UNITED
STATES  
SECURITIES AND EXCHANGE COMMISSION  
Washington, D.C. 20549

FORM 10-Q

þ QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE 
SECURITIES EXCHANGE ACT OF 1934

For the
Quarterly Period Ended: September 30, 2006

Or

o
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 1-6249

WINTHROP
REALTY TRUST
(Exact name of Registrant as specified in its certificate of incorporation)

|Ohio 
      (State or other jurisdiction of incorporation or organization)                     |  | 34-6513657 
  (IRS Employer Identification Number)
|---------------------------------------------------------------------------------------------- |  | --------------------------------------------------
|                                                                                               |  |                                                   
|7 Bulfinch Place, Suite 500, Boston, Massachusetts 
  (Address of principal executive offices) |  | 02114 
      (Zip Code)                           

(617)
570-4614  
(Registrants telephone number, including area code)

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  and Exchange Act of 1934 during the
preceding 12 months (or for such shorter  period that the  registrant  was required to
file such reports), and (2) has been subject to such filing requirements for at least the
past 90 days. Yes þ No o

Indicate by
check mark whether the registrant is a large  accelerated  filer,  an accelerated  filer,
or a  non-accelerated  filer (as  defined in Exchange Act Rule 12b-2).

Large
Accelerated Filer o   Accelerated filer þ   Non-accelerated
filer o

Indicate by
check mark whether the registrant is a shell company (as defined in Exchange Act
Rule12b-2). Yes o No þ

As of October
27, 2006 there were 45,819,718 Common Shares of beneficial interest outstanding.



---

INDEX

|Part I.       |         | Financial Information |                                                                                                                                                                    | Page
|------------- | ------- | --------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ----
|              |         |                       |                                                                                                                                                                    |     
|              | Item 1. |                       | Financial Statements (Unaudited):                                                                                                                                  |     
|              |         |                       |                                                                                                                                                                    |     
|              |         |                       | Unaudited Consolidated Balance Sheet as of September 30, 2006 and
Consolidated Balance Sheet as of December 31, 2005 as restated                                   |     
|              |         |                       |                                                                                                                                                                    |     
|              |         |                       | Unaudited Consolidated Statements of Operations and Comprehensive
Income for the Three and Nine Months Ended September 30, 2006 and
September 30, 2005 as restated |     
|              |         |                       |                                                                                                                                                                    |     
|              |         |                       | Unaudited Consolidated Statement of Shareholders Equity for the
Nine Months Ended September 30, 2006                                                              |     
|              |         |                       |                                                                                                                                                                    |     
|              |         |                       | Unaudited Consolidated Statements of Cash Flows for the Nine Months
Ended September 30, 2006 and September 30, 2005 as restated                                    |     
|              |         |                       |                                                                                                                                                                    |     
|              |         |                       | Notes to Unaudited Consolidated Financial Statements                                                                                                               |     
|              |         |                       |                                                                                                                                                                    |     
|              | Item 2. |                       | Managements Discussion and Analysis of Financial Condition
and Results of Operations                                                                              |     
|              |         |                       |                                                                                                                                                                    |     
|              | Item 3. |                       | Quantitative and Qualitative Disclosure about Market Risks                                                                                                         |     
|              |         |                       |                                                                                                                                                                    |     
|              | Item 4. |                       | Controls and Procedures                                                                                                                                            |     
|              |         |                       |                                                                                                                                                                    |     
|Part II.      |         | Other Information     |                                                                                                                                                                    |     
|              |         |                       |                                                                                                                                                                    |     
|              | Item 6. |                       | Exhibits                                                                                                                                                           |     
|              |         |                       |                                                                                                                                                                    |     
|              |         |                       |                                                                                                                                                                    |     
|Signatures    |         |                       |                                                                                                                                                                    | 59  
|              |         |                       |                                                                                                                                                                    |     
|Exhibit Index |         |                       |                                                                                                                                                                    | 60  

2



---

Item 1.
Financial Information

WINTHROP
REALTY TRUST  
FORM 10-Q - SEPTEMBER 30, 2006  
CONSOLIDATED BALANCE SHEETS(In thousands,
except share and per share data)

|                                                                     |  |  | September 30, 2006 
  (Unaudited) |          | December 31, 2005 |  
|-------------------------------------------------------------------- |  |  | --------------------------------- | -------- | ----------------- | -
|                                                                     |  |  |                                   |          |                   |  
|                                                                     |  |  |                                   |          | (as restated)     |  
|                                                                     |  |  |                                   |          |                   |  
|ASSETS                                                               |  |  |                                   |          |                   |  
|Investments in real estate, at cost                                  |  |  |                                   |          |                   |  
|Land                                                                 |  |  | $                                 | 19,406   |                   | $
|Buildings and improvements                                           |  |  |                                   | 230,433  |                   |  
|                                                                     |  |  |                                   |          |                   |  
|                                                                     |  |  |                                   | 249,839  |                   |  
|Less - Accumulated depreciation                                      |  |  |                                   | (13,672  | )                 |  
|                                                                     |  |  |                                   |          |                   |  
|Investments in real estate, net                                      |  |  |                                   | 236,167  |                   |  
|Cash and cash equivalents                                            |  |  |                                   | 20,323   |                   |  
|Restricted cash                                                      |  |  |                                   | 3,496    |                   |  
|Mortgage-backed securities available for sale pledged                |  |  |                                   |          |                   |  
|under repurchase agreements                                          |  |  |                                   | 100,429  |                   |  
|Loans receivable                                                     |  |  |                                   | 79,639   |                   |  
|Accounts receivable and prepayments, net of allowance                |  |  |                                   |          |                   |  
|of $2 and $23, respectively                                          |  |  |                                   | 5,729    |                   |  
|Real estate securities available for sale                            |  |  |                                   | 13,144   |                   |  
|Preferred equity investment                                          |  |  |                                   | 76,635   |                   |  
|Equity investment                                                    |  |  |                                   | 73,401   |                   |  
|Equity investment in joint venture                                   |  |  |                                   | 47,580   |                   |  
|Lease intangibles, net                                               |  |  |                                   | 37,398   |                   |  
|Equity investment in limited liability company                       |  |  |                                   | 13,808   |                   |  
|Deferred financing costs, net of accumulated amortization            |  |  |                                   | 6,706    |                   |  
|Assets of discontinued operations                                    |  |  |                                   |         |                   |  
|Other assets                                                         |  |  |                                   | 1,938    |                   |  
|                                                                     |  |  |                                   |          |                   |  
|TOTAL ASSETS                                                         |  |  | $                                 | 716,393  |                   | $
|                                                                     |  |  |                                   |          |                   |  
|                                                                     |  |  |                                   |          |                   |  
|LIABILITIES                                                          |  | 
|Mortgage loans payable                                               |  |  | $                                 | 233,647  |                   | $
|Repurchase agreements                                                |  |  |                                   | 96,561   |                   |  
|Series B-1 Cumulative Convertible Redeemable Preferred Shares of     |  |  |                                   |          |                   |  
|Beneficial Interest, $25 per share liquidating preference, 4,000,000 |  |  |                                   |          |                   |  
|shares authorized, 3,990,000 and 4,000,000 outstanding at            |  |  |                                   |          |                   |  
|September 30, 2006 and December 31, 2005, respectively               |  |  |                                   | 99,750   |                   |  
|Loans payable                                                        |  |  |                                   | 30,009   |                   |  
|Revolving line of credit                                             |  |  |                                   | 7,000    |                   |  
|Accounts payable and accrued liabilities                             |  |  |                                   | 8,906    |                   |  
|Dividends payable                                                    |  |  |                                   | 2,742    |                   |  
|Below market lease intangibles, net                                  |  |  |                                   | 4,749    |                   |  
|Deferred income                                                      |  |  |                                   | 7,000    |                   |  
|Liabilities of discontinued operations                               |  |  |                                   | 827      |                   |  
|                                                                     |  |  |                                   |          |                   |  
|TOTAL LIABILITIES                                                    |  |  |                                   | 491,191  |                   |  
|                                                                     |  |  |                                   |          |                   |  
|                                                                     |  |  |                                   |          |                   |  
|COMMITMENTS AND CONTINGENCIES                                        |  | 
|                                                                     |  |  |                                   |          |                   |  
|MINORITY INTEREST                                                    |  |  |                                   | 30,229   |                   |  
|                                                                     |  |  |                                   |          |                   |  
|                                                                     |  |  |                                   |          |                   |  
|SHAREHOLDERS' EQUITY                                                 |  |  |                                   |          |                   |  
|Series A Cumulative Convertible Redeemable Preferred Shares of       |  |  |                                   |          |                   |  
|Beneficial Interest, $25 per share liquidating preference, 2,300,000 |  |  |                                   |          |                   |  
|shares authorized, 0 and 983,082 outstanding at                      |  |  |                                   |          |                   |  
|September 30, 2006 and December 31, 2005, respectively               |  |  |                                   |         |                   |  
|Common Shares of Beneficial Interest, $1 par, unlimited authorized,  |  |  |                                   |          |                   |  
|45,693,809 and 35,581,479 outstanding at September 30, 2006 and      |  |  |                                   |          |                   |  
|December 31, 2005, respectively                                      |  |  |                                   | 45,694   |                   |  
|Additional paid-in capital                                           |  |  |                                   | 261,776  |                   |  
|Accumulated other comprehensive income                               |  |  |                                   | 4,345    |                   |  
|Accumulated distributions in excess of net income                    |  |  |                                   | (116,842 | )                 |  
|                                                                     |  |  |                                   |          |                   |  
|Total Shareholders' Equity                                           |  |  |                                   | 194,973  |                   |  
|                                                                     |  |  |                                   |          |                   |  
|TOTAL LIABILITIES, MINORITY INTEREST AND                             |  |  |                                   |          |                   |  
|SHAREHOLDERS' EQUITY                                                 |  |  | $                                 | 716,393  |                   | $
|                                                                     |  |  |                                   |          |                   |  

See Notes to
Consolidated Financial Statements.

3



---

WINTHROP
REALTY TRUST  
FORM 10-Q - SEPTEMBER 30, 2006

CONSOLIDATED
STATEMENTS OF OPERATIONS AND  
COMPREHENSIVE INCOME  
(Unaudited)

(In
thousands, except per share data)

|                                                                 |  |  | For the Three
        Months Ended
        September 30, |        | For the Nine Months
        Ended 
        September 30, |  
|---------------------------------------------------------------- |  |  | -------------------------------------------------------- | ------ | -------------------------------------------------------- | -
|                                                                 |  |  |                                                          |        |                                                          |  
|                                                                 |  |  | 2006                                                     |        | 2005                                                     |  
|                                                                 |  |  |                                                          |        |                                                          |  
|                                                                 |  |  |                                                          |        | (as restated)                                            |  
|Revenues                                                         |  |  |                                                          |        |                                                          |  
|Rents                                                            |  |  | $                                                        | 9,784  |                                                          | $
|Interest,
      dividends and other                              |  |  |                                                          | 3,737  |                                                          |  
|                                                                 |  |  |                                                          |        |                                                          |  
|                                                                 |  |  |                                                          | 13,521 |                                                          |  
|                                                                 |  |  |                                                          |        |                                                          |  
|                                                                 |  |  |                                                          |        |                                                          |  
|Expenses                                                         |  | 
|Property
      operating                                         |  |  |                                                          | 1,129  |                                                          |  
|Real
      estate taxes                                          |  |  |                                                          | 329    |                                                          |  
|Depreciation
      and amortization                              |  |  |                                                          | 3,065  |                                                          |  
|Interest                                                         |  |  |                                                          | 7,683  |                                                          |  
|General
      and administrative                                 |  |  |                                                          | 1,795  |                                                          |  
|State
      and local taxes                                      |  |  |                                                          | 110    |                                                          |  
|                                                                 |  |  |                                                          |        |                                                          |  
|                                                                 |  |  |                                                          | 14,111 |                                                          |  
|                                                                 |  |  |                                                          |        |                                                          |  
|                                                                 |  |  |                                                          |        |                                                          |  
|Other
      income (loss)                                        |  | 
|Legal
      settlement                                           |  |  |                                                          |       |                                                          |  
|Assignment
      of exclusivity agreement                        |  |  |                                                          | 833    |                                                          |  
|Equity
      in earnings of preferred equity investment          |  |  |                                                          | 1,887  |                                                          |  
|Equity
      in earnings of equity investment                    |  |  |                                                          | 4,475  |                                                          |  
|Equity
      in loss of equity investment in joint venture       |  |  |                                                          | (770   | )                                                        |  
|Gain
      on sale of real estate securities available for sale  |  |  |                                                          | 619    |                                                          |  
|Loss
      on early extinguishment of debt                       |  |  |                                                          | (543   | )                                                        |  
|                                                                 |  |  |                                                          |        |                                                          |  
|                                                                 |  |  |                                                          | 6,501  |                                                          |  
|                                                                 |  |  |                                                          |        |                                                          |  
|                                                                 |  |  |                                                          |        |                                                          |  
|Income
      from continuing operations before minority interest |  |  |                                                          | 5,911  |                                                          |  
|                                                                 |  |  |                                                          |        |                                                          |  
|Minority
      interest                                          |  |  |                                                          | 737    |                                                          |  
|                                                                 |  |  |                                                          |        |                                                          |  
|                                                                 |  |  |                                                          |        |                                                          |  
|Income
      from continuing operations                          |  |  |                                                          | 5,174  |                                                          |  
|                                                                 |  |  |                                                          |        |                                                          |  
|Discontinued
      operations                                    |  |  |                                                          |        |                                                          |  
|Income
      (loss) from discontinued operations                 |  |  |                                                          | 12     |                                                          |  
|                                                                 |  |  |                                                          |        |                                                          |  
|                                                                 |  |  |                                                          |        |                                                          |  
|Net
      income                                                 |  |  |                                                          | 5,186  |                                                          |  
|Series
      A Preferred dividend                                |  |  |                                                          |       |                                                          |  
|                                                                 |  |  |                                                          |        |                                                          |  
|                                                                 |  |  |                                                          |        |                                                          |  
|Net
      income applicable to Common Shares                     |  |  | $                                                        | 5,186  |                                                          | $
|                                                                 |  |  |                                                          |        |                                                          |  
|                                                                 |  |  |                                                          |        |                                                          |  
|Comprehensive
      income                                       |  |  |                                                          |        |                                                          |  
|Net income                                                       |  |  | $                                                        | 5,186  |                                                          | $
|Unrealized
      gain (loss) on real estate securities           |  |  |                                                          |        |                                                          |  
|available
      for sale arising during the period               |  |  |                                                          | 1,194  |                                                          |  
|Unrealized
      gain (loss) on mortgage-backed securities       |  |  |                                                          |        |                                                          |  
|available
      for sale arising during the period               |  |  |                                                          | 1,020  |                                                          |  
|Unrealized
      gain (loss) on interest rate derivative         |  |  |                                                          |        |                                                          |  
|arising
      during the period                                  |  |  |                                                          | (1,188 | )                                                        |  
|Less
      reclassification adjustment from gains                |  |  |                                                          |        |                                                          |  
|included
      in net income                                     |  |  |                                                          | (619   | )                                                        |  
|                                                                 |  |  |                                                          |        |                                                          |  
|Comprehensive
      income                                       |  |  | $                                                        | 5,593  |                                                          | $
|                                                                 |  |  |                                                          |        |                                                          |  
|                                                                 |  |  |                                                          |        |                                                          |  
|Per
      Common Share data - Basic                              |  | 
|Income
      from continuing operations                          |  |  | $                                                        | 0.11   |                                                          | $
|Income
      from discontinued operations                        |  |  |                                                          |       |                                                          |  
|                                                                 |  |  |                                                          |        |                                                          |  
|Net income                                                       |  |  | $                                                        | 0.11   |                                                          | $
|                                                                 |  |  |                                                          |        |                                                          |  
|                                                                 |  |  |                                                          |        |                                                          |  
|Per
      Common Share data - Diluted                            |  | 
|Income
      from continuing operations                          |  |  | $                                                        | 0.10   |                                                          | $
|Income
      from discontinued operations                        |  |  |                                                          |       |                                                          |  
|                                                                 |  |  |                                                          |        |                                                          |  
|Net income                                                       |  |  | $                                                        | 0.10   |                                                          | $
|                                                                 |  |  |                                                          |        |                                                          |  
|                                                                 |  |  |                                                          |        |                                                          |  
|Basic
      Weighted-Average Common Shares                       |  |  |                                                          | 45,694 |                                                          |  
|                                                                 |  |  |                                                          |        |                                                          |  
|                                                                 |  |  |                                                          |        |                                                          |  
|Diluted
      Weighted-Average Common Shares                     |  |  |                                                          | 67,925 |                                                          |  
|                                                                 |  |  |                                                          |        |                                                          |  

See Notes to
Consolidated Financial Statements.

4



---

WINTHROP
REALTY TRUST  
FORM 10-Q - SEPTEMBER 30, 2006

CONSOLIDATED
STATEMENT OF SHAREHOLDERS' EQUITY  
(Unaudited)

(In thousands)

|                                                          |  |  | Series A
        Preferred Shares of
        Beneficial Interest |      | Common Shares 
        of Beneficial Interest |   | Additional 
        Paid-In |   | Accumulated 
        Other
        Comprehensive |        | Accumulated 
        Distributions 
        in Excess of |   |        | 
|--------------------------------------------------------- |  |  | ---------------------------------------------------------------- | ---- | --------------------------------------------- | - | --------------------------- | - | ------------------------------------------------ | ------ | -------------------------------------------------------- | - | ------ | 
|                                                          |  |  | Shares                                                           |      | Amount                                        |   | Shares                      |   | Amount                                           |        | Capital                                                  |   | Income | 
|                                                          |  |  |                                                                  |      |                                               |   |                             |   |                                                  |        |                                                          |   |        | 
|                                                          |  |  |                                                                  |      |                                               |   |                             |   |                                                  |        |                                                          |   |        | 
|Balance,
      December 31, 2005                          |  |  |                                                                  | 983  |                                               | $ | 23,131                      |   |                                                  | 35,581 |                                                          | $ | 35,581 | 
|Net
      income                                          |  |  |                                                                  |     |                                               |   |                            |   |                                                  |       |                                                          |   |       | 
|Dividends
      paid or accrued on common shares of       |  |  |                                                                  |      |                                               |   |                             |   |                                                  |        |                                                          |   |        | 
|Beneficial
      Interest ($0.18 per share)               |  |  |                                                                  |     |                                               |   |                            |   |                                                  |       |                                                          |   |       | 
|Change
      in unrealized gain on real estate securities |  |  |                                                                  |      |                                               |   |                             |   |                                                  |        |                                                          |   |        | 
|available
      for sale, net of reclassification         |  |  |                                                                  |      |                                               |   |                             |   |                                                  |        |                                                          |   |        | 
|adjustment
      for amounts included in net income       |  |  |                                                                  |     |                                               |   |                            |   |                                                  |       |                                                          |   |       | 
|Change
      in unrealized gain on mortgage-backed        |  |  |                                                                  |      |                                               |   |                             |   |                                                  |        |                                                          |   |        | 
|securities
      held for sale                            |  |  |                                                                  |     |                                               |   |                            |   |                                                  |       |                                                          |   |       | 
|Change
      in unrealized loss on interest rate          |  |  |                                                                  |      |                                               |   |                             |   |                                                  |        |                                                          |   |        | 
|derivatives                                               |  |  |                                                                  |     |                                               |   |                            |   |                                                  |       |                                                          |   |       | 
|Redemption
      of Series A-1 preferred                  |  |  |                                                                  |      |                                               |   |                             |   |                                                  |        |                                                          |   |        | 
|shares
      for common shares                            |  |  |                                                                  | (983 | )                                             |   | (23,131                     | ) |                                                  | 4,837  |                                                          |   | 4,837  | 
|Conversion
      of Series B-1 preferred                  |  |  |                                                                  |      |                                               |   |                             |   |                                                  |        |                                                          |   |        | 
|shares
      to common shares                             |  |  |                                                                  |     |                                               |   |                            |   |                                                  | 56     |                                                          |   | 56     | 
|Issuance
      of common shares through                   |  |  |                                                                  |      |                                               |   |                             |   |                                                  |        |                                                          |   |        | 
|rights
      offering                                     |  |  |                                                                  |     |                                               |   |                            |   |                                                  | 5,220  |                                                          |   | 5,220  | 
|                                                          |  |  |                                                                  |      |                                               |   |                             |   |                                                  |        |                                                          |   |        | 
|Balance,
      September 30, 2006                         |  |  |                                                                  |     |                                               | $ |                            |   |                                                  | 45,694 |                                                          | $ | 45,694 | 
|                                                          |  |  |                                                                  |      |                                               |   |                             |   |                                                  |        |                                                          |   |        | 

See Notes to
Consolidated Financial Statements.

5



---

WINTHROP
REALTY TRUST  
FORM 10-Q - SEPTEMBER 30, 2006

CONSOLIDATED
STATEMENTS OF CASH FLOWS  
(Unaudited)

(In thousands)

|                                                                          |  |  | For the Nine Months Ended 
  September 30, |        
|------------------------------------------------------------------------- |  |  | ------------------------------------------ | -------
|                                                                          |  |  |                                            |        
|                                                                          |  |  | 2006                                       |        
|                                                                          |  |  |                                            |        
|                                                                          |  |  |                                            |        
|                                                                          |  |  |                                            |        
|Cash flows from operating activities                                      |  |  |                                            |        
|Net income                                                                |  |  | $                                          | 18,790 
|Adjustments to reconcile net income to net cash provided by               |  |  |                                            |        
|operating activities                                                      |  |  |                                            |        
|Depreciation and amortization (including amortization of deferred         |  |  |                                            |        
|financing costs)                                                          |  |  |                                            | 5,707  
|Amortization of lease intangibles                                         |  |  |                                            | 4,172  
|Straight-lining of rental income                                          |  |  |                                            | 150    
|Equity in earnings of preferred equity investment                         |  |  |                                            |        
|in deficit (excess) of distributions from earnings                        |  |  |                                            | 12     
|Equity in earnings of equity investment in excess of                      |  |  |                                            |        
|distributions from earnings                                               |  |  |                                            | (3,097 
|Equity in loss of equity investment in joint venture                      |  |  |                                            | 21     
|Interest earned on restricted cash                                        |  |  |                                            | (31    
|Minority interest                                                         |  |  |                                            | 2,088  
|Gain on sale of real estate securities available for sale                 |  |  |                                            | (8,125 
|Loss from early extinguishment of debt                                    |  |  |                                            | 126    
|Decrease in deferred income                                               |  |  |                                            | (2,500 
|Bad debt recovery                                                         |  |  |                                            | (20    
|Legal settlement receivable                                               |  |  |                                            |       
|Net changes in other operating assets and liabilities                     |  |  |                                            | 3,752  
|                                                                          |  |  |                                            |        
|Net cash provided by operating activities                                 |  |  |                                            | 21,045 
|                                                                          |  |  |                                            |        
|                                                                          |  |  |                                            |        
|Cash flows from investing activities                                      |  |  |                                            |        
|Investments in real estate                                                |  |  |                                            | (37,194
|Proceeds from sale of limited partnership interest                        |  |  |                                            | 580    
|Purchase of mortgage-backed securities available for sale                 |  |  |                                            |       
|Proceeds from repayments of mortgage-backed securities available for sale |  |  |                                            | 26,201 
|Investment in equity investment in joint venture                          |  |  |                                            | (47,601
|Investment in preferred equity investment                                 |  |  |                                            | (1,484 
|Proceeds from preferred equity investment                                 |  |  |                                            | 3,264  
|Investment in limited liability company                                   |  |  |                                            | (14,858
|Proceeds from limited liability company                                   |  |  |                                            | 1,050  
|Purchase of real estate securities available for sale                     |  |  |                                            | (2,463 
|Proceeds from sale of real estate securities available for sale           |  |  |                                            | 28,572 
|Increase in restricted cash                                               |  |  |                                            | (2,839 
|Issuance and acquisition of loans receivable                              |  |  |                                            | (20,519
|Collection of loans receivable                                            |  |  |                                            | 8,027  
|                                                                          |  |  |                                            |        
|Net cash used in investing activities                                     |  |  |                                            | (59,264
|                                                                          |  |  |                                            |        
|                                                                          |  |  |                                            |        

See Notes to
Consolidated Financial Statements.

