | Bath Shopping Center |  | Bath, ME    |  | 101,000             |  | $             | 21.8 |      | $ | 0.6 | (1)
|June 20, 2007 |  | Key Road Plaza       |  | Keene, NH   |  | 76,000              |  |               | 15.3 |      |   | 0.4 | (2)
|June 20, 2007 |  | Riverside Plaza      |  | Keene, NH   |  | 218,000             |  |               | 25.9 |      |   | 0.5 | (3)
|              |  |                      |  |             |  |                     |  |               |      |      |   |     |    
|              |  | Total                |  |             |  | 395,000             |  | $             | 63.0 |      | $ | 1.5 |    
|              |  |                      |  |             |  |                     |  |               |      |      |   |     |    

---

|(1) | Gain of $0.6 million is net of $0.3 million in taxes.
|--- | -----------------------------------------------------

|(2) | Gain of $0.4 million is net of $0.1 million in taxes.
|--- | -----------------------------------------------------

|(3) | Gain of $0.5 million is net of $0.1 million in taxes.
|--- | -----------------------------------------------------

On
October 11, 2007, we sold two properties located in Forest Hills, New York for $33.2 million, resulting in a net gain of approximately $19.0 million. The properties are classified as held for sale and their operations are included in
discontinued operations for all periods presented.



11



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##### Table of Contents

The revenues from all properties included in discontinued operations were $4.4 million and $2.2 million for the nine
months ended September 30, 2007 and 2006, respectively, and $0.7 million and $1.1 million for the three months ended September 30, 2007 and 2006, respectively.

NOTE CREAL ESTATE PARTNERSHIP

We have entered into a joint venture arrangement (the Partnership)
by forming a limited partnership with affiliates of a discretionary fund created and advised by ING Clarion Partners (Clarion). We own 30% of the equity in the Partnership, and Clarion owns 70%. We and Clarion both hold a 0.1% general
partner interest in the Partnership, and our remaining interests in the Partnership are held in the form of limited partner interests. We are the manager of the Partnership and its properties, earning fees for acquisitions, dispositions, management,
leasing, and financing. We also have the opportunity to receive performance based earnings through our partnership interest. We account for our interest in the Partnership using the equity method.

The following tables provide summarized operating results and the financial position of the Partnership:



|                                                     |  |                                |        |                                 |   |       |  |      |       |  |   |      
|---------------------------------------------------- |  | ------------------------------ | ------ | ------------------------------- | - | ----- |  | ---- | ----- |  | - | -----
|                                                     |  | Nine Months EndedSeptember 30, |        | Three Months EndedSeptember 30,
|                                                     |  | 2007                           |        | 2006                            |   | 2007  |  | 2006
|                                                     |  | (In thousands)                
|OPERATING RESULTS                                    |  |                                |        |                                 |   |       |  |      |       |  |   |      
|Revenue                                              |  | $                              | 12,903 |                                 | $ | 7,489 |  | $    | 4,935 |  | $ | 3,139
|Expenses                                             |  |                                |        |                                 |   |       |  |      |       |  |   |      
|Depreciation and amortization                        |  |                                | 3,300  |                                 |   | 1,972 |  |      | 1,163 |  |   | 867  
|Other operating expenses                             |  |                                | 3,136  |                                 |   | 1,836 |  |      | 1,190 |  |   | 687  
|Interest expense                                     |  |                                | 3,343  |                                 |   | 2,433 |  |      | 1,137 |  |   | 1,076
|                                                     |  |                                |        |                                 |   |       |  |      |       |  |   |      
|Total expenses                                       |  |                                | 9,779  |                                 |   | 6,241 |  |      | 3,490 |  |   | 2,630
|                                                     |  |                                |        |                                 |   |       |  |      |       |  |   |      
|Net income                                           |  | $                              | 3,124  |                                 | $ | 1,248 |  | $    | 1,445 |  | $ | 509  
|                                                     |  |                                |        |                                 |   |       |  |      |       |  |   |      
|Our share of net income from real estate partnership |  | $                              | 1,120  |                                 | $ | 533   |  | $    | 473   |  | $ | 196  
|                                                     |  |                                |        |                                 |   |       |  |      |       |  |   |      



|                                          |  |                   |         |                  |   |        
|----------------------------------------- |  | ----------------- | ------- | ---------------- | - | -------
|                                          |  | September 30,2007 |         | December 31,2006
|                                          |  | (In thousands)   
|BALANCE SHEETS                            |  |                   |         |                  |   |        
|Real estate, net                          |  | $                 | 192,564 |                  | $ | 123,478
|Cash                                      |  |                   | 2,572   |                  |   | 2,116  
|Other assets                              |  |                   | 7,212   |                  |   | 4,064  
|                                          |  |                   |         |                  |   |        
|Total assets                              |  | $                 | 202,348 |                  | $ | 129,658
|                                          |  |                   |         |                  |   |        
|Mortgages payable                         |  | $                 | 81,582  |                  | $ | 77,425 
|Other liabilities                         |  |                   | 8,740   |                  |   | 6,716  
|Partners capital                         |  |                   | 112,026 |                  |   | 45,517 
|                                          |  |                   |         |                  |   |        
|Total liabilities and partners capital   |  | $                 | 202,348 |                  | $ | 129,658
|                                          |  |                   |         |                  |   |        
|Our share of unconsolidated debt          |  | $                 | 24,475  |                  | $ | 23,228 
|Our investment in real estate partnership |  | $                 | 30,198  |                  | $ | 10,322 

For mortgages payable totaling $36.7 million that are secured by three properties owned by subsidiaries of the
Partnership, we are the guarantor for the obligations of the joint venture which are commonly referred to as non-recourse carve-outs. The guarantees do not have a finite term; however, once the lenders have been repaid in accordance with
the loan documents, the only likely basis for a claim on the guarantee is for loss to the lender as a result of potential future environmental liability at the properties to which the loans relate. We are not guaranteeing repayment of the debt
itself. The Partnership indemnifies us for any loss we incur under these guarantees. We are currently working with these lenders to substitute the Partnership for us as the guarantor of these loans and expect to complete the substitution this year.



12



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##### Table of Contents

The following table provides a summary of acquisitions made by the Partnership, during the nine months ended
September 30, 2007:



|                  |  |                                  |  |                  |  |                     |  |                |     
|----------------- |  | -------------------------------- |  | ---------------- |  | ------------------- |  | -------------- | ----
|Date              |  | Property                         |  | City, State      |  | Gross Leasable Area |  | Purchase Price
|                  |  |                                  |  |                  |  | (In square feet)    |  | (In millions) 
|February 15, 2007 |  | Free State Shopping Center       |  | Bowie, MD        |  | 278,000             |  | $              | 64.1
|February 20, 2007 |  | Lake Barcroft Shopping Center(1) |  | Falls Church, VA |  | 9,000               |  |                | 6.0 
|                  |  |                                  |  |                  |  |                     |  |                |     
|                  |  | Total                            |  |                  |  | 287,000             |  | $              | 70.1
|                  |  |                                  |  |                  |  |                     |  |                |     

---

|(1) | The property acquired is adjacent to and operated as part of Barcroft Plaza which is also owned by the Partnership.
|--- | -------------------------------------------------------------------------------------------------------------------

On April 10, 2007, the Partnership entered into a mortgage note for approximately $4.2 million. The mortgage note is secured by the Lake Barcroft property and
Barcroft Plaza. The note matures on July 1, 2016, bears interest at 5.71% per annum and requires monthly payments of interest only.

NOTE
DDEBT

In connection with the acquisition of the White Marsh portfolio and Shoppers World, we assumed five mortgage notes as follows:



|                          |  |                |      |               |                   |                             |      |  
|------------------------- |  | -------------- | ---- | ------------- | ----------------- | --------------------------- | ---- | -
|Property                  |  | Fair Value (1) |      | Maturity Date |                   | Stated Annual Interest Rate |     
|                          |  | (In millions)  |      |               |                   |                             |     
|THE AVENUE at White Marsh |  | $              | 61.9 |               | January 1, 2015   |                             | 5.46 | %
|White Marsh Plaza         |  | $              | 6.4  |               | April 1, 2013     |                             | 5.96 | %
|White Marsh Plaza         |  | $              | 4.5  |               | April 1, 2013     |                             | 6.18 | %
|White Marsh Other         |  | $              | 1.2  |               | December 31, 2008 |                             | 6.06 | %
|Shoppers World           |  | $              | 6.0  |               | January 31, 2021  |                             | 5.91 | %

---

|(1) | The aggregate face amount of the mortgage notes is $79.7 million. However, in accordance with GAAP, these mortgage notes were recorded at their fair value of $80.0 million.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

With the exception of one of the mortgage notes on White Marsh Plaza, all of the mortgage notes assumed require monthly payments of
principal and interest. The $4.5 million mortgage note on White Marsh Plaza is interest only through the maturity date.

During the nine months and three
months ended September 30, 2007, the maximum amount of borrowings outstanding under our $300 million revolving credit facility was $203 million and $200 million, respectively. The weighted average amount of borrowings outstanding was $159
million and $172 million for the nine months and three months ended September 30, 2007, respectively. Our revolving credit facility had a weighted average interest rate, before amortization of debt fees, of 5.71% and 5.79% for the nine months
and three months ended September 30, 2007, respectively.

Our credit facility and certain notes require us to comply with various financial covenants,
including the maintenance of minimum shareholders equity and debt coverage ratios and a maximum ratio of debt to net worth. As of September 30, 2007, we were in compliance with all loan covenants.

NOTE ECOMMITMENTS AND CONTINGENCIES

Warranty reserves for
condominium units sold at Santana Row are established to cover potential costs for materials, labor and other items associated with warranty-type claims that may arise within the ten-year statutorily mandated latent construction defect warranty
period. Our warranty and latent construction defect reserve is calculated based upon historical industry experience and current known factors. Variables used in the calculation of the warranty reserves, as well as the adequacy of the reserve based
on the number of condominium units still under warranty, are reviewed on a periodic basis.

Because of particular facts and circumstances that we became
knowledgeable of during the third quarter of 2007, we reassessed our initial warranty reserve covering the particular damages related to defects in certain fixtures which were upgraded during the condominium conversion. Based on current estimates,
we believe the range of possible incremental expense is between $2.9 million and $8.3 million, net of taxes of $2.2 million and $3.2 million, respectively. The full extent of damages and required repairs on any particular unit cannot be determined
until after work on that unit begins. To date, we have completed the repairs in only a limited number of units. The extent of the damages encountered in those units, and the resulting costs to repair, varied considerably. Accordingly, our current
estimates are based on limited and varying actual costs. We are continuing our evaluation of this matter and we have increased our reserve by $2.9 million to the low end of our estimated potential obligation related to these particular damages. This
range excludes any amounts we may recover from insurance or the consultants that perform such work. In the event that our evaluation allows us to develop a better estimate of these damages, we will accrue such amount. This increase reduces our gain
on sale of condominium units which were sold during 2005 and 2006. The increase in the reserve is included in Loss on sale of real estate from discontinued operations. The warranty reserve is included in accounts payable and accrued
expenses. Although we consider the warranty reserves to be adequate, there can be no assurance that the reserve will prove to be adequate over time to cover losses due to the difference between the assumptions used to estimate the warranty reserves
and actual losses.



13



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We are currently a party to various legal proceedings. Other than as described below, we do not believe that the ultimate
outcome of these matters, either individually or in the aggregate, could have a material adverse effect on our financial position or overall trends in results of operations; however, litigation is subject to inherent uncertainties. Also under our
leases, tenants are typically obligated to indemnify us from and against all liabilities, costs and expenses imposed upon or asserted against us (1) as owner of the properties due to certain matters relating to the operation of the properties
by the tenant, and (2) where appropriate, due to certain matters relating to the ownership of the properties prior to their acquisition by us.

We are
involved in a litigation matter relating to a shopping center in New Jersey where a former tenant has alleged that we and our management agent acted improperly by failing to disclose a condemnation action at the property that was pending when the
lease was signed. A trial as to liability only has been concluded and post-trial briefs have been filed, but no decision has been rendered. One of the plaintiffs in the matter has filed for bankruptcy protection and as a result, the judge in our
case has stayed further proceedings in the case. If we are found liable once the stay has been lifted, a trial will be held to determine the amount of damages. Based on the information available to us, we believe there is a reasonable possibility
that we will be found liable. If a verdict is rendered against us, we may seek indemnification from the third party management company that negotiated the lease on our behalf. We cannot assess with any certainty at this time the potential damages
for which we would be liable if a verdict is rendered against us or the potential amounts we might recover against the third party management company; however, if a verdict is rendered against us, there may be a material adverse impact on our net
income in the period during which our indemnification claim is pending.

We also have one litigation matter filed against us in May 2003 which alleges that
a one page document entitled Final Proposal, which included language that it was subject to approval of formal documentation, constituted a ground lease of a parcel of property located adjacent to our Santana Row property and gave the
plaintiff the option to require that we acquire the property at a price determined in accordance with a formula included in the Final Proposal. A trial as to liability only was held in June 2006 and a jury rendered a verdict against us.
A trial on the issue of damages has been set for March 2008. The complaint did not specify the amount of damages claimed. We have now received reports from our experts and the plaintiffs experts which show potential damages ranging from
$600,000 to $24 million. We cannot make a reasonable estimate of potential damages until discovery is completed on the damages issue and the court rules on various legal issues impacting the calculation of damages. We intend to appeal the jury
verdict; however, no appeal of the judgment can be taken until the trial on damages has been completed. If we are not successful in overturning the jury verdict, we will be liable for damages. Depending on the amount of damages awarded, it is
possible, there could be a material adverse impact on our net income in the period in which it is both probable that we will have to pay the damages and such damages can be reasonably estimated. In any event, management does not believe it will have
a material impact on our financial position.

NOTE FSHAREHOLDERS EQUITY

On March 8, 2007, as part of the consideration to acquire the White Marsh portfolio, we issued (i) 884,066 common shares at $88.18 per share, par value $0.01 per share, (ii) 399,896 shares of 5.417%
Series 1 Cumulative Convertible Preferred Shares (Series 1 Preferred Shares) at the liquidation preference of $25 per share, par value $0.01 per share, and (iii) 185,504 downREIT operating partnership units at $88.18 per share. The
Series 1 Preferred Shares will accrue dividends at a rate of 5.417% per year and are convertible at any time by the holders to our common shares at a conversion rate of $104.69 per share. The Series 1 Preferred Shares are also convertible under
certain circumstances at our election. The holders of the Series 1 Preferred Shares have no voting rights.

The following table provides a summary of
dividends declared and paid per share:



|                                                 |  |                                 |       |     |      |   |       |          |  |   |       |     |  |   |       |    
|------------------------------------------------ |  | ------------------------------- | ----- | --- | ---- | - | ----- | -------- |  | - | ----- | --- |  | - | ----- | ---
|                                                 |  | Nine Months Ended September 30, |      
|                                                 |  | 2007                            |       |     | 2006 |  
|                                                 |  | Declared                        |       |     | Paid |   |       | Declared |  |   | Paid  |    
|Common shares                                    |  | $                               | 1.760 |     |      | $ | 1.725 |          |  | $ | 1.885 | (1) |  | $ | 1.865 | (1)
|5.417% Series 1 Cumulative Convertible Preferred |  | $                               | 0.767 | (2) |      | $ | 0.429 | (2)      |  | $ |      |     |  | $ |      |    
|8.5% Series B Cumulative Preferred (3)           |  | $                               |      |     |      | $ |      |          |  | $ | 1.593 |     |  | $ | 1.593 |    

---

|(1) | Includes regular dividend declared and paid of $1.685 and $1.665, respectively, and special dividend of $0.200 resulting from the sales of condominiums at Santana Row.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------



14



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##### Table of Contents

|(2) | The Series 1 Preferred Shares were issued on March 8, 2007. The dividend declared on the Series 1 Preferred Shares is for the period from March 8, 2007 through and
including September 30, 2007; the dividend paid is for the period March 8, 2007 through and including June 30, 2007.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | On November 27, 2006, the Trust redeemed all 5,400,000 outstanding shares of its Series B Cumulative Redeemable Preferred Shares. Dividends on the Series B Preferred Shares
ceased to accrue on November 27, 2006.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

NOTE GCOMPONENTS OF RENTAL INCOME

The principal components of rental income are as follows:



|                      |  |                                |         |                                 |   |         |  |      |         |  |   |        
|--------------------- |  | ------------------------------ | ------- | ------------------------------- | - | ------- |  | ---- | ------- |  | - | -------
|                      |  | Nine Months EndedSeptember 30, |         | Three Months EndedSeptember 30,
|                      |  | 2007                           |         | 2006                            |   | 2007    |  | 2006
|                      |  | (In thousands)                
|Minimum rents         |  |                                |         |                                 |   |         |  |      |         |  |   |        
|Retail and commercial |  | $                              | 269,015 |                                 | $ | 240,738 |  | $    | 91,406  |  | $ | 81,782 
|Residential           |  |                                | 11,277  |                                 |   | 9,172   |  |      | 3,935   |  |   | 3,558  
|Cost reimbursement    |  |                                | 71,045  |                                 |   | 60,795  |  |      | 25,377  |  |   | 20,962 
|Percentage rent       |  |                                | 4,846   |                                 |   | 4,656   |  |      | 1,193   |  |   | 1,506  
|Other                 |  |                                | 4,472   |                                 |   | 4,312   |  |      | 1,648   |  |   | 1,563  
|                      |  |                                |         |                                 |   |         |  |      |         |  |   |        
|Total rental income   |  | $                              | 360,655 |                                 | $ | 319,673 |  | $    | 123,559 |  | $ | 109,371
|                      |  |                                |         |                                 |   |         |  |      |         |  |   |        

Minimum rents include $6.5 million and $4.7 million for the nine months ended September 30, 2007 and 2006,
respectively, and $1.8 million and $1.5 million for the three months ended September 30, 2007 and 2006, respectively, to recognize minimum rents on a straight-line basis. In addition, minimum rents include $2.0 million and $1.6 million for the
nine months ended September 30, 2007 and 2006, respectively, and $0.8 million and $0.6 million for the three months ended September 30, 2007 and 2006, respectively, to recognize income from the amortization of in-place leases in accordance
with SFAS No. 141. Residential minimum rents consist of the entire rental amounts at Rollingwood Apartments, the Crest at Congressional Plaza Apartments and residential units at Santana Row, excluding those units sold as condominiums and
included in discontinued operations.

