UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM
10-Q





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





For the
Quarterly Period Ended:  June 30, 2010


Or





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


For the
transition period from ____to ____





Commission
File Number 1-6249





WINTHROP
REALTY TRUST


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





Ohio
                
                34-6513657(State
      or other jurisdiction of incorporation or organization)
                
                (IRS
      Employer Identification Number)7 Bulfinch Place, Suite 500, Boston,
      Massachusetts
                
                02114(Address
      of principal executive offices)
                
                (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 x No  ̈





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate website, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).   Yes
 ̈ No  ̈





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.  See the definitions of “large accelerated filer,”
“accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.  (Check one):





Large
accelerated filer    ̈                                                     Accelerated
filer     x


Non-accelerated
filer     ̈                                                      Smaller
reporting company   ̈


(Do not
check if a smaller reporting company)





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





As of
August 1, 2010 there were 21,231,888 Common Shares of Beneficial Interest
outstanding.











INDEX





PagePart
      I.
                Financial
      InformationItem
      1.
                Financial
      Statements (Unaudited):Consolidated
      Balance Sheets as of June 30, 2010 and December 31, 2009
                3Consolidated
      Statements of Operations and Comprehensive Income (Loss) for the Three and
      Six Months Ended June 30, 2010 and June 30, 2009
                4Consolidated
      Statements of Equity for the Six Months Ended June 30, 2010 and June 30,
      2009
                5Consolidated
      Statements of Cash Flows for the Six Months Ended June 30, 2010 and June
      30, 2009
                6Notes
      to Consolidated Financial Statements
                8Item
      2.
                Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
                31Item
      3.
                Quantitative
      and Qualitative Disclosure about Market Risk
                45Item
      4.
                Controls
      and Procedures
                46Part
      II.
                Other
      InformationItem
      6.
                Exhibits
                47Signatures
                
                47Exhibit
      Index
                
                48





2





Item
1.  Financial Information





WINTHROP
REALTY TRUST


FORM
10-Q – JUNE 30, 2010


CONSOLIDATED
BALANCE SHEETS








June
      30,
                  
                  
                  December
      31,2010
                  
                  
                  2009(unaudited)
                  
                  
                  (unaudited)ASSETSInvestments
      in real estate, at costLand
                  
                  $
                  20,659
                  
                  
                  $
                  20,659Buildings
      and improvements
                  
                  
                  229,132
                  
                  
                  
                  228,419249,791
                  
                  
                  
                  249,078Less:
      accumulated depreciation
                  
                  
                  (33,279
                  )
                  
                  
                  (31,269
                  )Investments
      in real estate, net
                  
                  
                  216,512
                  
                  
                  
                  217,809Cash
      and cash equivalents
                  
                  
                  37,913
                  
                  
                  
                  66,493Restricted
      cash held in escrows
                  
                  
                  8,574
                  
                  
                  
                  9,505Loans
      receivable, net
                  
                  
                  53,395
                  
                  
                  
                  26,101Accounts
      receivable, net of allowances of $430 and $565,
    respectively
                  
                  
                  11,870
                  
                  
                  
                  14,559Securities
      carried at fair value
                  
                  
                  43,754
                  
                  
                  
                  52,394Loan
      securities carried at fair value
                  
                  
                  4,673
                  
                  
                  
                  1,661Available
      for sale securities, net
                  
                  
                  -
                  
                  
                  
                  203Preferred
      equity investment
                  
                  
                  3,951
                  
                  
                  
                  4,012Equity
      investments
                  
                  
                  82,907
                  
                  
                  
                  73,207Lease
      intangibles, net
                  
                  
                  23,218
                  
                  
                  
                  22,666Deferred
      financing costs, net
                  
                  
                  1,366
                  
                  
                  
                  1,495Deposits
                  
                  
                  4,100
                  
                  
                  
                  -Assets
      held for sale
                  
                  
                  2,180
                  
                  
                  
                  3,087TOTAL
      ASSETS
                  
                  $
                  494,413
                  
                  
                  $
                  493,192LIABILITIESMortgage
      loans payable
                  
                  $
                  213,375
                  
                  
                  $
                  216,767Series
      B-1 Cumulative Convertible Redeemable Preferred Shares, $25 per share
      liquidation preference; 852,000 shares authorized and outstanding at
      June 30, 2010 and December 31, 2009
                  
                  
                  21,300
                  
                  
                  
                  21,300Accounts
      payable and accrued liabilities
                  
                  
                  8,670
                  
                  
                  
                  7,401Dividends
      payable
                  
                  
                  3,481
                  
                  
                  
                  3,458Deferred
      income
                  
                  
                  38
                  
                  
                  
                  48Below
      market lease intangibles, net
                  
                  
                  2,514
                  
                  
                  
                  2,849TOTAL
      LIABILITIES
                  
                  
                  249,378
                  
                  
                  
                  251,823COMMITMENTS
      AND CONTINGENCIESNON-CONTROLLING
      REDEEMABLE PREFERRED INTERESTSeries
      C Cumulative Convertible Redeemable Preferred Shares, $25 per share
      liquidation preference, 144,000 and 544,000 shares authorized and
      outstanding at June 30, 2010 and December 31, 2009,
      respectively
                  
                  
                  3,221
                  
                  
                  
                  12,169Total
      non-controlling redeemable preferred interest
                  
                  
                  3,221
                  
                  
                  
                  12,169EQUITYWinthrop
      Realty Trust Shareholders’ Equity:Common
      Shares, $1 par, unlimited shares authorized; 21,181,449 and 20,375,483
      issued and outstanding at June 30, 2010 and December 31, 2009,
      respectively
                  
                  
                  21,181
                  
                  
                  
                  20,375Additional
      paid-in capital
                  
                  
                  507,440
                  
                  
                  
                  498,118Accumulated
      distributions in excess of net income
                  
                  
                  (299,584
                  )
                  
                  
                  (301,317
                  )Accumulated
      other comprehensive loss
                  
                  
                  (73
                  )
                  
                  
                  (87
                  )Total
      Winthrop Realty Trust Shareholders’ Equity
                  
                  
                  228,964
                  
                  
                  
                  217,089Non-controlling
      interests
                  
                  
                  12,850
                  
                  
                  
                  12,111Total
      Equity
                  
                  
                  241,814
                  
                  
                  
                  229,200TOTAL
      LIABILITIES AND EQUITY
                  
                  $
                  494,413
                  
                  
                  $
                  493,192





See Notes
to Consolidated Financial Statements and refer to Note 17 for information
regarding variable interest entities (VIEs) including VIEs for which the Trust
is the primary beneficiary.





3





WINTHROP
REALTY TRUST


FORM
10-Q – JUNE 30, 2010


CONSOLIDATED
STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)





(in
thousands, except per share data)





Three
      Months Ended
                
                
                Six
      Months Ended2010
                
                
                2009
                
                
                2010
                
                
                2009(unaudited)
                
                
                (unaudited)
                
                
                (unaudited)
                
                
                (unaudited)RevenueRents
      and reimbursements
                
                $
                9,636
                
                
                $
                10,105
                
                
                $
                19,156
                
                
                $
                20,760Interest
      and dividends
                
                
                3,590
                
                
                
                2,214
                
                
                
                6,799
                
                
                
                3,96613,226
                
                
                
                12,319
                
                
                
                25,955
                
                
                
                24,726ExpensesProperty
      operating
                
                
                1,822
                
                
                
                1,643
                
                
                
                3,781
                
                
                
                3,502Real
      estate taxes
                
                
                340
                
                
                
                621
                
                
                
                1,060
                
                
                
                1,294Depreciation
      and amortization
                
                
                2,434
                
                
                
                2,634
                
                
                
                4,796
                
                
                
                5,485Interest
                
                
                3,666
                
                
                
                4,301
                
                
                
                7,317
                
                
                
                8,576Provision
      for loss on loans receivable
                
                
                -
                
                
                
                1,724
                
                
                
                -
                
                
                
                2,152General
      and administrative
                
                
                1,916
                
                
                
                1,875
                
                
                
                3,825
                
                
                
                3,317State
      and local taxes
                
                
                85
                
                
                
                147
                
                
                
                100
                
                
                
                19710,263
                
                
                
                12,945
                
                
                
                20,879
                
                
                
                24,523Other
      income (loss)Earnings
      (loss) from preferred equity investments
                
                
                85
                
                
                
                (3,209
                )
                
                
                168
                
                
                
                (2,194
                )Equity
      in loss of equity investments
                
                
                (392
                )
                
                
                (82,249
                )
                
                
                (919
                )
                
                
                (100,412
                )Gain
      on sale of securities carried at fair value
                
                
                78
                
                
                
                2,685
                
                
                
                773
                
                
                
                2,598Unrealized
      (loss) gain on securities carried at fair value
                
                
                (750
                )
                
                
                12,580
                
                
                
                1,790
                
                
                
                1,432Impairment
      loss on real estate loan available for sale
                
                
                -
                
                
                
                (203
                )
                
                
                -
                
                
                
                (203
                )Gain
      on extinguishment of debt
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                5,237Unrealized
      gain on loan securities carried at fair value
                
                
                3,625
                
                
                
                -
                
                
                
                3,012
                
                
                
                -Interest
      income
                
                
                40
                
                
                
                42
                
                
                
                77
                
                
                
                1142,686
                
                
                
                (70,354
                )
                
                
                4,901
                
                
                
                (93,428
                )Income
      (loss) from continuing operations
                
                
                5,649
                
                
                
                (70,980
                )
                
                
                9,977
                
                
                
                (93,225
                )Discontinued
      operationsLoss
      from discontinued operations
                
                
                (898
                )
                
                
                (51
                )
                
                
                (776
                )
                
                
                (68
                )Consolidated
      net income (loss)
                