6



---

WINTHROP
REALTY TRUST  
FORM 10-Q - SEPTEMBER 30, 2006

CONSOLIDATED
STATEMENTS OF CASH FLOWS  
(Unaudited)

(In thousands)

(Continued)

|                                                                          |  |  | For the Nine Months Ended 
  September 30, |        
|------------------------------------------------------------------------- |  |  | ------------------------------------------ | -------
|                                                                          |  |  |                                            |        
|                                                                          |  |  | 2006                                       |        
|                                                                          |  |  |                                            |        
|                                                                          |  |  |                                            |        
|                                                                          |  |  |                                            |        
|Cash flows from financing activities                                      |  |  |                                            |        
|Borrowings under repurchase agreements                                    |  |  | $                                          |       
|Repayment of borrowings under repurchase agreements                       |  |  |                                            | (25,155
|Proceeds from mortgage loans payable                                      |  |  |                                            | 88,745 
|Principal payments of mortgage loans payable                              |  |  |                                            | (30,625
|Payments of loans payable                                                 |  |  |                                            | (16    
|Proceeds from revolving line of credit                                    |  |  |                                            | 67,000 
|Payment of revolving line of credit                                       |  |  |                                            | (76,000
|Deferred financing costs                                                  |  |  |                                            | (1,668 
|Contribution by minority interests                                        |  |  |                                            | 2,607  
|Distribution to minority interests                                        |  |  |                                            | (2,573 
|Issuance of Common Shares                                                 |  |  |                                            | 27,122 
|Issuance of Series B-1 Cumulative Convertible Redeemable Preferred Shares |  |  |                                            |       
|Dividends paid on Series A Preferred Shares                               |  |  |                                            | (516   
|Dividends paid on Common Shares                                           |  |  |                                            | (9,397 
|                                                                          |  |  |                                            |        
|Net cash provided by financing activities                                 |  |  |                                            | 39,524 
|                                                                          |  |  |                                            |        
|                                                                          |  |  |                                            |        
|Net increase in cash and cash equivalents                                 |  |  |                                            | 1,305  
|Cash and cash equivalents at beginning of period                          |  |  |                                            | 19,018 
|                                                                          |  |  |                                            |        
|Cash and cash equivalents at end of period                                |  |  | $                                          | 20,323 
|                                                                          |  |  |                                            |        
|                                                                          |  |  |                                            |        
|Supplemental Disclosure of Cash Flow Information                          |  |  |                                            |        
|                                                                          |  |  |                                            |        
|Interest paid                                                             |  |  | $                                          | 21,431 
|                                                                          |  |  |                                            |        
|State and local income taxes paid                                         |  |  | $                                          | 599    
|                                                                          |  |  |                                            |        
|Supplemental Disclosure of Non-Cash Investing and Financing Activities    |  |  |                                            |        
|                                                                          |  |  |                                            |        
|Dividends accrued on Preferred Shares                                     |  |  | $                                          |       
|                                                                          |  |  |                                            |        
|Dividends accrued on Common Shares                                        |  |  | $                                          | 2,742  
|                                                                          |  |  |                                            |        

See Notes to
Consolidated Financial Statements.

7



---

WINTHROP
REALTY TRUST  
FORM 10-Q SEPTEMBER 30, 2006

NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

|1. | Organization
|-- | ------------

| | Winthrop
Realty Trust is an  unincorporated  association in the form of a business trust organized
in Ohio under a Declaration of Trust  dated August 1, 1961,  as amended and restated on
December 15, 2005 (the  Declaration  of Trust),  which has as its stated
principal  business  activity  the  ownership  and  management  of, and lending to, real
estate and related  investments.  The Trust  conducts its  business through WRT Realty
L.P., a Delaware limited partnership (the Operating  Partnership).  The Trust
is the sole general partner  of, and owns directly and indirectly 100% of the limited
partnership  interests in, the Operating  Partnership.  All references to the  Trust refer
to Winthrop Realty Trust and its consolidated subsidiaries, including the Operating
Partnership.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|2. | Summary
of Significant Accounting Policies
|-- | ------------------------------------------

| | Basis
of Presentation
| | ---------------------

| | The
accompanying  unaudited  consolidated  interim  financial  statements have been prepared
in accordance with accounting  principles  generally  accepted  in the United  States  (GAAP)
for  interim  financial  statements  and with the  instructions  to Form 10-Q and  Rule 10-01
of  Regulation S-X.  Accordingly,  they do not include all of the  information  and
footnotes  required by GAAP for complete  financial  statements,  although  management
believes  that the  disclosures  presented  herein are adequate to make the  accompanying
unaudited  consolidated  interim  financial  statements  presented not misleading.  The
accompanying  unaudited  consolidated  interim  financial  statements  should be read in
conjunction  with the  audited  consolidated  annual  financial  statements  and the
related  Managements  Discussion  and Analysis of Financial  Condition and Results
of Operations  included in the Trusts Annual Report on Form  10-K/A  (Amendment No.
3) for the year ended  December 31,  2005 filed with the Securities and Exchange
Commission (the SEC). In the  opinion of management,  all adjustments (which
include normal recurring adjustments)  considered necessary for a fair presentation have
been  included.  The  results of  operations  for the nine  months  ended  September  30,
2006 are not  necessarily  indicative  of the  operating results for the full year.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
accompanying  unaudited  consolidated  financial  statements  represent the  consolidated
results of Winthrop  Realty Trust,  its  wholly-owned  taxable REIT subsidiary,  WRT TRS
Management Corp. (FUMI),  the Operating  Partnership,  wholly-owned
subsidiaries and  certain  partially-owned  entities,  in which the Operating
Partnership owns either (i) a controlling  interest or (ii) is the primary  beneficiary.
All  significant  intercompany  amounts have been  eliminated.  The Trust  accounts
for its  investments in companies in  which it has the  ability  to  significantly
influence,  but does not have a  controlling  interest,  by using  the  equity  method of
accounting.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Certain
prior year balances have been  reclassified  in order to conform to the current year
presentation,  in  particular,  balances  reflected in Note 19 Business Segments.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

8



---

WINTHROP
REALTY TRUST  
FORM 10-Q SEPTEMBER 30, 2006

NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

|2. | Summary
of Significant Accounting Policies (Continued)
|-- | ------------------------------------------------------

| | Use
of Estimates
| | ----------------

| | The
preparation of financial  statements in conformity  with GAAP requires  management to
make estimates and assumptions in determining  the reported  values of assets and
liabilities  and disclosure of contingent  assets and  liabilities at the date of the
consolidated  interim  financial  statements  and the reported  amounts of revenue and
expenses  during the  reporting  period.  Some of the critical  estimates made by the
Trust include,  but are not limited to, estimates of useful lives for long-lived assets,
reserves for collection  of accounts and loans  receivable  and  provisions  for
impairment of real estate.  As a result of the nature of estimates made by the  Trust,
actual results could differ.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Earnings
Per Share
| | ------------------

| | The
Trust has  calculated  earnings per share in  accordance  with SFAS No.128,  Earnings Per
Share.  SFAS No.128  requires that common  share  equivalents be excluded from the
weighted-average  shares  outstanding  for the  calculation  of basic earnings per share.
The  reconciliation of shares  outstanding for the basic and diluted earnings per share
calculation is as follows (in thousands,  except per  share data):
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                             |  |  | Three Months Ended
  September 30, |        | Nine Months Ended 
  September 30, |  
|------------------------------------------------------------ |  |  | ---------------------------------- | ------ | ---------------------------------- | -
|                                                             |  |  |                                    |        |                                    |  
|                                                             |  |  | 2006                               |        | 2005                               |  
|                                                             |  |  |                                    |        |                                    |  
|                                                             |  |  |                                    |        |                                    |  
|Basic                                                        |  |  |                                    |        |                                    |  
|Income from continuing operations                            |  |  | $                                  | 5,174  |                                    | $
|Series A Preferred dividend                                  |  |  |                                    |       |                                    |  
|                                                             |  |  |                                    |        |                                    |  
|Income from continuing operations, net of preferred dividend |  |  |                                    | 5,174  |                                    |  
|Income (loss) from discontinued operations                   |  |  |                                    | 12     |                                    |  
|                                                             |  |  |                                    |        |                                    |  
|Net income applicable to Common Shares                       |  |  | $                                  | 5,186  |                                    | $
|                                                             |  |  |                                    |        |                                    |  
|Basic weighted-average Common Shares                         |  |  |                                    | 45,694 |                                    |  
|                                                             |  |  |                                    |        |                                    |  
|Income from continuing operations, net of preferred dividend |  |  | $                                  | 0.11   |                                    | $
|Income (loss) from discontinued operations                   |  |  |                                    |       |                                    |  
|                                                             |  |  |                                    |        |                                    |  
|Net income per Common Share - Basic                          |  |  | $                                  | 0.11   |                                    | $
|                                                             |  |  |                                    |        |                                    |  

9



---

WINTHROP
REALTY TRUST  
FORM 10-Q SEPTEMBER 30, 2006

NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

|2. | Summary
of Significant Accounting Policies (Continued)
|-- | ------------------------------------------------------

| | Earnings
Per Share (Continued)
| | ------------------------------

|                                                 |  |  | Three Months Ended
        
        September 30, |        | Nine Months Ended
        
        September 30, |  
|------------------------------------------------ |  |  | ------------------------------------------------- | ------ | ------------------------------------------------ | -
|                                                 |  |  |                                                   |        |                                                  |  
|                                                 |  |  | 2006                                              |        | 2005                                             |  
|                                                 |  |  |                                                   |        |                                                  |  
|                                                 |  |  |                                                   |        |                                                  |  
|Diluted                                          |  |  |                                                   |        |                                                  |  
|Income
      from continuing operations          |  |  | $                                                 | 5,174  |                                                  | $
|Interest
      expense  Series B-1              |  |  |                                                   | 1,620  |                                                  |  
|                                                 |  |  |                                                   |        |                                                  |  
|Income
      from continuing operations          |  |  |                                                   | 6,794  |                                                  |  
|Income
      (loss) from discontinued operations |  |  |                                                   | 12     |                                                  |  
|                                                 |  |  |                                                   |        |                                                  |  
|Net income
      applicable to Common Shares     |  |  | $                                                 | 6,806  |                                                  | $
|                                                 |  |  |                                                   |        |                                                  |  
|Basic
      weighted-average Common Shares       |  |  |                                                   | 45,694 |                                                  |  
|Convertible
      Preferred Shares               |  |  |                                                   | 22,167 |                                                  |  
|Stock
      options                              |  |  |                                                   | 64     |                                                  |  
|                                                 |  |  |                                                   |        |                                                  |  
|Diluted
      weighted-average Common Shares     |  |  |                                                   | 67,925 |                                                  |  
|                                                 |  |  |                                                   |        |                                                  |  
|Income
      from continuing operations          |  |  | $                                                 | 0.10   |                                                  | $
|Income
      (loss) from discontinued operations |  |  |                                                   |       |                                                  |  
|                                                 |  |  |                                                   |        |                                                  |  
|Net income
      per Common Share  Diluted      |  |  | $                                                 | 0.10   |                                                  | $
|                                                 |  |  |                                                   |        |                                                  |  

| | The
Trusts Series A Cumulative  Convertible  Redeemable  Preferred  Shares of
Beneficial  Interest  (Series A Shares) and Series B-1  Cumulative
Convertible  Redeemable  Preferred Shares of Beneficial Interest (Series B-1 Shares)
were dilutive for the three and nine  months ended  September  30, 2005.  The Series A
Shares,  which were  redeemed for the Trusts  Common  Shares of  Beneficial
Interest  (Common  Shares) on February 7, 2006,  were dilutive for the nine
months ended September 30, 2006 and Series B-1 Shares were dilutive  for the three and
nine months ended September 30, 2006.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Variable
Interest Entities
| | --------------------------

| | Financial
        Accounting Standards Board (FASB) Interpretation No. 46 (Revised)
         Consolidation of Variable Interest Entities (FIN 46R)
        requires a variable interest entity (VIE) to be consolidated
        by its primary beneficiary. The primary beneficiary is the party that
        incurs a majority of the VIEs anticipated losses and/or a majority
        of the expected returns.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Trust has evaluated its loans and investments to determine whether they are variable
interests in a VIE. This evaluation  resulted  in the Trust  determining that certain of
its loans,  preferred  equity  investments and other  investments  were potentially
variable  interests in VIEs.  For each of these  investments,  the Trust has evaluated
(1) the  sufficiency of the  applicable  entitys  equity  investments  at risk
to absorb  expected  losses,  (2) whether  as a group the holders of the equity
investments  at risk have (a) the  direct or indirect ability through voting rights
to make decisions about the entitys  significant  activities,  (b) the
obligation to  absorb the expected  losses of the entity and whether their  obligations
are protected  directly or  indirectly,  and (c) the right to  receive the expected
residual return of the entity without a cap on the return,
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

10



---

WINTHROP
REALTY TRUST  
FORM 10-Q SEPTEMBER 30, 2006

NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

|2. | Summary
of Significant Accounting Policies (Continued)
|-- | ------------------------------------------------------

| | Variable
Interest Entities (Continued)
| | --------------------------------------

| | (3) whether
the voting rights of these  investors  are not  proportional  to their  obligations  to
absorb the expected  losses of the  entity,  their  rights to receive the  expected
returns of the equity,  or both,  and (4) whether  substantially  all of the  entitys
activities involve or are conducted on behalf of an investor that has disproportionately
few voting rights. As of September 30,  2006,  the Trust has  identified  the loan
acquired by WRT Marc RC LLC (see Note 5) to be a variable  interest in a VIE.  However,
the Trust  has determined that it is not the primary  beneficiary and therefore  accounts
for this  investment as a loan  receivable.  The Trusts  maximum exposure to loss
related to this VIE is limited to the amount of its investment.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Recently
Issued Accounting Standards
| | ------------------------------------

| | In
        September 2006, the FASB issued SFAS No. 157, Fair Value Measurements.
        This Statement applies under other accounting pronouncements that require
        or permit fair value measurements. Accordingly, this Statement does not
        require any new fair value measurements. However, for some entities, the
        application of this Statement will change current practice. This Statement
        clarifies that market participant assumptions include assumptions about
        risk, for example, the risk inherent in a particular valuation technique
        used to measure fair value (such as a pricing model) and/or risk inherent
        in the inputs to the valuation technique. This Statement clarifies that
        market participant assumptions also include assumptions about the effect
        of a restriction on the sale or use of an asset. This Statement also clarifies
        that a fair value measurement for a liability reflects its nonperformance
        risk. This Statement is effective for financial statements issued for
        fiscal years beginning after November 15, 2007, and interim periods within
        those fiscal years. The Trust is currently evaluating the impact that the adoption of SFAS
        No. 157 will have on the Trusts consolidated financial
        statements.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
        February 2006, the FASB issued SFAS No. 155, Accounting for Certain
        Hybrid Financial Instruments  an amendment of FASB Statements
        No. 133 and 140. This statement (1) permits fair value remeasurement
        for any hybrid financial instrument that contains an embedded derivative
        that otherwise would require bifurcation; (2) clarifies which interest-only
        strips and principal-only strips are not subject to the requirements of
        Statement 133; (3) establishes a requirement to evaluate interests in
        securitized financial assets to identify interests that are freestanding
        derivatives or that are hybrid financial instruments that contain an embedded
        derivative requiring bifurcation (4) clarifies that concentrations of
        credit risk in the form of subordination are not embedded derivatives;
        and (5) amends Statement 140 to eliminate the prohibition on a qualifying
        special-purpose entity from holding a derivative financial instrument
        that pertains to a beneficial interest other than derivative financial
        instrument. This Statement is effective for all financial instruments
        acquired or issued after the beginning of an entitys first fiscal
        year that begins after September 15, 2006. The Trust does not believe
        that the adoption of SFAS No. 155 will have a material effect on the Trusts
        consolidated financial statements.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

11



---

WINTHROP
REALTY TRUST  
FORM 10-Q SEPTEMBER 30, 2006

NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

|2. | Summary
of Significant Accounting Policies (Continued)
|-- | ------------------------------------------------------

| | Recently
Issued Accounting Standards (Continued)
| | ------------------------------------------------

| | In
June 2006, the FASB issued FIN No. 48, Accounting for Uncertainty in Income Taxesan
interpretation of FASB Statement No. 109. This Interpretation clarifies  the accounting
for uncertainty in income taxes recognized in an enterprises financial statements
in accordance with FASB Statement No. 109, Accounting for  Income Taxes. This
Interpretation prescribes a recognition threshold and measurement attribute for the
financial statement recognition and measurement of a tax  position taken or expected to
be taken in a tax return. This Interpretation also provides guidance on derecognition,
classification, interest and penalties,  accounting in interim periods, disclosure, and
transition. This Interpretation is effective for fiscal years beginning after December
15, 2006.  The Trust is  currently evaluating the impact that the adoption of FIN No. 48
will have on the Trusts consolidated financial statements.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
September  2006,  the SEC issued  Staff  Accounting  Bulletin  No. 108 to address
diversity  in practice  in  quantifying  financial  statement  misstatements  and the
potential  under  current  practice  for the build up of improper  amounts on the balance
sheet.  SAB 108  provides  guidance on the  consideration  of the  effects of prior year
misstatements  in  quantifying  current  year  misstatements  for the  purpose of a
materiality  assessment.  The Trust does not  believe  that the  adoption  of SAB 108
will have any effect  on the Trusts consolidated financial statements.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3. | Real
Estate Acquisitions, Dispositions and Financings
|-- | -----------------------------------------------------

| | Acquisitions
| | ------------

| | On
February 16, 2006, the Trust  acquired from an  unaffiliated  third party three office
buildings  located at 550-650,  701 and 1050  Warrenville Road, Lisle,  Illinois,  a
Chicago suburb.  The gross purchase price for the 550-650 and 701 properties (the
"Wholly-Owned  Properties")  was $31,750,000 and the purchase price for the
1050 property was $3,500,000,  which was acquired in a joint venture owned  60% by the
Trust and 40% by an entity,  the owners of which (the Marc  Principals) are
also owners of entities to which the Trust has  made mezzanine and second  mortgage
loans.  The Marc Principals are not affiliates of the Trust.  The  Wholly-Owned
Properties,  which  contain approximately 236,000 square feet, are 97% occupied and the
1050 property,  which contains  approximately 54,000 square feet of  office space, is
vacant.  The Trust incurred  approximately  $120,000 in closing costs with respect to the
Wholly-Owned  Properties and  its allocable share of approximately $31,600 with respect
to the 1050 property.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Dispositions
| | ------------

| | On
April 6, 2006,  the Trust  contributed  $13,332,562  in exchange for a 30%  interest in a
limited  liability  company  which in turn  indirectly  held a 33.14%  interest in a
partnership  that owns an  approximately  1,019,000  square foot office  building in
Chicago,  Illinois.  In July 2006,  the property was sold,  and the Trust  received an
initial  distribution  of  $1,050,000  with an  additional  distribution  equal to the
balance of the original  contribution  expected to be received  during the fourth quarter
of 2006. The Trust  made a $1,500,000  investment in the entity that purchased the
property,  an unaffiliated  third-party.  This investment is recorded as  equity
investment in limited liability company on the Consolidated Balance Sheet at September
30, 2006.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

12



---

WINTHROP
REALTY TRUST  
FORM 10-Q SEPTEMBER 30, 2006

NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

|3. | Real
Estate Acquisitions, Dispositions and Financings (Continued)
|-- | -----------------------------------------------------------------

| | Financings
| | ----------

| | On
February  10, 2006,  FT-Ontario  Holdings  LLC, a joint  venture in which the Trust holds
an 80% interest and an entity owned by the  Marc  Principals  holds a 20%  interest,
obtained a $21,600,000  loan from an  unaffiliated  third party  lender,  which is
secured by  FT-Ontarios  property and parking spaces located at One Erie, Chicago,
Illinois.  The loan bears interest at 5.75%. The loan requires  monthly  payments  of
interest  only  during  the  first  two  years of the loan  term and  thereafter
principal  (based on a 30-year  amortization  schedule)  and interest for the balance of
the term.  The loan is scheduled to mature on March 1, 2016, at which time the
outstanding principal balance is expected to be approximately $18,859,000.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | On
February 17, 2006, the Trust obtained a $9,550,000  loan from an  unaffiliated  third
party lender,  which is secured by the Trusts  wholly-owned  properties located in
Andover,  Massachusetts and South Burlington,  Vermont.  The loan bears interest at 6.6%,
requires  monthly  payments of principal and interest of  approximately  $65,000 (based
on a 30-year  amortization  schedule) and is scheduled to  mature on February 16, 2011,
at which time the outstanding principal balance is expected to be approximately
$8,733,000.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | On
March 29, 2006,  WRT-Marc RC LLC (WRT-Marc  RC) and WRT-Marc RC Land LLC (WRT-Marc
RC Land)  obtained loans from an unaffiliated  third party lender with a principal
amount of $9,500,000  and  $5,280,000,  respectively.  Both loans bear interest at a
floating rate  equal to the prime rate plus 0.50% (8.75% at September  30, 2006) and
mature on March 28,  2007,  subject to one-year  extensions.  The  loan made to  WRT-Marc
RC is secured by the  Commercial  Loan and the loan made to  WRT-Marc  RC Land is secured
by the Land Loan (see  Note 5).
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | On
May 5, 2006,  the Trust  obtained a  $24,600,000  loan from an  unaffiliated  third
party  lender,  which is secured by the Trusts  properties located at 550-650
Warrenville Road and 701 Warrenville Road, Lisle,  Illinois.   The loan bears
interest at 6.26%, requires  monthly  payments  of  interest  only  during  the  first
two  years of the loan  term and  thereafter  principal  (based on a 30-year
amortization  schedule)  and interest for the balance of the term.   The loan is
scheduled to mature on June 1, 2016, at which time the  outstanding principal balance is
expected to be approximately $21,782,000.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | On
June 30, 2006,  the Trust  modified  its existing  mortgage  loan secured by certain of
the Trusts net lease  properties,  commonly  referred to as the Finova Portfolio.
(See Note 11.)
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | On
July 10,  2006,  the Trust  increased  its  revolving  line of credit from  $50,000,000
to  $70,000,000.  In  connection  with this  increase, the Trust paid a fee of $200,000.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