NOTE HSHARE-BASED COMPENSATION PLANS

A summary of share-based compensation expense included in net income is as follows:



|                                     |  |                                |       |   |                                 |   |       |      |  |   |       |   |  |   |       |  
|------------------------------------ |  | ------------------------------ | ----- | - | ------------------------------- | - | ----- | ---- |  | - | ----- | - |  | - | ----- | -
|                                     |  | Nine Months EndedSeptember 30, |       |   | Three Months EndedSeptember 30, |  
|                                     |  | 2007                           |       |   | 2006                            |   |       | 2007 |  |   | 2006  |  
|                                     |  | (In thousands)                 |      
|Share-based compensation incurred    |  |                                |       |   |                                 |   |       |      |  |   |       |   |  |   |       |  
|Common shares                        |  | $                              | 4,565 |   |                                 | $ | 3,977 |      |  | $ | 1,523 |   |  | $ | 1,596 |  
|Options                              |  |                                | 829   |   |                                 |   | 813   |      |  |   | 278   |   |  |   | 305   |  
|                                     |  |                                |       |   |                                 |   |       |      |  |   |       |   |  |   |       |  
|                                     |  |                                | 5,394 |   |                                 |   | 4,790 |      |  |   | 1,801 |   |  |   | 1,901 |  
|Capitalized share-based compensation |  |                                | (609  | ) |                                 |   | (464  | )    |  |   | (200  | ) |  |   | (157  | )
|                                     |  |                                |       |   |                                 |   |       |      |  |   |       |   |  |   |       |  
|Share-based compensation expense     |  | $                              | 4,785 |   |                                 | $ | 4,326 |      |  | $ | 1,601 |   |  | $ | 1,744 |  
|                                     |  |                                |       |   |                                 |   |       |      |  |   |       |   |  |   |       |  



15



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##### Table of Contents

NOTE IEARNINGS PER SHARE

The following table provides a reconciliation between basic and diluted earnings per share:



|                                                                    |  |                                       |        |   |                                  |   |        |      |  |   |        |   |  |   |        |  
|------------------------------------------------------------------- |  | ------------------------------------- | ------ | - | -------------------------------- | - | ------ | ---- |  | - | ------ | - |  | - | ------ | -
|                                                                    |  | Nine Months Ended September 30,       |        |   | Three Months Ended September 30, |  
|                                                                    |  | 2007                                  |        |   | 2006                             |   |        | 2007 |  |   | 2006   |  
|                                                                    |  | (In thousands, except per share data) |       
|NUMERATOR                                                           |  |                                       |        |   |                                  |   |        |      |  |   |        |   |  |   |        |  
|Income from continuing operations                                   |  | $                                     | 72,778 |   |                                  | $ | 69,778 |      |  | $ | 25,773 |   |  | $ | 24,437 |  
|Preferred stock dividends                                           |  |                                       | (307   | ) |                                  |   | (8,607 | )    |  |   | (136   | ) |  |   | (2,869 | )
|                                                                    |  |                                       |        |   |                                  |   |        |      |  |   |        |   |  |   |        |  
|Income from continuing operations available for common shareholders |  |                                       | 72,471 |   |                                  |   | 61,171 |      |  |   | 25,637 |   |  |   | 21,568 |  
|Results from discontinued operations                                |  |                                       | 591    |   |                                  |   | 17,052 |      |  |   | (2,258 | ) |  |   | 547    |  
|Gain on sale of real estate                                         |  |                                       |       |   |                                  |   | 7,441  |      |  |   |       |   |  |   |       |  
|                                                                    |  |                                       |        |   |                                  |   |        |      |  |   |        |   |  |   |        |  
|Net income available for common shareholders, basic and dilutive    |  | $                                     | 73,062 |   |                                  | $ | 85,664 |      |  | $ | 23,379 |   |  | $ | 22,115 |  
|                                                                    |  |                                       |        |   |                                  |   |        |      |  |   |        |   |  |   |        |  
|DENOMINATOR                                                         |  |                                       |        |   |                                  |   |        |      |  |   |        |   |  |   |        |  
|Weighted average common shares outstandingbasic                    |  |                                       | 55,967 |   |                                  |   | 52,923 |      |  |   | 56,302 |   |  |   | 53,187 |  
|Effect of dilutive securities:                                      |  |                                       |        |   |                                  |   |        |      |  |   |        |   |  |   |        |  
|Stock options                                                       |  |                                       | 371    |   |                                  |   | 397    |      |  |   | 332    |   |  |   | 385    |  
|Unvested stock                                                      |  |                                       | 66     |   |                                  |   | 98     |      |  |   | 56     |   |  |   | 104    |  
|                                                                    |  |                                       |        |   |                                  |   |        |      |  |   |        |   |  |   |        |  
|Weighted average common shares outstandingdilutive (1)             |  |                                       | 56,404 |   |                                  |   | 53,418 |      |  |   | 56,690 |   |  |   | 53,676 |  
|                                                                    |  |                                       |        |   |                                  |   |        |      |  |   |        |   |  |   |        |  
|EARNINGS PER COMMON SHARE, BASIC                                    |  |                                       |        |   |                                  |   |        |      |  |   |        |   |  |   |        |  
|Continuing operations                                               |  | $                                     | 1.30   |   |                                  | $ | 1.16   |      |  | $ | 0.46   |   |  | $ | 0.41   |  
|Discontinued operations                                             |  |                                       | 0.01   |   |                                  |   | 0.32   |      |  |   | (0.04  | ) |  |   | 0.01   |  
|Gain on sale of real estate                                         |  |                                       |       |   |                                  |   | 0.14   |      |  |   |       |   |  |   |       |  
|                                                                    |  |                                       |        |   |                                  |   |        |      |  |   |        |   |  |   |        |  
|                                                                    |  | $                                     | 1.31   |   |                                  | $ | 1.62   |      |  | $ | 0.42   |   |  | $ | 0.42   |  
|                                                                    |  |                                       |        |   |                                  |   |        |      |  |   |        |   |  |   |        |  
|EARNINGS PER COMMON SHARE, DILUTED                                  |  |                                       |        |   |                                  |   |        |      |  |   |        |   |  |   |        |  
|Continuing operations                                               |  | $                                     | 1.29   |   |                                  | $ | 1.14   |      |  | $ | 0.45   |   |  | $ | 0.40   |  
|Discontinued operations                                             |  |                                       | 0.01   |   |                                  |   | 0.32   |      |  |   | (0.04  | ) |  |   | 0.01   |  
|Gain on sale of real estate                                         |  |                                       |       |   |                                  |   | 0.14   |      |  |   |       |   |  |   |       |  
|                                                                    |  |                                       |        |   |                                  |   |        |      |  |   |        |   |  |   |        |  
|                                                                    |  | $                                     | 1.30   |   |                                  | $ | 1.60   |      |  | $ | 0.41   |   |  | $ | 0.41   |  
|                                                                    |  |                                       |        |   |                                  |   |        |      |  |   |        |   |  |   |        |  

---

|(1) | The conversion of downREIT operating partnership units and Series 1 Preferred Shares are anti-dilutive for all periods presented. Accordingly, downREIT operating partnership units
and Series 1 Preferred Shares have been excluded from the weighted average common shares used to compute diluted earnings per share.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



16



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##### Table of Contents

NOTE JSEGMENT INFORMATION

We operate our portfolio of properties in two geographic operating regions: East and West, which constitute our segments under Statement of Financial Accounting Standard No. 131, Disclosures about Segments
of an Enterprise and Related Information.

A summary of our operations by geographic region is presented below:



|                                                            |  |                                      |           |   |      |   |         |       |  |   |          |   |  |   |           |  
|----------------------------------------------------------- |  | ------------------------------------ | --------- | - | ---- | - | ------- | ----- |  | - | -------- | - |  | - | --------- | -
|                                                            |  | Nine Months Ended September 30, 2007 |          
|                                                            |  | East                                 |           |   | West |   |         | Other |  |   | Total    |  
|                                                            |  | (In thousands)                       |          
|Rental income                                               |  | $                                    | 283,594   |   |      | $ | 77,061  |       |  | $ |         |   |  | $ | 360,655   |  
|Other property income                                       |  |                                      | 7,047     |   |      |   | 2,598   |       |  |   |         |   |  |   | 9,645     |  
|Mortgage interest income                                    |  |                                      | 2,211     |   |      |   | 1,175   |       |  |   |         |   |  |   | 3,386     |  
|Rental expenses                                             |  |                                      | (54,383   | ) |      |   | (21,619 | )     |  |   |         |   |  |   | (76,002   | )
|Real estate taxes                                           |  |                                      | (30,037   | ) |      |   | (6,283  | )     |  |   |         |   |  |   | (36,320   | )
|                                                            |  |                                      |           |   |      |   |         |       |  |   |          |   |  |   |           |  
|Property operating income                                   |  |                                      | 208,432   |   |      |   | 52,932  |       |  |   |         |   |  |   | 261,364   |  
|General and administrative expense                          |  |                                      |          |   |      |   |        |       |  |   | (18,271  | ) |  |   | (18,271   | )
|Depreciation and amortization                               |  |                                      | (55,271   | ) |      |   | (22,537 | )     |  |   | (735     | ) |  |   | (78,543   | )
|Other interest income                                       |  |                                      | 884       |   |      |   | 110     |       |  |   |         |   |  |   | 994       |  
|Interest expense                                            |  |                                      |          |   |      |   |        |       |  |   | (89,577  | ) |  |   | (89,577   | )
|Income from real estate partnership                         |  |                                      |          |   |      |   |        |       |  |   | 1,120    |   |  |   | 1,120     |  
|                                                            |  |                                      |           |   |      |   |         |       |  |   |          |   |  |   |           |  
|Income from continuing operations before minority interests |  |                                      | 154,045   |   |      |   | 30,505  |       |  |   | (107,463 | ) |  |   | 77,087    |  
|Minority interests                                          |  |                                      |          |   |      |   |        |       |  |   | (4,309   | ) |  |   | (4,309    | )
|Income from discontinued operations                         |  |                                      |          |   |      |   |        |       |  |   | 1,642    |   |  |   | 1,642     |  
|Loss on sale of real estate from discontinued operations    |  |                                      |          |   |      |   |        |       |  |   | (1,051   | ) |  |   | (1,051    | )
|                                                            |  |                                      |           |   |      |   |         |       |  |   |          |   |  |   |           |  
|Net income                                                  |  | $                                    | 154,045   |   |      | $ | 30,505  |       |  | $ | (111,181 | ) |  | $ | 73,369    |  
|                                                            |  |                                      |           |   |      |   |         |       |  |   |          |   |  |   |           |  
|Total assets at end of period                               |  | $                                    | 1,947,507 |   |      | $ | 877,934 |       |  | $ | 104,418  |   |  | $ | 2,929,859 |  
|                                                            |  |                                      |           |   |      |   |         |       |  |   |          |   |  |   |           |  
|                                                            | 
|                                                            |  | Nine Months Ended September 30, 2006 |          
|                                                            |  | East                                 |           |   | West |   |         | Other |  |   | Total    |  
|                                                            |  | (In thousands)                       |          
|Rental income                                               |  | $                                    | 248,030   |   |      | $ | 71,643  |       |  | $ |         |   |  | $ | 319,673   |  
|Other property income                                       |  |                                      | 3,233     |   |      |   | 2,514   |       |  |   |         |   |  |   | 5,747     |  
|Mortgage interest income                                    |  |                                      | 2,242     |   |      |   | 1,536   |       |  |   |         |   |  |   | 3,778     |  
|Rental expenses                                             |  |                                      | (44,251   | ) |      |   | (18,991 | )     |  |   |         |   |  |   | (63,242   | )
|Real estate taxes                                           |  |                                      | (26,149   | ) |      |   | (6,502  | )     |  |   |         |   |  |   | (32,651   | )
|                                                            |  |                                      |           |   |      |   |         |       |  |   |          |   |  |   |           |  
|Property operating income                                   |  |                                      | 183,105   |   |      |   | 50,200  |       |  |   |         |   |  |   | 233,305   |  
|General and administrative expense                          |  |                                      |          |   |      |   |        |       |  |   | (15,747  | ) |  |   | (15,747   | )
|Depreciation and amortization                               |  |                                      | (49,271   | ) |      |   | (21,354 | )     |  |   | (1,183   | ) |  |   | (71,808   | )
|Other interest income                                       |  |                                      | 868       |   |      |   | 109     |       |  |   | 1,111    |   |  |   | 2,088     |  
|Interest expense                                            |  |                                      |          |   |      |   |        |       |  |   | (75,110  | ) |  |   | (75,110   | )
|Income from real estate partnership                         |  |                                      |          |   |      |   |        |       |  |   | 533      |   |  |   | 533       |  
|                                                            |  |                                      |           |   |      |   |         |       |  |   |          |   |  |   |           |  
|Income from continuing operations before minority interests |  |                                      | 134,702   |   |      |   | 28,955  |       |  |   | (90,396  | ) |  |   | 73,261    |  
|Minority interests                                          |  |                                      |          |   |      |   |        |       |  |   | (3,483   | ) |  |   | (3,483    | )
|Income from discontinued operations                         |  |                                      |          |   |      |   |        |       |  |   | 627      |   |  |   | 627       |  
|Gain on sale of real estate from discontinued operations    |  |                                      |          |   |      |   |        |       |  |   | 16,425   |   |  |   | 16,425    |  
|Gain on sale of real estate                                 |  |                                      |          |   |      |   |        |       |  |   | 7,441    |   |  |   | 7,441     |  
|                                                            |  |                                      |           |   |      |   |         |       |  |   |          |   |  |   |           |  
|Net income                                                  |  | $                                    | 134,702   |   |      | $ | 28,955  |       |  | $ | (69,386  | ) |  | $ | 94,271    |  
|                                                            |  |                                      |           |   |      |   |         |       |  |   |          |   |  |   |           |  
|Total assets at end of period                               |  | $                                    | 1,629,636 |   |      | $ | 875,512 |       |  | $ | 134,974  |   |  | $ | 2,640,122 |  
|                                                            |  |                                      |           |   |      |   |         |       |  |   |          |   |  |   |           |  