                
                4,751
                
                
                
                (71,031
                )
                
                
                9,201
                
                
                
                (93,293
                )Income
      attributable to non-controlling interest
                
                
                (175
                )
                
                
                (165
                )
                
                
                (420
                )
                
                
                (336
                )Net
      income (loss) attributable to Winthrop Realty Trust
                
                
                4,576
                
                
                
                (71,196
                )
                
                
                8,781
                
                
                
                (93,629
                )Income
      attributable to non-controlling redeemable preferred
      interest
                
                
                (58
                )
                
                
                -
                
                
                
                (171
                )
                
                
                -Net
      income (loss) attributable to Common Shares
                
                $
                4,518
                
                
                $
                (71,196
                )
                
                $
                8,610
                
                
                $
                (93,629
                )Comprehensive
      income (loss)Consolidated
      net income (loss)
                
                $
                4,751
                
                
                
                (71,031
                )
                
                $
                9,201
                
                
                $
                (93,293
                )Change
      in unrealized gain (loss) on available for sale securities
                
                
                (5
                )
                
                
                9
                
                
                
                2
                
                
                
                11Change
      in unrealized gain (loss) on interest rate derivative
                
                
                (28
                )
                
                
                127
                
                
                
                12
                
                
                
                265Change
      in unrealized loss from equity investments
                
                
                -
                
                
                
                26,371
                
                
                
                -
                
                
                
                26,174Comprehensive
      income (loss)
                
                $
                4,718
                
                
                $
                (44,524
                )
                
                $
                9,215
                
                
                $
                (66,843
                )Per
      Common Share data - BasicIncome
      (loss) from continuing operations
                
                $
                0.25
                
                
                $
                (4.50
                )
                
                $
                0.44
                
                
                $
                (5.92
                )Loss
      from discontinued operations
                
                
                (0.04
                )
                
                
                -
                
                
                
                (0.03
                )
                
                
                -Net
      income (loss) attributable to Winthrop Realty Trust
                
                $
                0.21
                
                
                $
                (4.50
                )
                
                $
                0.41
                
                
                $
                (5.92
                )Per
      Common Share data - DilutedIncome
      (loss) from continuing operations
                
                $
                0.25
                
                
                $
                (4.50
                )
                
                $
                0.44
                
                
                $
                (5.92
                )Loss  from
      discontinued operations
                
                
                (0.04
                )
                
                
                -
                
                
                
                (0.03
                )
                
                
                -Net
      income (loss) attributable to Winthrop Realty Trust
                
                $
                0.21
                
                
                $
                (4.50
                )
                
                $
                0.41
                
                
                $
                (5.92
                )Basic
      Weighted-Average Common Shares
                
                
                21,175
                
                
                
                15,822
                
                
                
                20,888
                
                
                
                15,814Diluted
      Weighted-Average Common Shares
                
                
                21,177
                
                
                
                15,822
                
                
                
                21,412
                
                
                
                15,814





See Notes
to Consolidated Financial Statements.





4





WINTHROP
REALTY TRUST


FORM
10-Q – JUNE 30, 2010


CONSOLIDATED
STATEMENTS OF EQUITY


(unaudited)


(in
thousands, except per share data)





Accumulated
                    
                    
                    AccumulatedCommon Shares
                    
                    
                    Additional
                    
                    
                    Distributions
                    
                    
                    Otherof Beneficial Interest
                    
                    
                    Paid-In
                    
                    
                    In Excess of
                    
                    
                    Comprehensive
                    
                    
                    Non-ControllingShares
                    
                    
                    Amount
                    
                    
                    Capital
                    
                    
                    Net Income
                    
                    
                    Income (Loss)
                    
                    
                    Interests
                    
                    
                    TotalBalance,
      December 31, 2009
                    
                    
                    20,375
                    
                    
                    $
                    20,375
                    
                    
                    $
                    498,118
                    
                    
                    $
                    (301,317
                    )
                    
                    $
                    (87
                    )
                    
                    $
                    12,111
                    
                    
                    $
                    229,200Net
      income attributable to Winthrop Realty Trust
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    8,781
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    8,781Net
      income attributable to non-controlling interests
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    420
                    
                    
                    
                    420Distributions
      to non-controlling interests
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    (200
                    )
                    
                    
                    (200
                    )Contributions
      from non-controlling interests
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    519
                    
                    
                    
                    519Dividends
      paid or accrued on Common Shares of Beneficial Interest ($0.325 per
      share)
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    (6,877
                    )
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    (6,877
                    )Dividends
      paid or accrued on Series C Preferred Shares ($0.8125 per
      share)
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    (171
                    )
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    (171
                    )Change
      in unrealized gain on available for sale securities
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    2
                    
                    
                    
                    -
                    
                    
                    
                    2Change
      in unrealized gain on interest rate derivatives
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    12
                    
                    
                    
                    -
                    
                    
                    
                    12Conversion
      of Series C Preferred Shares to Common Shares
                    
                    
                    714
                    
                    
                    
                    714
                    
                    
                    
                    8,234
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    8,948Stock
      issued pursuant to dividend reinvestment plan
                    
                    
                    92
                    
                    
                    
                    92
                    
                    
                    
                    1,088
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    1,180Balance,
      June 30, 2010
                    
                    
                    21,181
                    
                    
                    $
                    21,181
                    
                    
                    $
                    507,440
                    
                    
                    $
                    (299,584
                    )
                    
                    $
                    (73
                    )
                    
                    $
                    12,850
                    
                    
                    $
                    241,814





Accumulated
                      
                      
                      AccumulatedCommon Shares
                      
                      
                      Additional
                      
                      
                      Distributions
                      
                      
                      Otherof Beneficial Interest
                      
                      
                      Paid-In
                      
                      
                      In Excess of
                      
                      
                      Comprehensive
                      
                      
                      Non-ControllingShares
                      
                      
                      Amount
                      
                      
                      Capital
                      
                      
                      Net Income
                      
                      
                      Income
                      
                      
                      Interests
                      
                      
                      TotalBalance,
      December 31, 2008
                      
                      
                      15,754
                      
                      
                      $
                      15,754
                      
                      
                      $
                      460,956
                      
                      
                      $
                      (213,284
                      )
                      
                      $
                      (15,176
                      )
                      
                      $
                      10,958
                      
                      
                      $
                      259,208Net
      loss attributable to Winthrop Realty Trust
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      (93,629
                      )
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      (93,629
                      )Cumulative
      effect, change in accounting principle
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      11,647
                      
                      
                      
                      (11,647
                      )
                      
                      
                      -
                      
                      
                      
                      -Net
      income attributable to non-controlling interests
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      336
                      
                      
                      
                      336Distributions
      to non-controlling interests
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      (743
                      )
                      
                      
                      (743
                      )Contributions
      from non-controlling interests
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      723
                      
                      
                      
                      723Dividends
      paid or accrued on Common Shares of Beneficial Interest ($0.50 per
      share)
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      (7,910
                      )
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      (7,910
                      )Change
      in unrealized gain on available for sale securities
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      11
                      
                      
                      
                      -
                      
                      
                      
                      11Change
      in unrealized gain on interest rate derivatives
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      265
                      
                      
                      
                      -
                      
                      
                      
                      265Change
      in unrealized loss from equity investments
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      26,174
                      
                      
                      
                      -
                      
                      
                      
                      26,174Stock
      issued pursuant to dividend reinvestment plan
                      
                      
                      69
                      
                      
                      
                      69
                      
                      
                      
                      658
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      727Balance,
      June 30, 2009
                      
                      
                      15,823
                      
                      
                      $
                      15,823
                      
                      
                      $
                      461,614
                      
                      
                      $
                      (303,176
                      )
                      
                      $
                      (373
                      )
                      
                      $
                      11,274
                      
                      
                      $
                      185,162





See Notes
to Consolidated Financial Statements.





5





WINTHROP
REALTY TRUST


FORM
10-Q – JUNE 30, 2010


CONSOLIDATED
STATEMENTS OF CASH FLOWS


(unaudited)


(in
thousands)





Six Months Ended
                  June 30,2010
                
                
                2009Cash
      flows from operating activitiesNet
      income (loss)
                
                $
                9,201
                
                
                $
                (93,293
                )Adjustments
      to reconcile net income (loss) to net cash provided by operating
      activities:Depreciation
      and amortization (including amortization of deferred financing
      costs)
                
                
                3,307
                
                
                
                3,746Amortization
      of lease intangibles
                
                
                1,369
                
                
                
                2,461Straight-lining
      of rental income
                
                
                708
                
                
                
                577(Earnings)
      loss of preferred equity investments
                
                
                (168
                )
                
                
                2,929Distributions
      from preferred equity investments
                
                
                229
                
                
                
                1,855Loss
      of equity investments
                
                
                919
                
                
                
                100,412Distributions
      from equity investments
                
                
                2,254
                
                
                
                665Restricted
      cash held in escrows
                
                
                1,656
                
                
                
                (1,003
                )Gain
      on sale of securities carried at fair value
                
                
                (773
                )
                
                
                (2,598
                )Unrealized
      gain on securities carried at fair value
                
                
                (1,790
                )
                
                
                (1,432
                )Unrealized
      gain on loan securities carried at fair value
                
                
                (3,012
                )
                
                
                -Impairment
      loss on real estate loan available for sale
                
                
                -
                
                
                
                203Impairment
      loss on real estate held for sale
                
                
                1,000
                
                
                
                -Gain
      on extinguishment of debt
                
                
                -
                
                
                
                (5,237
                )Provision
      for loss on loan receivable
                
                
                -
                
                
                
                2,152Tenant
      leasing costs
                
                
                (2,349
                )
                
                
                (1,806
                )Bad
      debt recovery
                
                
                (250
                )
                