13



---

WINTHROP
REALTY TRUST  
FORM 10-Q SEPTEMBER 30, 2006

NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

|4. | Mortgage-Backed
Securities Pledged Under Repurchase Agreements
|-- | --------------------------------------------------------------

| | At
September  30,  2006,  all of the Trusts  mortgage-backed  securities  which
consisted of Federal  National  Mortgage  Association  (Fannie Mae) whole
pool certificates were classified as  available-for-sale  and, as such, were carried at
their estimated fair value  based on prices obtained from a third party.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
following  table  presents the amortized  cost and fair value of the Trusts
mortgage-backed  securities at September 30, 2006 and  December 31, 2005 (in thousands):
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                    |  |  | September 30, 2006 |         | December 31, 2005 |  
|----------------------------------- |  |  | ------------------ | ------- | ----------------- | -
|                                    |  |  |                    |         |                   |  
|                                    |  |  |                    |         |                   |  
|Cost                                |  |  | $                  | 100,108 |                   | $
|Unrealized loss                     |  |  |                    | (745    | )                 |  
|Interest payment receivable         |  |  |                    | 383     |                   |  
|Unamortized premium                 |  |  |                    | 683     |                   |  
|                                    |  |  |                    |         |                   |  
|Carrying value/estimated fair value |  |  | $                  | 100,429 |                   | $
|                                    |  |  |                    |         |                   |  

| | The
unrealized  losses are a result of changes in interest  rates and  principal  prepayments
subsequent  to the  acquisition  of the  securities.  All the  securities  are
performing  according to their  terms.  Although  not rated,  whole pool agency
mortgage-backed  securities  carry an implied AAA rating and are guaranteed as to
principal and interest by Fannie Mae.  Furthermore,  the Trust intends  to, and has the
ability to, hold these  securities to maturity or at least until such time as the Trust
has recovered its  investments.  Accordingly,  although the period of continuous
unrealized  loss position is more than twelve months,  the Trust has determined  that
these impairments are temporary.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
mortgage-backed securities bear interest at a weighted average interest rate of 4.4%
based on balances at September 30, 2006.
| | ---------------------------------------------------------------------------------------------------------------------------------

| | The
        FASB has announced plans to re-write SFAS No.140 which may affect the
        treatment of transactions where mortgage-backed securities purchased from
        a particular counterparty are financed via a repurchase agreement with
        the same counterparty. At September 30, 2006 and December 31, 2005, the
        Trust recorded such assets and the related financing gross on its balance
        sheet, and the corresponding interest income and interest expense gross
        on its income statement. Any change in fair value of the security was
        reported through other comprehensive income under SFAS No.115, because
        the security was classified as available for sale. However,
        in a transaction where the mortgage-backed securities are acquired from
        and financed under a repurchase agreement with the same counterparty,
        the acquisition may not qualify as a sale from the sellers perspective
        under the provisions of SFAS No.140, Accounting for Transfers and Servicing
        of Financial Assets and Extinguishments of Liabilities. In such cases,
        the seller of the mortgage-backed securities may be required to continue
        to consolidate the assets sold to the Trust, based on their continuing
        involvement with such investments. Depending on the ultimate outcome of
        the FASB re-write of SFAS No.140, the Trust, to the extent it has securities
        acquired from and financed with the same counterparty, may be precluded
        from presenting the assets and
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

14



---

WINTHROP
REALTY TRUST  
FORM 10-Q SEPTEMBER 30, 2006

NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

|4. | Mortgage-Backed
Securities Pledged Under Repurchase Agreements (Continued)
|-- | --------------------------------------------------------------------------

| | liabilities
gross on its balance sheet and may instead treat its net investment in such assets as a
derivative.
| | ---------------------------------------------------------------------------------------------------------------

| | This
potential  change in  accounting  treatment  would not  affect  the  economics  of the
transactions  but  would  affect  how the  transactions  would be reported in the Trusts
financial  statements.  The Trusts cash flows,  its liquidity and its ability to
pay a  dividend  would be  unchanged,  and the Trust does not believe its taxable  income
or REIT status  would be  affected.  The Trusts net  equity would not be materially
affected.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|5. | Loans
Receivable
|-- | ----------------

| | On
March 29, 2006, the Trust through two  consolidated  joint ventures,  in which the Trust
holds a 60% interest and an entity owned by  the Marc Principals owns the remaining 40%
interest,  acquired (i) a loan with a principal  balance of $11,750,000  which is secured
by  a first  leasehold  mortgage on  approximately  241,000  square feet of commercial
space and an indoor  parking garage with 133 spaces  located at 800 South Wells,
Chicago,  Illinois and commonly referred to as River City (the Commercial  Loan),
and (ii) a loan with a  principal  balance of $5,915,000 which is secured by a first
priority  mortgage on both the land underlying the River City property and  the unsold
residential  condominium  units at the River City  property (the Land Loan).
The  Commercial  Loan was in default at the  time of  acquisition  and WRT-Marc RC, the
entity that acquired the  Commercial  Loan,  has commenced  foreclosure  proceedings  on
the  Commercial  Loan, and it is expected that the  foreclosure  sale will occur during
the fourth  quarter of 2006. In connection  with the  acquisition and  modification of
the Commercial  Loan,  WRT-Marc RC entered into an option  agreement with an unaffiliated
third party  pursuant  to which the third party has an option to acquire  the indoor
parking  structure  should  WRT-Marc  RC acquire  title to the  commercial  space and the
indoor  parking  secured by the Commercial  Loan. As  consideration  for entering into
the option  agreement,  WRT-Marc RC received a deed for the land  underlying  the River
City  property,  which deed is to be held in escrow until such time, if  at all, as
WRT-Marc RC acquires  title to the commercial  space.  If exercised,  the option price
will be equal to $1,900,000  plus 10%  interest per annum plus any  additional  expenses
incurred by WRT-Marc RC in connection  with  acquiring and operating the  commercial
space less any payments of interest received on account of the Commercial Loan.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Trust has determined  that the Commercial  Loan is a variable  interest in a VIE under
FIN 46R. Since the Trust has determined that  it is not the primary beneficiary, the
Trust accounts for this investment as a loan receivable.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The maturity date for the Land Loan was April 16, 2005. The entity from which the Land Loan was acquired had previously agreed to forbear from exercising any remedies on the Land Loan until April 16, 2006. WRT-Marc RC Land, the entity that acquired the Land Loan, entered into a modification agreement with the borrowers to extend the forbearance period to December 31, 2007 and reduced the interest rate to 10% per annum.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

15



---

WINTHROP
REALTY TRUST  
FORM 10-Q SEPTEMBER 30, 2006

NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

|5. | Loans
Receivable (Continued)
|-- | ----------------------------

| | The
following table summarizes the Trusts loans receivable at September 30, 2006 and
December 31, 2005 (in thousands):
| | -----------------------------------------------------------------------------------------------------------------------

|                                  |  |                      |  |                                   |  |                                                        |  |   | Carrying Amount             | 
|--------------------------------- |  | -------------------- |  | --------------------------------- |  | ------------------------------------------------------ |  | - | --------------------------- | 
|                                  |  |                      |  |                                   |  |                                                        |  |   |                             | 
|Property/Collateral               |  | Location             |  | Interest Rate                     |  | Maturity                                               |  |   | September 30, 
        2006 | 
|                                  |  |                      |  |                                   |  |                                                        |  |   |                             | 
|Toy Building
      (1)            |  | New York,
      NY   |  | LIBOR plus 5.6% 
        (10.93%) |  | April 2008                                             |  | $ | 59,797                      | 
|                                  |  |                      |  |                                   |  |                                                        |  |   |                             | 
|Ridgebrook
      Office Plaza (2) |  | Northbrook,
      IL |  | Prime (7%)                        |  | April 2006                                             |  |   |                            | 
|                                  |  |                      |  |                                   |  |                                                        |  |   |                             | 
|Wingate
      Inn (2)             |  | Clearwater,
      FL |  | 10%                               |  | February 2007                                          |  |   |                            | 
|                                  |  |                      |  |                                   |  |                                                        |  |   |                             | 
|Various
      (3)                 |  | Chicago,
      IL    |  | 8.5%                              |  | Various; 7 years
        from 
        date of funding |  |   | 3,357                       | 
|                                  |  |                      |  |                                   |  |                                                        |  |   |                             | 
|River
      City - Commercial (4) |  | Chicago,
      IL    |  | 9.75%                             |  | February 2006                                          |  |   | 11,830                      | 
|                                  |  |                      |  |                                   |  |                                                        |  |   |                             | 
|River
      City - Land (4)       |  | Chicago,
      IL    |  | 10%                               |  | December 2007                                          |  |   | 4,655                       | 
|                                  |  |                      |  |                                   |  |                                                        |  |   |                             | 
|                                  |  |                      |  |                                   |  |                                                        |  | $ | 79,639                      | 
|                                  |  |                      |  |                                   |  |                                                        |  |   |                             | 

| | The
carrying  amount  includes  accrued  interest of $532,000 and $877,000 at September  30,
2006 and December 31, 2005,  respectively.  All the loans,  except River City  Commercial
which was in default at the time of  acquisition,  are  performing  according to their
terms.  The Trust believes that the full amount of the  non-performing  River City loan
is recoverable  and,  accordingly no impairment  has been recorded.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (1) | Secured
by the ownership  interests in the property owner.  The Trust owns a one-third  interest
in a joint venture which owns  a 99%  participating  interest  in the  loan.  The  joint
venture  is  consolidated  with  the  Trusts  financial  statements.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (2) | Loan
was repaid during the nine months ended September 30, 2006.
| | --- | ----------------------------------------------------------------

| | (3) | Tenant
improvement and capital  expenditure  loans at various  properties which are secured by a
subordinate  mortgage or the  ownership interests in the property owner.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (4) | Secured
by a first mortgage.
| | --- | ----------------------------

| | Activity
related to mortgage loans receivable is as follows (in thousands):
| | ---------------------------------------------------------------------------

|                                 |  |  | 2006 |        | 2005 |  
|-------------------------------- |  |  | ---- | ------ | ---- | -
|                                 |  |  |      |        |      |  
|                                 |  |  |      |        |      |  
|Balance at January 1             |  |  | $    | 67,504 |      | $
|Purchases and advances made      |  |  |      | 20,519 |      |  
|Interest (received) accrued, net |  |  |      | (357   | )    |  
|Repayments                       |  |  |      | (8,027 | )    |  
|                                 |  |  |      |        |      |  
|Balance at September 30          |  |  | $    | 79,639 |      | $
|                                 |  |  |      |        |      |  

16



---

WINTHROP
REALTY TRUST  
FORM 10-Q SEPTEMBER 30, 2006

NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

|6. | Real Estate Securities Available for Sale
|-- | -----------------------------------------

| | The
following is a summary of Real Estate Securities Available for Sale at December 31, 2005
(in thousands):
| | ------------------------------------------------------------------------------------------------------------

|Name                                  |  |  |  | Date
        Purchased |  | Cost
        at
        December 31,
        2005 |        | Unrealized
        Gain at
        December 31,
        2005 |   | Balance
        at
        December 31, 
        2005 | 
|------------------------------------- |  |  |  | ---------------------- |  | ------------------------------------------------- | ------ | ------------------------------------------------------------ | - | ----------------------------------------------------- | 
|                                      |  |  |  |                        |  |                                                   |        |                                                              |   |                                                       | 
|America
      First Apartment         |  |  |  |                        |  |                                                   |        |                                                              |   |                                                       | 
|Investors,
      Inc.                 |  |  |  | Various                |  | $                                                 | 7,576  |                                                              | $ | 1,150                                                 | 
|Sizeler
      Property Investor, Inc. |  |  |  | Various                |  |                                                   | 17,520 |                                                              |   | 5,039                                                 | 
|Other
      real estate securities    |  |  |  | Various                |  |                                                   | 2,834  |                                                              |   | 181                                                   | 
|                                      |  |  |  |                        |  |                                                   |        |                                                              |   |                                                       | 
|                                      |  |  |  |                        |  | $                                                 | 27,930 |                                                              | $ | 6,370                                                 | 
|                                      |  |  |  |                        |  |                                                   |        |                                                              |   |                                                       | 

| | On
March 12, 2006,  the Trust sold a total of 1,385,000  shares of common stock of Sizeler
Property  Investors,  Inc.  ("Sizeler")  to  three  unaffiliated  third
parties in privately  negotiated  transactions.  The shares were sold for $14.35 per
share for an aggregate  sale price of approximately  $19,875,000.  The sale resulted in a
gain of approximately  $6,790,000  exclusive of dividends received on  such shares.
Also, the Trust sold its remaining  370,600  shares in market  transactions  at various
prices for an aggregate  price of  $5,487,704 and recognized an additional gain of
approximately  $1,053,000.  The Trust had fully divested all shares of common stock in
Sizeler at September 30, 2006.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | During
the nine months ended September 30, 2006, the Trust sold other real estate  securities
for an aggregate  price of  approximately  $3,120,000 resulting in a gain of
approximately $282,000 exclusive of dividends received.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
following is a summary of Real Estate Securities Available for Sale at September 30, 2006
(in thousands):
| | -------------------------------------------------------------------------------------------------------------

|Name                          |  |  |  | Date
        Purchased |  | Cost at

September 30,
     2006 |       | Unrealized
     Gain at
September 30,2006 |   | Balance
        at
        September 30,
        2006 | 
|----------------------------- |  |  |  | ---------------------- |  | -------------------------------- | ----- | ----------------------------------------- | - | ----------------------------------------------------- | 
|                              |  |  |  |                        |  |                                  |       |                                           |   |                                                       | 
|America
      First Apartment |  |  |  |                        |  |                                  |       |                                           |   |                                                       | 
|Investors,
      Inc.         |  |  |  | Various                |  | $                                | 9,950 |                                           | $ | 3,194                                                 | 
|                              |  |  |  |                        |  |                                  |       |                                           |   |                                                       | 

17



---

WINTHROP
REALTY TRUST  
FORM 10-Q SEPTEMBER 30, 2006

NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

|7. | Preferred
Equity Investment
|-- | ---------------------------

| | During
the third quarter of 2006,  two of the  properties  that secured the 7.65%  convertible
mezzanine  loans  described  below were  sold. The Trust received  proceeds from
repayment of its mezzanine  loans and as  distributions  from its equity interest of
$3,298,000   from the sales.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | At
September 30, 2006,  the Trust holds 22 separate  convertible  mezzanine  loans and
equity  investments  in each of the borrowers of  these loans, as well as two
participating  second mortgage loans, in the aggregate  amount of approximately
$74,996,000.  Each of the  borrowers  is owned  primarily  by the Marc  Principals.  Each
loan is secured by the  applicable  borrower's  ownership  interest in a  limited
liability  company  (each a Property  Owner) that in turn owns an office
building or complex.  Each loan bears  interest at  7.65%, matures on April 18, 2012 and
requires monthly payments of interest only.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
equity  interest in each borrower  entitles the Trust to  participate in capital
proceeds  derived from the sale or refinancing of  the  applicable  property to the
extent such  proceeds  generate  amounts in excess of that  required to fully  satisfy
all of the debt  encumbering  that property,  including its  respective  loan and a
return to the borrower of its deemed equity (the agreed value of the  applicable
property at the loan origination date less all debt encumbering that property  including
the loan made by the Trust) plus a  7.65% cumulative return thereon.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Trust has committed to advance  approximately  $7,350,000 to cover the costs of tenant
improvements and capital expenditures at the  foregoing 24 properties, of which
$4,008,000 had been advanced at September 30, 2006.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

18



---

WINTHROP
REALTY TRUST  
FORM 10-Q SEPTEMBER 30, 2006

NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

|7. | Preferred
Equity Investment (Continued)
|-- | ---------------------------------------

| | Summary
financial information for the Property Owner entities on a combined basis is as follows
(in thousands):
| | ---------------------------------------------------------------------------------------------------------------

|                                                      |  |  | As of
        September 30, 2006 |          | As of
        December 31, 2005 |  
|----------------------------------------------------- |  |  | -------------------------------- | -------- | ------------------------------- | -
|                                                      |  |  |                                  |          |                                 |  
|Condensed
      Balance Sheet Information             |  |  |                                  |          |                                 |  
|Investment
      in real estate, net                  |  |  | $                                | 145,713  |                                 | $
|Prepaid
      expenses and deposits in escrow         |  |  |                                  | 808      |                                 |  
|Cash
      and cash equivalents                       |  |  |                                  | 1,568    |                                 |  
|Receivables
      and other assets                    |  |  |                                  | 27,136   |                                 |  
|                                                      |  |  |                                  |          |                                 |  
|Total
      Assets                                    |  |  | $                                | 175,225  |                                 | $
|                                                      |  |  |                                  |          |                                 |  
|Nonrecourse
      mortgage debt                       |  |  | $                                | 277,604  |                                 | $
|Other
      liabilities                               |  |  |                                  | 8,547    |                                 |  
|                                                      |  |  |                                  |          |                                 |  
|Total
      Liabilities                               |  |  |                                  | 286,151  |                                 |  
|                                                      |  |  |                                  |          |                                 |  
|Partners
      Capital Deficit                       |  |  |                                  | (110,926 | )                               |  
|                                                      |  |  |                                  |          |                                 |  
|Total
      Liabilities and Partners Capital Deficit |  |  | $                                | 175,225  |                                 | $
|                                                      |  |  |                                  |          |                                 |  
|On
      the Trusts Consolidated Balance             |  |  |                                  |          |                                 |  
|Sheet:                                                |  |  |                                  |          |                                 |  
|Preferred
      Equity Investment                     |  |  | $                                | 76,635   | (1)                             | $
|                                                      |  |  |                                  |          |                                 |  

|(1) | Includes
principal, accrued interest and loan costs capitalized at time of loan origination.
|--- | --------------------------------------------------------------------------------------------

19



---

WINTHROP
REALTY TRUST  
FORM 10-Q SEPTEMBER 30, 2006

NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

|7. | Preferred
Equity Investment (Continued)
|-- | ---------------------------------------

|                                         |  |  | For
        the Three Months Ended |        | For
        the Nine Months Ended |  
|---------------------------------------- |  |  | ---------------------------------- | ------ | --------------------------------- | -
|                                         |  |  | September
        30, 2006         |        | September
        30, 2005        |  
|                                         |  |  |                                    |        |                                   |  
|Condensed
      Statements of Operations |  |  |                                    |        |                                   |  
|Information                              |  |  |                                    |        |                                   |  
|Revenues                                 |  |  | $                                  | 17,508 |                                   | $
|Operating
      expenses                 |  |  |                                    | (7,271 | )                                 |  
|Interest
      expense                   |  |  |                                    | (4,815 | )                                 |  
|Real
      estate taxes                  |  |  |                                    | (3,117 | )                                 |  
|Depreciation
      and amortization      |  |  |                                    | (2,598 | )                                 |  
|Other
      expenses                     |  |  |                                    | (1,237 | )                                 |  
|                                         |  |  |                                    |        |                                   |  
|Net
      income (loss)                  |  |  | $                                  | (1,530 | )                                 | $
|                                         |  |  |                                    |        |                                   |  
|On
      the Trusts Consolidated        |  |  |                                    |        |                                   |  
|Statement
      of Operations            |  |  |                                    |        |                                   |  
|and
      Comprehensive Income           |  |  |                                    |        |                                   |  
|Equity
      in earnings of preferred    |  |  |                                    |        |                                   |  
|equity
      investment                  |  |  | $                                  | 1,887  |                                   | $
|                                         |  |  |                                    |        |                                   |  

|8. | Newkirk
Equity Investment
|-- | -------------------------

| | On
November 7, 2005,  the Trust acquired  3,125,000  shares of common stock in Newkirk
Realty Trust,  Inc.  (Newkirk) at a per share  purchase price of $16.00,  for
a total purchase price of $50,000,000.  The executive officers of Newkirk are also the
Trusts executive  officers and NKT Advisors LLC (NKT),  the external
advisor of Newkirk,  is an entity owned in part and  controlled by Michael Ashner  and
other executive officers of the Trust and of FUR Advisors (FUR Advisors), the
Trusts external advisor.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
addition,  the Trust  assigned to Newkirk all rights it held under an  Exclusivity
Services  Agreement  with Michael  Ashner,  its  Chairman and Chief Executive Officer,
relating to business  opportunities  generated by or offered to Mr. Ashner relating to
net lease  assets,  as defined.  In consideration for the assignment of these rights,
Newkirk issued to the Trust an additional  1,250,000 shares  of Newkirks  common
stock (the  Exclusivity  Shares)  valued at $16.00 per share for a total
consideration  of  $20,000,000  and a  participation  in the incentive fee earned and
paid to NKT, if any. Both  transactions  were consummated in connection with the closing
of Newkirks initial public offering,  resulting in the Trust owning approximately
22.58% of Newkirks  outstanding common shares (6.8%  on a fully  diluted  basis).
During the fourth  quarter of 2005,  Newkirk  declared a  quarterly  cash  dividend of
$0.27 per share of  common stock  resulting in the Trust  receiving  $1,180,000 in
January 2006.  During each of the first three quarters of 2006,  Newkirk  declared a
quarterly cash dividend of $0.40 per share of common stock  resulting in the Trust
receiving  $1,750,000 in April,  July and  October 2006.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

20



---

WINTHROP
REALTY TRUST  
FORM 10-Q SEPTEMBER 30, 2006

NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

|8. | Newkirk
Equity Investment (Continued)
|-- | -------------------------------------

| | With
respect to the Exclusivity  Shares,  625,000 of the 1,250,000 shares were initially
subject to forfeiture which amount reduces by  17,361  shares each month,  commencing
December  2005 through  November  2008.  At September  30, 2006,  173,610  shares are no
longer  subject to  forfeiture  and 451,390  shares are subject to  forfeiture.  The
451,390  shares  would be  forfeited  if: (i) the advisory  agreement between Newkirk and
NKT is terminated by Newkirk for cause;  (ii) Michael Ashner dies or becomes  disabled,
unless the other  members of NKTs  senior  management  then in place  remain in
their  positions;  or (iii)  Michael  Ashner  resigns as an officer  and  director of
both Newkirk and NKT.  Conversely,  all of the forfeiture  restrictions  would terminate
and the Exclusivity Shares subject  to forfeiture  would fully vest if: (i) Newkirk
terminates the advisory  agreement with NKT other than for cause;  (ii) NKT terminates
the advisory  agreement  following a breach of a material term of the advisory  agreement
by Newkirk that is not timely cured; or (iii)  the  advisory  agreement  between  Newkirk
and NKT is not renewed for any reason.  The Trust has full voting and  dividend  rights
with  respect to the  restricted  shares,  which rights will terminate  only upon
forfeiture  with respect to those shares that had not then  vested.  The  Exclusivity
Shares not subject to  forfeiture  were  valued at  $10,000,000  and were  recognized  in
other  income when  received and the  remaining  $10,000,000  is  recognized  ratably
over the three year period.  At September  30, 2006,  $7,000,000  was  included in
deferred  income and $833,000 and  $2,500,000  was  recognized  in other income for the
three months and nine months ending  September 30, 2006.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | On
July 23, 2006,  Lexington  Corporate  Properties Trust  (Lexington) and
Newkirk announced that they have entered into an Agreement  and Plan of Merger (the Merger
Agreement) dated as of July 23, 2006.  Pursuant to the Merger Agreement,  Newkirk
will be merged with  and into Lexington (the Merger),  and each Newkirk
common share is to be converted into 0.8 common shares of the merged  company.  In
connection with the Merger,  the Trust entered into a Voting  Agreement with Lexington,
pursuant to which the Trust agreed to vote the  shares  of  Newkirk  held by it in favor
of the  Merger  and any other  matter  contemplated  under the  Merger  Agreement  that
could  reasonably  be  expected  to  facilitate  the  Merger;  provided  that the Voting
Agreement  will  terminate  upon the earlier of: the  effective  date of the Merger,  the
termination of the Merger  Agreement in accordance  with its terms,  the public
withdrawal by the  Newkirk  Board of  Directors of its  recommendation  of the Merger or
its public  approval of an  acquisition  proposal  other than the  Merger.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
addition,  the Trust agreed to amend, at the effective time of the Merger,  the
previously  entered into  Acquisition  Agreement and  the Assignment as respects net
lease assets of the Trusts  Exclusivity  Services  Agreement with Michael L.
Ashner,  both as currently  in effect between the Trust and Newkirk,  to permit the
assignment and  assumption of Newkirks  rights and  obligations  thereunder to  and
by Lexington.  Also, at the effective  time of the Merger,  all the  Exclusivity  Shares
of Newkirk  common stock held by the Trust  will immediately  vest and no longer be
subject to forfeiture and the lock-up  agreement with respect to all Newkirk shares held
by the  Trust, currently in effect until November 2008, will thereupon terminate.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