17



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|                                                            |  |                                       |           |   |      |   |         |       |  |   |         |   |  |   |           |  
|----------------------------------------------------------- |  | ------------------------------------- | --------- | - | ---- | - | ------- | ----- |  | - | ------- | - |  | - | --------- | -
|                                                            |  | Three Months Ended September 30, 2007 |          
|                                                            |  | East                                  |           |   | West |   |         | Other |  |   | Total   |  
|                                                            |  | (In thousands)                        |          
|Rental income                                               |  | $                                     | 98,072    |   |      | $ | 25,487  |       |  | $ |        |   |  | $ | 123,559   |  
|Other property income                                       |  |                                       | 3,608     |   |      |   | 1,042   |       |  |   |        |   |  |   | 4,650     |  
|Mortgage interest income                                    |  |                                       | 737       |   |      |   | 392     |       |  |   |        |   |  |   | 1,129     |  
|Rental expenses                                             |  |                                       | (18,793   | ) |      |   | (7,709  | )     |  |   |        |   |  |   | (26,502   | )
|Real estate taxes                                           |  |                                       | (11,041   | ) |      |   | (1,944  | )     |  |   |        |   |  |   | (12,985   | )
|                                                            |  |                                       |           |   |      |   |         |       |  |   |         |   |  |   |           |  
|Property operating income                                   |  |                                       | 72,583    |   |      |   | 17,268  |       |  |   |        |   |  |   | 89,851    |  
|General and administrative expense                          |  |                                       |          |   |      |   |        |       |  |   | (6,631  | ) |  |   | (6,631    | )
|Depreciation and amortization                               |  |                                       | (18,206   | ) |      |   | (7,620  | )     |  |   | (245    | ) |  |   | (26,071   | )
|Other interest income                                       |  |                                       | 282       |   |      |   | 31      |       |  |   |        |   |  |   | 313       |  
|Interest expense                                            |  |                                       |          |   |      |   |        |       |  |   | (30,533 | ) |  |   | (30,533   | )
|Income from real estate partnership                         |  |                                       |          |   |      |   |        |       |  |   | 473     |   |  |   | 473       |  
|                                                            |  |                                       |           |   |      |   |         |       |  |   |         |   |  |   |           |  
|Income from continuing operations before minority interests |  |                                       | 54,659    |   |      |   | 9,679   |       |  |   | (36,936 | ) |  |   | 27,402    |  
|Minority interests                                          |  |                                       |          |   |      |   |        |       |  |   | (1,629  | ) |  |   | (1,629    | )
|Income from discontinued operations                         |  |                                       |          |   |      |   |        |       |  |   | 642     |   |  |   | 642       |  
|Loss on sale of real estate from discontinued operations    |  |                                       |          |   |      |   |        |       |  |   | (2,900  | ) |  |   | (2,900    | )
|                                                            |  |                                       |           |   |      |   |         |       |  |   |         |   |  |   |           |  
|Net income                                                  |  | $                                     | 54,659    |   |      | $ | 9,679   |       |  | $ | (40,823 | ) |  | $ | 23,515    |  
|                                                            |  |                                       |           |   |      |   |         |       |  |   |         |   |  |   |           |  
|Total assets at end of period                               |  | $                                     | 1,947,507 |   |      | $ | 877,934 |       |  | $ | 104,418 |   |  | $ | 2,929,859 |  
|                                                            |  |                                       |           |   |      |   |         |       |  |   |         |   |  |   |           |  
|                                                            | 
|                                                            |  | Three Months Ended September 30, 2006 |          
|                                                            |  | East                                  |           |   | West |   |         | Other |  |   | Total   |  
|                                                            |  | (In thousands)                        |          
|Rental income                                               |  | $                                     | 85,207    |   |      | $ | 24,164  |       |  | $ |        |   |  | $ | 109,371   |  
|Other property income                                       |  |                                       | 940       |   |      |   | 847     |       |  |   |        |   |  |   | 1,787     |  
|Mortgage interest income                                    |  |                                       | 737       |   |      |   | 370     |       |  |   |        |   |  |   | 1,107     |  
|Rental expenses                                             |  |                                       | (14,082   | ) |      |   | (6,686  | )     |  |   |        |   |  |   | (20,768   | )
|Real estate taxes                                           |  |                                       | (9,318    | ) |      |   | (2,284  | )     |  |   |        |   |  |   | (11,602   | )
|                                                            |  |                                       |           |   |      |   |         |       |  |   |         |   |  |   |           |  
|Property operating income                                   |  |                                       | 63,484    |   |      |   | 16,411  |       |  |   |        |   |  |   | 79,895    |  
|General and administrative expense                          |  |                                       |          |   |      |   |        |       |  |   | (6,265  | ) |  |   | (6,265    | )
|Depreciation and amortization                               |  |                                       | (16,512   | ) |      |   | (7,018  | )     |  |   | (192    | ) |  |   | (23,722   | )
|Other interest income                                       |  |                                       | 338       |   |      |   | 46      |       |  |   | 1,111   |   |  |   | 1,495     |  
|Interest expense                                            |  |                                       |          |   |      |   |        |       |  |   | (26,076 | ) |  |   | (26,076   | )
|Income from real estate partnership                         |  |                                       |          |   |      |   |        |       |  |   | 196     |   |  |   | 196       |  
|                                                            |  |                                       |           |   |      |   |         |       |  |   |         |   |  |   |           |  
|Income from continuing operations before minority interests |  |                                       | 47,310    |   |      |   | 9,439   |       |  |   | (31,226 | ) |  |   | 25,523    |  
|Minority interests                                          |  |                                       |          |   |      |   |        |       |  |   | (1,086  | ) |  |   | (1,086    | )
|Income from discontinued operations                         |  |                                       |          |   |      |   |        |       |  |   | 452     |   |  |   | 452       |  
|Gain on sale of real estate from discontinued operations    |  |                                       |          |   |      |   |        |       |  |   | 95      |   |  |   | 95        |  
|                                                            |  |                                       |           |   |      |   |         |       |  |   |         |   |  |   |           |  
|Net income                                                  |  | $                                     | 47,310    |   |      | $ | 9,439   |       |  | $ | (31,765 | ) |  | $ | 24,984    |  
|                                                            |  |                                       |           |   |      |   |         |       |  |   |         |   |  |   |           |  
|Total assets at end of period                               |  | $                                     | 1,629,636 |   |      | $ | 875,512 |       |  | $ | 134,974 |   |  | $ | 2,640,122 |  
|                                                            |  |                                       |           |   |      |   |         |       |  |   |         |   |  |   |           |  

NOTE KSUBSEQUENT EVENT

On October 26, 2007, we acquired the fee interest in Mid-Pike Plaza located in Rockville, Maryland and Huntington Shopping Center located in Huntington, New York. Prior to the acquisition, we had a leasehold
interest in these properties and a capital lease obligation. In addition, on October 26, 2007, we sold our leasehold interest in six properties, Allwood, Blue Star, Brunswick, Clifton, Hamilton and Rutgers Shopping Centers, located in New
Jersey. The capital lease obligations of all 8 of the properties totaling $76.5 million at September 30, 2007, were extinguished as part of the transactions.



18



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|ITEM 2. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|------- | -------------------------------------------------------------------------------------

Forward-Looking Statements

The following discussion should be read in conjunction with the consolidated interim
financial statements and notes thereto appearing in Item 1 of this report and the more detailed information contained in our Annual Report on Form 10-K for the year ended December 31, 2006 filed with the Securities and Exchange Commission
on March 1, 2007.

This Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933,
Section 21E of the Securities Exchange Act of 1934 and the Private Securities Litigation Reform Act of 1995. When we refer to forward-looking statements or information, sometimes we use words such as may, will,
could, should, plans, intends, expects, believes, estimates, anticipates and continues. Forward-looking statements are not historical facts
or guarantees of future performance and involve certain known and unknown risks, uncertainties, and other factors, many of which are outside our control, that could cause actual results to differ materially from those we describe.

Given these uncertainties, readers are cautioned not to place undue reliance on any forward-looking statements that we make, including those in this Quarterly Report on
Form 10-Q. Except as may be required by law, we make no promise to update any of the forward-looking statements as a result of new information, future events or otherwise. You should carefully review the risks and the risk factors included in our
Annual Report on Form 10-K for the year ended December 31, 2006, before making any investments in us.

Overview

We are an equity real estate investment trust (REIT) specializing in the ownership, management, development and redevelopment of high quality retail and
mixed-use properties. As of September 30, 2007, we owned or had a majority interest in community and neighborhood shopping centers and mixed-use properties which are operated as 88 predominantly retail real estate projects comprising
approximately 19.5 million square feet, located primarily in densely populated and affluent communities in strategic metropolitan markets in the Northeast and Mid-Atlantic regions of the United States, as well as in California. In total, the
real estate projects were 96.4% leased at September 30, 2007. A joint venture in which we own a 30% interest owned seven retail real estate projects totaling approximately 1.0 million square feet as of September 30, 2007. In total,
the joint venture properties in which we own an interest were 98.0% leased at September 30, 2007. We have paid quarterly dividends to our shareholders continuously since our founding in 1962 and have increased our dividends per common share for
40 consecutive years.

2007 Property Acquisitions and Dispositions

The following table provides a summary of significant acquisitions made by us and our consolidated affiliates during the nine months ended September 30, 2007:



|                  |  |                                  |  |                     |  |                    |  |                |       |    
|----------------- |  | -------------------------------- |  | ------------------- |  | ------------------ |  | -------------- | ----- | ---
|Date              |  | Property                         |  | City, State         |  | GrossLeasable Area |  | Purchase Price |      
|                  |  |                                  |  |                     |  | (In square feet)   |  | (In millions)  |      
|February 28, 2007 |  | Crow Canyon Crest                |  | San Ramon, CA       |  | 17,000             |  | $              | 10.9  |    
|March 8, 2007     |  | The White Marsh Portfolio:       |  | White Marsh, MD     |  |                    |  |                | 189.4 | (1)
|                  |  | THE AVENUE at White Marsh        |  |                     |  | 296,000            |  |                |       |    
|                  |  | White Marsh Plaza                |  |                     |  | 79,000             |  |                |       |    
|                  |  | The Shoppes at Nottingham Square |  |                     |  | 186,000            |  |                |       |    
|                  |  | White Marsh Other                |  |                     |  | 53,000             |  |                |       |    
|May 30, 2007      |  | Shoppers World                  |  | Charlottesville, VA |  | 169,000            |  |                | 27.2  | (2)
|                  |  |                                  |  |                     |  |                    |  |                |       |    
|                  |  | Total                            |  |                     |  | 800,000            |  | $              | 227.5 |    
|                  |  |                                  |  |                     |  |                    |  |                |       |    

---

|(1) | The White Marsh Portfolio was purchased using $11.5 million of cash plus a combination of common stock and convertible preferred stock, downREIT operating partnership units, and the
assumption of mortgage loans through a merger with Nottingham Properties, Inc. The acquisition also included ground leases covering 50,000 square feet of office space and a hotel which are not included in gross leasable area.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | On May 30, 2007, we entered into a Section 1031 like-kind exchange agreement with a third party intermediary related to the acquisition of Shoppers
World. The exchange agreement is for a maximum of 180 days and allows us to defer gains on sale of other properties sold within this period. Until the termination of this exchange agreement, the third party intermediary is the legal owner of the
property, although we control the property and retain all of the economic
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

| | benefits and risks associated with the property. This property is held in a variable interest entity for which we are the primary beneficiary. Accordingly,
commencing on May 30, 2007, we consolidate the property and its operations. On October 11, 2007, we sold two properties located in Forest Hills, New York which completes the Section 1031 exchange. We now own this property directly.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The following table provides a summary of significant dispositions made by us and our consolidated affiliates during the nine months
ended September 30, 2007. All three properties were acquired in August 2006 by a TRS as part of a larger portfolio. The properties are classified as held for sale as of December 31, 2006, and their operations are included in discontinued
operations for all periods presented.



|              |  |                      |  |             |  |                    |  |               |      |      |   |     |    
|------------- |  | -------------------- |  | ----------- |  | ------------------ |  | ------------- | ---- | ---- | - | --- | ---
|Date          |  | Property             |  | City, State |  | GrossLeasable Area |  | Sales Price   |      | Gain |  
|              |  |                      |  |             |  | (In square feet)   |  | (In millions) |     
|April 5, 2007 |  | Bath Shopping Center |  | Bath, ME    |  | 101,000            |  | $             | 21.8 |      | $ | 0.6 | (1)
|June 20, 2007 |  | Key Road Plaza       |  | Keene, NH   |  | 76,000             |  |               | 15.3 |      |   | 0.4 | (2)
|June 20, 2007 |  | Riverside Plaza      |  | Keene, NH   |  | 218,000            |  |               | 25.9 |      |   | 0.5 | (3)
|              |  |                      |  |             |  |                    |  |               |      |      |   |     |    
|              |  | Total                |  |             |  | 395,000            |  | $             | 63.0 |      | $ | 1.5 |    
|              |  |                      |  |             |  |                    |  |               |      |      |   |     |    

---

|(1) | Gain of $0.6 million is net of $0.3 million in taxes.
|--- | -----------------------------------------------------

|(2) | Gain of $0.4 million is net of $0.1 million in taxes.
|--- | -----------------------------------------------------

|(3) | Gain of $0.5 million is net of $0.1 million in taxes.
|--- | -----------------------------------------------------

On
October 11, 2007, we sold two properties located in Forest Hills, New York for $33.2 million, resulting in a net gain of approximately $19.0 million. The properties are classified as held for sale and their operations are included in
discontinued operations for all periods presented.

The revenues from all properties included in discontinued operations were $4.4 million and $2.2 million
for the nine months ended September 30, 2007 and 2006, respectively, and $0.7 million and $1.1 million for the three months ended September 30, 2007 and 2006, respectively.

The following table provides a summary of acquisitions made by our unconsolidated real estate partnership during the nine months ended September 30, 2007:



|                  |  |                                  |  |                  |  |                    |  |                |     
|----------------- |  | -------------------------------- |  | ---------------- |  | ------------------ |  | -------------- | ----
|Date              |  | Property                         |  | City, State      |  | GrossLeasable Area |  | Purchase Price
|                  |  |                                  |  |                  |  | (In square feet)   |  | (In millions) 
|February 15, 2007 |  | Free State Shopping Center       |  | Bowie, MD        |  | 278,000            |  | $              | 64.1
|February 20, 2007 |  | Lake Barcroft Shopping Center(1) |  | Falls Church, VA |  | 9,000              |  |                | 6.0 
|                  |  |                                  |  |                  |  |                    |  |                |     
|                  |  | Total                            |  |                  |  | 287,000            |  | $              | 70.1
|                  |  |                                  |  |                  |  |                    |  |                |     

---

|(1) | The property acquired is adjacent to and operated as part of Barcroft Plaza which is also owned by our unconsolidated real estate partnership.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------

Warranty reserves for condominium units sold at Santana Row are established to cover potential costs for materials, labor and other items associated with warranty-type
claims that may arise within the ten-year statutorily mandated latent construction defect warranty period. Our warranty and latent construction defect reserve is calculated based upon historical industry experience and current known factors.
Variables used in the calculation of the warranty reserves, as well as the adequacy of the reserve based on the number of condominium units still under warranty, are reviewed on a periodic basis.

Because of particular facts and circumstances that we became knowledgeable of during the third quarter of 2007, we reassessed our initial warranty reserve covering the
particular damages related to defects in certain fixtures which were upgraded during the condominium conversion. Based on current estimates, we believe the range of possible incremental expense is between $2.9 million and $8.3 million, net of taxes
of $2.2 million and $3.2 million, respectively. The full extent of damages and required repairs on any particular unit cannot be determined until after work on that unit begins. To date, we have completed the repairs in only a limited number of
units. The extent of the damages encountered in those units, and the resulting costs to repair, varied considerably. Accordingly, our current estimates are based on limited and varying actual costs. We are continuing our evaluation of this matter
and we have increased our reserve by $2.9 million to the low end of our estimated potential obligation related to these particular damages. This range excludes any amounts we may recover from insurance or the consultants that perform such work. In
the event that our evaluation allows us to develop a better estimate of these damages, we will accrue such amount. This increase reduces our gain on sale of condominium units which were sold during 2005 and 2006. The increase in the reserve is
included in Loss on sale of real estate from discontinued operations. The warranty reserve is included in accounts payable and accrued expenses. Although we consider the warranty reserves to be adequate, there can be no assurance that
the reserve will prove to be adequate over time to cover losses due to the difference between the assumptions used to estimate the warranty reserves and actual losses.



20



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##### Table of Contents

2007 Significant Debt, Equity and Other Transactions

In connection with the acquisition of the White Marsh portfolio and Shoppers World, we assumed five mortgage notes as follows:



|                          |  |                |      |               |                   |                             |      |  
|------------------------- |  | -------------- | ---- | ------------- | ----------------- | --------------------------- | ---- | -
|Property                  |  | Fair Value (1) |      | Maturity Date |                   | Stated Annual Interest Rate |     
|                          |  | (In millions ) |      |               |                   |                             |     
|THE AVENUE at White Marsh |  | $              | 61.9 |               | January 1, 2015   |                             | 5.46 | %
|White Marsh Plaza         |  | $              | 6.4  |               | April 1, 2013     |                             | 5.96 | %
|White Marsh Plaza         |  | $              | 4.5  |               | April 1, 2013     |                             | 6.18 | %
|White Marsh Other         |  | $              | 1.2  |               | December 31, 2008 |                             | 6.06 | %
|Shoppers World           |  | $              | 6.0  |               | January 31, 2021  |                             | 5.91 | %

---

|(1) | The aggregate face amount of the mortgage notes is $79.7 million. However, in accordance with GAAP, these mortgage notes were recorded at their fair value of $80.0 million.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

On March 8, 2007, as part of the consideration to acquire the White Marsh portfolio, we issued (i) 884,066 common shares at $88.18
per share, par value $0.01 per share, (ii) 399,896 shares of 5.417% Series 1 Cumulative Convertible Preferred Shares (Series 1 Preferred Shares) at the liquidation preference of $25 per share, par value $0.01 per share, and
(iii) 185,504 downREIT operating partnership units at $88.18 per share. The Series 1 Preferred Shares will accrue dividends at a rate of 5.417% per year and are convertible at any time by the holders to our common shares at a conversion
rate of $104.69 per share. The Series 1 Preferred Shares are also convertible under certain circumstances at our election. The holders of the Series 1 Preferred Shares have no voting rights.

On April 10, 2007, our unconsolidated real estate partnership entered into a mortgage note for approximately $4.2 million. The mortgage note is secured by the Lake
Barcroft property which was acquired in February 2007 and by Barcroft Plaza. The Lake Barcroft property is adjacent to and operated as part of Barcroft Plaza. The note matures on July 1, 2016, bears interest at 5.71% per annum and requires
monthly payments of interest only.

Outlook

General

We anticipate our 2007 income from continuing operations to grow in comparison to our 2006 income from continuing operations. We expect this income
growth primarily to be generated by a combination of the following:



| |  |  | increased earnings in our same-center portfolio and from properties under redevelopment; and
| | - |  | --------------------------------------------------------------------------------------------



| |  |  | increased earnings as we expand our portfolio through property acquisitions.
| | - |  | ----------------------------------------------------------------------------

On August 1, 2007, we announced a regular quarterly cash dividend of $0.61 per share on our common shares, resulting in an indicated annual rate of $2.44 per share. The regular common dividend was payable on
October 15, 2007, to common shareholders of record as of September 21, 2007.