                
                (95
                )Net
      change in interest receivable
                
                
                (113
                )
                
                
                (480
                )Loan
      discount accretion
                
                
                (3,742
                )
                
                
                -Net
      change in other operating assets and liabilities
                
                
                3,423
                
                
                
                1,082Net
      cash provided by operating activities
                
                
                11,869
                
                
                
                10,138Cash
      flows from investing activitiesIssuance
      and acquisition of loans receivable
                
                
                (26,451
                )
                
                
                (11,147
                )Investments
      in real estate
                
                
                (1,753
                )
                
                
                (719
                )Investment
      in equity investments
                
                
                (12,873
                )
                
                
                -Investment
      in real estate loan available for sale
                
                
                -
                
                
                
                (35,000
                )Purchase
      of securities carried at fair value
                
                
                (1,856
                )
                
                
                (29,889
                )Proceeds
      from preferred equity investments
                
                
                -
                
                
                
                60Proceeds
      from sale of securities carried at fair value
                
                
                13,174
                
                
                
                16,759Proceeds
      from sale of available for sale securities
                
                
                205
                
                
                
                -Proceeds
      from sale of loans receivable
                
                
                3,000
                
                
                
                -Restricted
      cash held in escrows
                
                
                (2,171
                )
                
                
                2,597Deposits
      on acquisition of loans receivable
                
                
                (4,100
                )
                
                
                -Collection
      of loans receivable
                
                
                12
                
                
                
                6,800Net
      cash used in investing activities
                
                
                (32,813
                )
                
                
                (50,539
                )




(Continued
on next page)


See Notes
to Consolidated Financial Statements.





6





WINTHROP
REALTY TRUST


FORM
10-Q – JUNE 30, 2010


CONSOLIDATED
STATEMENTS OF CASH FLOWS


(unaudited)


(in
thousands, continued)





Six Months Ended
                      June 30,2010
                    
                    
                    2009Cash
      flows from financing activitiesProceeds
      from mortgage loans payable
                    
                    $
                    -
                    
                    
                    $
                    49Proceeds
      from loan payable
                    
                    
                    -
                    
                    
                    
                    19,818Proceeds
      from revolving line of credit
                    
                    
                    -
                    
                    
                    
                    35,000Principal
      payments of mortgage loans payable
                    
                    
                    (3,392
                    )
                    
                    
                    (3,131
                    )Restricted
      cash held in escrows
                    
                    
                    1,446
                    
                    
                    
                    3,938Payments
      of note payable
                    
                    
                    -
                    
                    
                    
                    (9,800
                    )Payment
      of revolving line of credit
                    
                    
                    -
                    
                    
                    
                    (35,000
                    )Deferred
      financing costs
                    
                    
                    (164
                    )
                    
                    
                    (61
                    )Contribution
      from non-controlling interest
                    
                    
                    519
                    
                    
                    
                    723Distribution
      to non-controlling interest
                    
                    
                    (200
                    )
                    
                    
                    (743
                    )Issuance
      of Common Shares under Dividend Reinvestment Plan
                    
                    
                    1,180
                    
                    
                    
                    727Dividend
      paid on Common Shares
                    
                    
                    (6,746
                    )
                    
                    
                    (9,888
                    )Dividend
      paid on Series C Preferred Shares
                    
                    
                    (279
                    )
                    
                    
                    -Net
      cash (used in) provided by financing activities
                    
                    
                    (7,636
                    )
                    
                    
                    1,632Net
      decrease in cash and cash equivalents
                    
                    
                    (28,580
                    )
                    
                    
                    (38,769
                    )Cash
      and cash equivalents at beginning of period
                    
                    
                    66,493
                    
                    
                    
                    59,238Cash
      and cash equivalents at end of period
                    
                    $
                    37,913
                    
                    
                    $
                    20,469Supplemental Disclosure of Cash Flow
      InformationInterest
      paid
                    
                    $
                    7,216
                    
                    
                    $
                    8,542Taxes
      paid
                    
                    $
                    98
                    
                    
                    $
                    129Supplemental Disclosure on Non-Cash Investing
      and Financing
      ActivitiesDividends
      accrued on Common Shares
                    
                    $
                    3,442
                    
                    
                    $
                    3,956Dividends
      accrued on Series C Preferred Shares
                    
                    $
                    39
                    
                    
                    $
                    -Capital
      expenditures accrued
                    
                    $
                    165
                    
                    
                    $
                    222Redemption
      of Series B-1 Preferred Shares
                    
                    $
                    -
                    
                    
                    $
                    (17,081
                    )Deposit
      on redemption of Series B-1 Preferred Shares
                    
                    $
                    -
                    
                    
                    $
                    17,081





See Notes
to Consolidated Financial Statements.





7


WINTHROP
REALTY TRUST
 FORM
10-Q JUNE 30, 2010
 
 NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


1.
            Organization





Winthrop
Realty Trust (“Winthrop”) 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 May 21, 2009, which has as its stated principal
business activity the ownership and management of, and lending to, real property
and real estate related assets.





Winthrop
conducts its business through WRT Realty L.P., a Delaware limited partnership
(the “Operating Partnership”). Winthrop is the sole general partner of, and owns
directly and indirectly, 100% of the limited partnership interest in the
Operating Partnership.  All references to the “Trust” refer to
Winthrop and its consolidated subsidiaries, including the Operating
Partnership.





The Trust
is engaged in the business of owning real property and real estate related
assets which it categorizes into three specific areas:  (i) direct or
indirect ownership of wholly and partially owned operating properties
(“operating properties”); (ii) origination and acquisition of loans and debt
securities secured directly or indirectly by commercial real property
(collectively “loan assets”), including collateral mortgage-backed securities,
and (iii) equity and debt interests in other real estate investment trusts
(“REIT securities”).





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 of the
Securities and Exchange Commission (the “SEC”). 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 not misleading. The accompanying unaudited consolidated interim
financial statements should be read in conjunction with the audited consolidated
annual financial statements and the notes thereto included in the Trust’s Annual
Report on Form 10-K for the year ended December 31, 2009 filed with the
SEC.  In the opinion of management, all adjustments considered
necessary for fair statements have been included, and all such adjustments are
of a normal recurring nature. The results of operations for the six months ended
June 30, 2010 are not necessarily indicative of the operating results for the
full year.





The
accompanying unaudited consolidated financial statements represent the
consolidated results of Winthrop, its wholly-owned taxable REIT subsidiary, WRT
TRS Management Corp., 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 of a variable
interest entity (“VIE”).  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.





Reclassifications





Certain
prior year balances have been reclassified in order to conform to the current
year’s presentation.  The Trust’s property in Athens, Georgia is
included in discontinued operations for the three and six month periods ended
June 30, 2010 and 2009.  The Trust’s Creekwood Apartments property in
Kansas City, Kansas is included in discontinued operations for the three and six
month periods ended June 30, 2009.





Earnings Per
Share





The Trust
determines basic earnings per share on the weighted average number of Common
Shares of Beneficial Interest (“Common Shares”) outstanding during the period
and reflects the impact of participating securities.  The holders of
the Series B-1 Cumulative Convertible Redeemable Preferred Shares (“Series B-1
Preferred Shares”) and the Series C Cumulative Convertible Redeemable Preferred
Shares (“Series C Preferred Shares”) are entitled to receive cumulative
preferential dividends on a quarterly basis equal to the greater of (i) $0.40625
per share quarterly (6.5% of the liquidation preference on an annualized basis)
or (ii) cash dividends payable on the number of Common Shares into which the
Series B-1 Preferred Shares and Series C Preferred Shares (assuming for this
purpose that the conversion price of the Series C Preferred Shares equals the
conversion price for the Series B-1 Preferred Shares) are
convertible.  The Trust computes diluted earnings per share based on
the weighted average number of Common Shares outstanding combined with the
incremental weighted average effect from all outstanding potentially dilutive
instruments.





8


WINTHROP
REALTY TRUST
 FORM
10-Q JUNE 30, 2010
 
 NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


The Trust
has calculated earnings per share in accordance with relevant accounting
guidance for participating securities and the two class method.  The
reconciliation of earnings attributable to Common Shares outstanding for the
basic and diluted earnings per share calculation is as follows (in thousands,
except per share data):





Three Months Ended
                              June 30,
                            
                            
                            Six Months Ended
                              June 30,2010
                            
                            
                            2009
                            
                            
                            2010
                            
                            
                            2009BasicIncome
      (loss) from continuing operations
                            
                            $
                            5,649
                            
                            
                            $
                            (70,980
                            )
                            
                            $
                            9,977
                            
                            
                            $
                            (93,225
                            )Income
      attributable to non-controlling interest
                            
                            
                            (175
                            )
                            
                            
                            (165
                            )
                            
                            
                            (420
                            )
                            
                            
                            (336
                            )Preferred
      dividend of Series C Preferred Shares
                            
                            
                            (58
                            )
                            
                            
                            -
                            
                            
                            
                            (171
                            )
                            
                            
                            -Income
      (loss) from continuing operations applicable to Common
    Shares
                            
                            
                            5,416
                            
                            
                            
                            (71,145
                            )
                            
                            
                            9,386
                            
                            
                            
                            (93,561
                            )Loss
      from discontinued operations
                            
                            
                            (898
                            )
                            
                            
                            (51
                            )
                            
                            
                            (776
                            )
                            
                            
                            (68
                            )Net
      income (loss) applicable to Common Shares for earnings per share
      purposes
                            
                            $
                            4,518
                            
                            
                            $
                            (71,196
                            )
                            
                            $
                            8,610
                            
                            
                            $
                            (93,629
                            )Basic
      weighted-average Common Shares
                            
                            
                            21,175
                            
                            
                            
                            15,822
                            
                            
                            
                            20,888
                            
                            
                            