21



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WINTHROP
REALTY TRUST  
FORM 10-Q SEPTEMBER 30, 2006

NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

|8. | Newkirk
Equity Investment (Continued)
|-- | -------------------------------------

| | In
        connection with the Merger, the advisory agreement between Newkirk and
        NKT Advisors will be terminated and NKT Advisors will receive a termination
        fee of which $5.5 million is attributable to the NKT Advisors incentive fee from
        Newkirk. Pursuant to the terms of the advisory agreement between the Trust
        and FUR Advisors, the fee payable by the Trust to FUR Advisors is reduced
        by 80% of all incentive fee paid by Newkirk to NKT Advisors. Accordingly,
        upon consummation of the Merger, the advisory fee payable by the Trust
        to FUR Advisors will be reduced by an aggregate of $4.4 million. If there
        is any unused portion of the $4.4 million outstanding after the eighth
        calendar quarter following the Merger, FUR Advisors is obligated to pay
        such unused portion to the Trust.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Trusts investment in Newkirk is accounted for on the equity method.
| | ------------------------------------------------------------------------

| | The
investment in Newkirk consists of the following:
| | ----------------------------------------------------

|                            |  |  | 2006 |       
|--------------------------- |  |  | ---- | ------
|                            |  |  |      |       
|Balance,
      January 1    |  |  | $    | 70,304
|Equity
      in income      |  |  |      | 7,777 
|Dividends
      received    |  |  |      | (4,680
|                            |  |  |      |       
|Balance,
      September 30 |  |  | $    | 73,401
|                            |  |  |      |       

22



---

WINTHROP
REALTY TRUST  
FORM 10-Q SEPTEMBER 30, 2006

NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

|8. | Newkirk
Equity Investment (Continued)
|-- | -------------------------------------

| | Summary
financial information of Newkirk is as follows (in thousands):
| | ----------------------------------------------------------------------

|                                             |  |  | As of 
        September 30,
        2006 |           | As
        of
        December 31,
        2005 |  
|-------------------------------------------- |  |  | ----------------------------------------- | --------- | ----------------------------------------------- | -
|                                             |  |  |                                           |           |                                                 |  
|Condensed
      Balance Sheet Information    |  |  |                                           |           |                                                 |  
|Real
      estate investments, net           |  |  | $                                         | 978,512   |                                                 | $
|Cash
      and cash equivalents              |  |  |                                           | 133,859   |                                                 |  
|Other
      assets                           |  |  |                                           | 340,050   |                                                 |  
|                                             |  |  |                                           |           |                                                 |  
|Total
      Assets                           |  |  | $                                         | 1,452,421 |                                                 | $
|                                             |  |  |                                           |           |                                                 |  
|Note
      payable                           |  |  | $                                         | 549,074   |                                                 | $
|Other
      liabilities                      |  |  |                                           | 322,471   |                                                 |  
|                                             |  |  |                                           |           |                                                 |  
|Total
      Liabilities                      |  |  |                                           | 871,545   |                                                 |  
|                                             |  |  |                                           |           |                                                 |  
|Minority
      Interests                     |  |  |                                           | 393,097   |                                                 |  
|Shareholders
      Equity                   |  |  |                                           | 187,779   |                                                 |  
|                                             |  |  |                                           |           |                                                 |  
|Total
      Liabilities, Minority Interests, |  |  |                                           |           |                                                 |  
|And
      Shareholders Equity               |  |  | $                                         | 1,452,421 |                                                 | $
|                                             |  |  |                                           |           |                                                 |  
|On
      the Trusts Consolidated Balance    |  |  |                                           |           |                                                 |  
|Sheet:                                       |  |  |                                           |           |                                                 |  
|Equity
      Investment                      |  |  | $                                         | 73,401    |                                                 | $
|                                             |  |  |                                           |           |                                                 |  

|                                                        |  |  | For
        the Three Months Ended 
        September 30, 2006 |         | For
        the Nine Months Ended
        September 30, 2006 |  
|------------------------------------------------------- |  |  | -------------------------------------------------------------- | ------- | ------------------------------------------------------------ | -
|                                                        |  |  |                                                                |         |                                                              |  
|Condensed
      Statements of Operations                |  |  |                                                                |         |                                                              |  
|Information                                             |  |  |                                                                |         |                                                              |  
|Revenues                                                |  |  | $                                                              | 53,152  |                                                              | $
|Equity
      in earnings (loss) of limited partnerships |  |  |                                                                | (198    | )                                                            |  
|Interest
      expense                                  |  |  |                                                                | (14,600 | )                                                            |  
|General
      and administrative                        |  |  |                                                                | (2,248  | )                                                            |  
|Exclusivity
      Agreement expense                     |  |  |                                                                | (833    | )                                                            |  
|Depreciation
      and amortization                     |  |  |                                                                | (9,805  | )                                                            |  
|Other
      expenses                                    |  |  |                                                                | (5,341  | )                                                            |  
|Minority
      interest                                 |  |  |                                                                | (16,150 | )                                                            |  
|Discontinued
      operations                           |  |  |                                                                | 15,839  |                                                              |  
|                                                        |  |  |                                                                |         |                                                              |  
|Net
      income                                        |  |  | $                                                              | 19,816  |                                                              | $
|                                                        |  |  |                                                                |         |                                                              |  
|On
      the Trusts Consolidated Statements of         |  |  |                                                                |         |                                                              |  
|Operations
      and Comprehensive Income               |  |  |                                                                |         |                                                              |  
|Equity
      in earnings of equity investment           |  |  | $                                                              | 4,475   |                                                              | $
|                                                        |  |  |                                                                |         |                                                              |  

23



---

WINTHROP
REALTY TRUST  
FORM 10-Q SEPTEMBER 30, 2006

NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

|9. | Investment
in Joint Venture
|-- | ---------------------------

| | On
March 31,  2006,  Newkirk  and the Trust  entered  into a joint  venture  to acquire  and
originate  loans  secured,  directly  and  indirectly,  by real estate assets through 111
Debt Holdings LLC (111 Debt  Holdings).  The joint venture is owned equally
by Newkirk  and the Trust.  The Trust and Newkirk  initially  committed to invest up to
$50,000,000  each in the joint venture.  In addition,  the  joint venture has entered
into a  $300,000,000  repurchase  agreement with Column  Financial  Inc., a subsidiary of
Credit Suisse First  Boston,  pursuant to which the joint venture  expects to leverage up
to 75% of the assets held in the joint venture.   In May 2006, the  joint  venture
entered  into a second  repurchase  agreement  with Bear  Stearns  International  Ltd.
enabling  the joint  venture an  additional  $200,000,000  in  leverage.  At  September
30,  2006,  111 Debt  Holdings had  balances  outstanding  of  $72,028,000  and
$96,942,000 under the Column repurchase  agreement and Bear Stearns  repurchase
agreement,  respectively.  Effective October 13, 2006,  each of the Trust and Newkirk
agreed to commit an additional  $50,000,000  ($100,000,000  in the aggregate) to the
joint venture.  Upon  acquisition  and  origination  of a  sufficient  level of loan
obligations,  the joint  venture may form one or more  collateral  debt  obligation pools.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
connection  with the  formation  of the joint  venture,  Newkirk  contributed  existing
loan  assets  which had been  acquired  in  anticipation  of the formation of the joint
venture and the Trust  contributed  $11,374,000,  which amount was equal to 50% of the
net  equity.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
joint  venture is governed by an  investment  committee  which  consists of two members
appointed by each of Newkirk and the Trust  with one additional  member being appointed
by the common  management of Newkirk and the Trust. All decisions  requiring the consent
of  the investment  committee  require the affirmative  vote by three of the four members
appointed by Newkirk and the Trust.  Pursuant to  the terms of the joint  venture
agreement of 111 Debt  Holdings,  all  material  actions to be taken by 111 Debt
Holdings,  including  investments in excess of $20,000,000,  require the consent of the
investment committee;  provided, however, the consent of both Newkirk  and the Trust is
required for the merger or  consolidation  of 111 Debt Holdings,  the admission of
additional  members,  the taking of  any action that, if taken  directly by Newkirk or
the Trust,  would  require  consent of the Trusts  Conflicts  Committee or Newkirks
independent directors, the entering into of any agreement with FUR Advisors or the
amendment of the joint venture agreement.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Trust accounts for this investment using the equity method.
| | ---------------------------------------------------------------

| | The
investment in joint venture consists of the following (in thousands):
| | -------------------------------------------------------------------------

|                                      |  |  | 2006 |       
|------------------------------------- |  |  | ---- | ------
|                                      |  |  |      |       
|Balance,
      January 1              |  |  | $    |      
|Investment
      in joint venture     |  |  |      | 47,601
|Equity
      in loss of joint venture |  |  |      | (21   
|                                      |  |  |      |       
|Balance,
      September 30           |  |  | $    | 47,580
|                                      |  |  |      |       

24



---

WINTHROP
REALTY TRUST  
FORM 10-Q SEPTEMBER 30, 2006

NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

|9. | Investment
in Joint Venture (Continued)
|-- | ---------------------------------------

| | The
joint ventures condensed balance sheet as of September 30, 2006 was as follows (in
thousands):
| | ---------------------------------------------------------------------------------------------------

|                                             |  |  | September
        30, 2006 |        
|-------------------------------------------- |  |  | -------------------------- | -------
|                                             |  |  |                            |        
|Condensed
      Balance Sheet Information    |  |  |                            |        
|Cash
      and restricted cash               |  |  | $                          | 5,948  
|Investment
      in debt securities          |  |  |                            | 261,835
|Other
      assets                           |  |  |                            | 230    
|                                             |  |  |                            |        
|Total
      assets                           |  |  | $                          | 268,013
|                                             |  |  |                            |        
|Accounts
      payable and other liabilities |  |  | $                          | 3,531  
|Repurchase
      agreements                  |  |  |                            | 168,970
|Members
      equity                        |  |  |                            | 95,512 
|                                             |  |  |                            |        
|Total
      liabilities and members equity  |  |  | $                          | 268,013
|                                             |  |  |                            |        
|On the
      Trusts Consolidated Balance    |  |  |                            |        
|Sheet:                                       |  |  |                            |        
|Equity
      investment in joint venture     |  |  | $                          | 47,580 
|                                             |  |  |                            |        

|                                                                                   |  |  | For
        the Three Months Ended 
        September 30, 2006 |        | For the Six Months 
        Ended September 30, 2006 |  
|---------------------------------------------------------------------------------- |  |  | -------------------------------------------------------------- | ------ | ---------------------------------------------------- | -
|                                                                                   |  |  |                                                                |        |                                                      |  
|Condensed
      Statement of Operations Information                                |  |  |                                                                |        |                                                      |  
|Interest
      income                                                              |  |  | $                                                              | 4,629  |                                                      | $
|Loss
      from change in fair market value of interest rate derivatives           |  |  |                                                                | (3,759 | )                                                    |  
|Interest
      expense                                                             |  |  |                                                                | (2,067 | )                                                    |  
|General
      and administrative                                                   |  |  |                                                                | (344   | )                                                    |  
|                                                                                   |  |  |                                                                |        |                                                      |  
|Net
      loss                                                                     |  |  | $                                                              | (1,541 | )                                                    | $
|                                                                                   |  |  |                                                                |        |                                                      |  
|On the
      Trusts Consolidated Statement of Operations and Comprehensive Income |  |  |                                                                |        |                                                      |  
|Equity
      in loss of equity investment in joint venture:                        |  |  | $                                                              | (770   | )                                                    | $
|                                                                                   |  |  |                                                                |        |                                                      |  

| | The
joint venture commenced operations on March 31, 2006.
| | ---------------------------------------------------------

25



---

WINTHROP
REALTY TRUST  
FORM 10-Q SEPTEMBER 30, 2006

NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

|10. | Repurchase
Agreements
|--- | ---------------------

| | Information
pertaining to the repurchase agreements entered into in connection with the
mortgage-backed  securities (see Note 4) as of  September 30, 2006 is as follows (dollars
in thousands):
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                 |  |  |                         |  |                                                 |       |     | September
        30, 2006          |  
|-------------------------------- |  |  | ----------------------- |  | ----------------------------------------------- | ----- | --- | ----------------------------------- | -
|                                 |  |  |                         |  |                                                 |       |     |                                     |  
|                                 |  |  | Expiration              |  | Interest Rate as of 
        September 30, 2006 |       |     | Debt
        Carrying
        Value |  
|                                 |  |  |                         |  |                                                 |       |     |                                     |  
|Repurchase
      agreement with  |  |  | October
      25, 2006, |  |                                                 |       |     |                                     |  
|Bear
      Stearns and Co., Inc. |  |  | renewable
      monthly |  |                                                 |       |     |                                     |  
|as counter-party                 |  |  |                         |  |                                                 | 5.31% | (1) |                                     | $
|                                 |  |  |                         |  |                                                 |       |     |                                     |  
|Repurchase
      agreement with  |  |  | October
      25, 2006, |  |                                                 |       |     |                                     |  
|Bear
      Stearns and Co., Inc. |  |  | renewable
      monthly |  |                                                 |       |     |                                     |  
|as counter-party                 |  |  |                         |  |                                                 | 5.31% |     |                                     |  
|                                 |  |  |                         |  |                                                 |       |     |                                     |  
|                                 |  |  |                         |  |                                                 |       |     |                                     | $
|                                 |  |  |                         |  |                                                 |       |     |                                     |  

| | (1) | As
a result of the Trust  entering  into an  interest  rate swap  agreement  with a notional
amount  guaranteed  to equal the  balance on this portion of the repurchase agreement, it
has effectively fixed the rate at 4.05% through January 2008.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Since
the acquisition of its mortgage  backed  securities,  the Trust has paid  $1,125,281 on
its repurchase  agreements in connection  with margin calls.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------

26



---

WINTHROP
REALTY TRUST  
FORM 10-Q SEPTEMBER 30, 2006

NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

|11. | Debt
|--- | ----

| | The
Trusts debt is summarized as follows (in thousands):
| | ---------------------------------------------------------

|                                 |  |  | Maturity             |  | Spread
        Over
        LIBOR/ 
        Prime |  |  | Interest
        Rate as of
        September 30, 2006 |       |   | Balance as of 
        September 30, 2006 |   | Balance as of 
        December 31, 2005 | 
|-------------------------------- |  |  | -------------------- |  | ------------------------------------------------- |  |  | ------------------------------------------------------ | ----- | - | ----------------------------------------- | - | ---------------------------------------- | 
|                                 |  |  |                      |  |                                                   |  |  |                                                        |       |   |                                           |   |                                          | 
|Mortgage
      Loans Payable:    |  |  |                      |  |                                                   |  |  |                                                        |       |   |                                           |   |                                          | 
|                                 |  |  |                      |  |                                                   |  |  |                                                        |       |   |                                           |   |                                          | 
|Fixed
      Interest Rate:       |  |  |                      |  |                                                   |  |  |                                                        |       |   |                                           |   |                                          | 
|                                 |  |  |                      |  |                                                   |  |  |                                                        |       |   |                                           |   |                                          | 
|Plantation,
      FL (1)         |  |  | March
      2010     |  |                                                  |  |  |                                                        |      |   |                                           |   |                                         | 
|Kroger
      Properties (1)      |  |  | November
      2010  |  |                                                  |  |  |                                                        |      |   |                                           |   |                                         | 
|Jacksonville,
      FL (1)       |  |  | July
      2011      |  |                                                  |  |  |                                                        |      |   |                                           |   |                                         | 
|Amherst,
      NY                |  |  | October
      2013   |  |                                                  |  |  |                                                        | 5.65  | % |                                           |   | 17,706                                   | 
|Indianapolis,
      IN           |  |  | April
      11, 2015 |  |                                                  |  |  |                                                        | 5.82  | % |                                           |   | 4,522                                    | 
|Houston,
      TX                |  |  | April
      2016     |  |                                                  |  |  |                                                        | 6.66  | % |                                           |   | 72,840                                   | 
|Andover,
      MA                |  |  | February
      2011  |  |                                                  |  |  |                                                        | 6.60  | % |                                           |   | 6,636                                    | 
|S. Burlington,
      VT          |  |  | February
      2011  |  |                                                  |  |  |                                                        | 6.60  | % |                                           |   | 2,844                                    | 
|Chicago,
      IL                |  |  | March
      2016     |  |                                                  |  |  |                                                        | 5.75  | % |                                           |   | 21,600                                   | 
|Lisle,
      IL                  |  |  | June
      2016      |  |                                                  |  |  |                                                        | 6.26  | % |                                           |   | 24,600                                   | 
|                                 |  |  |                      |  |                                                   |  |  |                                                        |       |   |                                           |   |                                          | 
|Variable
      Interest Rate:    |  |  |                      |  |                                                   |  |  |                                                        |       |   |                                           |   |                                          | 
|                                 |  |  |                      |  |                                                   |  |  |                                                        |       |   |                                           |   |                                          | 
|Various                          |  |  | June
      2009      |  | LIBOR
        + 1.75%                             |  |  |                                                        | (2    | ) |                                           |   | 69,238                                   | 
|Chicago,
      IL                |  |  | March
      2007     |  | Prime
        + 0.50%                             |  |  |                                                        | 8.75  | % |                                           |   | 9,500                                    | 
|Chicago,
      IL                |  |  | March
      2007     |  | Prime
        + 0.50%                             |  |  |                                                        | 8.75  | % |                                           |   | 4,161                                    | 
|                                 |  |  |                      |  |                                                   |  |  |                                                        |       |   |                                           |   |                                          | 
|Total
      Mortgage Debt        |  |  |                      |  |                                                   |  |  |                                                        |       |   |                                           | $ | 233,647                                  | 
|                                 |  |  |                      |  |                                                   |  |  |                                                        |       |   |                                           |   |                                          | 
|Loans
      Payable:             |  |  |                      |  |                                                   |  |  |                                                        |       |   |                                           |   |                                          | 
|                                 |  |  |                      |  |                                                   |  |  |                                                        |       |   |                                           |   |                                          | 
|Secured
      by joint venture   |  |  |                      |  |                                                   |  |  |                                                        |       |   |                                           |   |                                          | 
|participation
      in the Toy   |  |  |                      |  |                                                   |  |  |                                                        |       |   |                                           |   |                                          | 
|Building
      Loan              |  |  | April
      2008     |  | LIBOR
        + 3.00                              |  |  |                                                        | 8.33  | % |                                           | $ | 30,000                                   | 
|Miscellaneous                    |  |  | February
      2007  |  |                                                  |  |  |                                                        | 7.50  | % |                                           |   | 9                                        | 
|                                 |  |  |                      |  |                                                   |  |  |                                                        |       |   |                                           |   |                                          | 
|                                 |  |  |                      |  |                                                   |  |  |                                                        |       |   |                                           |   |                                          | 
|                                 |  |  |                      |  |                                                   |  |  |                                                        |       |   |                                           | $ | 30,009                                   | 
|                                 |  |  |                      |  |                                                   |  |  |                                                        |       |   |                                           |   |                                          | 
|Revolving
      Line of Credit:  |  |  |                      |  |                                                   |  |  |                                                        |       |   |                                           |   |                                          | 
|                                 |  |  |                      |  |                                                   |  |  |                                                        |       |   |                                           |   |                                          | 
|$70 Million
      Revolving Line |  |  |                      |  |                                                   |  |  |                                                        |       |   |                                           |   |                                          | 
|of Credit                        |  |  | December
      2008  |  | LIBOR
        + 2.25%                             |  |  |                                                        | 7.125 | % |                                           | $ | 7,000                                    | 
|                                 |  |  |                      |  |                                                   |  |  |                                                        |       |   |                                           |   |                                          | 

| | (1) | Loans
were satisfied during 2006.
| | --- | ---------------------------------

| | (2) | As
a result of the Trust entering into an interest rate swap agreement in the notional
amount of  $40,000,000,  the Trust has  effectively  converted the interest rate from a
floating rate to a fixed rate of 8.55% through  November,  2007. The remaining  principal
amount of $29,238,000  remains  variable at LIBOR plus 1.75% (which  equated to 7.25% on
$11,022,000  and 7.125% on  $18,216,000 at September 30, 2006).
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

27



---

WINTHROP
REALTY TRUST  
FORM 10-Q SEPTEMBER 30, 2006

NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

|11. | Debt
(Continued)
|--- | ----------------

| | During
March and April 2006, the Trust  satisfied the three first  mortgage notes secured by the
Jacksonville,  Florida  property.  In  March 2006,  the Trust  satisfied two first
mortgage  notes for  approximately  $3,414,000 and recognized a $165,000 gain on the
early  extinguishment  of debt. In April 2006,  the Trust  satisfied the  remaining
first  mortgage  note for  approximately  $2,500,000  and  recognized a gain on the early
extinguishment of debt of $249,000.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | On
June 30, 2006,  the Trust  modified  its existing  mortgage  loan secured by certain of
the Trusts net lease  properties,  commonly  referred  to as the FINOVA  portfolio.
The loan which had a  principal  balance  outstanding  of  $51,022,000  at June 30,
2006,  was  modified to (a) reduce the interest rate from LIBOR plus 4.50% to LIBOR plus
1.75%,  (b) extend the maturity to June 30, 2009,  subject  to two one-year  extensions
and (c)  eliminate  the  requirement  for  principal  payments  equal to 50% of cash flow
(as defined) and  replaced this  requirement with quarterly  principal  payments of
approximately  $306,000,  beginning April 1, 2007.  During the second  quarter of 2006,
in connection  with the foregoing  modifications,  the Trust  incurred a fee of $730,000
and  recognized a loss on the  early extinguishment of debt of $525,000.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
lender has agreed to advance an additional  amount up to  $22,000,000  to be used to
refinance the Trusts  existing first mortgage  debt secured by its  properties
leased to The Kroger Co. and Bell South  Communications,  Inc.  An  additional  draw
of  approximately  $9,331,000  was made in August  2006 to  satisfy  the first  mortgage
debt  secured  by its  properties  leased to the  Kroger  Co. An  additional  draw of
approximately  $8,885,000  was made in September  2006 to satisfy the first  mortgage
debt secured by its property  leased to Bell South  Communications,  Inc. A final
additional draw of  approximately  $778,000 was made in October 2006 to cover costs
associated  with the loan  modification.  The additional  draws which total  $18,994,000
are subject to the same terms as the modified  loan and also require that in 2006 the
Trust make additional  principal  payments equal to what would have been paid under the
existing  first  mortgage  debt  encumbering  these  properties.  In connection  with the
satisfaction  of the first  mortgage  debt,  the Trust  recognized a loss on the early
extinguishment of debt of $543,000 in the third quarter of 2006.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