We continue to see a positive impact on our income as a result of
the redevelopment of our shopping centers and higher rental rates on existing spaces as leases on these spaces expire. We anticipate investments in redevelopment projects of approximately $110 million and $100 million to stabilize in 2007 and 2008,
respectively. As redevelopment properties are completed, spaces that were out of service begin generating revenue; in addition, spaces that were not out of service and that have expiring leases may generate higher revenue because we generally
receive higher rent on new leases. For example, leases signed in 2005, 2006 and year-to-date 2007 on spaces for which there was a previous tenant have on average been renewed at double digit cash basis base rent increases. On spaces where the tenant
leases are expiring over the next few years, our analysis of current market rents as compared to rents on the existing leases leads us to expect that the base rents on new leases will have double-digit weighted average increases over the cash basis
base rents currently in place.

At September 30, 2007, the leasable square feet in our shopping centers was 95.1% occupied and 96.4% leased. The
leased rate is higher than the occupied rate due to leased spaces that are being redeveloped or improved or that are awaiting permits and, therefore, are not yet ready to be occupied. Our occupancy and leased rates are subject to variability over
time due to factors including acquisitions, the timing of the start and stabilization of our redevelopment projects, lease expirations and tenant bankruptcies.



21



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##### Table of Contents

Acquisitions

We
anticipate growth in earnings from acquisitions of neighborhood and community shopping centers in our primary markets in the East and West regions, as well as a reduction in earnings from selective dispositions. Any growth in earnings from
acquisitions is contingent, however, on our ability to find properties that meet our qualitative standards at prices that meet our financial hurdles. Changes in interest rates may also affect our success in achieving growth through acquisitions by
affecting both the price that must be paid to acquire a property, as well as our ability to economically finance the property acquisition.

Same-Center

Throughout this section, we have provided certain information on a same-center basis. Information provided on a same-center basis includes
the results of properties that we owned and operated for the entirety of both periods being compared except for properties for which significant development, redevelopment or expansion occurred during either of the periods being compared and
properties classified as discontinued operations.

RESULTS OF OPERATIONSNINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006



|                                                                |  |                               |          |   |      |   |          |         |  |   |         |   |  |        |  
|--------------------------------------------------------------- |  | ----------------------------- | -------- | - | ---- | - | -------- | ------- |  | - | ------- | - |  | ------ | -
|                                                                |  |                               |          |   |      |   |          | Change  | 
|                                                                |  | 2007                          |          |   | 2006 |   |          | Dollars |  |   | %       |  
|                                                                |  | (Dollar amounts in thousands) |         
|Rental income                                                   |  | $                             | 360,655  |   |      | $ | 319,673  |         |  | $ | 40,982  |   |  | 12.8   | %
|Other property income                                           |  |                               | 9,645    |   |      |   | 5,747    |         |  |   | 3,898   |   |  | 67.8   | %
|Mortgage interest income                                        |  |                               | 3,386    |   |      |   | 3,778    |         |  |   | (392    | ) |  | -10.4  | %
|                                                                |  |                               |          |   |      |   |          |         |  |   |         |   |  |        |  
|Total property revenue                                          |  |                               | 373,686  |   |      |   | 329,198  |         |  |   | 44,488  |   |  | 13.5   | %
|Rental expenses                                                 |  |                               | 76,002   |   |      |   | 63,242   |         |  |   | 12,760  |   |  | 20.2   | %
|Real estate taxes                                               |  |                               | 36,320   |   |      |   | 32,651   |         |  |   | 3,669   |   |  | 11.2   | %
|                                                                |  |                               |          |   |      |   |          |         |  |   |         |   |  |        |  
|Total property expenses                                         |  |                               | 112,322  |   |      |   | 95,893   |         |  |   | 16,429  |   |  | 17.1   | %
|                                                                |  |                               |          |   |      |   |          |         |  |   |         |   |  |        |  
|Property operating income                                       |  |                               | 261,364  |   |      |   | 233,305  |         |  |   | 28,059  |   |  | 12.0   | %
|Other interest income                                           |  |                               | 994      |   |      |   | 2,088    |         |  |   | (1,094  | ) |  | -52.4  | %
|Income from real estate partnership                             |  |                               | 1,120    |   |      |   | 533      |         |  |   | 587     |   |  | 110.1  | %
|Interest expense                                                |  |                               | (89,577  | ) |      |   | (75,110  | )       |  |   | (14,467 | ) |  | 19.3   | %
|General and administrative expense                              |  |                               | (18,271  | ) |      |   | (15,747  | )       |  |   | (2,524  | ) |  | 16.0   | %
|Depreciation and amortization                                   |  |                               | (78,543  | ) |      |   | (71,808  | )       |  |   | (6,735  | ) |  | 9.4    | %
|                                                                |  |                               |          |   |      |   |          |         |  |   |         |   |  |        |  
|Total other, net                                                |  |                               | (184,277 | ) |      |   | (160,044 | )       |  |   | (24,233 | ) |  | 15.1   | %
|                                                                |  |                               |          |   |      |   |          |         |  |   |         |   |  |        |  
|Income from continuing operations before minority interests     |  |                               | 77,087   |   |      |   | 73,261   |         |  |   | 3,826   |   |  | 5.2    | %
|Minority interests                                              |  |                               | (4,309   | ) |      |   | (3,483   | )       |  |   | (826    | ) |  | 23.7   | %
|Income from discontinued operations                             |  |                               | 1,642    |   |      |   | 627      |         |  |   | 1,015   |   |  | 161.9  | %
|(Loss) gain on sale of real estate from discontinued operations |  |                               | (1,051   | ) |      |   | 16,425   |         |  |   | (17,476 | ) |  | -106.4 | %
|Gain on sale of real estate                                     |  |                               |         |   |      |   | 7,441    |         |  |   | (7,441  | ) |  | -100.0 | %
|                                                                |  |                               |          |   |      |   |          |         |  |   |         |   |  |        |  
|Net income                                                      |  | $                             | 73,369   |   |      | $ | 94,271   |         |  | $ | (20,902 | ) |  | -22.2  | %
|                                                                |  |                               |          |   |      |   |          |         |  |   |         |   |  |        |  

Property Revenues

Total property revenue increased $44.5 million, or 13.5%, to $373.7 million in the nine months ended September 30, 2007 compared to $329.2 million in the nine months ended September 30, 2006. The percentage leased at our shopping
centers decreased to 96.4% at September 30, 2007 compared to 97.3% at September 30, 2006 due primarily to vacancies caused by the Chapter 7 liquidation of Tower Records during the fourth quarter of 2006 and CompUSA during 2007. Changes in
the components of property revenue are discussed below.

Rental Income

Rental income consists primarily of minimum rent, cost recoveries from tenants and percentage rent. Rental income increased $41.0 million, or 12.8%, to $360.7 million in the nine months ended September 30,
2007 compared to $319.7 million in the nine months ended September 30, 2006 due primarily to the following:



| |  |  | an increase of $24.8 million attributable to properties acquired in 2007 and 2006 and the completion of the power-center at Assembly Square Mall,
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

| |  |  | an increase of $8.6 million at same-center properties due to increased rental rates on new leases and increased cost recoveries,
| | - |  | --------------------------------------------------------------------------------------------------------------------------------



| |  |  | an increase of $6.9 million at redevelopment properties due to increased occupancy, increased rental rates on new leases and increased cost recoveries,
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | an increase of $1.9 million at Santana Row residential due primarily to leasing of residential units throughout 2006,
| | - |  | ---------------------------------------------------------------------------------------------------------------------

offset by



| |  |  | a decrease of $0.8 million related to the sale of Greenlawn Plaza to our unconsolidated real estate partnership in June 2006.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------

Other Property Income

Other property income increased
$3.9 million, or 67.8%, to $9.6 million in the nine months ended September 30, 2007 compared to $5.7 million in the nine months ended September 30, 2006. Included in other property income are items which, although recurring, tend to
fluctuate more than rental income from period to period, such as lease termination fees. This increase is due primarily to an increase in lease and other termination fees at same-center properties.

Mortgage Interest Income

Mortgage interest income decreased $0.4
million, or 10.4%, to $3.4 million in the nine months ended September 30, 2007 compared to $3.8 million in the nine months ended September 30, 2006. This decrease is primarily due to an amendment of our $17.7 million secondary mortgage
note receivable secured by a hotel at our Santana Row project in San Jose, California which was executed on August 4, 2006 and decreased the interest rate from 14% per annum to 9% per annum.

Property Expenses

Total property expenses increased $16.4 million,
or 17.1%, to $112.3 million in the nine months ended September 30, 2007 compared to $95.9 million in the nine months ended September 30, 2006. Changes in the components of property expenses are discussed below.

Rental Expenses

Rental expenses increased $12.8 million, or
20.2%, to $76.0 million in the nine months ended September 30, 2007 compared to $63.2 million in the nine months ended September 30, 2006. This increase is due primarily to the following:



| |  |  | an increase of $4.3 million attributable to properties acquired in 2007 and 2006 and the completion of the power-center at Assembly Square Mall,
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | an increase of $3.1 million in repairs and maintenance at same-center and redevelopment properties due primarily to higher snow removal and maintenance costs,
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | an increase of $1.6 million in utilities at same-center and redevelopment properties,
| | - |  | -------------------------------------------------------------------------------------



| |  |  | an increase of $1.1 million in insurance at our same-center and redevelopment properties,
| | - |  | -----------------------------------------------------------------------------------------



| |  |  | an increase of $0.9 million in legal fees related to the litigation at a shopping center in New Jersey and at Santana Row, and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------



| |  |  | an increase of $0.6 million attributable to Santana Row Residential.
| | - |  | --------------------------------------------------------------------

As a result of the changes in rental income, rental expenses and other property income described above, rental expenses as a percentage of rental income plus other property income increased to 20.5% in the nine months
ended September 30, 2007 from 19.4% in the nine months ended September 30, 2006.

Real Estate Taxes

Real estate tax expense increased $3.7 million, or 11.2%, to $36.3 million in the nine months ended September 30, 2007 compared to $32.7 million in the nine
months ended September 30, 2006. This increase is due primarily to increased taxes of $2.7 million related to properties acquired in 2007 and 2006 and Assembly Square Mall and $1.0 million related to higher assessments at our same-center,
redevelopment and Santana Row residential properties.



23



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##### Table of Contents

Property Operating Income

Property operating income increased $28.1 million, or 12.0%, to $261.4 million in the nine months ended September 30, 2007 compared to $233.3 million in the nine months ended September 30, 2006. This increase, as discussed above,
is due primarily to the following:



| |  |  | earnings attributable to properties acquired in 2007 and 2006 and the completion of the power-center at Assembly Square Mall,
| | - |  | -----------------------------------------------------------------------------------------------------------------------------



| |  |  | growth in same-center earnings,
| | - |  | -------------------------------



| |  |  | growth in earnings at redevelopment properties, and
| | - |  | ---------------------------------------------------



| |  |  | growth in earnings at Santana Row residential.
| | - |  | ----------------------------------------------

Other

Interest Expense

Interest
expense increased $14.5 million, or 19.3%, to $89.6 million in the nine months ended September 30, 2007 compared to $75.1 million in the nine months ended September 30, 2006. This increase is due primarily to the following:



| |  |  | an increase of $20.5 million due to higher borrowings to finance our acquisitions,
| | - |  | ----------------------------------------------------------------------------------

offset by



| |  |  | an increase of $3.6 million in capitalized interest,
| | - |  | ----------------------------------------------------



| |  |  | a decrease of $2.0 million due to a lower overall weighted average borrowing rate, and
| | - |  | --------------------------------------------------------------------------------------



| |  |  | a decrease of $0.2 million due to lower participation on certain capital leases.
| | - |  | --------------------------------------------------------------------------------

Gross interest costs were $95.6 million and $77.5 million in the nine months ended September 30, 2007 and 2006, respectively. Capitalized interest amounted to $6.0 million and $2.4 million in
the nine months ended September 30, 2007 and 2006, respectively. Capitalized interest increased due primarily to development at Linden Square which was acquired in August 2006 and redevelopment at Arlington East.

General and Administrative Expense

General and administrative
expense increased $2.5 million, or 16.0%, to $18.3 million in the nine months ended September 30, 2007 compared to $15.7 million in the nine months ended September 30, 2006. This is primarily due to an increase in personnel and
increased share-based and other compensation expense.

Depreciation and Amortization

Depreciation and amortization expense increased $6.7 million, or 9.4%, to $78.5 million in the nine months ended September 30, 2007 from $71.8 million in the nine months ended September 30, 2006.
This increase is due primarily to acquisitions and capital improvements at same-center and redevelopment properties.

Minority Interests

Income to minority partners increased $0.8 million, or 23.7%, to $4.3 million in the nine months ended September 30, 2007 compared to $3.5 million in the nine
months ended September 30, 2006. This increase is due primarily to an increase in earnings at properties held in non-wholly owned partnerships and an increase in operating partnership units issued to acquire the White Marsh portfolio in March
2007.

Income from Discontinued Operations

Income from
discontinued operations represents the operating income of properties that have been disposed or will be disposed, which is required to be reported separately from results of ongoing operations. The reported operating income of $1.6 million and $0.6
million for the nine months ended September 30, 2007 and 2006, respectively, represents the operating income for the period during which we owned properties sold or to be sold in 2007 and 2006.

(Loss) Gain on Sale of Real Estate From Discontinued Operations

The
loss on sale of real estate from discontinued operations of $1.1 million during the nine months ended September 30, 2007 is due to a $2.9 million increase in the warranty reserve, net of taxes, related to condominiums sold in 2006 and 2005 at



24



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##### Table of Contents

Santana Row partially offset by a gain on sale of $1.8 million primarily related to the sales of Bath Shopping Center, Key Road Plaza, and Riverside Plaza.
The gain on sale of real estate from discontinued operations of $16.4 million for the nine months ended September 30, 2006, was due to the sale of condominiums at Santana Row.

Gain on Sale of Real Estate

The gain on sale of real estate includes properties which we maintained continuing
involvement through our unconsolidated real estate partnership. No properties were sold in 2007 for which we maintained continuing involvement. One property, Greenlawn Plaza, was sold in 2006 to our unconsolidated real estate partnership, which
resulted in a $7.4 million gain.

Segment Results

We
operate our business on an asset management model, where asset management teams are responsible for a portfolio of assets. We manage our portfolio as two operating regions: East and West. Property management teams consist of asset managers, leasing
agents, development staff and financial personnel, each of whom has responsibility for a distinct portfolio.

The following table provides selected key
segment data for the nine months ended September 30, 2007 and 2006. The results of properties classified as discontinued operations have been excluded for rental income, total revenue and property operating income from the following table.



|                                                        |  |                                                   |           |   |      |   |           |  
|------------------------------------------------------- |  | ------------------------------------------------- | --------- | - | ---- | - | --------- | -
|                                                        |  | Nine Months Ended September 30,                   |          
|                                                        |  | 2007                                              |           |   | 2006 |  
|                                                        |  | (In thousands, except percentages andsquare feet) |          
|East                                                    |  |                                                   |           |   |      |   |           |  
|Rental income                                           |  | $                                                 | 283,594   |   |      | $ | 248,030   |  
|Total revenue                                           |  | $                                                 | 292,852   |   |      | $ | 253,505   |  
|Property operating income (1)                           |  | $                                                 | 208,432   |   |      | $ | 183,105   |  
|Property operating income as a percent of total revenue |  |                                                   | 71.2      | % |      |   | 72.2      | %
|Total assets                                            |  | $                                                 | 1,947,507 |   |      | $ | 1,629,636 |  
|Gross leasable area (square feet)                       |  |                                                   | 16,879    |   |      |   | 15,945    |  
|West                                                    |  |                                                   |           |   |      |   |           |  
|Rental income                                           |  | $                                                 | 77,061    |   |      | $ | 71,643    |  
|Total revenue                                           |  | $                                                 | 80,834    |   |      | $ | 75,693    |  
|Property operating income (1)                           |  | $                                                 | 52,932    |   |      | $ | 50,200    |  
|Property operating income as a percent of total revenue |  |                                                   | 65.5      | % |      |   | 66.3      | %
|Total assets                                            |  | $                                                 | 877,934   |   |      | $ | 875,512   |  
|Gross leasable area (square feet)                       |  |                                                   | 2,628     |   |      |   | 2,605     |  

---

|(1) | Property operating income consists of rental income, other property income and mortgage interest income, less rental expenses and real estate taxes. This measure is used internally
to evaluate the performance of our regional operations, and we consider it to be a significant measure.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

East

Rental income for the East region increased $35.6 million, or 14.3%, to $283.6 million in the nine months ended September 30, 2007 compared to $248.0 million in the
nine months ended September 30, 2006 due primarily to the following:



| |  |  | an increase of $24.3 million attributable to properties acquired in 2007 and 2006 and the completion of the power-center at Assembly Square Mall,
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | an increase of $7.4 million at same-center properties due to increased rental rates on new leases and increased cost recoveries,
| | - |  | --------------------------------------------------------------------------------------------------------------------------------



| |  |  | an increase of $5.1 million at redevelopment properties
| | - |  | -------------------------------------------------------

offset by



| |  |  | a decrease of $0.8 million related to the sale of Greenlawn Plaza to our unconsolidated real estate partnership in June 2006.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------

Property operating income for the East region increased $25.3 million due primarily to the increase in rental income discussed above and an increase in lease and other
termination fees. These increases in income were partially offset by a $10.1 million increase in rental expense due to the acquisition of properties, increased snow removal costs, repairs and



25



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##### Table of Contents

maintenance costs, insurance costs, and additional legal costs and a $3.9 million increase in real estate taxes due primarily to the acquisition of
properties and higher assessments on our same-center and redevelopment properties. As a result of these changes, the ratio of property operating income to total revenue for the East region decreased to 71.2% in the nine months ended
September 30, 2007 from 72.2% in the nine months ended September 30, 2006.