                            15,814Income
      (loss) from continuing operations
                            
                            $
                            0.25
                            
                            
                            $
                            (4.50
                            )
                            
                            $
                            0.44
                            
                            
                            $
                            (5.92
                            )Loss
      from discontinued operations
                            
                            
                            (0.04
                            )
                            
                            
                            -
                            
                            
                            
                            (0.03
                            )
                            
                            
                            -Net
      income (loss) per Common Share
                            
                            $
                            0.21
                            
                            
                            $
                            (4.50
                            )
                            
                            $
                            0.41
                            
                            
                            $
                            (5.92
                            )DilutedIncome
      (loss) from continuing operations
                            
                            $
                            5,649
                            
                            
                            $
                            (70,980
                            )
                            
                            $
                            9,977
                            
                            
                            $
                            (93,225
                            )Income
      attributable to non-controlling interest
                            
                            
                            (175
                            )
                            
                            
                            (165
                            )
                            
                            
                            (420
                            )
                            
                            
                            (336
                            )Preferred
      dividend of Series C Preferred Shares
                            
                            
                            (58
                            )
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -Income
      (loss) from continuing operations applicable to Common
    Shares
                            
                            
                            5,416
                            
                            
                            
                            (71,145
                            )
                            
                            
                            9,557
                            
                            
                            
                            (93,561
                            )Loss
      from discontinued operations
                            
                            
                            (898
                            )
                            
                            
                            (51
                            )
                            
                            
                            (776
                            )
                            
                            
                            (68
                            )Net
      income (loss) applicable to Common Shares for earnings per share
      purposes
                            
                            $
                            4,518
                            
                            
                            $
                            (71,196
                            )
                            
                            $
                            8,781
                            
                            
                            $
                            (93,629
                            )Basic
      weighted-average Common Shares
                            
                            
                            21,175
                            
                            
                            
                            15,822
                            
                            
                            
                            20,888
                            
                            
                            
                            15,814Series
      B-1 Preferred Shares (1)
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -Series
      C Preferred Shares (2)
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            522
                            
                            
                            
                            -Stock
      options (3)
                            
                            
                            2
                            
                            
                            
                            -
                            
                            
                            
                            2
                            
                            
                            
                            -Diluted
      weighted-average Common Shares
                            
                            
                            21,777
                            
                            
                            
                            15,822
                            
                            
                            
                            21,412
                            
                            
                            
                            15,814





(Continued
on next page)




9




WINTHROP
REALTY TRUST
 FORM
10-Q JUNE 30, 2010
 
 NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


Three Months Ended
                      June 30,
                    
                    
                    Six Months Ended
                      June 30,2010
                    
                    
                    2009
                    
                    
                    2010
                    
                    
                    2009Income
      (loss) from continuing operations
                    
                    $
                    0.25
                    
                    
                    $
                    (4.50
                    )
                    
                    $
                    0.44
                    
                    
                    $
                    (5.92
                    )Loss
      from discontinued operations
                    
                    
                    (0.04
                    )
                    
                    
                    -
                    
                    
                    
                    (0.03
                    )
                    
                    
                    -Net
      income (loss) per Common Share
                    
                    $
                    0.21
                    
                    
                    $
                    (4.50
                    )
                    
                    $
                    0.41
                    
                    
                    $
                    (5.92
                    )





(1)
            The
      Series B-1 Preferred Shares were anti-dilutive for the three and six
      months ended June 30, 2010 and 2009 and are not included in the
      weighted-average shares outstanding for the calculation of diluted
      earnings per Common Share.


(2)
            The
      Series C Preferred Shares were issued November 1, 2009, were anti-dilutive
      for the three months ended June 30, 2010 and were dilutive for the six
      months ended June 30, 2010.


(3)
            The
      Trust’s outstanding stock options are dilutive for the three and six
      months ended June 30, 2010.  The stock options were
      anti-dilutive for the three and six months ended June 30, 2009 and are not
      included in the weighted average shares outstanding for the calculation of
      diluted earnings per Common Share for
2009.





Recently Issued Accounting
Standards





In
January 2010 the FASB issued an amendment to the accounting and disclosure
requirements for fair value measurements. This amendment requires more robust
disclosure of valuation techniques and inputs into fair value measurements
and requires amounts and reasons for significant transfers between levels in the
fair value hierarchy to be reported along with disclosure of a company’s policy
for recognizing such transfers. This amendment is effective for the Trust
beginning on January 1, 2010, except for Level 3 sensitivity disclosures, which
are effective for the Trust beginning in fiscal 2011. The Trust has adopted this
standard which did not have a material impact on its consolidated financial
statements.





3.
            Fair
      Value Measurement





Cash equivalents, derivative financial
instruments, available for sale securities and certain securities are reported
at fair value.  The fair value measurements are
determined based on the assumptions that market participants would use in
pricing the applicable asset or liability. As a basis for considering market
participant assumptions in fair value measurements, the standards establish a
fair value hierarchy that distinguishes between market participant assumptions
based on market data obtained from sources independent of the reporting entity
(observable inputs that are classified within Levels 1 and 2 of the hierarchy)
and the reporting entity’s own assumptions about market participant assumptions
(unobservable inputs classified within Level 3 of the
hierarchy).





The table
below presents the Trust’s assets and liabilities measured at fair value on a
recurring basis as of June 30, 2010, according to the level in the fair value
hierarchy within which those measurements fall(in
thousands):





Recurring Basis
                        
                        Quoted Prices in Active
                          Markets for Identical Assets
                          and Liabilities (Level 1)
                        
                        
                        Significant Other
                          Observable Inputs
                          (Level 2)
                        
                        
                        Significant
                          Unobservable
                          Inputs (Level 3)
                        
                        
                        TotalAssetsCash
      and cash equivalents
                        
                        $
                        37,913
                        
                        
                        $
                        -
                        
                        
                        $
                        -
                        
                        
                        $
                        37,913Restricted
      cash held in escrow
                        
                        
                        8,574
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        8,574Securities
      carried at fair value
                        
                        
                        43,754
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        43,754Loan
      securities carried at fair value
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        4,673
                        
                        
                        
                        4,673$
                        90,241
                        
                        
                        $
                        -
                        
                        
                        $
                        4,673
                        
                        
                        $
                        94,914LiabilitiesDerivative
      liabilities
                        
                        $
                        -
                        
                        
                        $
                        73
                        
                        
                        $
                        -
                        
                        
                        $
                        73





10


WINTHROP
REALTY TRUST
 FORM
10-Q JUNE 30, 2010
 
 NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


The table
below presents the Trust’s assets and liabilities measured at fair value on a
recurring basis as of December 31, 2009, according to the level in the fair
value hierarchy within which those measurements fall(in
thousands):





Recurring Basis
                      
                      Quoted Prices in Active
                        Markets for Identical Assets
                        and Liabilities (Level 1)
                      
                      
                      Significant Other
                        Observable Inputs
                        (Level 2)
                      
                      
                      Significant
                        Unobservable
                        Inputs (Level 3)
                      
                      
                      TotalAssetsCash
      and cash equivalents
                      
                      $
                      66,493
                      
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      66,493Restricted
      cash held in escrow
                      
                      
                      9,505
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      9,505Available
      for sale securities
                      
                      
                      203
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      203Securities
      carried at fair value
                      
                      
                      51,702
                      
                      
                      
                      -
                      
                      
                      
                      692
                      
                      
                      
                      52,394Loan
      securities carried at fair value
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      1,661
                      
                      
                      
                      1,661$
                      127,903
                      
                      
                      $
                      -
                      
                      
                      $
                      2,353
                      
                      
                      $
                      130,256LiabilitiesDerivative
      liabilities
                      
                      $
                      -
                      
                      
                      $
                      84
                      
                      
                      $
                      -
                      
                      
                      $
                      84





The table
below includes a roll forward (in thousands) of the balance sheet amounts from
January 1, 2010 to June 30, 2010, including the change in fair value, for
financial instruments classified by the Trust within Level 3 of the valuation
hierarchy.  When a determination is made to classify a financial
instrument within Level 3 of the valuation hierarchy, it is based upon the
significance of the unobservable factors to the overall fair value
measurement.





Six Months Ended  June 30, 2010
                
                Securities Carried
                  at Fair Value
                
                
                Loan Securities
                  Carried at Fair ValueFair
      value, January 1, 2010
                
                $
                692
                
                
                $
                1,661Purchases,
      issuances and settlements, net
                
                
                (692
                )
                
                
                -Unrealized
      gain, net
                
                
                -
                
                
                
                3,012Fair
      value,  June 30, 2010
                
                $
                -
                
                
                $
                4,673





Non-recurring
Measurements





The table
below presents as of June 30, 2010 the Trust’s assets and liabilities measured
at fair value as events dictate (non-recurring measurements) according to the
level in the fair value hierarchy within which those measurements fall (in
thousands):





Non-Recurring Basis
                      
                      Quoted Prices in
                        Active Markets for
                        Identical Assets and
                        Liabilities (Level 1)
                      
                      
                      Significant Other
                        Observable
                        Inputs (Level 2)
                      
                      
                      Significant
                        Unobservable
                        Inputs (Level 3)
                      
                      
                      TotalAssets
      held for sale
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      2,180
                      
                      
                      $
                      2,180$
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      2,180
                      
                      
                      $
                      2,180





11


WINTHROP
REALTY TRUST
 FORM
10-Q JUNE 30, 2010
 
 NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


Fair
Value Option





The
current accounting guidance for fair value measurement provides a fair value
option election that allows companies to irrevocably elect fair value as the
measurement attribute for certain financial assets and liabilities. Changes in
fair value for assets and liabilities for which the election is made are
recognized in earnings on a quarterly basis based on the then market price
regardless of whether such assets or liabilities have been disposed of at such
time.  The fair value option guidance permits the fair value option
election to be made on an instrument by instrument basis when it is initially
recorded or upon an event that gives rise to a new basis of accounting for that
asset or liability.  The Trust elected the fair value option for all
securities acquired subsequent to September 30, 2008.