28



---

WINTHROP
REALTY TRUST  
FORM 10-Q SEPTEMBER 30, 2006

NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

|12. | Hedge
Instruments
|--- | -----------------

| | The
table below presents information about the Trusts interest rate swaps at September
30, 2006 (dollars in thousands):
| | ------------------------------------------------------------------------------------------------------------------------

|Active
        Period Through |  | Swap
        Rate |      | Notional
        
        Amount of 
        Hedged
        Liability |  | Cost of
        Hedge |        | Estimated Fair
        Value/Carrying 
        Value |   | Gross Unrealized
        Gain (Loss) For
        the Nine Months 
        Ended 
        September 30, 
        2006 | 
|----------------------------- |  | ----------------- | ---- | --------------------------------------------------------------------- |  | --------------------- | ------ | ---------------------------------------------------- | - | -------------------------------------------------------------------------------------------------------------------- | 
|                              |  |                   |      |                                                                       |  |                       |        |                                                      |   |                                                                                                                      | 
|November
      2007           |  |                   | 8.55 | %                                                                     |  | $                     | 40,000 |                                                      | $ |                                                                                                                     | 
|January
      2008            |  |                   | 4.05 | %                                                                     |  | $                     | 85,832 |                                                      | $ |                                                                                                                     | 

| | No
hedge  ineffectiveness  as defined by FAS No. 133 on cash flow hedges was recognized  for
the three and nine months ended  September  30, 2006.
| | --------------------------------------------------------------------------------------------------------------------------------------------------

|13. | Convertible
Preferred Shares of Beneficial Interest
|--- | ---------------------------------------------------

| | Series
A Preferred Shares
| | -------------------------

| | On
February 7, 2006,  the Trust  converted all of its  outstanding  Series A Shares into
4,836,763  Common  Shares.  The conversion was  effected in  accordance  with the
Certificate  of  Designations  for the Series A Shares at a ratio of 4.92 Common Shares
per Series A  Share.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Series
B-1 Preferred Shares
| | ---------------------------

| | In
February  2005 and June 2005,  the Trust  sold an  aggregate  of  4,000,000  of its
Series B-1 Shares to a number of  institutional  investors for  $100,000,000  in gross
proceeds.  The Trust incurred a total of $5,822,000 of  underwriting,  placement agent
and legal  fees to  unaffiliated  third  parties in  connection  with this  issuance.
The Series B-1 Shares  entitle  the  holders to  cumulative  dividends at a minimum rate
of 6.5% and are convertible  into Common Shares at a conversion  price of $4.50,  subject
to  anti-dilution  adjustments.  Under the terms of the Series B-1 Shares,  on February
28, 2012 the Trust is required to redeem all  outstanding  Series  B-1 Shares at the
liquidating  preference  price of $25.00 per Series B-1 Share.  Accordingly,  the Trust
accounts for the Series B-1  Shares as a liability and the associated  issuance  costs as
deferred  financing  costs on its  consolidated  balance sheet.  Dividends  accrued on
the Series B-1 Shares are included in interest  expense on the  consolidated  statement
of  operations.  In  addition,  the  holders of Series B-1 Shares have the right to elect
one  trustee to the Board of  Trustees of the Trust as long as 910,000  Series B-1
Shares are outstanding.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | On
February  2, 2006,  a holder of the Series B-1 Shares  exercised  its right to convert
10,000 of its Series B-1 Shares into Common  Shares.  In accordance  with the terms of
the  Certificate of  Designations  for the Series B-1 Shares,  on February 14, 2006 the
Trust  issued 55,556 Common Shares (5.56 Common Shares per Series B-1 Share).
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

29



---

WINTHROP
REALTY TRUST  
FORM 10-Q SEPTEMBER 30, 2006

NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

|14. | Common
Shares of Beneficial Interest
|--- | ------------------------------------

| | Rights
Offering
| | ---------------

| | On
March 29, 2006 the Trust  distributed  non-transferable  subscription  rights to
subscribe  for and  purchase  its Common  Shares to  holders of record at the close of
business on March 22, 2006.  Each holder of Common Shares received one basic
subscription  right for  every twelve Common  Shares owned,  or in the case of Series B-1
Shares,  one basic  subscription  right for every twelve Common Shares  issuable  upon
conversion  of such Series B-1 Shares,  as of the record date.  Each basic  subscription
right  entitled the holder to  purchase one Common Share for a subscription  price of
$5.25 per share.  Holders who exercised  their rights in full were also entitled  to
purchase additional Common Shares, subject to availability.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
connection with this offering,  certain existing  shareholders of the Trust agreed,
subject to certain conditions,  to purchase all  unsubscribed  Common Shares at the
subscription  price.  At the April 27, 2006  expiration of this offering,  the Trust
received basic  and  oversubscriptions  for all  5,220,022  Common  Shares.  Upon
issuance  of the shares  subscribed  for in May 2006,  the Trust (i)  received net
proceeds of $27,122,000 and (ii) has outstanding 45,693,809 Common Shares.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
net proceeds from the rights offering will be used for general  corporate  purposes which
may include the acquisition of additional  investments and/or the repayment of
outstanding indebtedness.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Dividend
Reinvestment Plan
| | --------------------------

| | On
August 24, 2006, the Trust filed a Registration  Statement on Form S-3 to register for
issuance up to 2,500,000  Common Shares to be  issued pursuant to its Dividend
Reinvestment and Stock Purchase Plan (DRIP).  Under the DRIP,  holders
of Common Shares can reinvest  all or a portion of the dividends  paid on the Common
Shares as well as invest  additional  sums in Common  Shares.  Any Common Shares
issued in  connection  with the DRIP are sold at a price equal to 98% of the average of
the high and low trading  prices on the day the  applicable  dividend is paid.  On
October 16,  2006,  pursuant to the DRIP,  the Trust  issued a total of 125,909  Common
Shares for a  gross sales price of $805,129.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Public
Offering of 15,000,000 Common Shares
| | -------------------------------------------

| | On
October 18, 2006, the Trust announced its intention to sell  approximately  15,000,000
newly issued Common Shares in an underwritten  public offering pursuant to the Trusts
effective shelf registration statement.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

30



---

WINTHROP
REALTY TRUST  
FORM 10-Q SEPTEMBER 30, 2006

NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

|15. | Discontinued
Operations
|--- | -----------------------

| | During
the third quarter of 2006,  the Sherman,  Texas  property  previously  included in
discontinued  operations  was placed back in  service due to the  determination  that the
potential  sale to the tenant is unlikely.  The operating  results of this property are
now  included in continuing operations for all periods presented in the financial
statements.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Trust  classified as discontinued  operations the income and expenses for the Little
Rock,  Arkansas  property (sold June 2004) and  Ventek  (sold  December  2005) in its
consolidated  statement of  operations  and  comprehensive  income.  In addition,  the
Trust has  classified the assets and liabilities  related to the Little Rock,  Arkansas
property and Ventek as assets of discontinued  operations  and liabilities of
discontinued operations.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Liabilities
of discontinued operations at September 30, 2006 and December 31, 2005 are summarized as
follows (in thousands):
| | ----------------------------------------------------------------------------------------------------------------------------

|                                            |  |  | 2006 |     | 2005 |  
|------------------------------------------- |  |  | ---- | --- | ---- | -
|                                            |  |  |      |     |      |  
|Mortgage
      loan payable                 |  |  | $    |    |      | $
|Accounts
      payable and accrued expenses |  |  |      | 827 |      |  
|                                            |  |  |      |     |      |  
|                                            |  |  | $    | 827 |      | $
|                                            |  |  |      |     |      |  

| | The
combined  results related to discontinued  operations for the three and nine months ended
September 30, 2006 and September 30, 2005  are as follows (in thousands):
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                 |  |  | For
        the Three Months
        Ended September 30, |    | For
        the Nine Months
        Ended September 30, |  
|------------------------------------------------ |  |  | -------------------------------------------------------- | -- | ------------------------------------------------------- | -
|                                                 |  |  |                                                          |    |                                                         |  
|(Amounts
        in thousands)                   |  |  | 2006                                                     |    | 2005                                                    |  
|                                                 |  |  |                                                          |    |                                                         |  
|Total
      revenues                             |  |  | $                                                        | 12 |                                                         | $
|Total
      expenses                             |  |  |                                                          |   |                                                         |  
|                                                 |  |  |                                                          |    |                                                         |  
|Income
      (loss) from discontinued operations |  |  | $                                                        | 12 |                                                         | $
|                                                 |  |  |                                                          |    |                                                         |  

|16. | Contingencies
|--- | -------------

| | Indemnity
to Former Trustee
| | ---------------------------

| | William
Ackman,  a former Trustee of the Trust,  has made demand on the Trust for
indemnification  for  approximately  $1.5 million of  expenses  incurred by him in his
capacity as a Trustee in connection with the litigation  matters relating to the aborted
merger of the  Trust with Gotham Golf Corp., an entity controlled by Mr. Ackman.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Trust has  forwarded  this  demand to its  insurance  carrier.  Both the  Trusts
insurance  carrier and the Trust have denied Mr.  Ackmans  demand  based on the
lack of adequate  documentation  submitted  to date and the  absence of a release  from
Mr.  Ackman.  No  reserve for any liability attributable to this matter has been accrued
in the financial statements as of September 30, 2006.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

31



---

WINTHROP
REALTY TRUST  
FORM 10-Q SEPTEMBER 30, 2006

NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

|16. | Contingencies
(Continued)
|--- | -------------------------

| | Indemnity
to Imperial Parking Limited
| | -------------------------------------

| | Revenue
Canada made inquiries of Imperial  Parking  relating to deductions  taken by Imperial
Parking at the time it was owned by FUMI.  If these  deductions are  ultimately
disallowed,  Imperial  Parking may make a claim for  indemnification  for amounts owed to
Revenue  Canada.  Although FUMI is required to indemnify Imperial Parking for certain
damages,  FUMI might not be required to indemnify Imperial  Parking for these particular
damages.  However, the Trust has established a reserve for possible costs related to this
matter.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Condemnation
Proceedings
| | ------------------------

| | The
City of St. Louis has  commenced a  condemnation  proceeding  with respect to the Trusts
property in St.  Louis,  Missouri.   The  property,  which is currently  vacant,  is
leased to The Kroger Company pursuant to a net lease with a term scheduled to expire
October  31, 2010 and annual rent of  $233,000.  The City is seeking to take the
property as part of an area-wide  redevelopment  program.  At  present the Trust and
the tenant are contesting the  condemnation.  Pursuant to the terms of the lease
with the tenant,  the tenant is  required to make a revocable  offer to purchase the
property at a scheduled  price at such time, if at all, as a condemnation  occurs.  The
scheduled  price,  which  decreases over time, is slightly in excess of the existing
principal  balance due on the loan secured by  the property.  It is not possible at
this time to determine whether the City will be successful in its efforts to take the
property.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|17. | Related-Party
Transactions
|--- | --------------------------

| | The
following describes certain related party transactions not discussed elsewhere in the
footnotes.
| | ----------------------------------------------------------------------------------------------------

| | The
affairs of the Trust and its  subsidiaries  are  administered  by FUR  Advisors  pursuant
to the terms of the  Advisory  Agreement  between  the Trust and FUR  Advisors.  FUR
Advisors is  controlled  by and  partially  owned by the  executive  officers of the
Trust.  Pursuant to the terms of the Advisory  Agreement,  FUR Advisors is responsible
for providing asset management services to the Trust and  coordinating  with the Trusts
shareholder  transfer  agent and  property  managers.  For  providing  such  services,
FUR Advisors is  entitled to a base  management fee calculated  based on either an asset
based  calculation  or an equity based  calculation,  whichever  results in a lesser
amount on a quarterly basis.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | FUR
Advisors is also entitled to receive (i) property and construction  management fees at
commercially  reasonable rates as determined  by the independent  Trustees of the Board,
and (ii) an incentive fee. At September 30, 2006,  Winthrop  Management  L.P., an
affiliate  of FUR Advisors,  provides property  management  services at five of the Trusts
properties and receives a fee for such services equal  to 3% of gross revenues at the
property or a minimum of $500.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

32



---

WINTHROP
REALTY TRUST  
FORM 10-Q SEPTEMBER 30, 2006

NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

|17. | Related-Party
Transactions (Continued)
|--- | --------------------------------------

| | The
incentive  fee entitles FUR Advisors to receive (a) an amount equal to 20% of all
distributions  paid to holders of Common Shares  after  December 31, 2003 in excess of
the Threshold  Amount,  hereinafter  defined,  and in addition,  (b) upon the
termination of the  Advisory  Agreement,  an  amount  equal to 20% of the  liquidation
value of the  Trust in  excess  of the  Threshold  Amount at the  termination
date.  As defined in the  Advisory  Agreement,  the  Threshold  Amount is equal to (x)
$71,300,000,  increased by the net  issuance price of all Common Shares,  with an
adjustment for Preferred Shares converted,  issued after December 31, 2003, and decreased
by the redemption price of all shares redeemed after December 31, 2003 plus (y) a return
on the amount,  as adjusted,  set forth in (x)  equal to 7% per annum compounded
annually.  The incentive fee is reduced by any direct damages to the Trust if the
Advisory  Agreement  is terminated by the Trust for cause.  At September 30, 2006, the
Threshold Amount was $137,908,000.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
following  table sets forth the fees and  reimbursements  paid by the Trust for the three
and nine months ended  September 30, 2006  and 2005, respectively to FUR Advisors and
Winthrop Management L.P. (in thousands):
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                              |  |  | Three
        Months Ended |     | Nine
        Months Ended |  
|----------------------------- |  |  | -------------------------- | --- | ------------------------- | -
|                              |  |  |                            |     |                           |  
|                              |  |  | 2006                       |     | 2005                      |  
|                              |  |  |                            |     |                           |  
|Asset
      Management (1)    |  |  | $                          | 896 | (3)                       | $
|Property
      Management (2) |  |  |                            | 63  |                           |  
|Incentive
      Fee           |  |  |                            |    |                           |  

| | (1) | Payable
to FUR Advisors
| | --- | -----------------------

| | (2) | Payable
to Winthrop Management L.P.
| | --- | -----------------------------------

| | (3) | Determined
using the equity based method
| | --- | ----------------------------------------

|18. | Restatement
|--- | -----------

| | Subsequent
to the issuance of the Trusts  consolidated  financial  statements  for the
quarterly  period ended  September 30,  2005,  management  determined  that the Trusts
consolidated  balance sheet as of September 30, 2005, and its statements of operations
and  comprehensive  income and cash flows for the associated three and nine months ended
September 30, 2005 should be restated.  In the  nine months ended  September 30, 2005,
$100,000,000  of Series B-1 Shares were issued and were  previously  included in
shareholders equity but should have been  included  in total  liabilities,  and the
related  costs  associated  with the  issuance of the Series B-1  Shares in the amount of
$5,684,000  should have been  included as deferred  costs.  In addition,  the deferred
costs should have been  amortized, and the dividends accrued on the Series B-1 Shares
should have been treated as interest expense.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

33



---

WINTHROP
REALTY TRUST  
FORM 10-Q SEPTEMBER 30, 2006

NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

|18. | Restatement
(Continued)
|--- | -----------------------

| | The
effects of the restatement are as follows (in thousands except per share amounts):
| | --------------------------------------------------------------------------------------

| | Statements
of Operations for the Three and Nine Months Ended September 30, 2005:
| | --------------------------------------------------------------------------------

|                                           |  |  | As
        Previously
        Reported                        |        | As
        Restated                                          |   | As Previously 
        Reported |  | As
        Restated |       
|------------------------------------------ |  |  | ------------------------------------------------------------- | ------ | ------------------------------------------------------------ | - | ------------------------------- |  | ------------------- | ------
|                                           |  |  |                                                               |        |                                                              |  
|                                           |  |  | For
        the Three Months Ended
        September 30, 2005 |        | For
        the Nine Months Ended
        September 30, 2005 |  
|                                           |  |  |                                                               |        |                                                              |  
|Interest
      expense                     |  |  | $                                                             | 4,491  |                                                              | $ | 6,334                           |  | $                   | 10,530
|Net income                                 |  |  |                                                               | 13,256 |                                                              |   | 11,427                          |  |                     | 16,819
|Net income
      (loss) applicable to      |  |  |                                                               |        |                                                              |   |                                 |  |                     |       
|Common
      Shares of Beneficial Interest |  |  |                                                               | 11,115 |                                                              |   | 10,911                          |  |                     | 11,641
|Earnings
      per share  basic           |  |  |                                                               | 0.35   |                                                              |   | 0.34                            |  |                     | 0.37  
|Earnings
      per share - diluted         |  |  | $                                                             | 0.22   |                                                              | $ | 0.22                            |  | $                   | 0.30  

| | Statement
of Cash Flows for the Nine Months Ended September 30, 2005:
| | ---------------------------------------------------------------------

|                                                           |  |  | As
        Previously
        Reported |         | As
        Restated |  
|---------------------------------------------------------- |  |  | -------------------------------------- | ------- | ------------------- | -
|                                                           |  |  |                                        |         |                     |  
|Cash
      Flows from Operating Activities:                |  |  |                                        |         |                     |  
|                                                           |  |  |                                        |         |                     |  
|Net
      income                                           |  |  | $                                      | 16,819  |                     | $
|Depreciation
      and amortization                        |  |  |                                        | 3,469   |                     |  
|Net
      change in other operating assets and liabilities |  |  |                                        | (2,514  | )                   |  
|Net
      cash flow provided by operating activities       |  |  |                                        | 8,385   |                     |  
|                                                           |  |  |                                        |         |                     |  
|Cash
      Flows from Financing Activities:                |  |  |                                        |         |                     |  
|                                                           |  |  |                                        |         |                     |  
|Deferred
      financing costs                             |  |  |                                        | (304    | )                   |  
|Issuance
      of Series B-1 Shares                        |  |  |                                        | 94,316  |                     |  
|Dividends
      paid on Series A and Series B-1 shares     |  |  |                                        | (4,078  | )                   |  
|Net
      cash flow provided by financing activities       |  |  | $                                      | 213,774 |                     | $

|19. | Business
Segments
|--- | -----------------

| | The
following tables present a summary of revenues from Operating  Properties,  Loans and
Real Estate  Securities and expenses incurred  by each  segment for the three and nine
months  ended  September  30, 2006 and  September  30,  2005.  The Trust includes in  Corporate
Income  (Expense) interest on cash reserves, general and administrative expenses and
other non-segment specific income and expense items.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

34



---

WINTHROP
REALTY TRUST  
FORM 10-Q SEPTEMBER 30, 2006

NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Business
Segments (in thousands)

|                                                        |  |  | For
        the Three Months Ended |        | For
        the Nine Months Ended  |  
|------------------------------------------------------- |  |  | ---------------------------------- | ------ | ---------------------------------- | -
|                                                        |  |  | September
        30,
        2006 |        | September
        30,
        2005 |  
|                                                        |  |  |                                    |        |                                    |  
|Operating
      Properties                              |  |  |                                    |        |                                    |  
|Rents
      and other                                   |  |  | $                                  | 9,784  |                                    | $
|Operating
      expenses                                |  |  |                                    | (1,129 | )                                  |  
|Real
      estate taxes                                 |  |  |                                    | (329   | )                                  |  
|                                                        |  |  |                                    |        |                                    |  
|                                                        |  |  |                                    | 8,326  |                                    |  
|                                                        |  |  |                                    |        |                                    |  
|                                                        |  |  |                                    |        |                                    |  
|Loans                                                   |  |  |                                    |        |                                    |  
|Interest
      income                                   |  |  |                                    | 3,333  |                                    |  
|Equity
      earnings in preferred equity investment    |  |  |                                    | 1,887  |                                    |  
|Equity
      loss of equity investment in joint venture |  |  |                                    | (770   | )                                  |  
|                                                        |  |  |                                    |        |                                    |  
|                                                        |  |  |                                    | 4,450  |                                    |  
|                                                        |  |  |                                    |        |                                    |  
|                                                        |  |  |                                    |        |                                    |  
|Real
      Estate Securities                            |  |  |                                    |        |                                    |  
|Dividends                                               |  |  |                                    | 230    |                                    |  
|Gain
      on sale of real estate securities            |  |  |                                    | 619    |                                    |  
|Assignment
      of exclusivity agreement               |  |  |                                    | 833    |                                    |  
|Equity
      earnings in equity investment              |  |  |                                    | 4,475  |                                    |  
|                                                        |  |  |                                    |        |                                    |  
|                                                        |  |  |                                    | 6,157  |                                    |  
|                                                        |  |  |                                    |        |                                    |  
|                                                        |  |  |                                    |        |                                    |  
|Less
      - Depreciation and Amortization              |  |  |                                    |        |                                    |  
|Operating
      Properties                              |  |  |                                    | 2,981  |                                    |  
|Loans                                                   |  |  |                                    | 84     |                                    |  
|                                                        |  |  |                                    |        |                                    |  
|Less
      - Interest Expense                           |  |  |                                    |        |                                    |  
|Operating
      Properties                              |  |  |                                    | 3,626  |                                    |  
|Loans                                                   |  |  |                                    | 2,173  |                                    |  
|                                                        |  |  |                                    |        |                                    |  
|Corporate
      Income (Expense)                        |  |  |                                    |        |                                    |  
|Interest
      income                                   |  |  |                                    | 174    |                                    |  
|Interest
      expense                                  |  |  |                                    | (1,884 | )                                  |  
|General
      and administrative                        |  |  |                                    | (1,795 | )                                  |  
|State
      and local taxes                             |  |  |                                    | (110   | )                                  |  
|Legal
      Settlement                                  |  |  |                                    |       |                                    |  
|Loss
      on early extinguishment of debt              |  |  |                                    | (543   | )                                  |  
|                                                        |  |  |                                    |        |                                    |  
|Income
      from continuing operations before          |  |  |                                    |        |                                    |  
|minority
      interest                                 |  |  |                                    | 5,911  |                                    |  
|Minority
      interest                                 |  |  |                                    | (737   | )                                  |  
|                                                        |  |  |                                    |        |                                    |  
|Income
      from continuing operations                 |  |  |                                    | 5,174  |                                    |  
|                                                        |  |  |                                    |        |                                    |  
|Income
      (loss) from discontinued operations        |  |  |                                    | 12     |                                    |  
|                                                        |  |  |                                    |        |                                    |  
|Net
      Income                                        |  |  | $                                  | 5,186  |                                    | $
|                                                        |  |  |                                    |        |                                    |  
|Capital
      Expenditures                              |  |  |                                    |        |                                    |  
|Operating
      properties                              |  |  | $                                  | 196    |                                    | $
|                                                        |  |  |                                    |        |                                    |  
|                                                        |  |  |                                    |        |                                    |  
|                                                        |  |  |                                    |        |                                    |  
|Identifiable
      Assets                               |  |  |                                    |        |                                    |  
|Operating
      Properties                              |  |  |                                    |        |                                    |  
|Loans                                                   |  |  |                                    |        |                                    |  
|Real
      Estate Securities                            |  |  |                                    |        |                                    |  
|Other                                                   |  |  |                                    |        |                                    |  
|                                                        |  |  |                                    |        |                                    |  
|Total
      Assets                                      |  |  |                                    |        |                                    |  
|                                                        |  |  |                                    |        |                                    |  