West

Rental income for the West region increased $5.4 million, or 7.6%, to $77.1 million in the nine months ended September 30, 2007 from $71.6 million in the nine months
ended September 30, 2006 due primarily to the following:



| |  |  | an increase of $3.0 million at Santana Row due to leasing residential units throughout 2006, increased retail occupancy and increased rental rates on new retail
leases, and
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | an increase of $1.8 million at redevelopment projects.
| | - |  | ------------------------------------------------------

Property operating income for the West region increased $2.7 million due primarily to the increase in rental income discussed above partially offset by a $2.4 million increase in rental expense and real estate taxes primarily at Santana Row
and a $0.4 million decrease in mortgage interest income due to an amendment of our $17.7 million mortgage note receivable secured by a hotel at our Santana Row project in San Jose, California, which was executed on August 14, 2006 and
decreased the interest rate from 14% per annum to 9% per annum. As a result of these changes, the ratio of property operating income to total revenue for the West region decreased to 65.5% in the nine months ended September 30, 2007
from 66.3% in the nine months ended September 30, 2006.

RESULTS OF OPERATIONSTHREE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006



|                                                                |  |                               |         |   |      |   |         |         |  |   |        |   |  |          |  
|--------------------------------------------------------------- |  | ----------------------------- | ------- | - | ---- | - | ------- | ------- |  | - | ------ | - |  | -------- | -
|                                                                |  |                               |         |   |      |   |         | Change  | 
|                                                                |  | 2007                          |         |   | 2006 |   |         | Dollars |  |   | %      |  
|                                                                |  | (Dollar amounts in thousands) |        
|Rental income                                                   |  | $                             | 123,559 |   |      | $ | 109,371 |         |  | $ | 14,188 |   |  | 13.0     | %
|Other property income                                           |  |                               | 4,650   |   |      |   | 1,787   |         |  |   | 2,863  |   |  | 160.2    | %
|Mortgage interest income                                        |  |                               | 1,129   |   |      |   | 1,107   |         |  |   | 22     |   |  | 2.0      | %
|                                                                |  |                               |         |   |      |   |         |         |  |   |        |   |  |          |  
|Total property revenue                                          |  |                               | 129,338 |   |      |   | 112,265 |         |  |   | 17,073 |   |  | 15.2     | %
|Rental expenses                                                 |  |                               | 26,502  |   |      |   | 20,768  |         |  |   | 5,734  |   |  | 27.6     | %
|Real estate taxes                                               |  |                               | 12,985  |   |      |   | 11,602  |         |  |   | 1,383  |   |  | 11.9     | %
|                                                                |  |                               |         |   |      |   |         |         |  |   |        |   |  |          |  
|Total property expenses                                         |  |                               | 39,487  |   |      |   | 32,370  |         |  |   | 7,117  |   |  | 22.0     | %
|                                                                |  |                               |         |   |      |   |         |         |  |   |        |   |  |          |  
|Property operating income                                       |  |                               | 89,851  |   |      |   | 79,895  |         |  |   | 9,956  |   |  | 12.5     | %
|Other interest income                                           |  |                               | 313     |   |      |   | 1,495   |         |  |   | (1,182 | ) |  | -79.1    | %
|Income from real estate partnership                             |  |                               | 473     |   |      |   | 196     |         |  |   | 277    |   |  | 141.3    | %
|Interest expense                                                |  |                               | (30,533 | ) |      |   | (26,076 | )       |  |   | (4,457 | ) |  | 17.1     | %
|General and administrative expense                              |  |                               | (6,631  | ) |      |   | (6,265  | )       |  |   | (366   | ) |  | 5.8      | %
|Depreciation and amortization                                   |  |                               | (26,071 | ) |      |   | (23,722 | )       |  |   | (2,349 | ) |  | 9.9      | %
|                                                                |  |                               |         |   |      |   |         |         |  |   |        |   |  |          |  
|Total other, net                                                |  |                               | (62,449 | ) |      |   | (54,372 | )       |  |   | (8,077 | ) |  | 14.9     | %
|                                                                |  |                               |         |   |      |   |         |         |  |   |        |   |  |          |  
|Income from continuing operations before minority interests     |  |                               | 27,402  |   |      |   | 25,523  |         |  |   | 1,879  |   |  | 7.4      | %
|Minority interests                                              |  |                               | (1,629  | ) |      |   | (1,086  | )       |  |   | (543   | ) |  | 50.0     | %
|Income from discontinued operations                             |  |                               | 642     |   |      |   | 452     |         |  |   | 190    |   |  | 42.0     | %
|(Loss) gain on sale of real estate from discontinued operations |  |                               | (2,900  | ) |      |   | 95      |         |  |   | (2,995 | ) |  | -3,152.6 | %
|                                                                |  |                               |         |   |      |   |         |         |  |   |        |   |  |          |  
|Net income                                                      |  | $                             | 23,515  |   |      | $ | 24,984  |         |  | $ | (1,469 | ) |  | -5.9     | %
|                                                                |  |                               |         |   |      |   |         |         |  |   |        |   |  |          |  

Property Revenues

Total property revenue increased $17.1 million, or 15.2%, to $129.3 million in the three months ended September 30, 2007 compared to $112.3 million in the three months ended September 30, 2006. The percentage leased at
our shopping centers decreased slightly to 96.4% at September 30, 2007 compared to 97.3% at September 30, 2006 due primarily to vacancies caused by the Chapter 7 liquidation of Tower Records during the fourth quarter of 2006 and CompUSA
during 2007. Changes in the components of property revenue are discussed below.



26



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##### Table of Contents

Rental Income

Rental
income consists primarily of minimum rent, cost recoveries from tenants and percentage rent. Rental income increased $14.2 million, or 13.0%, to $123.6 million in the three months ended September 30, 2007 compared to $109.4 million in the
three months ended September 30, 2006 due primarily to the following:



| |  |  | an increase of $10.6 million attributable to properties acquired in 2007 and 2006,
| | - |  | ----------------------------------------------------------------------------------



| |  |  | an increase of $2.5 million at same-center properties due to increased rental rates on new leases and increased cost recoveries,
| | - |  | --------------------------------------------------------------------------------------------------------------------------------



| |  |  | an increase of $1.1 million at redevelopment properties due to increased occupancy, increased rental rates on new leases and increased cost recoveries, and
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | an increase of $0.3 million at Santana Row residential due primarily to leasing of residential units throughout 2006.
| | - |  | ---------------------------------------------------------------------------------------------------------------------

Other Property Income

Other property income increased $2.9 million,
or 160.2%, to $4.7 million in the three months ended September 30, 2007 compared to $1.8 million in the three months ended September 30, 2006. Included in other property income are items which, although recurring, tend to fluctuate more
than rental income from period to period, such as lease termination fees. This increase is due primarily to an increase in lease and other termination fees at same-center properties.

Property Expenses

Total property expenses increased $7.1 million, or 22.0%, to $39.5 million in the three months
ended September 30, 2007 compared to $32.4 million in the three months ended September 30, 2006. Changes in the components of property expenses are discussed below.

Rental Expenses

Rental expenses increased $5.7 million, or 27.6%, to $26.5 million in the three months ended
September 30, 2007 compared to $20.8 million in the three months ended September 30, 2006. This increase is due primarily to the following:



| |  |  | an increase of $1.7 million attributable to properties acquired in 2007 and 2006,
| | - |  | ---------------------------------------------------------------------------------



| |  |  | an increase of $1.3 million in repairs and maintenance and insurance at same-center and redevelopment properties,
| | - |  | -----------------------------------------------------------------------------------------------------------------



| |  |  | an increase of $0.7 million in utility costs at same-center and redevelopment properties,
| | - |  | -----------------------------------------------------------------------------------------



| |  |  | an increase of $0.7 million in bad debt expense at same-center and redevelopment properties due to recoveries in 2006 of receivables previously considered
uncollectible, and
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | an increase of $0.3 million in legal fees related to the litigation at a shopping center in New Jersey and at Santana Row.
| | - |  | --------------------------------------------------------------------------------------------------------------------------

As a result of the changes in rental income, rental expenses and other property income described above, rental expenses as a percentage of rental income plus other
property income increased to 20.7% in the three months ended September 30, 2007 from 18.7% in the three months ended September 30, 2006.

Real
Estate Taxes

Real estate tax expense increased $1.4 million, or 11.9%, to $13.0 million in the three months ended September 30, 2007 compared to
$11.6 million in the three months ended September 30, 2006. This increase is due primarily to increased taxes of $1.5 million related to properties acquired in 2007 and 2006.

Property Operating Income

Property operating income increased $10.0 million, or 12.5%, to $89.9 million in the three
months ended September 30, 2007 compared to $79.9 million in the three months ended September 30, 2006. This increase is due primarily to the following:



| |  |  | earnings attributable to properties acquired in 2007 and 2006,
| | - |  | --------------------------------------------------------------



| |  |  | growth in same-center earnings, and
| | - |  | -----------------------------------



| |  |  | growth in earnings at redevelopment properties.
| | - |  | -----------------------------------------------



27



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##### Table of Contents

Other

Interest
Expense

Interest expense increased $4.5 million, or 17.1%, to $30.5 million in the three months ended September 30, 2007 compared to $26.1
million in the three months ended September 30, 2006. This increase is due primarily to the following:



| |  |  | an increase of $6.9 million due to higher borrowings to finance our acquisitions, offset by
| | - |  | -------------------------------------------------------------------------------------------



| |  |  | a decrease of $1.5 million due to a lower overall weighted average borrowing rate, and
| | - |  | --------------------------------------------------------------------------------------



| |  |  | an increase of $0.9 million in capitalized interest.
| | - |  | ----------------------------------------------------

Gross interest costs were $32.5 million and $27.1 million in the three months ended September 30, 2007 and 2006, respectively. Capitalized interest amounted to $1.9 million and $1.1 million in the three months ended
September 30, 2007 and 2006, respectively. Capitalized interest increased due primarily to development at Linden Square which was acquired in August 2006 and redevelopment at Arlington East.

General and Administrative Expense

General and administrative
expense increased $0.4 million, or 5.8%, to $6.6 million in the three months ended September 30, 2007 compared to $6.3 million in the three months ended September 30, 2006. This is primarily due to an increase in personnel, wages and
legal costs.

Depreciation and Amortization

Depreciation and amortization expense increased $2.3 million, or 9.9%, to $26.1 million in the three months ended September 30, 2007 from $23.7 million in the three months ended September 30, 2006. This increase is due
primarily to acquisitions and capital improvements at same-center and redevelopment properties.

Minority Interests

Income to minority partners increased $0.5 million, or 50.0%, to $1.6 million in the three months ended September 30, 2007 compared to $1.1 million in the three
months ended September 30, 2006. This increase is due primarily to an increase in earnings at properties held in non-wholly owned partnerships and an increase in operating partnership units issued to acquire the White Marsh portfolio in March
2007.

Income from Discontinued Operations

Income from
discontinued operations represents the operating income of properties that have been disposed or will be disposed, which is required to be reported separately from results of ongoing operations. The reported operating income of $0.6 million and $0.5
million for the three months ended September 30, 2007 and 2006, respectively, represents the operating income for the period during which we owned properties sold or to be sold in 2007 and 2006.

(Loss) Gain on Sale of Real Estate from Discontinued Operations

The
loss on sale of real estate from discontinued operations of $2.9 million during the three months ended September 30, 2007 relates to an increase in the warranty reserve for condominiums sold in 2006 and 2005 at Santana Row. The gain of $0.1
million during the three months ended September 30, 2006 is related to the sale of condominiums at Santana Row.

Segment Results

We operate our business on an asset management model, where asset management teams are responsible for a portfolio of assets. We manage our portfolio as two operating
regions: East and West. Property management teams consist of asset managers, leasing agents, development staff and financial personnel, each of whom has responsibility for a distinct portfolio.



28



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##### Table of Contents

The following table provides selected key segment data for the three months ended September 30, 2007 and 2006. The
results of properties classified as discontinued operations have been excluded for rental income, total revenue and property operating income from the following table.



|                                                        |  |                                                   |           |   |      |   |           |  
|------------------------------------------------------- |  | ------------------------------------------------- | --------- | - | ---- | - | --------- | -
|                                                        |  | Three Months Ended September 30,                  |          
|                                                        |  | 2007                                              |           |   | 2006 |  
|                                                        |  | (In thousands, exceptpercentages and square feet) |          
|East                                                    |  |                                                   |           |   |      |   |           |  
|Rental income                                           |  | $                                                 | 98,072    |   |      | $ | 85,207    |  
|Total revenue                                           |  | $                                                 | 102,417   |   |      | $ | 86,884    |  
|Property operating income (1)                           |  | $                                                 | 72,583    |   |      | $ | 63,484    |  
|Property operating income as a percent of total revenue |  |                                                   | 70.9      | % |      |   | 73.1      | %
|Total assets                                            |  | $                                                 | 1,947,507 |   |      | $ | 1,629,636 |  
|Gross leasable area (square feet)                       |  |                                                   | 16,879    |   |      |   | 15,945    |  
|West                                                    |  |                                                   |           |   |      |   |           |  
|Rental income                                           |  | $                                                 | 25,487    |   |      | $ | 24,164    |  
|Total revenue                                           |  | $                                                 | 26,921    |   |      | $ | 25,381    |  
|Property operating income (1)                           |  | $                                                 | 17,268    |   |      | $ | 16,411    |  
|Property operating income as a percent of total revenue |  |                                                   | 64.1      | % |      |   | 64.7      | %
|Total assets                                            |  | $                                                 | 877,934   |   |      | $ | 875,512   |  
|Gross leasable area (square feet)                       |  |                                                   | 2,628     |   |      |   | 2,605     |  

---

|(1) | Property operating income consists of rental income, other property income and mortgage interest income, less rental expenses and real estate taxes. This measure is used internally
to evaluate the performance of our regional operations, and we consider it to be a significant measure.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

East

Rental income for the East region increased $12.9 million, or 15.1%, to $98.1 million in the three months ended September 30, 2007 compared to $85.2 million in the
three months ended September 30, 2006 due primarily to the following:



| |  |  | an increase of $10.4 million attributable to properties acquired in 2007 and 2006,
| | - |  | ----------------------------------------------------------------------------------



| |  |  | an increase of $2.1 million at same-center properties due to increased rental rates on new leases and increased cost recoveries,
| | - |  | --------------------------------------------------------------------------------------------------------------------------------



| |  |  | an increase of $0.7 million at redevelopment properties.
| | - |  | --------------------------------------------------------

Property operating income for the East region increased $9.1 million due primarily to the increase in rental income discussed above and an increase in lease and other termination income. These increases in income were partially offset by a
$4.7 million increase in rental expense due to the acquisition of properties and increases in expenses at same-center and redevelopment properties, and a $1.7 million increase in real estate taxes due primarily to the acquisition of properties and
higher assessments on our same-center and redevelopment properties. As a result of these changes, the ratio of property operating income to total revenue for the East region decreased to 70.9% in the three months ended September 30, 2007 from
73.1% in the three months ended September 30, 2006.

West

Rental income for the West region increased $1.3 million, or 5.5%, to $25.5 million in the three months ended September 30, 2007 from $24.2 million in the three months ended September 30, 2006 due primarily to the following:



| |  |  | an increase of $0.5 million at Santana Row due to leasing residential units throughout 2006, increased retail occupancy, and increased rental rates on new retail
leases, and
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | an increase of $0.5 million at redevelopment projects.
| | - |  | ------------------------------------------------------

Property operating income for the West region increased $0.9 million due primarily to the increase in rental income discussed above partially offset by a $0.7 million increase in rental expenses and real estate taxes. As a result of these
changes, the ratio of property operating income to total revenue for the West region decreased to 64.1% in the three months ended September 30, 2007 from 64.7% in the three months ended September 30, 2006.



29



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Subsequent Event

On
October 26, 2007, we acquired the fee interest in Mid-Pike Plaza located in Rockville, Maryland and Huntington Shopping Center located in Huntington, New York. Prior to the acquisition, we had a leasehold interest in these properties and a
capital lease obligation. In addition, on October 26, 2007, we sold our leasehold interest in six properties, Allwood, Blue Star, Brunswick, Clifton, Hamilton and Rutgers Shopping Centers, located in New Jersey. The capital lease obligations of
all 8 of the properties totaling $76.5 million at September 30, 2007, were extinguished as part of the transactions.