The Trust
recognized a net unrealized gain of $2,875,000 and $4,802,000 for the three and
six months ended June 30, 2010, respectively, and a net unrealized gain of
$12,580,000 and $1,432,000 for the three and six months ended June 30, 2009
respectively, as a result of the change in fair value of the securities for
which the fair value option was elected, which is recorded as an unrealized gain
or loss in the Trust’s statements of operations.  Income related to
securities carried at fair value is recorded as interest and dividend
income.





The
following table presents as of June 30, 2010 and December 31, 2009 the Trust's
financial assets for which the fair value option was elected (in
thousands):





Financial instruments, at fair value
                  
                  June 30, 2010
                  
                  
                  December 31, 2009AssetsSecurities
      carried at fair value:Debentures
                  
                  $
                  15,907
                  
                  
                  $
                  18,794Preferred
      shares
                  
                  
                  25,922
                  
                  
                  
                  23,950Common
      shares
                  
                  
                  1,925
                  
                  
                  
                  9,650Loan
      securities carried at fair value
                  
                  
                  4,673
                  
                  
                  
                  1,661$
                  48,427
                  
                  
                  $
                  54,055





The table
below presents as of June 30, 2010the
difference between fair values and the aggregate contractual amounts due for
which the fair value option has been elected (in thousands):





Fair Value at
                      June 30, 2010
                    
                    
                    Amount Due
                      Upon Maturity
                    
                    
                    DifferenceAssetsSecurities
      carried at fair value:Debentures
                    
                    $
                    15,907
                    
                    
                    $
                    16,290
                    
                    
                    $
                    383Loan
      securities carried at fair value
                    
                    
                    4,673
                    
                    
                    
                    7,494
                    
                    
                    
                    2,821$
                    20,580
                    
                    
                    $
                    23,784
                    
                    
                    $
                    3,204





The table
below presents as of December 31, 2009 the difference between fair values and
the aggregate contractual amounts due for which the fair value option has been
elected (in thousands):





Fair Value at
                      December 31, 2009
                    
                    
                    Amount Due
                      Upon Maturity
                    
                    
                    DifferenceAssetsSecurities
      carried at fair value:Debentures
                    
                    $
                    18,794
                    
                    
                    $
                    21,191
                    
                    
                    $
                    2,397Loan
      securities carried at fair value
                    
                    
                    1,661
                    
                    
                    
                    7,494
                    
                    
                    
                    5,833$
                    20,455
                    
                    
                    $
                    28,685
                    
                    
                    $
                    8,230





12


WINTHROP
REALTY TRUST
 FORM
10-Q JUNE 30, 2010
 
 NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


4.
            Acquisitions,
      Dispositions and Other Activity





Acquisitions of
Loans





Driver Building, San Diego,
California – First Mortgage Loan -On May 14, 2010 the Trust acquired at
par a non-performing $6,540,000 first mortgage loan. The loan is collateralized
by an 80,300 square foot office building referred to as the Robert F. Driver
Building located in San Diego, California. This loan which bears interest at
7.47% and matured on March 1, 2010, is in maturity
default.  Subsequent to June 30, 2010 the Trust has commenced
foreclosure on the property with a foreclosure sale expected to occur in
September 2010.





Crossroads Building, Englewood
Colorado– First Mortgage Loan -On June 11, 2010 the Trust acquired for
$8,100,000 a $10,031,000 non-performing first mortgage loan. The loan is
collateralized by an 118,200 square foot office building referred to as the
Crossroads II at Meridian, located in Englewood, Colorado, a suburb of Denver.
This loan is in default and the Trust has commenced foreclosure on the property
with a foreclosure sale expected to occur in the fourth quarter of
2010.





Deer Valley Medical Center, Deer
Valley, Arizona – First Mortgage Loan -On June 28, 2010 the Trust,
through WRT-DV LLC (“WRT-DV”), a newly formed wholly owned subsidiary, acquired
for $10,257,000 a $20,491,000 non-performing first mortgage loan. The loan is
collateralized by a newly constructed 85,600 square foot office building with
its own 4-story enclosed parking garage referred to as the Deer Valley Medical
Center located in Deer Valley, Arizona, a suburb of Phoenix. In connection with
the purchase of the loan, WRT-DV also assumed a tenant improvement capital
obligation not to exceed $2,500,000 with respect to a lease with a division of
United Healthcare.  This loan
was in maturity default and the property was foreclosed on August 6,
2010.  In July 2010, in exchange for a capital contribution of
$157,000, the Trust admitted Fenway VI LLC (“Fenway”), an unrelated third party,
as a member of WRT-DV.





Riverside Shopping Center,
Riverside, California – On June 28, 2010 the Trust and Retail Opportunity
Investment Corp. (“ROIC”) each contributed $7,800,000 and formed a 50%-50% joint
venture entity which acquired at par a 12% $15,600,000 B participation in a
performing $70,000,000 first mortgage loan.  The first mortgage loan
is collateralized by a 405,000 square foot retail center located in Riverside,
California and matures on December 1, 2012.  The B participation is
subordinate to $54,400,000 A participation.





Acquisitions &
Dispositions of REIT Securities





During
the quarter ended June 30, 2010 the Trust sold debentures and received net
proceeds of approximately $1,767,000. The Trust recognized a net gain on the
sale of these securities of approximately $78,000 exclusive of any interest or
dividends earned.





Financing





In April
2010, the Trust exercised its one-year option to extend the loan with KeyBank
collateralized by 14 properties (the “KeyBank loan”) through June
2011.





13


WINTHROP
REALTY TRUST
 FORM
10-Q JUNE 30, 2010
 
 NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


5.
            Loans
      Receivable





The
following table summarizes the Trust’s loans receivable at June 30, 2010 and
December 31, 2009 (in thousands):





Carrying AmountProperty
                          
                          Location
                          
                          Interest Rate
                          
                          Maturity
                          
                          June 30,
                            2010
                          
                          
                          December
                            31, 2009180
      North Michigan (1)
                          
                          Chicago,
      IL
                          
                          
                          8.5
                          %
                          May
      2016
                          
                          $
                          1,070
                          
                          
                          $
                          717160
      Spear (1)
                          
                          San
      Francisco, CA
                          
                          
                          (2
                          )
                          June
      2012
                          
                          
                          5,253
                          
                          
                          
                          4,281160
      Spear – Mezzanine (1)
                          
                          San
      Francisco, CA
                          
                          
                          15.0
                          %
                          June
      2012
                          
                          
                          2,422
                          
                          
                          
                          1,212Siete
      Square (3)
                          
                          Phoenix,
      AZ
                          
                          
                          (3
                          )
                          June
      2012
                          
                          
                          2,486
                          
                          
                          
                          5,505Beverly
      Hilton (1)
                          
                          Beverly
      Hills, CA
                          
                          Libor
      + 1.74%
                          
                          August
      2010
                          
                          
                          6,502
                          
                          
                          
                          5,384Wellington
      Tower (1)
                          
                          New
      York, NY
                          
                          
                          6.79
                          %
                          July
      2017
                          
                          
                          2,406
                          
                          
                          
                          2,364Metropolitan
      Tower (1)
                          
                          New
      York, NY
                          
                          Libor
      + 1.5%
                          
                          Nov
      2010
                          
                          
                          8,244
                          
                          
                          
                          6,638Deer
      Valley (1) (5)
                          
                          Deer
      Valley, AZ
                          
                          
                          (4
                          )
                          April
      2009
                          
                          
                          10,256
                          
                          
                          
                          -Crossroads
      (1) (5)
                          
                          Englewood,
      CO
                          
                          
                          6.07
                          %
                          July
      2013
                          
                          
                          8,134
                          
                          
                          
                          -Driver
      (1) (5)
                          
                          San
      Diego, CA
                          
                          
                          7.47
                          %
                          March
      2010
                          
                          
                          6,622
                          
                          
                          
                          -$
                          53,395
                          
                          
                          $
                          26,101





(1)
              The
      Trust determined that these loan receivables were deemed to be variable
      interests in VIEs primarily based on the fact that the underlying entities
      do not have sufficient equity at risk to permit the entity to finance its
      activities without additional subordinated financial
      support.  The Trust does not have the power to direct the
      activities of the entity that most significantly impact the entity’s
      economic performance.


(2)
              The
      Trust holds a B Note in this loan.  Interest on the B Note
      equals the difference between (i) interest on the entire outstanding loan
      principal balance ($73,796 at June 30, 2010) at a rate of 6.48215% per
      annum less (ii) interest payable on the outstanding principal balance of
      the A Note ($35,000 at June 30, 2010) at a rate of 9.75% per
      annum.  As a result, the effective yield on the Trust’s $3,410
      cash investment is 40.8%.


(3)
              The
      borrower has notified the Trust of its intent to pay off this loan in full
      in August 2010 at the discounted payoff amount of
  $2,500.


(4)
              The
      loan bears interest at a rate of 9.25% with respect to $18,200 and 10%
      with respect to $2,100 of face
value.


(5)
              Loan
      is in default and the contractually required payments receivable include
      the total outstanding principal of the loan, stated interest as noted
      above, default interest on the outstanding principal and applicable late
      fees.





The
carrying amount of loans receivable includes accrued interest of $310,000 and
$197,000 at June 30, 2010 and December 31, 2009, respectively, and accretion of
discount of $4,763,000 and $1,021,000 at June 30, 2010 and December 31, 2009,
respectively.  For the three and six months ended June 30, 2010, the
Trust recorded discount accretion into interest income of $2,001,000 and
$3,742,000, respectively.  There was no discount accretion for the
three and six months ended June 30, 2009.  The fair
value of the Trust’s loans receivable, exclusive of interest receivable, was
approximately $73,810,000 at June 30, 2010.