35



---

WINTHROP
REALTY TRUST  
FORM 10-Q SEPTEMBER 30, 2006

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

| | Certain
        statements contained herein constitute forward-looking statements as such
        term is defined in Section 27A of the Securities Act of 1933, as amended,
        and Section 21E of the Securities Exchange Act of 1934, as amended. 
        Forward-looking statements are not guarantees of performance.  They
        involve risks, uncertainties and assumptions.  Our future results,
        financial condition and business may differ materially from those expressed
        in these forward-looking statements.  You can find many of these
        statements by looking for words such as approximates, believes,
        expects, anticipates, intends, plans,
        would, may or similar expressions in this quarterly
        report on Form 10-Q.  These forward-looking statements are subject
        to numerous assumptions, risks and uncertainties.  Many of the factors
        that will determine these items are beyond our ability to control or predict. 
        Factors that may cause actual results to differ materially from those
        contemplated by the forward-looking statements include, but are not limited
        to, those set forth in the Trusts Annual Report on Form 10-K/A (Amendment
        No. 3) for the year ended December 31, 2005 under Forward Looking
        Statements and Item 1. Business - Risk Factors.
        For these statements, the Trust claims the protection of the safe harbor
        for forward-looking statements contained in the Private Securities Litigation
        Reform Act of 1995.  We expressly disclaim any responsibility to
        update forward-looking statements, whether as a result of new information,
        future events or otherwise.  Accordingly, investors should use caution
        in relying on forward-looking statements, which are based on information,
        judgments and estimates at the time they are made, to anticipate future
        results or trends.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Managements
Discussion  and  Analysis  of  Financial  Condition  and  Results of  Operations
includes a  discussion  of the  Trusts  consolidated  financial  statements for the
three and nine months ended  September 30, 2006.  The  preparation of financial
statements  in conformity with accounting  principles  generally accepted in the United
States of America requires management to make estimates and  assumptions  that affect the
reported  amounts of assets and  liabilities  and disclosure of contingent  assets and
liabilities at the  date of the financial  statements  and the reported  amounts of
revenues and expenses  during the reporting  periods.  Actual  results  could differ
from those estimates.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | This
item should be read in conjunction with the financial statements, footnotes thereto and
other items contained elsewhere in the  report.
| | --------------------------------------------------------------------------------------------------------------------------------------------

| | Overview
| | --------

| | We
are a real estate  investment  trust (REIT) engaged in the business of owning
real property and real estate related assets through  our direct  ownership of real
property loans secured by real estate  property and  acquisitions  of equity and debt
securities of other  REITs. Our primary  business is making  investments in: (i)
operating  properties;  (ii) joint ventures formed to invest in real estate  related
assets;  (iii) loans; and (iv) real estate  securities.  We make these investments in
three strategic  business  segments:  (i)  Operating Properties, (ii) Loans and (iii)
Real Estate Securities.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

36



---

WINTHROP
REALTY TRUST  
FORM 10-Q SEPTEMBER 30, 2006

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

| | Overview
(Continued)
| | --------------------

| | Our
business  objective is to maximize  long-term  shareholder value through superior total
returns on our investments.  We measure our  success in meeting this objective by a
number of factors,  including  increases in diluted per share net income, cash returns
generated  by our  investments,  increases  in  shareholder  equity and total  return to
our  shareholders.  In  addition,  funds from  operations  (FFO),  while not
an ideal  measurement  given the nature of the  Trusts  investments,  is also a
useful  measurement  with which to  facilitate a comparison of current operating
performances among REITs.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | During
the three and nine months ended September 30, 2006 and 2005 our operating results were as
follows:
| | ---------------------------------------------------------------------------------------------------------

|                                                      |  |  | For
        the Three Months Ended |           | For
        the Nine Months Ended  |  
|----------------------------------------------------- |  |  | ---------------------------------- | --------- | ---------------------------------- | -
|                                                      |  |  | September
        30,
        2006 |           | September
        30,
        2005 |  
|                                                      |  |  |                                    |           |                                    |  
|Net income
      applicable to Common Shares          |  |  | $                                  | 5,186,000 |                                    | $
|                                                      |  |  |                                    |           |                                    |  
|Net income
      per Common Share, basic              |  |  | $                                  | 0.11      |                                    | $
|                                                      |  |  |                                    |           |                                    |  
|Net income
      per Common Share, diluted            |  |  | $                                  | 0.10      |                                    | $
|                                                      |  |  |                                    |           |                                    |  
|Funds
      from Operations per Common Share, diluted |  |  |                                    |           |                                    |  
|                                                      |  |  |                                    |           |                                    |  
|Net cash
      flow provided by operating activities  |  |  |                                    |           |                                    |  
|                                                      |  |  |                                    |           |                                    |  

| | At
September 30, 2006 and December 31, 2005, total assets and total shareholders equity
were as follows:
| | ---------------------------------------------------------------------------------------------------------

|                                 |  |  | September
        30, 2006 |             | December
        31, 2005 |  
|-------------------------------- |  |  | -------------------------- | ----------- | ------------------------- | -
|                                 |  |  |                            |             |                           |  
|Total
      assets               |  |  | $                          | 716,393,000 |                           | $
|                                 |  |  |                            |             |                           |  
|Total
      shareholders equity |  |  | $                          | 194,973,000 |                           | $
|                                 |  |  |                            |             |                           |  

37



---

WINTHROP
REALTY TRUST  
FORM 10-Q SEPTEMBER 30, 2006

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

| | Overview
(Continued)
| | --------------------

| | Shareholders equity
increased by $35,367,000 to $194,973,000  primarily as the result of our issuance of
common shares of beneficial  interest  (Common  Shares) and the net income
recognized  during the nine months ended  September  30, 2006.  Shareholders equity,
under generally  accepted  accounting  principles,  attributable to the Common Shares
increased from $3.95 per Common Share at December  31, 2005 (after  giving  effect to the
conversion  of the Series A Preferred  Shares) to $4.26 per Common Share at September 30,
2006.  In addition,  common  shareholders  received a dividend of $0.11 per Common Share
in January 2006 as well as a dividend  equal to $0.12  per Common Share in August 2006
and $0.06 per Common Share in October 2006.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | We
intend to continue to pursue our business  objective by basing our  investments  on our
assessment  that a potential  investment is  significantly  undervalued on a risk
adjusted basis or presents an opportunity  to outperform the  marketplace.  Additionally,
we will  make  investments  in assets  believed  to be  underperforming  and in which we
believe,  through an  infusion of capital and  improved  management,  an appropriate
return on investment can be realized.  Consequently,  with certain limitations,  we will
seek opportunities  to invest in or acquire most types of real estate assets or
securities.  As a result of our  investment in Newkirk  Realty Trust,  Inc.  (Newkirk)
as described  below,  it is unlikely that we will invest directly in net lease or
single-tenant  properties.  However,  we  will have a significant  investment in
single-tenant  assets through our ownership of shares in Newkirk,  and after the
consummation of  the proposed merger with Lexington Corporate  Properties Trust (Lexington),
through our ownership of shares in Lexington.  Moreover,  except as  limited  by the
restrictions  placed on us in order to meet our  requirements  to  maintain  REIT
status,  our  investment  decisions  will not be  materially  affected by the nature of
an  investment  or where that  investment  falls in an  entitys  capital
structure.  We will  acquire  entities  that own real  estate,  invest  directly in the
equity of a real estate  asset  exclusively  or  through a venture,  acquire  preferred
equity,  mezzanine  debt or first mortgage debt of a real estate asset to the extent we
believe  the ownership of the underlying  real estate would be consistent  with our
investment  goals.  In general,  it is not expected that we  will invest in an entity in
which we do not own 100% of the equity  unless we control or have  significant  influence
on  management of  the entity or have the means to acquire  control of the  investment
or have a mechanism  in place to exit the  investment  for a price  consistent with fair
value at a time of our election.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
view of the  foregoing,  our  near-term  investment  strategy  will be to identify  and
invest in discrete  real estate  investments  consistent with the stated criteria.  As
appropriate  investment  opportunities  arise, we will aggressively  pursue such
opportunities  independently  or through the formation of joint ventures.  We intend to
fund these  investments  through one or more of the following:  cash reserves,
borrowings  under our credit  facility,  property loans or the issuance of debt and/or
equity.  Toward that end, during  2006 we issued additional equity, instituted a
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

38



---

WINTHROP
REALTY TRUST  
FORM 10-Q SEPTEMBER 30, 2006

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

| | Overview
(Continued)
| | --------------------

| | dividend
reinvestment  and stock  purchase  plan,  announced  plans to issue more equity and have
increased the amount of our revolving  credit  facility.  For the  long-term,  as
investments  mature in value to the point where we are  unlikely  to achieve  better than
a  market  return on their then  enhanced  value,  it is likely we will exit the
investment  and seek to  redeploy  the capital to higher  yielding opportunities.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Accordingly,
our Consolidated  Statements of Operations and  Comprehensive  Income include both income
from continuing  operations and  discontinued operations.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Significant
investments, dispositions and financing transactions during the nine months ended
September 30, 2006 included:
| | --------------------------------------------------------------------------------------------------------------------------

| | o | acquiring
three office properties containing approximately 290,000 square feet;
| | - | -------------------------------------------------------------------------------

| | o | acquiring
in a joint  venture,  two loans  secured by first  priority  liens on 241,000  square
feet of commercial  space,  an  indoor parking  structure,  the underlying land and
unsold  condominiums at a property  commonly  referred to as River City in  Chicago,
Illinois;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | forming
a joint  venture  with  Newkirk as described  further  below in  Managements
Discussion  of  Liquidity  and Capital  Resources to acquire and originate loans
and create collateral debt obligation pools;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | selling
all of our 1,755,600  shares in Sizeler for an aggregate  sale price of  approximately
$25,363,000,  representing  an  aggregate gain excluding dividends of $7,843,000;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | obtaining
$70,530,000 in first mortgage indebtedness; and
| | - | ---------------------------------------------------------

| | o | modification
of our  mortgage  debt  encumbering  certain  of our net lease  properties  commonly
referred  to as the Finova  Portfolio;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------

| | Other
significant milestones for the nine months ended September 30, 2006 included:
| | -----------------------------------------------------------------------------------

| | o | redeeming
our Series A Preferred Shares;
| | - | ----------------------------------------

| | o | issuing
rights to our common and  preferred  shareholders  to  subscribe  for and purchase up to
an aggregate of 5,220,022 of  newly-issued  Common Shares for a price of $5.25 per Common
Share,  which was fully  subscribed,  raising net proceeds in the  second quarter of 2006
of approximately $27,122,000;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | establishing
a quarterly dividend of $0.06 per Common Share retroactive to January 1, 2006; and
| | - | -----------------------------------------------------------------------------------------------

| | o | instituting
a dividend reinvestment and stock purchase plan.
| | - | ------------------------------------------------------------

| | In
addition,  on October 18, 2006 we announced  our  intention  to sell  approximately
15,000,000  newly  issued  Common  Shares in an  underwritten public offering pursuant to
our effective shelf registration  statement  previously filed with the Securities and
Exchange  Commission.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

39



---

WINTHROP
REALTY TRUST  
FORM 10-Q SEPTEMBER 30, 2006

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

| | Critical
Accounting Policies and Estimates
| | ------------------------------------------

| | A
summary of the Trusts critical  accounting  policies is included in our Annual
Report on Form 10-K/A  (Amendment No. 3) for the year  ended December 31, 2005.  There
have been no significant changes to those policies during 2006.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Recently
Issued Accounting Standards
| | ------------------------------------

| | In
        September 2006, the FASB issued SFAS No. 157, Fair Value Measurements.
        This Statement applies under other accounting pronouncements that require
        or permit fair value measurements. Accordingly, this Statement does not
        require any new fair value measurements. However, for some entities, the
        application of this Statement will change current practice. This Statement
        clarifies that market participant assumptions include assumptions about
        risk, for example, the risk inherent in a particular valuation technique
        used to measure fair value (such as a pricing model) and/or risk inherent
        in the inputs to the valuation technique. This Statement clarifies that
        market participant assumptions also include assumptions about the effect
        of a restriction on the sale or use of an asset. This Statement also clarifies
        that a fair value measurement for a liability reflects its nonperformance
        risk. This Statement is effective for financial statements issued for
        fiscal years beginning after November 15, 2007, and interim periods within
        those fiscal years. We are currently evaluating the impact that the adoption of SFAS No. 157
        will have on our consolidated financial statements.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
        February 2006, the FASB issued SFAS No. 155, Accounting for Certain
        Hybrid Financial Instruments  an amendment of FASB Statements
        No. 133 and 140. This statement (1) permits fair value remeasurement
        for any hybrid financial instrument that contains an embedded derivative
        that otherwise would require bifurcation; (2) clarifies which interest-only
        strips and principal-only strips are not subject to the requirements of
        Statement 133; (3) establishes a requirement to evaluate interests in
        securitized financial assets to identify interests that are freestanding
        derivatives or that are hybrid financial instruments that contain an embedded
        derivative requiring bifurcation (4) clarifies that concentrations of
        credit risk in the form of subordination are not embedded derivatives;
        and (5) amends Statement 140 to eliminate the prohibition on a qualifying
        special-purpose entity from holding a derivative financial instrument
        that pertains to a beneficial interest other than derivative financial
        instrument. This Statement is effective for all financial instruments
        acquired or issued after the beginning of an entitys first fiscal
        year that begins after September 15, 2006. We do not believe that the
        adoption of SFAS No. 155 will have a material effect on our consolidated
        financial statements.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
        June 2006, the FASB issued FIN No. 48, Accounting for Uncertainty in
        Income Taxesan interpretation of FASB Statement No. 109. This
        Interpretation clarifies the accounting for uncertainty in income taxes
        recognized in an enterprises financial statements in accordance
        with FASB Statement No. 109, Accounting for Income Taxes. This
        Interpretation prescribes a recognition threshold and measurement attribute
        for the financial statement recognition and measurement of a tax position
        taken or expected to be taken in a tax return. This Interpretation also
        provides guidance on derecognition, classification, interest and penalties,
        accounting in interim periods, disclosure, and transition. This Interpretation
        is effective for fiscal years beginning after December 15, 2006. The Trust
        is currently evaluating the impact that the adoption of FIN No. 48 will
        have on the Trusts consolidated financial statements.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
September  2006,  the SEC issued  Staff  Accounting  Bulletin  No. 108 to address
diversity  in practice  in  quantifying  financial  statement  misstatements  and the
potential  under  current  practice  for the build up of improper  amounts on the balance
sheet.  SAB 108 provides guidance on the
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

40



---

WINTHROP
REALTY TRUST  
FORM 10-Q SEPTEMBER 30, 2006

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

| | Recently
Issued Accounting Standards (Continued)
| | ------------------------------------------------

| | consideration
of the effects of prior year  misstatements in quantifying  current year  misstatements
for the purpose of a materiality  assessment.  We do not believe that the adoption of SAB
108 will have any effect on our consolidated financial statements.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Results
of Operations
| | ---------------------

| | As
discussed earlier,  one of the factors used to measure  managements  performance is
net income. We report our operations by each of  our three strategic  business  segments
to provide a measure of our  performance in these  segments.  In addition to our three
business  segments, we include in our Corporate Activities interest on cash reserves,
general and administrative  expenses and other non-segment  specific income and expense
items. (See Business Segments - Note 19 to the financial statements in Item 1.)
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Net
Earnings
| | ------------

| | Net
income  applicable  to Common  Shares  increased by $7,597,000  to  $18,790,000  for the
nine months ended  September 30, 2006 from  $11,193,000  for the nine months ended
September 30, 2005. As described in greater detail below,  the increase was due primarily
to an  increase  in other  income of  $8,728,000,  the  components  of which are
discussed  further  below,  and an  increase  in revenues of  $16,152,000.  These
increases were partially offset by an increase in expenses of $16,247,000 and an increase
in earnings  allocated to  minority interest of $2,163,000, both of which are also
discussed in detail below.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Results
of Operations  Nine Months Ended September 30, 2006 Versus September 30, 2005
| | --------------------------------------------------------------------------------------

| | Operating
Properties
| | --------------------

| | Revenues
and expenses  increased for the nine months ended  September 30, 2006 as compared to the
nine months ended  September 30, 2005  primarily  as a result of our  acquisition  of the
Andover,  Massachusetts  property,  the  Burlington,  Vermont  property and the two
wholly-owned  Lisle,  Illinois  properties.  This was partially offset by the results at
our  Jacksonville,  Florida property which was  vacated by Winn Dixie in November  2005.
This  property was  approximately  81% leased at September 30, 2006.  The  operating
results  from all our other properties remained relatively constant.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

41



---

WINTHROP
REALTY TRUST  
FORM 10-Q SEPTEMBER 30, 2006

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

| | Results
of Operations  Nine Months Ended September 30, 2006 Versus September 30,
2005(Continued)
| | -------------------------------------------------------------------------------------------------

| | Operating
Properties (Continued)
| | --------------------------------

| | o | Rental
income  increased by $9,804,000 to $28,032,000  for the nine months ended  September 30,
2006 from  $18,228,000 for the  nine months ended  September  30, 2005.  This increase
was  partially  offset by a reduction in rental  revenue of $516,000 at  our property
located in Jacksonville, Florida;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | operating
expenses from our  properties  increased by $2,387,000 to $2,951,000  for the nine months
ended  September 30, 2006  from $564,000 for the nine months ended September 30, 2005;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | real
estate tax expense increased by $846,000 to $908,000;
| | - | ----------------------------------------------------------

| | o | interest
expense  related to our operating  properties was  $10,754,000 for the nine months ended
September 30, 2006 compared  to $9,066,000 for the nine months ended  September 30, 2005
due primarily to the new financings  obtained in late 2005 and the  first quarter 2006,
the effects of which were partially  offset by more favorable  interest rates obtained by
the  refinancing  in 2006 of certain mortgage debt;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | loss
on  extinguishment  of debt was $668,000 for the nine months ended  September 30, 2006
compared to $0 for the same period  in 2005 due to the refinancing of the first mortgage
debt encumbering the Finova portfolio on more favorable terms ; and
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | depreciation
and  amortization  expense  relating to our operating  properties  increased by
$3,319,000 to $8,306,000 for the  nine months ended September 30, 2006 compared to
$4,987,000 for the nine months ended September 30, 2005.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Loans
| | -----

| | Interest
income from our loan  investments  was $9,801,000  for the nine months ended  September
30, 2006 compared to $427,000 for the  nine months ended  September  30, 2005.  The
increase was due  primarily to our  investment  in the Toy Building  loan which
generated  $4,773,000 of interest income during the nine months ended  September 30, 2006
and our investment in whole pool agency  mortgage-backed  securities,  which  generated
interest  income of  $3,813,000  during  this  same  period.  Equity in  earnings  in
preferred  equity  investments  increased by  $2,258,000  to $4,856,000  for the nine
months ended  September 30, 2006.  The increase was due to our April  2005  origination
of 24 mezzanine  loans and two second mortgage loans,  commonly  referred to as the Marc
portfolio and the sale in  the third quarter 2006 of two of the properties
indirectly  securing these loans,  which generated a gain of  approximately  $410,000.
Partially  offsetting  some of these increases was an unrealized  decline in fair market
value of our joint  ventures  investment with  Newkirk, 111 Debt Holdings, interest
rate swaps which resulted in $21,000 of equity loss.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

42



---

WINTHROP
REALTY TRUST  
FORM 10-Q SEPTEMBER 30, 2006

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

| | Results
of Operations  Nine Months Ended September 30, 2006 Versus September 30, 2005
(Continued)
| | --------------------------------------------------------------------------------------------------

| | Loans
(Continued)
| | -----------------

| | Interest
expense  related to our loan  investments  was $6,209,000 for the nine months ended
September 30, 2006 compared to $1,261,000  for the nine months ended  September  30, 2005
due primarily to the  financing  secured by our Toy Building  loan and interest  expense
incurred on our repurchase agreements secured by whole pool agency mortgage-backed
securities.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Real
Estate Securities
| | ----------------------

| | During
2005 we  significantly  increased our  investment in real estate  securities,  most
notably by our  investment in Newkirk.  This  investment  generated  equity earnings of
$7,777,000  during the nine months ended September 30, 2006. In addition,  as a result of
our  assignment  of certain  rights with  respect to net lease assets under an
Exclusivity  Services  Agreement  with  Michael  Ashner,  we  recognized  other income of
$2,500,000  during the nine months ended  September  30, 2006.  Dividends  recognized on
other real estate  securities  were $641,000  during the nine months ended  September 30,
2006 compared to $1,319,000 for the nine months ended  September  30, 2005.  This
decrease was due primarily to the sale of Sizeler  stock during 2006.  Also during the
nine months ended  September 30,  2006, we recognized  gains  aggregating  $8,125,000 on
the sale of our shares of certain real estate  securities,  primarily  shares of  Sizeler
stock.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Corporate
Activities
| | --------------------

| | Interest
income  earned on our cash and cash  equivalents  during the nine months ended  September
30, 2006 was $678,000  compared to  $3,026,000  for the same period  during  2005.  The
decrease  was due  primarily  to less cash  invested  during the nine months ended
September 30, 2006.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Interest
expense  increased by $1,875,000  to $6,201,000  for the nine months ended  September 30,
2006 from  $4,326,000  for the nine  months  ended  September  30,  2005.  The  increase
was  primarily  related to the  $1,400,000  increase in dividends on the Series B-1
Cumulative  Convertible  Redeemable  Preferred Shares (the Series B-1 Shares)
due to the shares being  outstanding nine months during  2006 while being  outstanding
seven  months  during 2005 which  dividends  are treated as  interest  expense for
financial  reporting  purposes.  The additional increase was related to interest expense
incurred on the Line of Credit borrowing during 2006.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | General
and  administrative  expenses  increased  by  $1,283,000  to  $5,015,000  for the nine
months  ended  September  30, 2006 from  $3,732,000 for the nine months ended  September
30, 2005.  This was primarily due to increases in the advisory fee paid to FUR Advisors
of $538,000 as a
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

43



---

WINTHROP
REALTY TRUST  
FORM 10-Q SEPTEMBER 30, 2006

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

| | Results
of Operations  Nine Months Ended September 30, 2006 Versus September 30, 2005
(Continued)
| | --------------------------------------------------------------------------------------------------

| | Corporate
Activities (Continued)
| | --------------------------------

| | result
of the increase in our  outstanding  equity and increased  legal,  auditing and tax
preparation  fees accrued of $790,000 which  were partially offset by a savings in
directors and officers insurance expense of $69,000.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | State
Income Taxes
| | ------------------

| | State
income taxes of $330,000 for the nine months ended  September 30, 2006 resulted from our
anticipating  taxable  income for state  purposes  after the dividends paid deduction and
utilization of net operating  losses.  The decrease in state income taxes of $285,000
from the same period in 2005 is due to a higher dividend paid deduction during 2006.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Legal
Settlement
| | ----------------

| | In
2005 we settled  litigation  with the state of California  related to flood damage at our
Peachtree  Mall  property.  In connection  with this settlement $11,000,000 was accrued
during the third quarter 2005 and was paid during the fourth quarter 2005.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Comprehensive
Income
| | --------------------

| | Comprehensive
income for the nine months ended  September  30, 2006 was comprised of  $8,125,000  of
gain  recognized  during the nine  months ended September 30, 2006 due to the sale of
real estate  securities  available for sale and consequently  included in net income  as
well as  unrealized  gain on our real  estate  securities  available  for sale of
$4,953,000,  unrealized  gain of  $648,000 on our  mortgage backed securities held for
sale and unrealized loss on our interest rate swap and cap agreements of $46,000.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Comprehensive
income for the nine months ended September 30, 2005 was comprised of $243,000 of gain
recognized  during the nine months  ended September 30, 2005 due to the sale of real
estate securities  available for sale and consequently  included in net income as well
as unrealized  gain on our real estate  securities  available  for sale of  $1,192,000,
unrealized  loss of $1,159,000 on our mortgage  backed securities held for sale and
unrealized gain on our interest rate swap and cap agreements of $1,730,000.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