New Accounting Standards
Implemented

In July 2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation No. 48 (FIN 48),
Accounting for Uncertainty in Income Taxesan interpretation of FASB Statement No. 109, Accounting for Income Taxes. FIN 48 was issued to reduce the diversity in practice associated with certain aspects of
recognition, disclosure and measurement related to accounting for uncertain income tax positions. We adopted FIN 48 effective January 1, 2007. The adoption of FIN 48 did not have a material impact on our financial position, results of
operations, or cash flows. We recognize penalties and interest accrued related to unrecognized tax benefits as income tax expense. With few exceptions, we are no longer subject to U.S. federal, state, and local tax examinations by tax authorities
for years before 2003. As of September 30, 2007, we had no material unrecognized tax benefits.

New Accounting Standards to Be Implemented

In September 2006, the FASB issued SFAS No. 157 Fair Value Measurement (SFAS No. 157). SFAS No. 157 defines fair
value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. SFAS No. 157 applies to accounting pronouncements that require or permit fair value
measurements, except for share-based payments under SFAS No. 123(R). We are required to adopt SFAS No. 157 effective January 1, 2008. We do not believe the adoption of SFAS No. 157 will have a material impact on our financial
position, results of operations or cash flows.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and
Financial Liabilities Including an Amendment of FASB Statement No. 115 (SFAS No. 159). This standard permits entities to choose to measure many financial instruments and certain other items at fair value and is effective
for the first fiscal year beginning after November 15, 2007. We do not expect SFAS No. 159 to have a material impact on our financial statements.

Liquidity and Capital Resources

Due to the nature of our business and strategy, we generally generate significant amounts of cash from
operations. The cash generated from operations is primarily paid to our shareholders in the form of dividends. As a REIT, we must generally make annual distributions to shareholders of at least 90% of our REIT taxable income.

Our short-term liquidity requirements consist primarily of obligations under our capital and operating leases, normal recurring operating expenses, regular debt service
requirements (including debt service relating to additional or replacement debt, as well as scheduled debt maturities), recurring expenditures, non-recurring expenditures (such as tenant improvements and redevelopments) and dividends to common and
preferred shareholders. Overall capital requirements in 2007 will depend upon acquisition opportunities, the level of improvements and redevelopments on existing properties and the timing and cost of development of future phases of existing
properties.

Our long-term capital requirements consist primarily of maturities under our long-term debt, development and redevelopment costs and potential
acquisitions. We expect to fund these through a combination of sources which we believe will be available to us, including additional and replacement secured and unsecured borrowings, issuance of additional equity, joint venture relationships
relating to existing properties or new acquisitions and property dispositions.

The cash needed to execute our strategy and invest in new properties, as
well as to pay our debt at maturity, must come from one or more of the following sources:



| |  |  | cash provided by operations that is not distributed to shareholders,
| | - |  | --------------------------------------------------------------------



| |  |  | proceeds from the issuance of new debt or equity securities, or
| | - |  | ---------------------------------------------------------------



| |  |  | proceeds from property dispositions.
| | - |  | ------------------------------------

It is
managements intention that we continually have access to the capital resources necessary to expand and develop our business. As a result, we intend to operate with and maintain a conservative capital structure that will allow us to maintain
strong debt service coverage and fixed-charge coverage ratios as part of our commitment to investment-grade debt ratings. We may, from time to time, seek to obtain funds by the following means:



| |  |  | additional equity offerings,
| | - |  | ----------------------------



| |  |  | unsecured debt financing and/or mortgage financings, and
| | - |  | --------------------------------------------------------



| |  |  | other debt and equity alternatives, including formation of joint ventures, in a manner consistent with our intention to operate with a conservative capital
structure.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------



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The following factors could affect our ability to meet our liquidity requirements:



| |  |  | we may be unable to obtain debt or equity financing on favorable terms, or at all, as a result of our financial condition or market conditions at the time we seek
additional financing;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | restrictions in our debt instruments or preferred stock equity may prohibit us from incurring debt or issuing equity under certain circumstances, or on acceptable
terms under then-prevailing market conditions; and
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | we may be unable to service additional or replacement debt due to increases in interest rates or a decline in our operating performance.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------

We seek to maintain a laddered maturity schedule of debt maturities such that a disproportionate amount of debt maturities does not
occur in any one year. Consistent therewith, we have less than $175 million of debt maturities occurring through December 31, 2008 and despite the current turmoil in the credit markets, we believe that we will be able to refinance these
maturities at interest rates not materially higher than currently being paid on this debt.

Cash and cash equivalents were $10.3 million at
September 30, 2007, which is a $1.2 million decrease from the balance of cash and cash equivalents at December 31, 2006. Cash and cash equivalents are not a good indicator of our liquidity. We have a $300.0 million unsecured revolving
credit facility that matures July 27, 2010, subject to a one-year extension at our option. We intend to utilize our revolving credit facility to initially finance the acquisition of properties and meet other short-term working capital
requirements.

Summary of Cash Flows



|                                                 |  |                                 |          |   |      |   |          |  
|------------------------------------------------ |  | ------------------------------- | -------- | - | ---- | - | -------- | -
|                                                 |  | Nine Months Ended September 30, |         
|                                                 |  | 2007                            |          |   | 2006 |  
|                                                 |  | (In thousands)                  |         
|Cash provided by operating activities            |  | $                               | 158,734  |   |      | $ | 140,455  |  
|Cash used in investing activities                |  |                                 | (130,063 | ) |      |   | (233,282 | )
|Cash (used in) provided by financing activities  |  |                                 | (29,885  | ) |      |   | 150,612  |  
|                                                 |  |                                 |          |   |      |   |          |  
|(Decrease) increase in cash and cash equivalents |  |                                 | (1,214   | ) |      |   | 57,785   |  
|Cash and cash equivalents, beginning of year     |  |                                 | 11,495   |   |      |   | 8,639    |  
|                                                 |  |                                 |          |   |      |   |          |  
|Cash and cash equivalents, end of period         |  | $                               | 10,281   |   |      | $ | 66,424   |  
|                                                 |  |                                 |          |   |      |   |          |  

Net cash provided by operating activities increased $18.3 million to $158.7 million during the nine months ended
September 30, 2007 from $140.5 million during the nine months ended September 30, 2006. The increase was primarily attributable to:



| |  |  | $10.5 million higher net income before gain on sale of real estate, equity in income from real estate partnership, depreciation and amortization, minority interest,
and other non-cash expenses, and
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | $7.8 million decrease in cash used for working capital due primarily to higher accounts payable and lower prepaid balances.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------

Net cash used in investing activities decreased $103.2 million to $130.1 million during the nine months ended September 30, 2007 from $233.3 million during the nine
months ended September 30, 2006. The decrease was primarily attributable to:



| |  |  | $174.7 million decrease in acquisitions of real estate, and
| | - |  | -----------------------------------------------------------



| |  |  | $0.9 million increase in repayments of mortgage and note receivable
| | - |  | -------------------------------------------------------------------

partially offset by



| |  |  | $30.5 million decrease in proceeds from the sale of real estate,
| | - |  | ----------------------------------------------------------------



| |  |  | $26.0 million increase in capital expenditures primarily for development and redevelopment activities,
| | - |  | ------------------------------------------------------------------------------------------------------



| |  |  | $15.5 million increase in contributions to our unconsolidated real estate partnership due to additional acquisitions by the real estate partnership, and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | $0.8 million increase in leasing costs.
| | - |  | ---------------------------------------

Net cash
used in financing activities increased $180.5 million to $29.9 million during the nine months ended September 30, 2007 from $150.6 million provided during the nine months ended September 30, 2006. The increase was primarily attributable
to:



| |  |  | $376.2 million in net proceeds from the issuance of senior debentures in 2006,
| | - |  | ------------------------------------------------------------------------------



31



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##### Table of Contents

| |  |  | $149.2 million in net proceeds from the issuance of common shares in a public offering in 2006, and
| | - |  | ---------------------------------------------------------------------------------------------------



| |  |  | $1.1 million increase in distributions to minority interests
| | - |  | ------------------------------------------------------------

partially offset by



| |  |  | $250.3 million repayment of three-year and five-year term loans in 2006,
| | - |  | ------------------------------------------------------------------------



| |  |  | $49.5 million increase in net borrowings on our revolving credit facility,
| | - |  | --------------------------------------------------------------------------



| |  |  | $40.5 million repayment of senior debentures in 2006, and
| | - |  | ---------------------------------------------------------



| |  |  | $10.7 million decrease in dividends paid to shareholders due primarily to $10.6 million of special common dividends paid in 2006 and a $8.4 million decrease in
preferred share dividends offset by an increase in the common dividend rate in 2007.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Off-Balance Sheet Arrangements

We are joint venture partners in eight restaurants at Santana Row. Our investment balance in the restaurant joint ventures was approximately $8.1 million and $8.6
million at September 30, 2007 and December 31, 2006, respectively. Our equity in earnings from the restaurant joint ventures was $1.6 million and $1.4 million for the nine months ended September 30, 2007 and 2006, respectively.

In July 2004, we entered into a joint venture arrangement (the Partnership) by forming a limited partnership with affiliates of a
discretionary fund created and advised by ING Clarion Partners (Clarion). We own 30% of the equity in the Partnership, and Clarion owns 70%. We are the manager of the Partnership and its properties, earning fees for acquisitions,
management, leasing and financing. We also have the opportunity to receive performance-based earnings through our Partnership interest. We account for our interest in the Partnership using the equity method. In total, at September 30, 2007, the
Partnership had $81.6 million of mortgages payable outstanding. For mortgages payable totaling $36.7 million that are secured by three properties owned by subsidiaries of the Partnership, we are the guarantor for the obligations of the joint venture
which are commonly referred to as non-recourse carve-outs. The guarantees do not have a finite term; however, once the lenders have been repaid in accordance with the loan documents, the only likely basis for a claim on the guarantee is
for loss to the lender as a result of potential future environmental liability at the properties to which the loans relate. We are not guaranteeing repayment of the debt itself. The Partnership indemnifies us for any loss we incur under these
guarantees. We are currently working with these lenders to substitute the Partnership for us as the guarantor of these loans and expect to complete the substitution this year.



32



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##### Table of Contents

Debt Financing Arrangements

The following is a summary of our total debt outstanding as of September 30, 2007:



|                                         |  |                        |          |                                            |   |           |                                               |  |               |               |  |                     
|---------------------------------------- |  | ---------------------- | -------- | ------------------------------------------ | - | --------- | --------------------------------------------- |  | ------------- | ------------- |  | --------------------
|Description of Debt                      |  | Original Debt Issued   |          | Principal Balance as of September 30, 2007 |   |           | Stated Interest Rate as of September 30, 2007 |  |               | Maturity Date
|                                         |  | (Dollars in thousands) |          |                                            |   |           |                                               | 
|Mortgage Loans (1)                       |  |                        |          |                                            |   |           |                                               |  |               |               |  |                     
|Secured Fixed Rate                       |  |                        |          |                                            |   |           |                                               |  |               |               |  |                     
|Leesburg Plaza                           |  | $                      | 9,900    |                                            | $ | 9,665     |                                               |  | 6.510         | %             |  | October 1, 2008     
|164 E. Houston Street                    |  |                        | 345      |                                            |   | 60        |                                               |  | 7.500         | %             |  | October 6, 2008     
|White Marsh other                        |  |                        | Acquired |                                            |   | 1,159     |                                               |  | 6.060         | %             |  | December 31, 2008   
|Mercer Mall                              |  |                        | Acquired |                                            |   | 4,458     |                                               |  | 8.375         | %             |  | April 1, 2009       
|Federal Plaza                            |  |                        | 36,500   |                                            |   | 33,803    |                                               |  | 6.750         | %             |  | June 1, 2011        
|Tysons Station                           |  |                        | 7,000    |                                            |   | 6,255     |                                               |  | 7.400         | %             |  | September 1, 2011   
|White Marsh Plaza (2)                    |  |                        | Acquired |                                            |   | 10,410    |                                               |  | 6.040         | %             |  | April 1, 2013       
|Crow Canyon                              |  |                        | Acquired |                                            |   | 21,680    |                                               |  | 5.400         | %             |  | August 11, 2013     
|Melville Mall                            |  |                        | Acquired |                                            |   | 25,250    |                                               |  | 5.250         | %             |  | September 1, 2014   
|THE AVENUE at White Marsh                |  |                        | Acquired |                                            |   | 61,281    |                                               |  | 5.460         | %             |  | January 1, 2015     
|Barracks Road                            |  |                        | 44,300   |                                            |   | 42,149    |                                               |  | 7.950         | %             |  | November 1, 2015    
|Hauppauge                                |  |                        | 16,700   |                                            |   | 15,889    |                                               |  | 7.950         | %             |  | November 1, 2015    
|Lawrence Park                            |  |                        | 31,400   |                                            |   | 29,875    |                                               |  | 7.950         | %             |  | November 1, 2015    
|Wildwood                                 |  |                        | 27,600   |                                            |   | 26,260    |                                               |  | 7.950         | %             |  | November 1, 2015    
|Wynnewood                                |  |                        | 32,000   |                                            |   | 30,446    |                                               |  | 7.950         | %             |  | November 1, 2015    
|Brick Plaza                              |  |                        | 33,000   |                                            |   | 31,257    |                                               |  | 7.415         | %             |  | November 1, 2015    
|Shoppers World                          |  |                        | Acquired |                                            |   | 6,010     |                                               |  | 5.910         | %             |  | January 31, 2021    
|Mount Vernon (3)                         |  |                        | 13,250   |                                            |   | 12,041    |                                               |  | 5.660         | %             |  | April 15, 2028      
|Chelsea                                  |  |                        | Acquired |                                            |   | 8,285     |                                               |  | 5.360         | %             |  | January 15, 2031    
|                                         |  |                        |          |                                            |   |           |                                               |  |               |               |  |                     
|Subtotal                                 |  |                        |          |                                            |   | 376,233   |                                               |  |               |               |  |                     
|Unamortized Net Discount                 |  |                        |          |                                            |   | (632      | )                                             |  |               |               |  |                     
|                                         |  |                        |          |                                            |   |           |                                               |  |               |               |  |                     
|Total Mortgage Loans                     |  |                        |          |                                            |   | 375,601   |                                               |  |               |               |  |                     
|                                         |  |                        |          |                                            |   |           |                                               |  |               |               |  |                     
|Notes Payable                            |  |                        |          |                                            |   |           |                                               |  |               |               |  |                     
|Unsecured Fixed Rate                     |  |                        |          |                                            |   |           |                                               |  |               |               |  |                     
|Perring Plaza Renovation                 |  |                        | 3,087    |                                            |   | 1,473     |                                               |  | 10.000        | %             |  | January 31, 2013    
|Unsecured Variable Rate                  |  |                        |          |                                            |   |           |                                               |  |               |               |  |                     
|Revolving credit facilities (4)          |  |                        | 300,000  |                                            |   | 168,000   |                                               |  | LIBOR + 0.425 | %             |  | July 27, 2010       
|Escondido (Municipal Bonds) (5)          |  |                        | 9,400    |                                            |   | 9,400     |                                               |  | 3.671         | %             |  | October 1, 2016     
|                                         |  |                        |          |                                            |   |           |                                               |  |               |               |  |                     
|Total Notes Payable                      |  |                        |          |                                            |   | 178,873   |                                               |  |               |               |  |                     
|                                         |  |                        |          |                                            |   |           |                                               |  |               |               |  |                     
|Senior Notes and Debentures              |  |                        |          |                                            |   |           |                                               |  |               |               |  |                     
|Unsecured Fixed Rate                     |  |                        |          |                                            |   |           |                                               |  |               |               |  |                     
|6.125% Notes (6)                         |  |                        | 150,000  |                                            |   | 150,000   |                                               |  | 6.325         | %             |  | November 15, 2007   
|8.75% Notes                              |  |                        | 175,000  |                                            |   | 175,000   |                                               |  | 8.750         | %             |  | December 1, 2009    
|4.50% Notes                              |  |                        | 75,000   |                                            |   | 75,000    |                                               |  | 4.500         | %             |  | February 15, 2011   
|6.00% Notes                              |  |                        | 175,000  |                                            |   | 175,000   |                                               |  | 6.000         | %             |  | July 15, 2012       
|5.40% Notes                              |  |                        | 135,000  |                                            |   | 135,000   |                                               |  | 5.400         | %             |  | December 1, 2013    
|5.65% Notes                              |  |                        | 125,000  |                                            |   | 125,000   |                                               |  | 5.650         | %             |  | June 1, 2016        
|6.20% Notes                              |  |                        | 200,000  |                                            |   | 200,000   |                                               |  | 6.200         | %             |  | January 15, 2017    
|7.48% Debentures (7)                     |  |                        | 50,000   |                                            |   | 50,000    |                                               |  | 7.480         | %             |  | August 15, 2026     
|6.82% Medium Term Notes                  |  |                        | 40,000   |                                            |   | 40,000    |                                               |  | 6.820         | %             |  | August 1, 2027      
|                                         |  |                        |          |                                            |   |           |                                               |  |               |               |  |                     
|Subtotal                                 |  |                        |          |                                            |   | 1,125,000 |                                               |  |               |               |  |                     
|Unamortized Net Premium                  |  |                        |          |                                            |   | 2,567     |                                               |  |               |               |  |                     
|                                         |  |                        |          |                                            |   |           |                                               |  |               |               |  |                     
|Total Senior Notes and Debentures        |  |                        |          |                                            |   | 1,127,567 |                                               |  |               |               |  |                     
|Capital Lease Obligations                |  |                        |          |                                            |   |           |                                               |  |               |               |  |                     
|Various                                  |  |                        |          |                                            |   | 152,862   |                                               |  | Various       |               |  | Various through 2106
|                                         |  |                        |          |                                            |   |           |                                               |  |               |               |  |                     
|Total Debt and Capital Lease Obligations |  |                        |          |                                            | $ | 1,834,903 |                                               |  |               |               |  |                     
|                                         |  |                        |          |                                            |   |           |                                               |  |               |               |  |                     