14




WINTHROP
REALTY TRUST


FORM
10-Q JUNE 30, 2010





NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS




Loan
Revenue Recognition




Interest
income on performing loans is recognized over the life of the investments using
the effective interest method and recognized on the accrual basis.  Costs
of acquiring loans are expensed as incurred.




Certain
of the Trust's loans provide for accrual of interest at specified rates that
differ from current payment terms. Interest is recognized on such loans at the
accrual rate subject to management's determination that accrued interest and
outstanding principal are collectible, based on the underlying collateral and
operations of the borrower.




The Trust
considers a loan to be non-performing and places loans on non-accrual status at
such time as: management determines it is probable that it will be unable to
collect all amounts due according to the contractual terms of the loan. While on
non-accrual status, based on the Trust's judgment as to collectability of
principal, loans are either accounted for on a cash basis, where interest income
is recognized only upon actual receipt of cash, or on a cost-recovery basis,
where all cash receipts reduce a loan's carrying value.




For the
three and six months ended June 30, 2010 and 2009, the Trust did not recognize
any interest income on impaired loans subsequent to the date of their
impairment.  There were no cash payments received on impaired loans
for the three and six months ended June 30, 2010.  As of June 30,
2009, the Trust received $9,000 which was recorded as a cash recovery on
impaired loans.




Loan
Losses
 The Trust
performs an analysis for loan losses in instances where it is deemed probable
that the Trust may be unable to collect all amounts of principal and interest
due according to the contractual terms of the loan. If, upon completion of the
valuation, the estimated fair value of the underlying collateral securing the
loan is less than the net carrying value of the loan, an allowance is created
with a corresponding charge to the provision for loan losses. The allowance for
each loan is maintained at a level the Trust believes is adequate to absorb
losses.
 
 There was
no provision for loan loss recorded during the three and six months ended June
30, 2010.  During the three and six months ended June 30, 2009, the
Trust recorded a provision for loan loss of $1,724,000 and $2,152,000
respectively related to loans on several properties in the Marc Realty
portfolio.


6.
            Securities
      Carried at Fair Value And Loan Securities Carried at Fair
      Value





Securities
carried at fair value are comprised of debentures, preferred shares, and common
shares for which the Trust has elected the fair value option.





Securities
carried at fair value and loan securities carried at fair value at June 30, 2010
are summarized in the table below (in thousands):





Cost
                  
                  
                  Fair ValueDebentures
                  
                  $
                  11,045
                  
                  
                  $
                  15,907Preferred
      shares
                  
                  
                  14,868
                  
                  
                  
                  25,922Common
      shares
                  
                  
                  1,660
                  
                  
                  
                  1,92527,573
                  
                  
                  
                  43,754Loan
      securities
                  
                  
                  1,661
                  
                  
                  
                  4,673$
                  29,234
                  
                  
                  $
                  48,427





For the
three and six months ended June 30, 2010, the Trust recognized unrealized gains
on securities carried at fair value of $2,875,000 and $4,802,000
respectively.  For the three and six months ended June 30, 2009, the
Trust recognized unrealized gains on securities carried at fair value of
$12,580,000 and $1,432,000 respectively.


15


WINTHROP
REALTY TRUST


FORM
10-Q JUNE 30, 2010





NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS





Securities
carried at fair value and loan securities carried at fair value at December 31,
2009 are summarized in the table below (in thousands):





Cost
                  
                  
                  Fair ValueDebentures
                  
                  $
                  13,597
                  
                  
                  $
                  18,794Preferred
      shares
                  
                  
                  14,231
                  
                  
                  
                  23,950Common
      shares
                  
                  
                  8,234
                  
                  
                  
                  9,65036,062
                  
                  
                  
                  52,394Loan
      securities
                  
                  
                  1,661
                  
                  
                  
                  1,661$
                  37,723
                  
                  
                  $
                  54,055





During
the three and six months ended June 30, 2010 securities were sold for total
proceeds of approximately $1,767,000 and $13,174,000,
respectively.  The Trust recognized gains of $78,000 and $773,000
respectively on the sale of these securities.





During
the three and six months ended June 30, 2009 securities were sold for total
proceeds of approximately $9,792,000 and $16,759,000, respectively. The Trust
recognized gains of $2,685,000 and $2,598,000 respectively on the sale of these
securities.





The Trust
utilizes the specific identification method for calculating gain or loss on the
sale of securities.





7.
                  Preferred
      Equity Investments – Marc
  Realty





The Trust
recognized earnings from preferred equity investments of $85,000 and $168,000
for the three and six months ended June 30, 2010 and recognized loss from
preferred equity investments of $3,209,000 and $2,194,000 respectively for the
three and six months ended June 30, 2009 which included impairment losses of
$2,186,000 in the second quarter of 2009.  The results for the six
months ended June 30, 2010 reflect the effects of the restructuring of the
preferred equity investment with Marc Realty in July
2009.   Effective with the third quarter of 2009, 12 of the
investments with Marc Realty were deemed to be equity investments for which the
Trust began recognizing its pro-rata share of income or loss subsequent to June
30, 2009.  Prior to June 30, 2009, the Trust accounted for these 12
investments as preferred equity investments.





8.
            Equity
      Investments





The
Trust’s equity investments consist of the following at June 30,
2010:




Investment Group (1)
                        
                        Equity Investment
                        
                        Nominal %
                          Ownership (2)
                        
                        
                        Equity
                          Investment
                          June 30,
                          2010
                        
                        
                        Equity
                          Investment
                          December 31,
                          2009(in
      thousands)Marc
      Realty
                        
                        8
      South Michigan LLC
                        
                        
                        50
                        %
                        
                        $
                        7,050
                        
                        
                        $
                        6,859Marc
      Realty
                        
                        11
      East Adams Street LLC
                        
                        
                        49
                        %
                        
                        
                        3,217
                        
                        
                        
                        2,963Marc
      Realty
                        
                        29
      East Madison Street LLC
                        
                        
                        50
                        %
                        
                        
                        7,836
                        
                        
                        
                        7,750Marc
      Realty
                        
                        Michigan
      30 LLC
                        
                        
                        50
                        %
                        
                        
                        12,012
                        
                        
                        
                        11,881Marc
      Realty
                        
                        High
      Point Plaza LLC
                        
                        
                        50
                        %
                        
                        
                        6,034
                        
                        
                        
                        5,986Marc
      Realty
                        
                        Brooks
      Building LLC
                        
                        
                        50
                        %
                        
                        
                        7,358
                        
                        
                        
                        7,346Marc
      Realty (3)
                        
                        1701
      Woodfield LLC
                        
                        
                        50
                        %
                        
                        
                        3,163
                        
                        
                        
                        1,582Marc
      Realty
                        
                        River
      Road LLC
                        
                        
                        50
                        %
                        
                        
                        4,117
                        
                        
                        
                        4,075Marc
      Realty
                        
                        3701
      Algonquin Road LLC
                        
                        
                        50
                        %
                        
                        
                        3,046
                        
                        
                        
                        2,827Marc
      Realty
                        
                        Enterprise
      Center LLC
                        
                        
                        50
                        %
                        
                        
                        3,102
                        
                        
                        
                        3,094Marc
      Realty
                        
                        900
      Ridgebrook LLC
                        
                        
                        50
                        %
                        
                        
                        1,781
                        
                        
                        
                        1,661Marc
      Realty
                        
                        Salt
      Creek LLC
                        
                        
                        50
                        %
                        
                        
                        2,284
                        
                        
                        
                        1,536Sealy
                        
                        Northwest
      Atlanta Partners LP
                        
                        
                        60
                        %
                        
                        
                        2,840
                        
                        
                        
                        3,189Sealy
                        
                        Airpark
      Nashville GP
                        
                        
                        50
                        %
                        
                        
                        3,870
                        
                        
                        
                        4,618Sealy
                        
                        Newmarket
      GP LLC
                        
                        
                        68
                        %
                        
                        
                        7,392
                        
                        
                        
                        7,840Concord
                        
                        Lex-Win
      Concord LLC
                        
                        
                        50
                        %
                        
                        
                        -
                        
                        
                        
                        -ROIC
                        
                        WRT-ROIC
      Riverside LLC
                        
                        
                        50
                        %
                        
                        
                        7,805
                        
                        
                        
                        -$
                        82,907
                        
                        
                        $
                        73,207


16


WINTHROP
REALTY TRUST


FORM
10-Q JUNE 30, 2010





NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS





(1)
            The
      Trust has various venture partners which it refers to as investment groups
      for purposes of explaining its equity investments. Further detail is
      provided for the equity investments under their respective investment
      group headings below.


(2)
            The
      Trust has determined that all of the Marc Realty equity investments and
      the investment in Lex-Win Concord LLC are VIEs.  The Trust has
      determined that it is not the primary beneficiary of these
      investments.