44



---

WINTHROP
REALTY TRUST  
FORM 10-Q SEPTEMBER 30, 2006

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

| | Results
of Operations  Three Months Ended September 30, 2006 Versus September 30, 2005
| | ---------------------------------------------------------------------------------------

| | Operating
Properties
| | --------------------

| | Revenues
and expenses  increased  for the three months ended  September  30, 2006 as compared to
the three months ended  September  30,  2005 primarily as a result of our acquisition of
the Andover,  Massachusetts  property,  the Burlington,  Vermont  property and the two
wholly-owned  Lisle,  Illinois  properties.  This was partially offset by the results at
our  Jacksonville,  Florida property which was  vacated by Winn Dixie in November  2005.
This  property was  approximately  81% leased at September 30, 2006.  The  operating
results  from all our other properties remained relatively constant.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | Rental
income  increased by $3,411,000 to $9,784,000  for the three months ended  September 30,
2006 from  $6,373,000  for the  three months ended September 30, 2005;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | operating
expenses  from our  properties  increased by $946,000 to $1,129,000  for the three months
ended  September 30, 2006  from $183,000 for the three months ended September 30, 2005;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | real
estate tax expense increased by $308,000 to $329,000 for the three months ended September
30, 2006;
| | - | --------------------------------------------------------------------------------------------------------

| | o | interest
expense  related to our operating  properties was $3,626,000 for the three months ended
September 30, 2006 compared  to $3,165,000  for the three months ended  September 30,
2005 due  primarily to the new  financings  obtained in late 2005 and  during 2006, the
effects of which were partially  offset by more favorable  interest rates obtained by the
refinancing in 2006  of certain mortgage debt; and
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | depreciation
and  amortization  expense  relating to our operating  properties  increased by
$1,210,000 to $2,981,000 for the  three months ended September 30, 2006 compared to
$1,771,000 for the three months ended September 30, 2005.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Loans
| | -----

| | Interest
income from our loan  investments  was $3,333,000 for the three months ended  September
30, 2006 compared to $208,000 for the  three  months  ended  September  30,  2005.  The
increase was due  primarily  to our  investment  in the Toy Building  which  generated
$1,659,000 of interest income during the three months ended September 30, 2006 and our
investment in whole pool agency  mortgage-backed  securities,  which generated  interest
income in 2006 of $1,179,000.  Equity in earnings in preferred equity  investments
increased by  $419,000  in  2006.  The  increase  was  due to  the  sale  of two
properties  in  the  Marc  portfolio,  in  which  we had an  equity  participation.
Partially  offsetting  some of these increases was an unrealized  decline in value of 111
Debt Holdings interest rate  swaps which resulted in $770,000 of equity loss.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

45



---

WINTHROP
REALTY TRUST  
FORM 10-Q SEPTEMBER 30, 2006

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

| | Results
of Operations  Three Months Ended September 30, 2006 Versus September 30, 2005
(Continued)
| | ---------------------------------------------------------------------------------------------------

| | Real
Estate Securities
| | ----------------------

| | During
2005 we  significantly  increased our  investment in real estate  securities,  most
notably by our  investment in Newkirk.  This  investment  generated equity earnings of
$4,475,000  during the three months ended September 30, 2006. In addition,  as a result
of our  assignment  of certain  rights with  respect to net lease assets under an
Exclusivity  Services  Agreement  with  Michael  Ashner,  we  recognized  other income of
$833,000.  Dividends  recognized  on other real estate  securities  were  $230,000
during the three months  ended  September  30, 2006  compared to $414,000  for the three
months ended  September  30, 2005.  Also during the three months ended  September 30,
2006, we recognized gains aggregating $619,000 on the sale of our shares of Sizeler stock.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Corporate
Activities
| | --------------------

| | Interest
income earned on our cash and cash  equivalents  during the three months ended  September
30, 2006 was $174,000  compared to  $1,825,000 for the same period during 2005.  The
increase was due primarily to less cash invested during 2006.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Interest
expense  decreased by $24,000 to  $1,884,000  for the three months ended  September  30,
2006 from  $1,908,000  for the three  months ended September 30, 2005. The decrease was
primarily  related to a lower borrowing base on the Line of Credit  borrowing  during
2006.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | General
and  administrative  expenses increased by $749,000 to $1,795,000 for the three months
ended September 30, 2006 from $1,046,000  for the three  months  ended  September  30,
2005.  This was  primarily  due to an increase in the advisory fee paid to FUR Advisors
of  $172,000 due to an increase in our outstanding equity and an increase in auditing,
legal and tax preparation fees accrued of $511,600.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Comprehensive
Income
| | --------------------

| | Comprehensive
income for the three months ended  September  30, 2006 was  comprised  of $619,000 of
gain  recognized  during the three  months ended September 30, 2006 due to the sale of
real estate  securities  available for sale and consequently  included in net income  as
well as  unrealized  gain on our real estate  securities  available  for sale of
$1,194,000,  unrealized  gain of $1,020,000 on our  mortgage backed securities held for
sale and unrealized loss on our interest rate swap and cap agreements of $1,188,000.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

46



---

WINTHROP
REALTY TRUST  
FORM 10-Q SEPTEMBER 30, 2006

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

| | Results
of Operations  Three Months Ended September 30, 2006 Versus September 30, 2005
(Continued)
| | ---------------------------------------------------------------------------------------------------

| | Comprehensive
Income (Continued)
| | --------------------------------

| | Comprehensive
income for the three months ended  September  30, 2005 was  comprised  of $101,000 of
gain  recognized  during the three  months ended September 30, 2005 due to the sale of
real estate  securities  available for sale and consequently  included in net income  as
well as  unrealized  loss on our real estate  securities  available  for sale of
$1,146,000,  unrealized  loss of $1,159,000 on our  mortgage backed securities held for
sale and unrealized gain on our interest rate swap and cap agreements of $1,480,000.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Liquidity
and Capital Resources
| | -------------------------------

| | General
| | -------

| | Liquidity
is a measurement of our ability to meet potential  cash  requirements,  including
ongoing  commitments to repay  borrowings,  fund and maintain  investments,  pay
dividends on our Preferred and Common  Shares and other general  business  needs.  We
believe that  cash flow from operations will continue to provide adequate  capital to
fund our operating and  administrative  expenses,  regular debt  service  obligations and
all dividend payments in accordance with REIT  requirements in both the short-term and
long-term.  Contractual  commitments  have increased by $70,530,000 in mortgage loans
payable since December 31, 2005. In addition,  we anticipate  that cash on  hand,
borrowings under our credit facility and issuance of equity and debt, as well as other
alternatives,  will provide the necessary  capital  required for our investment
activities.  Moreover,  to maintain our status as a REIT under the Internal Revenue Code,
we must  distribute annually at least 90% of our REIT taxable income.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Our
primary sources of funds for liquidity consist of:
| | ------------------------------------------------------

| | o | cash
and cash equivalents;
| | - | --------------------------

| | o | operating
cash flow derived primarily from rental income received from our Operating Properties;
| | - | ------------------------------------------------------------------------------------------------

| | o | debt
service received from Loans held;
| | - | --------------------------------------

| | o | dividends
received from our ownership of Real Estate Securities;
| | - | ----------------------------------------------------------------

| | o | borrowings
under our credit facility; and
| | - | -----------------------------------------

| | o | issuance
of equity and debt.
| | - | ----------------------------

47



---

WINTHROP
REALTY TRUST  
FORM 10-Q SEPTEMBER 30, 2006

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

| | Liquidity
and Capital Resources (Continued)
| | -------------------------------------------

| | General
(Continued)
| | -------------------

| | We
had cash and cash  equivalents of $20,323,000 at September 30, 2006. In addition,  we had
$63,000,000  available under our revolving  line of credit with KeyBank.  In the future,
we may raise  additional  funds through other debt  financings  and/or equity  offerings.
Toward that end, (i) in August 2006 we instituted a Dividend  Reinvestment  and Stock
Purchase Plan (DRIP)  pursuant to which holders  of our Common Shares can
reinvest all or a portion of the  dividends  paid on the Common  Shares as well as invest
additional  sums in  our Common  Shares and (ii) on October 18, 2006,  we announced  our
intention to sell  approximately  15,000,000  newly issued  Common  Shares in an
underwritten  public offering pursuant to our effective shelf  registration  statement.
On October 16, 2006,  pursuant to  the DRIP, we issued a total of 125,909 Common Shares
for a gross sales price of $805,129.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | At
September 30, 2006,  there was an effective  registration  statement  under which the
Trust can offer an aggregate of  approximately  $330,000,000  equity or debt securities.
In addition,  our UPREIT structure enables us to acquire properties by issuing to
sellers, as  a form of  consideration,  limited  partnership  interests in our operating
partnership.  Although to date we have not issued  limited  partnership  interests in a
transaction,  we believe that this structure will facilitate our ability to acquire
individual  properties  and portfolios of properties by enabling us to structure
transactions  which will defer taxes payable by a seller while preserving our  available
cash for other purposes, including the possible payment of dividends and distributions.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

| | Our
level of  liquidity  based upon cash and cash  equivalents  increased  by  approximately
$1,305,000  during the nine months  ended  September  30,  2006.  The increase  resulted
from  $21,045,000  of cash  provided by operating  activities  and  $39,524,000  of cash
generated by our financing activities, which was offset by $59,264,000 of cash used in
our investing activities.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
        significant components of the cash we used for our investing activities
        during the nine months ended September 30, 2006 were as follows: (i) $47,601,000
        for our investment in our joint venture, 111 Debt Holdings which was used
        to fund acquisitions described below in the section entitled Equity
        Investment in Joint Venture; (ii) $20,519,000 for the acquisition
        and origination of loans; (iii) $37,194,000 for building acquisitions
        and capital improvements to our existing operating properties; (iv) $2,463,000
        for purchases of various real estate securities; (v) increase in restricted
        cash of $2,839,000; (vi) $1,484,000 for investment in preferred equity;
        and (vii) $14,858,000 for investment in a limited partnership.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

48



---

WINTHROP
REALTY TRUST  
FORM 10-Q SEPTEMBER 30, 2006

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

| | Liquidity
and Capital Resources (Continued)
| | -------------------------------------------

| | Cash
Flows (Continued)
| | ----------------------

| | Cash
provided by investing  activities  consisted  primarily of  $26,201,000  of proceeds
received  from  prepayment on our whole pool  mortgage-backed  securities  available for
sale and  $28,572,000  of proceeds from the sale of real estate  securities.  The balance
of  the increase in cash from investing  activities  related to the collection of loans
receivable of $8,027,000,  return of the preferred  equity of $3,264,000 and a partial
return of the investment in the limited liability company of $1,050,000.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Cash
provided by financing  activities  was the result of several  transactions  including (i)
$88,745,000  of mortgage loan proceeds;  (ii) $67,000,000 of proceeds from our revolving
line of credit with KeyBank;  (iii) $27,122,000 of proceeds from the issuance of Common
Shares; and (iv) contributions from minority partners of $2,607,000.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | During
the nine months ended  September 30, 2006, we used cash primarily for financing
activities as follows:  (i) $516,000 of dividend  payments on our Series A Shares;  (ii)
$9,397,000  of dividend  payments on our Common  Shares;  (iii)  $25,155,000  of
repayment  of  borrowings  under  repurchase  agreements;  (iv)  $30,625,000  of mortgage
loan  repayments;  (v)  repayments  of borrowings  under our  revolving line of credit of
$76,000,000; and (vi) $2,573,000 for distributions to minority interests.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Cash
provided by  operating  activities  of  $21,045,000  was  comprised  of (i) net income of
$18,790,000;  (ii) net decrease due to  adjustments  for  non-cash  items of  $1,497,000
and (iii) a net  increase  due to changes in  operating  assets  and  liabilities  of
$3,752,000.  The  adjustments  for non-cash  items were  primarily  comprised of
decreases  due to (i) net gains on sale of  securities  available  for sale of
$8,125,000;  (ii)  decrease in deferred  income  relating to the  assignment  of the
Exclusivity  Agreement of  $2,500,000;  (iii) equity in earnings in excess of
distributions  of equity  investment of  $3,097,000;  and (iv) bad debt recovery of
$20,000 and increases due to (i) depreciation and amortization of $9,879,000;  (ii) the
effect of  straight-lining  of rental income of  $150,000;  (iii) minority interest
expense of $2,088,000; (iv) loss on the early extinguishment of debt of $126,000; (v)
equity in loss  of equity  investment  in joint  venture of  $21,000;  and (vi)
distributions  in excess of equity in  earnings  of  preferred  equity  investment of
$12,000.  See our discussion of our results of operations above for additional details on
our operations.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Equity
Investment in Joint Venture
| | ----------------------------------

| | As
of October 18, 2006,  we  contributed  $49,601,000  to the joint venture 111 Debt
Holdings,  $47,601,000  of which was  contributed  during the nine months ended September
30, 2006, for the following acquisitions:
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

49



---

WINTHROP
REALTY TRUST  
FORM 10-Q SEPTEMBER 30, 2006

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

| | Liquidity
and Capital Resources (Continued)
| | -------------------------------------------

| | First
Mortgage Loans:
| | ---------------------

| | o | a
$19,000,000  floating rate first  mortgage  note secured by The Heart of Palm Beach Hotel
in Palm Beach,  Florida.  The two-  year loan bears an interest rate of LIBOR plus 2.40%
and is subject to three one-year extensions.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | B-Notes/Junior
Participations in First Mortgage Loans:
| | ------------------------------------------------------

| | o | a
$13,000,000 B Note secured by a 638,363  square foot Class A office  building in downtown
Atlanta for a purchase  price of  $10,473,000.  The B Note has an interest rate of 6.09%
and an expected yield of 12.43%.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | a
$4,500,000  junior  participation  in a first mortgage loan secured by an office
portfolio know as Boston Wharf  Properties  containing  a total of 438,522  square feet
located in Boston,  MA. The  underlying  loan has a term of two years with three,
one-year extensions.  The participation interest held by 111 Debt Holdings bears interest
at LIBOR plus 2.25%
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | a
$20,900,000 junior  participation in a first mortgage loan secured by The James Hotel in
Chicago,  Illinois, a 297 room full  service  hotel.  The  underlying  loan is scheduled
to mature on June 9, 2008 with the ability to extend for one,  three year  term.  The
participation interest held by 111 Debt Holdings bears interest at LIBOR plus 2.35%.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | a
$35,000,000  junior  participation  in a first  mortgage loan secured by the JW Marriot
Star Pass Resort & Spa , a 575-room  full service  resort  situated on a 380 acre site in
Tucson,  Arizona.  The  underlying  loan has a term of two years with the  ability to
extend to August 2011.  The participation interest held by 111 Debt Holdings bears
interest at LIBOR plus 2.35%.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Mezzanine
Loans:
| | ----------------

| | o | a
$1,500,000  mezzanine  loan  secured by the  ownership  interests  in  entities  owning
fee title to a 130,000  square foot  industrial  facility  that is net leased to Rockwell
Automation.  The loan bears an interest rate of 12% and matures in April  2016.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | a
$10,000,000  participation  in a mezzanine  loan secured by the  ownership  interests  in
entities  owning fee title to One  Madison Avenue,  a 1,100,000  square foot office
building  located in New York City and 95% leased to Credit Suisse.  The loan  was
purchased for $8,469,000 and has an expected unleveraged yield to maturity of 7.58%.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | a
$20,000,000  mezzanine  loan secured by the  ownership  interests in entities  owning fee
title to One Pepsi Way, a 539,692  square foot Class A office  building  situated on 206
acres in  Westchester  County,  NY. The two-year  loan bears an interest  rate of LIBOR
plus 4.25% and is subject to three, one-year extensions.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

50



---

WINTHROP
REALTY TRUST  
FORM 10-Q SEPTEMBER 30, 2006

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

| | Liquidity
and Capital Resources (Continued)
| | -------------------------------------------

| | Mezzanine
Loans (Continued):
| | ----------------------------

| | o | a
$19,052,187  fully  amortizing  mezzanine  note secured by the ownership  interests in
the entities  owning fee title to the  Computer Associates  headquarters,  a 778,367
square foot office building located in Islandia,  NY and 100% leased to Computer
Associates.  The loan bears an interest of 8.530% and matures on August 15, 2016.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | a
$1,900,000  mezzanine  note secured by the  ownership  interest in the entities  owning
fee title to 99 Founders  Plaza,  a  148,000  square foot class-B  office  building
in East  Hartford,  CT and 100% leased to Bank of America.  The mezzanine  note  bears a
fixed interest rate of 12% and matures in September 2016.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Preferred
Equity:
| | -----------------

| | o | a
$30,000,000 participation in a preferred membership interest in an entity which
indirectly holds an ownership interest in  the owner of a 907,142 square foot office
building located at 450 Lexington Avenue, New York, New York.  The participation
entitles 111 Debt Holdings to a preferred return of 8.5% and is required to be redeemed
prior to August 24, 2007.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Remics/Bonds:
| | -------------

| | o | $87,345,716
in credit mortgage backed securities and collateral debt obligations as follows:
| | - | --------------------------------------------------------------------------------------------

|Security                        |  |  | Class            |  | Face Value at Date
        of Acquisition |            | Margin/Coupon |                    | Rating
        Moody's/S&P/Fitch(1) |             
|------------------------------- |  |  | ---------------- |  | ----------------------------------------- | ---------- | ------------- | ------------------ | ----------------------------------- | ------------
|                                |  |  |                  |  |                                           |            |               |                    |                                     |             
|BSCMS
      04 BA5              |  |  | Class
      K    |  | $                                         | 13,000,000 |               | LIBOR
      + 3.25 |                                     | NR/BB/-     
|COMM
      05-FL11              |  |  | Class
      L    |  | $                                         | 15,355,763 |               | LIBOR
      + 2.25 |                                     | NR/BBB-/-   
|BACM
      2005-6               |  |  | Class
      KC-E |  | $                                         | 11,707,811 |               | 6.13               |                                     | NR/BBB/-    
|G-Force                         |  |  | Class
      J    |  | $                                         | 11,000,000 |               | 5.60               |                                     | NR/BBB-/-   
|LBFRC
      2006-LLFA           |  |  | Class
      L    |  | $                                         | 10,000,000 |               | LIBOR
      + 1.70 |                                     | NR/BBB-/BBB-
|MSC 2006-XLF                    |  |  | Class
      M    |  | $                                         | 7,745,207  |               | LIBOR
      + 1.65 |                                     | NR/BBB-/-   
|BALL
      04 BBA4              |  |  | Class
      K    |  | $                                         | 7,000,000  |               | LIBOR
      + 3.10 |                                     | -/BB/-      
|BSCMS
      06 BBA7             |  |  | Class
      K    |  | $                                         | 4,785,666  |               | LIBOR
      + 1.70 |                                     | NR/BBB-/BBB-
|Ball
      2003 BBA2            |  |  | Class
      L    |  | $                                         | 3,000,000  |               | 7.48               |                                     | -/BB/-      
|Fortress
      Rake Bond (MF) 1 |  |  | FRT1             |  | $                                         | 2,051,269  |               | LIBOR
      + 0.95 |                                     | -/NR/-      
|Fortress
      Rake Bond (MF) 2 |  |  | FRT2             |  | $                                         | 1,700,000  |               | LIBOR
      + 1.05 |                                     | -/NR/-      

|(1) | Rating
at date of purchase
|--- | --------------------------

51



---

WINTHROP
REALTY TRUST  
FORM 10-Q SEPTEMBER 30, 2006

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

| | Liquidity
and Capital Resources (Continued)
| | -------------------------------------------

| | Dividends
and Distributions
| | ---------------------------

| | In
December  2005, we declared a special  dividend of  $3,914,000  ($0.11 per share) on our
Common Shares which was paid on January 17,  2006 to the holders of record as of December
30, 2005.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
December 2005, we declared a dividend of $517,000 ($0.525 per share) on our Series A
Shares which was paid on January 31, 2006.
| | ----------------------------------------------------------------------------------------------------------------------------------

| | In
December  2005,  we declared a dividend of  $1,625,000  ($0.40625  per share) on our
Series B-1 Shares which was paid on January 31,  2006.
| | ----------------------------------------------------------------------------------------------------------------------------------------------

| | In
March 2006 we declared a dividend of $1,621,000 ($0.40625 per share) on our Series B-1
Shares which was paid on April 28, 2006.
| | ----------------------------------------------------------------------------------------------------------------------------------

| | In
June 2006 we declared a dividend of $1,621,000 ($0.40625 per share) on our Series B-1
Shares which was paid on July 31, 2006.
| | --------------------------------------------------------------------------------------------------------------------------------

| | All
dividends accrued on the Series B-1 Shares are treated as interest expense.
| | -------------------------------------------------------------------------------

| | In
July 2006 we declared a dividend of  $5,483,000  ($0.12 per share) on our Common  Shares
which was paid on August 7, 2006 to holders  of record as of July 24, 2006. In connection
with this  dividend,  pursuant to the terms of our Series B-1 Shares,  $1,621,000 was set
aside to fund the third quarter dividend payable on the Series B-1 Shares.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
September  2006, we declared a dividend of  $2,742,000  ($0.06 per share) on our Common
Shares which was paid on October 15, 2006 to  holders of record as of September 30, 2006.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

52



---

WINTHROP
REALTY TRUST  
FORM 10-Q SEPTEMBER 30, 2006

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

| | Funds
From Operations
| | ---------------------

| | We
compute funds from operations  (FFO) as shown in the calculation  below.
Funds from  operations is a non-GAAP  financial  measure  which  represents  "funds
from  operations"  as defined by NAREIT.  NAREIT  defines funds from  operations  as
net income,  computed in  accordance with generally  accepted  accounting  principles or
GAAP,  excluding gains (or losses) from debt  restructuring and sales of  property,  plus
depreciation and amortization on real estate assets,  and after adjustments for
unconsolidated  partnerships and joint  ventures.  We  consider  FFO a useful  additional
measure  of  performance  because it can also  facilitate  a  comparison  of current
operating  performance  among REITs.  FFO does not represent cash generated by operating
activities in accordance with GAAP and should  not be  considered  an  alternative  to
net income or cash flow from  operating  activities  as a measure of financial
performance  or  liquidity.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
following  presents a  reconciliation  of our net income to our funds from  operations
for the nine months ended September 30, 2006  and September 30, 2005 (in thousands,
except per share amounts):
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                        |  |  | For
        the Nine Months Ended |       
|------------------------------------------------------- |  |  | --------------------------------- | ------
|                                                        |  |  | September
        30, 2006        |       
|                                                        |  |  |                                   |       
|Net income                                              |  |  | $                                 | 18,790
|Real
      estate depreciation                          |  |  |                                   | 4,405 
|Amortization
      of capitalized leasing costs         |  |  |                                   | 3,814 
|Real
      estate depreciation and amortization         |  |  |                                   |       
|of
      unconsolidated interests                       |  |  |                                   | 2,655 
|Less:
      Minority interest share of depreciation     |  |  |                                   |       
|and
      amortization                                  |  |  |                                   | (2,186
|Gain
      on sale of operating property of             |  |  |                                   |       
|unconsolidated
      interests                          |  |  |                                   | (3,452
|                                                        |  |  |                                   |       
|Funds
      from operations                             |  |  |                                   | 24,026
|Series
      A preferred dividend                       |  |  |                                   |      
|                                                        |  |  |                                   |       
|Funds
      from operations applicable to common shares |  |  |                                   | 24,026
|Interest
      expense on Series B-1 shares             |  |  |                                   | 4,847 
|Series
      A preferred dividend                       |  |  |                                   |      
|                                                        |  |  |                                   |       
|Funds
      from operations applicable to common        |  |  |                                   |       
|Shares
      plus assumed conversions                   |  |  | $                                 | 28,873
|                                                        |  |  |                                   |       