---

|1) | Mortgage loans do not include our 30% share ($24.5 million) of the $81.6 million debt of the partnership with Clarion Lion Properties Fund.
|-- | -------------------------------------------------------------------------------------------------------------------------------------------

|2) | The interest rate of 6.04% represents the weighted average interest rate for two mortgage notes secured by this property. The loan balance represents an interest only note of $4.4
million at a rate of 6.18% and the remaining balance at a rate of 5.96%.
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

|3) | The interest rate is fixed at 5.66% for the first ten years and then will be reset to a market rate. The lender has the option to call the loan on April 15, 2013 or any time
thereafter.
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4) | The maximum amount drawn under our revolving credit facility during the nine and three months ended September 30, 2007 was $203 million and $200 million, respectively. The
weighted average effective interest rate on borrowings under our revolving credit facility, before amortization of debt fees, was 5.71% and 5.79% for the nine and three months ended September 30, 2007, respectively. This credit facility is
subject to a one-year extension at our option.
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|5) | The bonds require monthly interest only payments through maturity. The bonds bear interest at a variable rate determined weekly, which would enable the bonds to be remarketed at
100% of their principal amount. The property is not encumbered by a lien.
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|6) | We purchased an interest rate lock to hedge a planned note offering. A hedge loss of $1.5 million associated with this hedge is being amortized into the note offering, thereby
increasing the effective interest rate on these notes to 6.325%. We are currently in the process of obtaining new financing to finance the maturity of those notes.
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|7) | On August 15, 2008, the debentures are redeemable by the holders thereof at the original purchase price of $1,000 per debenture.
|-- | --------------------------------------------------------------------------------------------------------------------------------

Our credit facility and other debt agreements include financial and other covenants that may limit our operating activities in the future. As of September 30, 2007,
we were in compliance with all of the financial and other covenants. If we were to breach any of our debt covenants and did not cure the breach within any applicable cure period, our lenders could require us to repay the debt immediately and, if the
debt is secured, could immediately begin proceedings to take possession of the property securing the loan. Many of our debt arrangements, including our public notes and our credit facility, are cross-defaulted, which means that the lenders under
those debt arrangements can put us in default and require immediate repayment of their debt if we breach and fail to cure a covenant or default under certain of our other debt obligations. As a result, any default under our debt covenants could have
an adverse effect on our financial condition, our results of operations, our ability to meet our obligations and the market value of our shares.

The
following is a summary of our debt maturities as of September 30, 2007:



|                        |  |                |         |              |   |           |  |   |           |     |  |   |           |    
|----------------------- |  | -------------- | ------- | ------------ | - | --------- |  | - | --------- | --- |  | - | --------- | ---
|                        |  | Secured        |         | CapitalLease |   | Unsecured |  |   | Total     |    
|                        |  | (In thousands) |        
|Reminder of 2007        |  | $              | 1,168   |              | $ | 428       |  | $ | 150,053   |     |  | $ | 151,649   |    
|2008                    |  |                | 17,320  |              |   | 1,432     |  |   | 226       |     |  |   | 18,978    |    
|2009                    |  |                | 11,232  |              |   | 1,626     |  |   | 175,250   |     |  |   | 188,108   |    
|2010                    |  |                | 7,344   |              |   | 1,757     |  |   | 168,275   | (1) |  |   | 177,376   |    
|2011                    |  |                | 44,645  |              |   | 1,899     |  |   | 75,304    |     |  |   | 121,848   |    
|2012 and thereafter (2) |  |                | 294,524 |              |   | 145,720   |  |   | 734,765   |     |  |   | 1,175,009 |    
|                        |  |                |         |              |   |           |  |   |           |     |  |   |           |    
|                        |  | $              | 376,233 |              | $ | 152,862   |  | $ | 1,303,873 |     |  | $ | 1,832,968 | (3)
|                        |  |                |         |              |   |           |  |   |           |     |  |   |           |    

Our organizational documents do not limit the level or amount of debt that we may incur.

---

|1) | Includes $168.0 million outstanding under our revolving credit facility which is subject to a one-year extension.
|-- | -----------------------------------------------------------------------------------------------------------------

|2) | Includes $10.0 million under the Mount Vernon mortgage loan that may be required to be paid on or after April 15, 2013 and $50 million of unsecured debt that may be called by
the holders on August 15, 2008.
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3) | The total debt maturities differs from the total reported on the consolidated balance sheet due to the unamortized net premium discount on certain mortgage loans, senior notes and
debentures as of September 30, 2007.
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Interest Rate Hedging

We had no hedging instruments outstanding during the nine months ended September 30, 2007. However, we may enter into interest rate swaps and treasury rate locks that qualify as cash flow hedges under SFAS
No. 133, Accounting for Derivative Instruments and Hedging Activities. We generally enter into interest rate swaps to manage our exposure to variable interest rate risk and treasury locks to manage the risk of interest rates rising
prior to the issuance of debt. We do not purchase derivatives for speculation. Our cash flow hedges are recorded at fair value. The effective portion of changes in fair value of our cash flow hedges is recorded in other comprehensive income and
reclassified to earnings when the hedged item affects earnings. The ineffective portion of changes in fair value of our cash flow hedges is recognized in earnings in the period affected. We assess effectiveness of our cash flow hedges both at
inception and on an ongoing basis. Hedge ineffectiveness



34



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##### Table of Contents

did not have a significant impact on earnings in the nine months ended September 30, 2007 and 2006, and we do not anticipate it will have a significant
effect in the future. We had no hedging instruments outstanding during the nine months ended September 30, 2007.

Funds From Operations

Funds from operations (FFO) is a supplemental non-GAAP financial measure of real estate companies operating performance. The National
Association of Real Estate Investment Trusts (NAREIT) defines FFO as follows: net income, computed in accordance with the U.S. GAAP, plus depreciation and amortization of real estate assets and excluding extraordinary items and gains and
losses on the sale of real estate. We compute FFO in accordance with the NAREIT definition, and we have historically reported our FFO available for common shareholders in addition to our net income and net cash provided by operating activities. It
should be noted that FFO:



| |  |  | does not represent cash flows from operating activities in accordance with GAAP (which, unlike FFO, generally reflects all cash effects of transactions and other
events in the determination of net income);
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | should not be considered an alternative to net income as an indication of our performance; and
| | - |  | ----------------------------------------------------------------------------------------------



| |  |  | is not necessarily indicative of cash flow as a measure of liquidity or ability to fund cash needs, including the payment of dividends.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------

We consider FFO available for common shareholders a meaningful, additional measure of operating performance primarily because it
excludes the assumption that the value of the real estate assets diminishes predictably over time, as implied by the historical cost convention of GAAP and the recording of depreciation. We use FFO primarily as one of several means of assessing our
operating performance in comparison with other REITs. Comparison of our presentation of FFO to similarly titled measures for other REITs may not necessarily be meaningful due to possible differences in the application of the NAREIT definition used
by such REITs.

An increase or decrease in FFO available for common shareholders does not necessarily result in an increase or decrease in aggregate
distributions because our Board of Trustees is not required to increase distributions on a quarterly basis unless necessary for us to maintain REIT status. However, we must distribute at least 90% of our REIT taxable income (including net capital
gain) to remain qualified as a REIT. Therefore, a significant increase in FFO will generally require an increase in distributions to shareholders although not necessarily on a proportionate basis.

The reconciliation of net income to funds from operations available for common shareholders is as follows:



|                                                                           |  |                                         |         |   |                                          |   |         |      |  |   |        |   |  |   |        |  
|-------------------------------------------------------------------------- |  | --------------------------------------- | ------- | - | ---------------------------------------- | - | ------- | ---- |  | - | ------ | - |  | - | ------ | -
|                                                                           |  | For the Nine Months Ended
September 30, |         |   | For the Three Months Ended
September 30, |  
|                                                                           |  | 2007                                    |         |   | 2006                                     |   |         | 2007 |  |   | 2006   |  
|                                                                           |  | (In thousands, except per share data)   |        
|Net income                                                                 |  | $                                       | 73,369  |   |                                          | $ | 94,271  |      |  | $ | 23,515 |   |  | $ | 24,984 |  
|Loss (gain) on sale of real estate                                         |  |                                         | 1,051   |   |                                          |   | (23,866 | )    |  |   | 2,900  |   |  |   | (95    | )
|Depreciation and amortization of real estate assets                        |  |                                         | 71,910  |   |                                          |   | 65,452  |      |  |   | 23,651 |   |  |   | 21,570 |  
|Amortization of initial direct costs of leases                             |  |                                         | 6,122   |   |                                          |   | 5,378   |      |  |   | 1,945  |   |  |   | 1,814  |  
|Depreciation of joint venture real estate assets                           |  |                                         | 915     |   |                                          |   | 553     |      |  |   | 324    |   |  |   | 236    |  
|                                                                           |  |                                         |         |   |                                          |   |         |      |  |   |        |   |  |   |        |  
|Funds from operations                                                      |  |                                         | 153,367 |   |                                          |   | 141,788 |      |  |   | 52,335 |   |  |   | 48,509 |  
|Dividends on preferred stock                                               |  |                                         | (307    | ) |                                          |   | (8,607  | )    |  |   | (136   | ) |  |   | (2,869 | )
|Income attributable to operating partnership units                         |  |                                         | 923     |   |                                          |   | 660     |      |  |   | 279    |   |  |   | 182    |  
|                                                                           |  |                                         |         |   |                                          |   |         |      |  |   |        |   |  |   |        |  
|Funds from operations available for common shareholders                    |  | $                                       | 153,983 |   |                                          | $ | 133,841 |      |  | $ | 52,478 |   |  | $ | 45,822 |  
|                                                                           |  |                                         |         |   |                                          |   |         |      |  |   |        |   |  |   |        |  
|Weighted average number of common shares, diluted (1)                      |  |                                         | 56,885  |   |                                          |   | 53,815  |      |  |   | 57,148 |   |  |   | 54,066 |  
|                                                                           |  |                                         |         |   |                                          |   |         |      |  |   |        |   |  |   |        |  
|Funds from operations available for common shareholders, per diluted share |  | $                                       | 2.71    |   |                                          | $ | 2.49    |      |  | $ | 0.92   |   |  | $ | 0.85   |  
|                                                                           |  |                                         |         |   |                                          |   |         |      |  |   |        |   |  |   |        |  

---

|(1) | The weighted average common shares used to compute FFO per diluted common share includes operating partnership units that were excluded from the computation of diluted EPS.
Conversion of these operating partnership units is dilutive in the computation of FFO per diluted common share but is anti-dilutive in the computation of diluted EPS for the periods presented.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

|ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|------- | ----------------------------------------------------------

Our use
of financial instruments, such as debt instruments, subjects us to market risk which may affect our future earnings and cash flows, as well as the fair value of our assets. Market risk generally refers to the risk of loss from changes in interest
rates and market prices. We manage our market risk by attempting to match anticipated inflow of cash from our operating, investing and financing activities with anticipated outflow of cash to fund debt payments, dividends to common and preferred
shareholders, investments, capital expenditures and other cash requirements.

We also enter into certain types of derivative financial instruments to
further reduce interest rate risk. We use interest rate protection and swap agreements, for example, to convert some of our variable rate debt to a fixed-rate basis or to hedge anticipated financing transactions. We use derivatives for hedging
purposes rather than speculation and do not enter into financial instruments for trading purposes. We had no hedging instruments outstanding during the nine months ended September 30, 2007.

Interest Rate Risk

The following discusses the effect of
hypothetical changes in market rates of interest on interest expense for our variable rate debt and on the fair value of our total outstanding debt, including our fixed-rate debt. Interest rate risk amounts were determined by considering the impact
of hypothetical interest rates on our debt. This analysis does not purport to take into account all of the factors that may affect our debt, such as the effect that a changing interest rate environment could have on the overall level of economic
activity or the action that our management might take to reduce our exposure to the change. This analysis assumes no change in our financial structure.

Fixed Interest Rate Debt

The majority of our outstanding debt obligations (maturing at various times through 2031 or through 2106 including
capital lease obligations) have fixed interest rates which limit the risk of fluctuating interest rates. However, interest rate fluctuations may affect the fair value of our fixed rate debt instruments. At September 30, 2007 we had $1.5 billion
of fixed-rate debt outstanding. If interest rates on our fixed-rate debt instruments at September 30, 2007 had been 1.0% higher, the fair value of those debt instruments on that date would have decreased by approximately $67.0 million. If
interest rates on our fixed-rate debt instruments at September 30, 2007 had been 1.0% lower, the fair value of those debt instruments on that date would have increased by approximately $74.9 million.

Variable Interest Rate Debt

We believe that our primary interest
rate risk is due to fluctuations in interest rates on our variable rate debt. At September 30, 2007, we had $177.4 million of variable rate debt outstanding. Based upon this amount of variable rate debt, if interest rates increased 1.0%, our
annual interest expense would increase by approximately $1.8 million, and our net income and cash flows for the year would decrease by approximately $1.8 million. Conversely, if interest rates decreased 1.0%, our annual interest expense would
decrease by approximately $1.8 million, and our net income and cash flows for the year would increase by approximately $1.8 million.



|ITEM 4. | CONTROLS AND PROCEDURES
|------- | -----------------------

Periodic Evaluation and Conclusion of
Disclosure Controls and Procedures

An evaluation has been performed, under the supervision and with the participation of our management, including our
Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, 2007. Based on this evaluation, our management, including our Chief Executive
Officer and Chief Financial Officer, concluded that our disclosure controls and procedures were effective as of September 30, 2007 to provide reasonable assurance that information required to be disclosed in our reports filed or submitted under
the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission.

Changes in Internal Control Over Financial Reporting

There has been no change in our internal controls over
financial reporting during the quarterly period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.



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##### Table of Contents

PART IIOTHER INFORMATION



|Item 1. | Legal Proceedings
|------- | -----------------

In May 2003, First National Mortgage Company
filed a complaint against us in the United States District Court for the Northern District of California. The complaint alleged that a one page document entitled Final Proposal, which included language that it was subject to approval of
formal documentation, constituted a ground lease of a parcel of property located adjacent to our Santana Row property and gave First National Mortgage Company the option to require that we acquire the property at a price determined in accordance
with a formula included in the Final Proposal. A trial as to liability only was held in June 2006 and a jury rendered a verdict against us. A trial on the issue of damages has been set for March 2008. The complaint did not specify the
amount of damages claimed. We have now received reports from our experts and the plaintiffs experts which show potential damages ranging from $600,000 to $24 million. We cannot make a reasonable estimate of potential damages until discovery is
completed on the damages issue and the court rules on various legal issues impacting the calculation of damages. We intend to appeal the jury verdict; however, no appeal of the judgment can be taken until the trial on damages has been completed. If
we are not successful in overturning the jury verdict, we will be liable for damages. Depending on the amount of damages awarded, it is possible, there could be a material adverse impact on our net income in the period in which it is both probable
that we will have to pay the damages and such damages can be reasonably estimated. In any event, management does not believe it will have a material impact on our financial position.