(3)
            The
      increase in the Trust’s equity investment balance relates to an additional
      investment of $1,600 pertaining to a debt modification at the property.
      (See Note 19-Subsequent Events)





The
following table reflects the activity of the Trust’s equity investments for the
six months ended June 30, 2010 (in thousands):





Marc Realty
                          Ventures
                        
                        
                        Sealy
                          Ventures
                        
                        
                        Lex-Win
                          Concord LLC
                        
                        
                        WRT-ROIC
                          Riverside
                        
                        
                        TotalBalance
      at December 31, 2009
                        
                        $
                        57,560
                        
                        
                        $
                        15,647
                        
                        
                        $
                        -
                        
                        
                        $
                        -
                        
                        
                        $
                        73,207Equity
      in income (loss)
                        
                        
                        307
                        
                        
                        
                        (1,231
                        )
                        
                        
                        -
                        
                        
                        
                        5
                        
                        
                        
                        (919
                        )Contributions
                        
                        
                        5,073
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        7,800
                        
                        
                        
                        12,873Distributions/capital
      returns
                        
                        
                        (1,940
                        )
                        
                        
                        (314
                        )
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        (2,254
                        )Balance
      at June 30, 2010
                        
                        $
                        61,000
                        
                        
                        $
                        14,102
                        
                        
                        $
                        -
                        
                        
                        $
                        7,805
                        
                        
                        $
                        82,907





Marc
Realty





On July
1, 2009, the Trust restructured certain of its existing investments with Marc
Realty and reclassified 12 investments from preferred equity investments to
equity investments.  In addition, any tenant improvement and capital
expenditure loans to these properties were reclassified from loans receivable to
equity investments.





The
restructuring of each of the Marc Realty investments was considered to be a
reconsideration event under FASB’s consolidation guidance due to the material
change in the agreements and the exchange of consideration between Marc Realty
and the Trust. As a result of the reconsideration, the Marc Realty equity
investments were deemed to be variable interests in VIEs primarily based on the
fact that the underlying entities do not have sufficient equity at risk to
permit the entity to finance its activities without additional subordinated
financial support.  As a result of the existence of certain provisions
in the operating agreements identifying the Trust and Marc Realty as related
parties, the Trust determined that Marc Realty, as the primary decision maker
and manager of the operating properties, is considered to be most closely
aligned with the business and is the primary beneficiary of the
VIEs.





Although
the legal structure of the investments with Marc Realty is as loans, the
characteristics of both the mezzanine loans and the tenant improvement and
capital expenditure loans indicate that equity method accounting is most
appropriate.  The Trust is entitled to residual proceeds from capital
transactions and net operating cash flows, both of which are typical of an
equity investment.  The Trust's level of participation also supports
venture accounting treatment.  There are also provisions in the
agreements for future funding of additional tenant improvement and capital
expenditure loans for which both parties will fund in accordance with their
effective equity percentages.  The additional funding will be used to
fund either capital expenditures or operating losses, as necessary, which can be
viewed akin to capital contributions.


17


WINTHROP
REALTY TRUST


FORM
10-Q JUNE 30, 2010





NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS





As a
result, effective with the third quarter of 2009, the investments with Marc
Realty are deemed to be equity investments for which the Trust recognizes its
pro-rata share of income or loss on 12 separate equity investments. The Trust
recorded net income from the 12 equity investments of $231,000 and $307,000 for
the three and six months ended June 30, 2010
respectively.  Additionally, the Trust received cash distributions of
$1,940,000 from the investments during the six months ended June 30,
2010.





The
combined summarized balance sheets of the Trust’s Marc Realty venture
investments are as follows (in thousands):





June 30, 2010
                        
                        
                        December 31, 2009ASSETSReal
      estate, net
                        
                        $
                        173,305
                        
                        
                        $
                        174,310Cash
      and cash equivalents
                        
                        
                        2,739
                        
                        
                        
                        1,100Receivables
      and other assets
                        
                        
                        28,121
                        
                        
                        
                        25,287Total
      Assets
                        
                        $
                        204,165
                        
                        
                        $
                        200,697LIABILITIES
      AND MEMBERS’ CAPITALMortgage
      and notes payable
                        
                        $
                        92,288
                        
                        
                        $
                        94,969Other
      liabilities
                        
                        
                        11,780
                        
                        
                        
                        12,722Members’
      Capital
                        
                        
                        100,097
                        
                        
                        
                        93,006Total
      Liabilities and Members’ Capital
                        
                        $
                        204,165
                        
                        
                        $
                        200,697Trust’s
      share of equity
                        
                        $
                        50,081
                        
                        
                        $
                        46,497Basis
      differentials (1)
                        
                        
                        13,419
                        
                        
                        
                        13,563Other-than-temporary
      impairment
                        
                        
                        (2,500
                        )
                        
                        
                        (2,500
                        )Carrying
      value of the Trust’s investments in the equity investments
                        
                        $
                        61,000
                        
                        
                        $
                        57,560





(1)
            This
      amount represents the aggregate difference between the Trust’s historical
      cost basis and the basis reflected at the equity investment level, which
      is typically amortized over the life of the related assets and
      liabilities.  The basis differentials are the result of (i)
      other-than-temporary impairments at the investment level, (ii) a
      reallocation of equity at the venture level as a result of the
      restructuring, and (iii) certain acquisition, transaction and other costs
      incurred by the Trust.





The
combined summarized statements of operations of the Trust’s Marc Realty venture
investments are as follows (in thousands):





For
      The
                      Three
      Months Ended
                      June 30, 2010
                    
                    
                    For
      The
                      Six
      Months Ended
                      June 30, 2010Total
      revenue
                    
                    $
                    10,314
                    
                    
                    $
                    20,381ExpensesOperating
                    
                    
                    4,161
                    
                    
                    
                    8,461Interest
                    
                    
                    1,216
                    
                    
                    
                    2,368Real
      estate taxes
                    
                    
                    1,482
                    
                    
                    
                    2,964Depreciation
      and amortization
                    
                    
                    2,354
                    
                    
                    
                    4,693Other
      expense
                    
                    
                    553
                    
                    
                    
                    1,049Total
      expenses
                    
                    
                    9,766
                    
                    
                    
                    19,535Other
      Income
                    
                    
                    63
                    
                    
                    
                    63Net
      income
                    
                    $
                    611
                    
                    
                    $
                    909Trust’s
      share of net income
                    
                    $
                    303
                    
                    
                    $
                    451Amortization
      of basis differential
                    
                    
                    (72
                    )
                    
                    
                    (144
                    )Income
      from equity investments
                    
                    $
                    231
                    
                    
                    $
                    307


18


WINTHROP
REALTY TRUST


FORM
10-Q JUNE 30, 2010





NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS





Sealy





As of
June 30, 2010 the Trust owns between 50-68% of three office flex parks located
in southeastern United States together with its venture partner, Sealy &
Co., Ltd. (“Sealy”), a real estate investment and operating company
headquartered in Dallas, Texas and Shreveport, Louisiana.





The
combined summarized balance sheets of the Sealy venture equity investments are
as follows (in thousands):





June 30,
                        2010
                      
                      
                      December 31,
                        2009ASSETSReal
      estate, net
                      
                      $
                      150,814
                      
                      
                      $
                      153,565Cash
      and cash equivalents
                      
                      
                      1,397
                      
                      
                      
                      971Receivables
      and other assets
                      
                      
                      13,790
                      
                      
                      
                      14,658Total
      Assets
                      
                      $
                      166,001
                      
                      
                      $
                      169,194LIABILITIES
      AND MEMBERS’/PARTNERS’ EQUITYMortgage
      and notes payable
                      
                      $
                      139,750
                      
                      
                      $
                      139,750Other
      liabilities
                      
                      
                      2,961
                      
                      
                      
                      3,373Members’/Partners’
      equity
                      
                      
                      23,290
                      
                      
                      
                      26,071Total
      Liabilities and Members’/Partners’ Equity
                      
                      $
                      166,001
                      
                      
                      $
                      169,194Carrying
      value of the Trust’s investments in the equity investments
                      
                      $
                      14,102
                      
                      
                      $
                      15,647





The
combined summarized statements of operations of the Sealy venture equity
investments are as follows (in thousands):





For
      the Three Months Ended
                        June
      30,
                      
                      
                      For
      the Six Months Ended
                        June
      30,2010
                      
                      
                      2009
                      
                      
                      2010
                      
                      
                      2009Total
      revenue
                      
                      $
                      4,174
                      
                      
                      $
                      4,409
                      
                      
                      $
                      8,544
                      
                      
                      $
                      8,852ExpensesOperating
                      
                      
                      817
                      
                      
                      
                      978
                      
                      
                      
                      1,774
                      
                      
                      
                      1,638Real
      estate taxes
                      
                      
                      446
                      
                      
                      
                      490
                      
                      
                      
                      893
                      
                      
                      
                      981Interest
                      
                      
                      2,080
                      
                      
                      
                      2,087
                      
                      
                      
                      4,138
                      
                      
                      
                      4,138Depreciation
      and amortization
                      
                      
                      1,679
                      
                      
                      
                      1,785
                      
                      
                      
                      3,391
                      
                      
                      
                      3,633Other
      expense
                      
                      
                      271
                      
                      
                      
                      297
                      
                      
                      
                      499
                      
                      
                      
                      542Total
      expenses
                      
                      
                      5,293
                      
                      
                      
                      5,637
                      
                      
                      
                      10,695
                      
                      
                      
                      10,932Net
      loss
                      
                      $
                      (1,119
                      )
                      
                      $
                      (1,228
                      )
                      
                      $
                      (2,151
                      )
                      
                      $
                      (2,080
                      )Trust’s
      share of net loss
                      
                      $
                      (628
                      )
                      
                      $
                      (695
                      )
                      
                      $
                      (1,231
                      )
                      
                      $
                      (1,177
                      )


19


WINTHROP
REALTY TRUST


FORM
10-Q JUNE 30, 2010





NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS





Lex-Win Concord LLC –
“Concord”





At June
30, 2009, the Trust wrote down its investment in Lex-Win Concord LLC
(“Lex-Win”), the entity that holds an interest in Concord Debt Holdings LLC
(“Concord”), to zero and recognized an impairment loss of $31,670,000 primarily
as a result of the fair value of its indirect share of Concord’s net asset value
being less than zero.