53



---

WINTHROP
REALTY TRUST  
FORM 10-Q SEPTEMBER 30, 2006

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

| | Funds
From Operations (Continued)
| | ---------------------------------

|                                                |  |  | For
        the Nine Months Ended
        September 30, |       
|----------------------------------------------- |  |  | ------------------------------------------------------- | ------
|                                                |  |  |                                                         |       
|                                                |  |  | 2006                                                    |       
|                                                |  |  |                                                         |       
|Basic
      weighted-average Common Shares      |  |  |                                                         | 42,696
|Convertible
      Preferred Shares              |  |  |                                                         | 22,831
|Stock
      options                             |  |  |                                                         | 62    
|                                                |  |  |                                                         |       
|Diluted
      weighted-average Common Shares    |  |  | $                                                       | 65,589
|                                                |  |  |                                                         |       
|Funds
      from operations per share - diluted |  |  | $                                                       | 0.44  
|                                                |  |  |                                                         |       

| | Funds
from  operations  includes funds from  continuing  operations of $28,856,000  and
$18,922,000 for the nine months ended September  30, 2006 and 2005,  respectively  and
funds from  operations  of  discontinued  operations  of $17,000 and $438,000 for the
nine months  ended September 30, 2006 and 2005, respectively.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

54



---

WINTHROP
REALTY TRUST  
FORM 10-Q SEPTEMBER 30, 2006

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

| | Interest
Rate Risk
| | ------------------

| | We
have exposure to  fluctuations  in market  interest  rates.  Market  interest rates are
highly  sensitive to many factors beyond our  control.  Various  financial  vehicles
exist which would allow  management to mitigate the impact of interest rate  fluctuations
on our  cash flow and  earnings.  Among our  liabilities  are both fixed and  variable
rate debt.  In an attempt to  mitigate  the  effects of  fluctuations  in interest  rates
on the variable rate portion of this debt, we entered into the following  agreements:
(i) an interest  rate swap with a  $40,000,000  notional  amount that  effectively
converted the interest rate on that portion of principal of our note  payable to KeyBank,
with an outstanding  balance at September 30, 2006 of  $69,238,000,  from a floating rate
equal to LIBOR plus 4.5%  to a fixed rate of 8.55% and (ii) an interest rate swap with a
balance  guaranty on our Repurchase  Agreement,  which bears interest at  LIBOR minus
0.003%,  effectively  fixing our rate at 4.045% on that  financing.  The notional  amount
of the balance  guaranty swap was  $76,741,000 at September 30, 2006.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
fair value of the Trusts fixed rate debt approximates its carrying value at
September 30, 2006 primarily as a result of the debt being issued in the past 12 months.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
following  table  shows what the annual  effect of an increase  in the LIBOR rate would
have on  interest  expense  based upon the  unhedged balances in variable rate loans at
September 30, 2006.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                          |  |  | Change
        in Libor |          
|--------------------------------------------------------- |  |  | ----------------------- | ---------
|                                                          |  |  |                         |          
|                                                          |  |  | 1%                      |          
|                                                          |  |  |                         |          
|Consolidated
      debt                                   |  |  | $                       | 997,000  
|Pro-rata
      share of debt of non-consolidated entities |  |  |                         | 458,000  
|Minority
      partners share                             |  |  |                         | (255,000 
|                                                          |  |  |                         |          
|Total
      change in annual income                       |  |  | $                       | 1,200,000
|                                                          |  |  |                         |          

| | We
may utilize  various  financial  instruments  to mitigate the impact of interest rate
fluctuations  on our cash flows and earnings,  including  hedging  strategies,  depending
on our analysis of the interest rate environment and the costs and risks of such
strategies.  In addition, we have a pro-rata share of notes and mortgage loans receivable
aggregating  $69,380,000 as of September 30, 2006, which  are based on variable rates,
and partially mitigate our exposure to change in interest rates.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

55



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WINTHROP
REALTY TRUST  
FORM 10-Q SEPTEMBER 30, 2006

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

| | Market
Value Risk
| | -----------------

| | Our
        whole pool agency mortgage-backed securities are carried at their estimated
        fair value of $100,429,000 at September 30, 2006 with unrealized gains
        and losses excluded from earnings and reported in other comprehensive
        income pursuant to SFAS No. 115 Accounting for Certain Investments
        in Debt and Equity Securities. The estimated fair value of these securities
        fluctuates primarily due to changes in interest rates and other factors;
        however, given that these securities are guaranteed as to principal and/or
        interest by an agency of the U.S. Government, such fluctuations are
        generally not based on the creditworthiness of the mortgages securing
        these securities. Generally, in a rising interest rate environment, the
        estimated fair value of these securities would be expected to decrease;
        conversely, in a decreasing interest rate environment, the estimated fair
        value of these securities would be expected to increase.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Prepayment
Risk
| | ---------------

| | As
we receive  prepayments  of principal on the whole pool agency  mortgage-backed
securities,  premiums paid on such  securities  are  amortized  against  interest  income
using the  effective  yield method  through the expected  maturity  dates of the
securities.  In  general,  an increase in prepayment rates will accelerate the
amortization of purchase  premiums,  thereby reducing the interest income  earned on the
securities.  The amount subject to prepayment risk at September 30, 2006 was the
unamortized premium of $683,000.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

56



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WINTHROP
REALTY TRUST  
FORM 10-Q SEPTEMBER 30, 2006

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

| | The
Company maintains  disclosure controls and procedures that are designed to ensure that
information  required to be disclosed in the  Companys reports filed with the
Securities and Exchange  Commission (SEC) is recorded,  processed,  summarized and
reported within the  time periods  specified in the SECs rules and forms,  and that
such  information  is  accumulated  and  communicated  to the Companys  management,
including its Chief Executive Officer  (CEO) and Chief Financial Officer (CFO), as
appropriate,  to allow timely decisions  regarding required disclosure.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | As
of September 30,  2006, an evaluation was performed under the supervision and with
the  participation  of the Companys  management,  including the CEO and CFO, of the
effectiveness  of the design and operation of the Companys  disclosure  controls
and procedures (as  defined in  Rules 13a-15(e)  under the U.S.  Securities
Exchange Act of 1934).  Based on that  evaluation,  the Companys  management,
including the CEO and CFO, concluded that the Companys disclosure controls and
procedures were effective as of September 30, 2006.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Other
Matters
| | -------------

| | There
have been no changes in the  Companys  internal  controls  over  financial
reporting  during the most recent  quarter that have  materially affected, or are
reasonably likely to materially affect, the Companys internal control over
financial reporting.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

57



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WINTHROP
REALTY TRUST  
FORM 10-Q SEPTEMBER 30, 2006

PART II.
OTHER INFORMATION

|ITEM 6. | EXHIBITS
|------- | --------

| | Exhibits
required by Item 601 of Regulation S-K are filed herewith or incorporated  herein by
reference and are listed in the attached  Exhibit Index.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------

58



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WINTHROP
REALTY TRUST  
FORM 10-Q SEPTEMBER 30, 2006

SIGNATURES

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

|                       | Winthrop Realty Trust
|---------------------- | ---------------------
|                       |                      
|                       |                      
|Date: October 27, 2006 | By:                  
|                       |                      
|                       |                      
|                       |                      
|                       |                      
|Date: October 27, 2006 | By:                  
|                       |                      
|                       |                      

59



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WINTHROP
REALTY TRUST  
FORM 10-Q SEPTEMBER 30, 2006

EXHIBIT INDEX

|Exhibit |  | Description                                                                                                                                                                                                                                                                                        |  | Page
        
        Number
|------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------
|        |  |                                                                                                                                                                                                                                                                                                    |  |                             
|3.1     |  | Bylaws of the Trust
      as restated on November 8, 2005.                                                                                                                                                                                                                                         |  | (m)                         
|        |  |                                                                                                                                                                                                                                                                                                    |  |                             
|3.2     |  | Amended and Restated
      Declaration of Trust as of December 15, 2005.                                                                                                                                                                                                                           |  | (p)                         
|        |  |                                                                                                                                                                                                                                                                                                    |  |                             
|4.1     |  | Form of certificate
      for Shares of Beneficial Interest.                                                                                                                                                                                                                                       |  | (b)                         
|        |  |                                                                                                                                                                                                                                                                                                    |  |                             
|4.2     |  | Warrant to purchase
      500,000 shares of Beneficial Interest of Trust.                                                                                                                                                                                                                          |  | (a)                         
|        |  |                                                                                                                                                                                                                                                                                                    |  |                             
|4.3     |  | Agreement of Limited
      Partnership of First Union REIT L.P., dated as of January 1, 2005.                                                                                                                                                                                                      |  | (g)                         
|        |  |                                                                                                                                                                                                                                                                                                    |  |                             
|4.4     |  | Amended and Restated
      Certificate of Designations for Series B-1 Cumulative Convertible Redeemable
      Preferred Shares of Beneficial Interest.                                                                                                                                             |  | (l)                         
|        |  |                                                                                                                                                                                                                                                                                                    |  |                             
|10.1    |  | 1999 Trustee Share Option
      Plan.                                                                                                                                                                                                                                                              |  | (c)                         
|        |  |                                                                                                                                                                                                                                                                                                    |  |                             
|10.2    |  | 1999 Long Term Incentive
      Performance Plan.                                                                                                                                                                                                                                                   |  | (c)                         
|        |  |                                                                                                                                                                                                                                                                                                    |  |                             
|10.3    |  | Indemnification Agreement
      with Neil Koenig, dated as of April 29, 2002.                                                                                                                                                                                                                      |  | (d)                         
|        |  |                                                                                                                                                                                                                                                                                                    |  |                             
|10.4    |  | Stock Purchase Agreement
      between the Trust and FUR Investors, LLC, dated as of November 26, 2003
      ("Stock Purchase Agreement"), including Annex A thereto, being the list
      of Conditions to the Offer.                                                                             |  | (e)                         
|        |  |                                                                                                                                                                                                                                                                                                    |  |                             
|10.5    |  | Amended and Restated
      Advisory Agreement dated November 7, 2005, between the Trust and FUR Advisors
      LLC.                                                                                                                                                                                |  | (m)                         
|        |  |                                                                                                                                                                                                                                                                                                    |  |                             
|10.6    |  | Amendment No. 1 to Amended
      and Restated Advisory Agreement dated May 17, 2006, between the Trust and
      FUR Advisors.                                                                                                                                                                     |  | (t)                         
|        |  |                                                                                                                                                                                                                                                                                                    |  |                             
|10.7    |  | Exclusivity Services
      Agreement between the Trust and Michael L. Ashner.                                                                                                                                                                                                                      |  | (e)                         
|        |  |                                                                                                                                                                                                                                                                                                    |  |                             
|10.8    |  | Amendment No. 1 to Exclusivity
      Agreement, dated November 7, 2005.                                                                                                                                                                                                                            |  | (m)                         
|        |  |                                                                                                                                                                                                                                                                                                    |  |                             
|10.9    |  | Covenant Agreement between
      the Trust and FUR Investors, LLC.                                                                                                                                                                                                                                 |  | (e)                         
|        |  |                                                                                                                                                                                                                                                                                                    |  |                             
|10.10   |  | Loan Agreement, dated
      November 18, 2004, among FT-Fin Acquisition LLC, Keybank National Association,
      Newstar CP Funding LLC, Keybank National Association, as agent for itself
      and such other lending institutions, and Keybanc Capital Markets, as the
      Arranger.          |  | (f)                         
|        |  |                                                                                                                                                                                                                                                                                                    |  |                             
|10.11   |  | Loan Modification Agreement,
      dated June 30, 2006, among FT-Fin Acquisition LLC, Keybank National Association,
      Newstar CP Funding LLC, Keybank National Association, as agent for itself
      and such other lending institutions, and Keybank Capital Markets, as the
      Arranger. |  | (t)                         
|        |  |                                                                                                                                                                                                                                                                                                    |  |                             
|10.12   |  | Form of Mortgage, dated
      November 18, 2004, in favor of Keybank National Association.                                                                                                                                                                                                         |  | (f)                         

60



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WINTHROP
REALTY TRUST  
FORM 10-Q SEPTEMBER 30, 2006

|10.13 |  | Ownership Interest Pledge
      Agreement, dated November 18, 2004, from FT-Fin Acquisition LLC to Keybank
      National Association.                                                                              |  | (f)
|----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---
|      |  |                                                                                                                                                                                                                     |  |    
|10.14 |  | Guaranty, dated as of
      November 18, 2004, by First Union Real Estate Equity and Mortgage Investments
      in favor of Keybank National Association, as the agent.                                             |  | (f)
|      |  |                                                                                                                                                                                                                     |  |    
|10.15 |  | Indemnity Regarding
      Hazardous Materials, dated as of November 18, 2004, by First Union Real
      Estate Equity and Mortgage Investments in favor of Keybank National Association,
      as the agent.        |  | (f)
|      |  |                                                                                                                                                                                                                     |  |    
|10.16 |  | Amended and Restated
      Omnibus Agreement, dated March 16, 2005, among Gerald Nudo, Laurence Weiner
      and First Union REIT L.P.                                                                              |  | (h)
|      |  |                                                                                                                                                                                                                     |  |    
|10.17 |  | Securities Purchase
      Agreement, dated February 16, 2005, between First Union Real Estate Equity
      and Mortgage Investments and Kimco Realty Corporation.                                                   |  | (i)
|      |  |                                                                                                                                                                                                                     |  |    
|10.18 |  | Securities Purchase
      Agreement, dated February 25, 2005, between First Union Real Estate Equity
      and Mortgage Investments, Perrin Holden & Davenport Capital Corp. and
      the Investors named therein. |  | (j)
|      |  |                                                                                                                                                                                                                     |  |    
|10.19 |  | Securities Purchase
      Agreement, dated June 15, 2005, between First Union Real Estate Equity and
      Mortgage Investments, Perrin Holden & Davenport Capital Corp. and the
      Investors named therein.     |  | (l)
|      |  |                                                                                                                                                                                                                     |  |    
|10.20 |  | Amended and Restated
      Registration Rights Agreement, dated June 20, 2005, between First Union
      Real Estate Equity and Mortgage Investments and the Investors named therein.                               |  | (l)
|      |  |                                                                                                                                                                                                                     |  |    
|10.21 |  | Amended and Restated
      Investor Rights Agreement, dated June 20, 2005, between First Union Real
      Estate Equity and Mortgage Investments and the Investors named therein.                                   |  | (l)
|      |  |                                                                                                                                                                                                                     |  |    
|10.22 |  | Loan Agreement, dated
      May 25, 2005, between FT-Amherst Property LLC, as borrower, and Greenwich
      Capital Financial Products, Inc., as lender.                                                            |  | (k)
|      |  |                                                                                                                                                                                                                     |  |    
|10.23 |  | Promissory Note, dated
      May 25, 2005, in the original principal amount of $18,000,000 from FT-Amherst
      Property LLC to Greenwich Capital Financial Products, Inc.                                         |  | (k)
|      |  |                                                                                                                                                                                                                     |  |    
|10.24 |  | Securities Purchase
      Agreement, dated November 7, 2005, between the Trust and Vornado Investments
      L.L.C. (Vornado).                                                                                    |  | (m)
|      |  |                                                                                                                                                                                                                     |  |    
|10.25 |  | Registration Rights
      Agreement, dated November 7, 2005, between the Trust and Vornado.                                                                                                                         |  | (m)
|      |  |                                                                                                                                                                                                                     |  |    
|10.26 |  | Securities Purchase
      Agreement, dated November 7, 2005, between Newkirk Realty Trust, Inc. and
      the Trust.                                                                                                |  | (m)
|      |  |                                                                                                                                                                                                                     |  |    
|10.27 |  | Acquisition Agreement,
      dated November 7, 2005, between Newkirk Realty Trust, Inc. and the Trust.                                                                                                              |  | (m)
|      |  |                                                                                                                                                                                                                     |  |    
|10.28 |  | Registration Rights
      Agreement, dated November 7, 2005, between Newkirk Realty Trust, Inc. and
      the Trust.                                                                                                |  | (m)
|      |  |                                                                                                                                                                                                                     |  |    
|10.29 |  | Lock-Up Agreement, dated
      November 7, 2005, executed by the Trust.                                                                                                                                             |  | (m)

61



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WINTHROP
REALTY TRUST  
FORM 10-Q SEPTEMBER 30, 2006

|10.30 |  | Ownership Limit Waiver
      Agreement dated November 7, 2005, between the Trust and Newkirk Realty Trust,
      Inc.                                                                            |  | (m)
|----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ---
|      |  |                                                                                                                                                                                                  |  |    
|10.31 |  | Joinder Agreement with respect to the Securities Purchase  Agreement,  dated November
7, 2005, by and among the Trust,  Newkirk  Realty Trust,  Inc. and The Newkirk Master
Limited Partnership. |  | (m)
|      |  |                                                                                                                                                                                                  |  |    
|10.32 |  | Undertaking,  dated  November 7, 2005,  by FUR  Holdings LLC and FUR Advisors for the
benefit of the Trust.                                                                                      |  | (m)
|      |  |                                                                                                                                                                                                  |  |    
|10.33 |  | Participation and Servicing  Agreement,  dated December 8, 2005, between Arbor Realty
Funding LLC and FT-Toy LLC.                                                                                |  | (n)
|      |  |                                                                                                                                                                                                  |  |    
|10.34 |  | Loan  Agreement,  dated  December 7, 2005,  between the Arbor Realty  Funding LLC and
FT-Toy LLC.                                                                                                |  | (n)
|      |  |                                                                                                                                                                                                  |  |    
|10.35 |  | Promissory  Note,  dated  December 7, 2005,  between the Arbor Realty Funding LLC and
FT-Toy LLC                                                                                                 |  | (n)
|      |  |                                                                                                                                                                                                  |  |    
|10.36 |  | Pledge  Agreement,  dated  December  7, 2005,  from  FT-Toy  LLC to the Arbor  Realty
Funding LLC.                                                                                               |  | (n)
|      |  |                                                                                                                                                                                                  |  |    
|10.37 |  | Guaranty from Winthrop Realty Trust in favor of the Arbor Realty Funding LLC.                                                                                                                    |  | (n)
|      |  |                                                                                                                                                                                                  |  |    
|10.38 |  | Loan Agreement, dated as of December 16, 2005, between WRT Realty L.P. and KeyBank,
National Association.                                                                                        |  | (o)
|      |  |                                                                                                                                                                                                  |  |    
|10.39 |  | Guaranty from Winthrop Realty Trust in favor of KeyBank, National Association.                                                                                                                   |  | (o)
|      |  |                                                                                                                                                                                                  |  |    
|10.40 |  | Limited Liability Company Agreement of 111 Debt Holdings LLC, dated March 31, 2006,
among The Newkirk Master Limited Partnership, WRT Realty, L.P. and FUR Holdings LLC.                         |  | (q)
|      |  |                                                                                                                                                                                                  |  |    
|10.41 |  | Master Repurchase Agreement, dated March 30, 2006, among Column Financial Inc., 111
Debt Acquisition LLC, 111 Debt Acquisition Mezz LLC and Newkirk Realty Trust, Inc.                           |  | (q)
|      |  |                                                                                                                                                                                                  |  |    
|10.42 |  | Master Repurchase Agreement, dated May 24, 2006, between Bear, Stearns International
Limited and 111 Debt Acquisition-Two LLC.                                                                   |  | (r)
|      |  |                                                                                                                                                                                                  |  |    
|10.43 |  | Voting Agreement between Winthrop Realty Trust and Lexington Corporate Properties
Trust dated July 23, 2006.                                                                                     |  | (s)
|      |  |                                                                                                                                                                                                  |  |    
|10.44 |  | Agreement between Michael L. Ashner and Winthrop Realty Trust dated July 23, 2006.                                                                                                               |  | (s)
|      |  |                                                                                                                                                                                                  |  |    
|31    |  | Certifications Pursuant
      to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                  |  | *  
|      |  |                                                                                                                                                                                                  |  |    
|32    |  | Certification Pursuant
      to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                   |  | *  

* filed herewith

62



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WINTHROP
REALTY TRUST  
FORM 10-Q SEPTEMBER 30, 2006

|(a) | Incorporated
by reference to the Trusts 1998 Form 10-K
|--- | -------------------------------------------------------

|(b) | Incorporated
by reference to the Trusts Registration Statement on Form S-3 No. 33-2818
|--- | ---------------------------------------------------------------------------------------

|(c) | Incorporated
by reference to the Trusts 1999 Proxy Statement for Special Meeting held May 17,
1999 in lieu of Annual Meeting
|--- | -----------------------------------------------------------------------------------------------------------------------------

|(d) | Incorporated
by reference to the Trusts 2002 Form 10-K
|--- | -------------------------------------------------------

|(e) | Incorporated
by reference to the Trusts Form 8-K dated November 26, 2003
|--- | -------------------------------------------------------------------------

|(f) | Incorporated
by reference to the Trusts Form 8-K dated November 18, 2004
|--- | -------------------------------------------------------------------------

|(g) | Incorporated
by reference to the Trusts Form 8-K dated January 1, 2004
|--- | -----------------------------------------------------------------------

|(h) | Incorporated
by reference to the Trusts Form 8-K dated March 18, 2005
|--- | ----------------------------------------------------------------------

|(i) | Incorporated
by reference to the Trusts Form 8-K dated February 17, 2005
|--- | -------------------------------------------------------------------------

|(j) | Incorporated
by reference to the Trusts Form 8-K dated March 2, 2005
|--- | ---------------------------------------------------------------------

|(k) | Incorporated
by reference to the Trusts Form 8-K dated May 27, 2005
|--- | --------------------------------------------------------------------

|(l) | Incorporated
by reference to the Trusts Form 8-K dated June 21, 2005
|--- | ---------------------------------------------------------------------

|(m) | Incorporated
by reference to the Trusts Form 8-K dated November 10, 2005
|--- | -------------------------------------------------------------------------

|(n) | Incorporated
by reference to the Trusts Form 8-K dated December 12, 2005
|--- | -------------------------------------------------------------------------

|(o) | Incorporated
by reference to the Trusts Form 8-K dated December 21, 2005
|--- | -------------------------------------------------------------------------

|(p) | Incorporated
by reference to the Trusts 2005 Form 10-K
|--- | -------------------------------------------------------

|(q) | Incorporated
by reference to the Trusts Form 8-K dated April 4, 2006
|--- | ---------------------------------------------------------------------

|(r) | Incorporated
by reference to the Trusts Form 8-K dated May 30, 2006
|--- | --------------------------------------------------------------------

|(s) | Incorporated by reference to the Trusts Form 8-K dated July 25, 2006                                                
|--- | ---------------------------------------------------------------------------------------------------------------------
|(t) | Incorporated
      by reference to the Trusts Quarterly
      report on Form 10-Q for the period ended June 30, 2006

63