We are also involved in a litigation matter relating to a shopping center in New Jersey where a former tenant has alleged that we and our management agent acted improperly by failing to disclose a condemnation action
at the property that was pending when the lease was signed. A trial as to liability only has been concluded and post-trial briefs have been filed, but no decision has been rendered. One of the plaintiffs in the matter has filed for bankruptcy
protection and as a result, the judge in our case has stayed further proceedings in the case. If we are found liable once the stay has been lifted, a trial will be held to determine the amount of damages. Based on the information available to us, we
believe there is a reasonable possibility that we will be found liable. If a verdict is rendered against us, we may seek indemnification from the third party management company that negotiated the lease on our behalf. We cannot assess with any
certainty at this time the potential damages for which we would be liable if a verdict is rendered against us or the potential amounts we might recover against the third party management company; however, if a verdict is rendered against us, there
may be a material adverse impact on our net income in the period during which our indemnification claim is pending.



|Item 1A. | Risk Factors
|-------- | ------------

There have been no material changes to the risk
factors previously disclosed in our Annual Report for the year ended December 31, 2006 filed with the Securities and Exchange Commission on March 1, 2007. These factors include, but are not limited to, the following:



| |  |  | risks that our tenants will not pay rent or that we may be unable to renew leases or re-let space at favorable rents as leases expire;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------



| |  |  | risks that we may not be able to proceed with or obtain necessary approvals for any redevelopment or renovation project, and that any redevelopment or renovation
project that we do pursue may not perform as anticipated;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | risks that the number of properties we acquire for our own account, and therefore the amount of capital we invest in acquisitions, may be impacted by our real
estate partnership;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | risks normally associated with the real estate industry, including risks that:
| | - |  | ------------------------------------------------------------------------------



| |  |  | occupancy levels at our properties and the amount of rent that we receive from our properties may be lower than expected,
| | - |  | -------------------------------------------------------------------------------------------------------------------------



| |  |  | completion of anticipated or ongoing property redevelopments or renovations may cost more, take more time to complete, or fail to perform as expected,
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | new acquisitions may fail to perform as expected,
| | - |  | -------------------------------------------------



| |  |  | competition for acquisitions could result in increased prices for acquisitions,
| | - |  | -------------------------------------------------------------------------------



| |  |  | environmental issues may develop at our properties and result in unanticipated costs, and
| | - |  | -----------------------------------------------------------------------------------------



| |  |  | because real estate is illiquid, we may not be able to sell properties when appropriate;
| | - |  | ----------------------------------------------------------------------------------------



| |  |  | risks that our growth will be limited if we cannot obtain additional capital;
| | - |  | -----------------------------------------------------------------------------



| |  |  | risks of financing, such as our ability to consummate additional financings or obtain replacement financing on terms which are acceptable to us, our ability to meet
existing financial covenants and the limitations imposed on our operations by those covenants, and the possibility of increases in interest rates that would result in increased interest expense; and
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

| |  |  | risks related to our status as a real estate investment trust, commonly referred to as a REIT, for federal income tax purposes, such as the existence of complex tax
regulations relating to our status as a REIT, the effect of future changes in REIT requirements as a result of new legislation, and the adverse consequences of the failure to qualify as a REIT.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds
|------- | -----------------------------------------------------------

Under
the terms of various operating partnership agreements of certain of our affiliated limited partnerships, the interests of limited partners in those limited partnerships may be redeemed, subject to certain conditions, for cash or an equivalent number
of our common shares, at our option. On August 3, 2007, we redeemed 146,248 operating partnership units for an equivalent number of our common shares. On September 14, 2007, we redeemed 30,508 operating partnership units for an equivalent
number of our common shares.



|Item 3. | Defaults Upon Senior Securities
|------- | -------------------------------

None



|Item 4. | Submission of Matters to a Vote of Security Holders
|------- | ---------------------------------------------------

None



|Item 5. | Other Information
|------- | -----------------

None



|Item 6. | Exhibits
|------- | --------

A list of exhibits to this Quarterly Report on Form 10-Q
is set forth on the Exhibit Index immediately preceding such exhibits and is incorporated herein by reference.

SIGNATURES

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



|                 |  |                                               
|---------------- |  | ----------------------------------------------
|                 |  | FEDERAL REALTY INVESTMENT TRUST               
|                 | 
|October 31, 2007 |  | /s/ DONALD C. WOOD                            
|                 |  | Donald C. Wood,                               
|                 |  | President, Chief Executive Officer and Trustee
|                 |  | (Principal Executive Officer)                 



|                 |  |                                                       
|---------------- |  | ------------------------------------------------------
|October 31, 2007 |  | /s/ LARRY E. FINGER                                   
|                 |  | Larry E. Finger,                                      
|                 |  | Executive Vice President and                          
|                 |  | Chief Financial Officer (Principal Accounting Officer)



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EXHIBIT INDEX



|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|----------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|3.1         |  | Declaration of Trust of Federal Realty Investment Trust dated May 5, 1999 as amended by the Articles of Amendment of Declaration of Trust of Federal Realty Investment Trust dated May 6,
2004, as corrected by the Certificate of Correction of Articles of Amendment of Declaration of Trust of Federal Realty Investment Trust dated June 17, 2004 (previously filed as Exhibit 3.1 to the Trusts Quarterly Report on Form 10-Q for the
quarter ended June 30, 2005 (File No. 1-07533) (the 2005 2Q Form 10-Q) and incorporated herein by reference)
|            | 
|3.2         |  | Amended and Restated Bylaws of Federal Realty Investment Trust dated February 12, 2003, as amended October 29, 2003, May 5, 2004 and February 17, 2006 (previously filed as Exhibit 3.2 to the
Trusts Annual Report on Form 10-K for the year ended December 31, 2005 (File No. 1-07533) (the 2005 Form 10-K) and incorporated herein by reference)                                                                                                                                                                                                    
|            | 
|4.1         |  | Specimen Common Share certificate (previously filed as Exhibit 4(i) to the Trusts Annual Report on Form 10-K for the year ended December 31, 1999 (File No. 1-07533)
(the 1999 Form 10-K) and incorporated herein by reference)                                                                                                                                                                                                                                                                                                                        
|            | 
|4.2         |  | Articles Supplementary relating to the 5.417% Series 1 Cumulative Convertible Preferred Shares of Beneficial Interest (previously filed as Exhibit 4.1 to the Trusts Current
Report on Form 8 filed on March 13, 2007, (File No. 333-142231) and incorporated herein by reference)                                                                                                                                                                                                                                                                       
|            | 
|4.3         |  | Amended and Restated Rights Agreement, dated March 11, 1999, between the Trust and American Stock Transfer & Trust Company (previously filed as Exhibit 1 to the Trusts Registration
Statement on Form 8-A/A filed on March 11, 1999 (File No. 1-07533) and incorporated herein by reference)                                                                                                                                                                                                                                                            
|            | 
|4.4         |  | First Amendment to Amended and Restated Rights Agreement, dated as of November , 2003, between the Trust and American Stock Transfer & Trust Company (previously filed as Exhibit 4.5 to the
Trusts Annual Report on Form 10-K for the year ended December 31, 2003 (File No. 1-07533) and incorporated herein by reference)                                                                                                                                                                                                                             
|            | 
|4.5         |  | Indenture dated December 13, 1993 related to the Trusts 7.48% Debentures due August 15, 2026; and 6.82% Medium Term Notes due August 1, 2027; (previously filed as Exhibit
4(a) to the Trusts Registration Statement on Form S-3 (File No. 33-51029), and amended on Form S-3 (File No. 33-63687), filed on December 13, 1993 and incorporated herein by reference)                                                                                                                                                                                     
|            | 
|4.6         |  | Indenture dated September 1, 1998 related to the Trusts 8.75% Notes due December 1, 2009; 61/8% Notes due November 15, 2007; 4.50% Notes due 2011; 5.65% Notes due 2016; 6.00% Notes due 2012; 6.20% Notes due 2017; and 5.40% Notes due 2013 (previously filed as Exhibit 4(a) to the Trusts
Registration Statement on Form S-3 (File No. 333-63619) filed on September 17, 1998 and incorporated herein by reference)                                                                                                                                 
|            | 
|4.7         |  | Pursuant to Regulation S-K Item 601(b)(4)(iii), the Trust by this filing agrees, upon request, to furnish to the Securities and Exchange Commission a copy of other instruments defining the
rights of holders of long-term debt of the Trust                                                                                                                                                                                                                                                                                                             
|            | 
|10.1        |  | Amended and Restated 1983 Stock Option Plan and 1985 Non-Qualified Stock Option Plan of Federal Realty Investment Trust (previously filed as exhibits to the Trusts Registration Statement
in Form S-8 (File No. 33-55111), filed on August 17, 1994 and incorporated herein by reference)                                                                                                                                                                                                                                                               
|            | 
|10.2        |  | 1985 Non-Qualified Stock Option Plan (previously filed as a portion of Exhibit 10 to the Trusts Annual Report on Form 10-K for the year ended December 31, 1985 (File
No. 1-07533) and incorporated herein by reference)                                                                                                                                                                                                                                                                                                                                 



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|            |  |                                                                                                                                                                                                                                                                                                                      
|----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                                                                                                                          
|10.3        |  | 1991 Share Purchase Plan (previously filed as a portion of Exhibit 10 to the Trusts Annual Report on Form 10-K for the year ended December 31, 1990 (File No. 1-07533)
and incorporated herein by reference)                                                                                                        
|            | 
|10.4        |  | Amended and Restated 1993 Long-Term Incentive Plan, as amended on October 6, 1997 and further amended on May 6, 1998 (previously filed as Exhibit 10.26 to the Trusts Annual
Report on Form 10-K for the year ended December 31, 1998 (File No. 1-07533) and incorporated herein by reference)                      
|            | 
|10.5        |  | Fiscal Agency Agreement dated as of October 28, 1993 between the Trust and Citibank, N.A. (previously filed as an exhibit to the Trusts Quarterly Report on Form 10-Q for the
quarter ended September 30, 1993 (File No. 1-07533) and incorporated herein by reference)                                             
|            | 
|10.6        |  | Form of Severance Agreement between the Trust and Certain of its Officers dated December 31, 1994 (previously filed as a portion of Exhibit 10 to the Trusts Annual Report on
Form 10-K for the year ended December 31, 1994 (File No. 1-07533) and incorporated herein by reference)                               
|            | 
|10.7        |  | Performance Share Award Agreement dated as of February 9, 2000 between the Trust and Donald C. Wood (previously filed as a portion of Exhibit 10 to the 1999 Form 10-K
and incorporated herein by reference)                                                                                                         
|            | 
|10.8        |  | Restricted Share Award Agreement dated as of February 9, 2000 between the Trust and Donald C. Wood (previously filed as a portion of Exhibit 10 to the 1999 Form 10-K and
incorporated herein by reference)                                                                                                          
|            | 
|10.9        |  | Severance Agreement between the Trust and Donald C. Wood dated February 22, 1999 (previously filed as a portion of Exhibit 10 to the Trusts Quarterly Report on Form 10-Q for the
quarter ended March 31, 1999 (File No. 1-07533) (the 1999 1Q Form 10-Q) and incorporated herein by reference)                   
|            | 
|10.10       |  | Executive Agreement between Federal Realty Investment Trust and Donald C. Wood dated February 22, 1999 (previously filed as a portion of Exhibit 10 to the 1999 1Q Form 10-Q and
incorporated herein by reference)                                                                                                   
|            | 
|10.11       |  | Amendment to Executive Agreement between Federal Realty Investment Trust and Donald C. Wood dated February 16, 2005 (previously filed as Exhibit 10.12 to the Trusts Annual Report
on Form 10-K for the year ended December 31, 2004 (File No. 1-07533) (the 2004 Form 10-K) and incorporated herein by reference)
|            | 
|10.12       |  | Amendment to Restricted Share Award Agreement dated December 8, 2000 between the Trust and Donald C. Wood (previously filed as a portion of Exhibit 10 to the Trusts Annual Report
on Form 10-K for the year ended December 31, 2000 (File No. 1-07533) (the 2000 Form 10-K) and incorporated herein by reference)
|            | 
|10.13       |  | Split Dollar Life Insurance Agreement dated August 12, 1998 between the Trust and Donald C. Wood (previously filed as a portion of Exhibit 10 to the 2000 Form 10-K and
incorporated herein by reference)                                                                                                            
|            | 
|10.14       |  | Restricted Share Award Agreement dated as of February 15, 2000 between the Trust and Jeffrey S. Berkes (previously filed as a portion of Exhibit 10 to the Trusts Annual
Report on Form 10-K for the year ended December 31, 2001 (File No. 1-07533) (the 2001 Form 10-K) and incorporated herein by reference)   
|            | 
|10.15       |  | Severance Agreement between the Trust and Jeffrey S. Berkes dated March 1, 2000 (previously filed as a portion of Exhibit 10 to the 2001 Form 10-K and incorporated herein by
reference)                                                                                                                             
|            | 
|10.16       |  | Amendment to Severance Agreement between Federal Realty Investment Trust and Jeffrey S. Berkes dated February 16, 2005 (previously filed as Exhibit 10.17 to the 2004 Form 10-K and incorporated
herein by reference)                                                                                                



40



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|            |  |                                                                                                                                                                                                                                                                                                                     
|----------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                                                                                                                         
|10.17       |  | Severance Agreement dated March 1, 2002 between the Trust and Larry E. Finger (previously filed as a portion of Exhibit 10 to the Trusts Quarterly Report on Form 10-Q for the quarter
ended June 30, 2002 (File No. 1-07533) (the 2002 2Q Form 10-Q) and incorporated herein by reference)                      
|            | 
|10.18       |  | Amendment to Severance Agreement between Federal Realty Investment Trust and Larry E. Finger dated February 16, 2005 (previously filed as Exhibit 10.19 to the 2004 Form 10-K and incorporated
herein by reference)                                                                                                 
|            | 
|10.19       |  | Combined Incentive and Non-Qualified Stock Option Agreement dated February 28, 2002 between the Trust and Larry E. Finger (previously filed as a portion of Exhibit 10 to the 2002 2Q Form
10-Q and incorporated herein by reference)                                                                               
|            | 
|10.20       |  | Performance Share Award Agreement between the Trust and Donald C. Wood dated February 28, 2002 (previously filed as a portion of Exhibit 10 to the 2002 2Q Form 10-Q and incorporated herein
by reference)                                                                                                          
|            | 
|10.21       |  | Performance Share Award Agreement between the Trust and Jeffrey S. Berkes dated February 28, 2002 (previously filed as a portion of Exhibit 10 to the 2002 2Q Form 10-Q and incorporated
herein by reference)                                                                                                       
|            | 
|10.22       |  | Amendment to Stock Option Agreement dated August 15, 2002 between the Trust and Dawn M. Becker (previously filed as a portion of Exhibit 10 to the Trusts Quarterly Report on
Form 10-Q for the quarter ended September 30, 2002 (File No. 1-075330 (the 2002 3Q Form 10-Q) and incorporated herein by reference)
|            | 
|10.23       |  | Amendment to Stock Option Agreement dated August 15, 2002 between Federal Realty Investment Trust and Jeffrey S. Berkes (previously filed as a portion of Exhibit 10 to the 2002 3Q Form 10-Q
and incorporated herein by reference)                                                                                 
|            | 
|10.24       |  | 2001 Long-Term Incentive Plan (previously filed as Exhibit 99.1 to the Trusts S-8 Registration Number 333-60364 filed on May 7, 2001 and incorporated herein by
reference)                                                                                                                                         
|            | 
|10.25       |  | Health Coverage Continuation Agreement between Federal Realty Investment Trust and Don Wood dated February 16, 2005 (previously filed as Exhibit 10.26 to the 2004 Form 10-K and incorporated
herein by reference)                                                                                                  
|            | 
|10.26       |  | Severance Agreement between the Trust and Dawn Becker dated April 19, 2000 (previously filed as Exhibit 10.26 to the Trusts 2005 2Q Form 10-Q and incorporated herein by
reference)                                                                                                                                
|            | 
|10.27       |  | Amendment to Severance Agreement between the Trust and Dawn M. Becker dated February 16, 2005 (previously filed as Exhibit 10.27 to the 2004 Form 10-K and incorporated herein by reference)                                                                                                                        
|            | 
|10.28       |  | Form of Restricted Share Award Agreement for awards made under the Trusts 2003 Long-Term Incentive Award Program for shares issued out of 2001 Long-Term Incentive Plan (previously filed as
Exhibit 10.28 to the 2004 Form 10-K and incorporated herein by reference)                                             
|            | 
|10.29       |  | Form of Restricted Share Award Agreement for awards made under the Trusts Annual Incentive Bonus Program for shares issued out of 2001 Long-Term Incentive Plan (previously filed as Exhibit
10.29 to the 2004 Form 10-K and incorporated herein by reference)                                                     
|            | 
|10.30       |  | Form of Option Award Agreement for options awarded under 2001 Long-Term Incentive Plan (previously filed as Exhibit 10.30 to the 2004 Form 10-K and incorporated herein by
reference)                                                                                                                               
|            | 
|10.31       |  | Form of Option Award Agreement for awards made under the Trusts 2003 Long-Term Incentive Award Program for shares issued out of the 2001 Long-Term Incentive Plan (previously filed as
Exhibit 10.28 to the 2004 Form 10-K and incorporated herein by reference)                                                   



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##### Table of Contents

|            |  |                                                                                                                                                                                                                                                                                                                                               
|----------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                                                                                                                                                   
|10.32       |  | Form of Option Award Agreement for awards made under the Trusts 2003 Long-Term Incentive Award Program for shares issued out of the 2001 Long-Term Incentive Plan (previously filed as
Exhibit 10.32 to the 2005 Form 10-K and incorporated herein by reference)                                                                             
|            | 
|10.33       |  | Credit Agreement dated as of July 28, 2006, by and between the Trust, Wachovia Capital Markets LLC, Wachovia Bank, National Association and various other financial institutions (previously filed
as Exhibit 10.1) to the Trusts Current Report on Form 8-K (File No. 1-07533), filed on July 31, 2006 and incorporated herein by reference)
|            | 
|10.34       |  | Amended and Restated 2001 Long-Term Incentive Plan (previously filed as Exhibit 10.34 to the 2007 2Q Form 10-Q and incorporated herein by reference)                                                                                                                                                                                          
|            | 
|31.1        |  | Rule 13a-14(a) Certification of Chief Executive Officer (filed herewith)                                                                                                                                                                                                                                                                      
|            | 
|31.2        |  | Rule 13a-14(a) Certification of Chief Financial Officer (filed herewith)                                                                                                                                                                                                                                                                      
|            | 
|32.1        |  | Section 1350 Certification of Chief Executive Officer (filed herewith)                                                                                                                                                                                                                                                                        
|            | 
|32.2        |  | Section 1350 Certification of Chief Financial Officer (filed herewith)                                                                                                                                                                                                                                                                        



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