Concord
is in violation of certain debt covenants to its lenders at June 30, 2010 as a
result of the deterioration of the value of its assets and cumulative operating
losses.  Concord’s debt is non-recourse to Lex-Win and the Trust and
Concord’s lenders’ sole recourse with respect to defaults is limited to the
value of Concord’s assets.  The lenders do not have recourse against
Lex-Win’s or the Trust’s assets.





On May
22, 2009, a wholly-owned subsidiary of Inland American Real Estate Trust, Inc.
(“Inland”) filed a legal action against Concord.  On December 21,
2009, Inland, Concord and certain of their affiliates entered into a settlement
agreement to resolve the action.  However, the implementation of the
settlement agreement is conditioned on certain events including the ability of
certain Concord Real Estate CDO 2006-1, Ltd. (“CDO-1”) bonds held by Concord
Debt Funding Trust (“CDFT”), a subsidiary of Concord, to be
cancelled.





In
January 2010, the trustee for CDO-1 refused to cancel the CDO-1 bonds held by
CDFT and CDO-1 brought an action in the Delaware Court of Chancery (the “Court”)
seeking declaratory relief that the bonds held by CDFT should be cancelled and
no longer remain outstanding.  If the bonds remain outstanding obligations,
CDO-1 will not satisfy certain of its par value tests resulting in funds used
for interest payments and distributions on certain of the CDO-1 bonds being used
instead to redeem the most senior class of CDO-1 bonds, thereby reducing the
cash flow to CDFT from CDO-1.





The
parties in the action brought cross summary judgment motions which were heard on
April 21, 2010.  On May 14, 2010 the Court ruled in favor of CDO-1 and
that the bonds be deemed cancelled effective January 2010.  However, on
June 14, 2010 the trustee for CDO-1 issued a notice to appeal the Court’s
ruling. We anticipate the appeal process to be completed and a decision on the
appeal to be received by the end of 2010.





The
summarized consolidated balance sheets of Lex-Win are as follows (in
thousands):




June 30, 2010
                        
                        
                        December 31, 2009Condensed
      Consolidated Balance SheetsASSETSCash
      and restricted cash
                        
                        $
                        12,429
                        
                        
                        $
                        26,116Real
      estate debt investments, net of loss allowance
                        
                        
                        430,891
                        
                        
                        
                        447,270Real
      estate debt investments held for sale
                        
                        
                        -
                        
                        
                        
                        66,311Available
      for sale securities, net
                        
                        
                        97,368
                        
                        
                        
                        83,977Other
      assets
                        
                        
                        6,633
                        
                        
                        
                        10,834Total
      assets
                        
                        $
                        547,321
                        
                        
                        $
                        634,508LIABILITIES
      AND MEMBERS’ CAPITALRepurchase
      agreements
                        
                        $
                        69,214
                        
                        
                        $
                        135,064Revolving
      credit facility
                        
                        
                        51,208
                        
                        
                        
                        58,850Collateralized
      debt obligations
                        
                        
                        347,525
                        
                        
                        
                        347,525Contingent
      collateral support obligation
                        
                        
                        9,995
                        
                        
                        
                        9,757Sub-participation
      obligation
                        
                        
                        4,500
                        
                        
                        
                        4,500Accounts
      payable and other liabilities
                        
                        
                        17,119
                        
                        
                        
                        14,198Non-controlling
      redeemable preferred interest
                        
                        
                        10,692
                        
                        
                        
                        5,720


20


WINTHROP
REALTY TRUST


FORM
10-Q JUNE 30, 2010





NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS




June 30, 2010
                      
                      
                      December 31, 2009Members’
      Capital
                      
                      
                      91,001
                      
                      
                      
                      113,928Accumulated
      other comprehensive loss
                      
                      
                      (54,041
                      )
                      
                      
                      (55,148
                      )Non-controlling
      interest
                      
                      
                      108
                      
                      
                      
                      114Total
      Liabilities and Members’ Capital
                      
                      $
                      547,321
                      
                      
                      $
                      634,508Trust’s
      share of equity
                      
                      $
                      18,480
                      
                      
                      $
                      29,390Basis
      differential (1)
                      
                      
                      (18,480
                      )
                      
                      
                      (29,390
                      )Carrying
      value of the Trust’s investment in Concord
                      
                      $
                      -
                      
                      
                      $
                      -





(1)
            At
      June 30, 2010, this amount represents other-than-temporary impairments
      recognized by the Trust of $68,213 adjusted for suspended losses of
      $22,712 and accumulated other comprehensive losses of
      $27,021.  At December 31, 2009, this amount represents
      other-than-temporary impairments recognized by the Trust of $68,213
      adjusted for suspended losses of $11,249 and accumulated other
      comprehensive losses of $27,574.





The
summarized consolidated statements of operations of Lex-Win are as follows (in
thousands):




For the Three Months Ended
                  
                  
                  For the Six Months EndedJune 30, 2010
                  
                  
                  June 30, 2009
                  
                  
                  June 30, 2010
                  
                  
                  June 30, 2009Condensed
      Consolidated Statement of  OperationsInterest
      and other income
                  
                  $
                  8,024
                  
                  
                  $
                  10,227
                  
                  
                  $
                  15,133
                  
                  
                  $
                  22,775Interest
      expense
                  
                  
                  (3,578
                  )
                  
                  
                  (4,226
                  )
                  
                  
                  (7,185
                  )
                  
                  
                  (8,858
                  )Impairment
      loss on available for sale securities
                  
                  
                  (1,247
                  )
                  
                  
                  (7,674
                  )
                  
                  
                  (3,875
                  )
                  
                  
                  (8,555
                  )Provision
      for loss allowance on real estate debt investments
                  
                  
                  (12,289
                  )
                  
                  
                  (41,192
                  )
                  
                  
                  (17,889
                  )
                  
                  
                  (43,692
                  )Impairment
      loss on real estate debt investments held for sale
                  
                  
                  -
                  
                  
                  
                  (27,505
                  )
                  
                  
                  -
                  
                  
                  
                  (64,413
                  )Realized
      loss on sale of investments
                  
                  
                  (674
                  )
                  
                  
                  (16,520
                  )
                  
                  
                  (1,220
                  )
                  
                  
                  (16,520
                  )Contingent
      collateral support expense
                  
                  
                  (120
                  )
                  
                  
                  (9,600
                  )
                  
                  
                  (238
                  )
                  
                  
                  (9,600
                  )General
      and administrative
                  
                  
                  (890
                  )
                  
                  
                  (1,381
                  )
                  
                  
                  (1,709
                  )
                  
                  
                  (2,492
                  )Discontinued
      operations
                  
                  
                  (21
                  )
                  
                  
                  -
                  
                  
                  
                  (966
                  )
                  
                  
                  -Consolidated
      net loss
                  
                  
                  (10,795
                  )
                  
                  
                  (97,871
                  )
                  
                  
                  (17,949
                  )
                  
                  
                  (131,355
                  )Income
      attributable to non-controlling preferred interest
                  
                  
                  (2,500
                  )
                  
                  
                  (1,895
                  )
                  
                  
                  (4,972
                  )
                  
                  
                  (3,769
                  )Income
      attributable to non-controlling interest
                  
                  
                  (3
                  )
                  
                  
                  (3
                  )
                  
                  
                  (6
                  )
                  
                  
                  (6
                  )Net
      loss attributable to Concord
                  
                  $
                  (13,298
                  )
                  
                  $
                  (99,769
                  )
                  
                  $
                  (22,927
                  )
                  
                  $
                  (135,130
                  )Trust’s
      share of net loss
                  
                  $
                  (6,650
                  )
                  
                  $
                  (49,884
                  )
                  
                  $
                  (11,464
                  )
                  
                  $
                  (67,565
                  )Other-than
      temporary impairment
                  
                  
                  -
                  
                  
                  
                  (31,670
                  )
                  
                  
                  -
                  
                  
                  
                  (31,670
                  )Suspended
      Loss
                  
                  
                  6,650
                  
                  
                  
                  -
                  
                  
                  
                  11,464
                  
                  
                  
                  -Loss
      from equity investment
                  
                  $
                  -
                  
                  
                  $
                  (81,554
                  )
                  
                  $
                  -
                  
                  
                  $
                  (99,235
                  )


21


WINTHROP
REALTY TRUST


FORM
10-Q JUNE 30, 2010





NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS





WRT-ROIC
Riverside





On June
28, 2010 the Trust entered into a 50%-50% joint venture with ROIC. The new joint
venture entity was formed and funded by its members concurrent with its purchase
of the Riverside Plaza loan.





9.
                Debt





Mortgage Loans
Payable





The Trust
had outstanding mortgage loans payable of $213,375,000 and $216,767,000 at June
30, 2010 and December 31, 2009, respectively.  The mortgage loan
payments of principal and interest are generally due monthly, quarterly or
semi-annually.





The
Trust’s mortgage loans payable at June 30, 2010 and December 31, 2009 are
summarized as follows:





Collateral
                        
                        Maturity
                        
                        Spread Over
                          LIBOR/Prime
                        
                        
                        Interest Rate at
                          June 30, 2010
                        
                        
                        Balance at
                          June 30, 2010
                        
                        
                        Balance at
                          December 31, 2009(in thousands)Amherst,
      NY
                        
                        October
      2013
                        
                        
                        —
                        
                        
                        
                        5.65
                        %
                        
                        $
                        16,323
                        
                        
                        $
                        16,526Indianapolis,
      IN
                        
                        April  2015
                        
                        
                        —
                        
                        
                        
                        5.82
                        %
                        
                        
                        4,281
                        
                        
                        
                        4,317Houston,
      TX
                        
                        April
      2016
                        
                        
                        —
                        
                        
                        
                        6.37
                        %
                        
                        
                        62,164
                        
                        
                        
                        63,869Andover,
      MA
                        
                        March
      2011
                        
                        
                        —
                        
                        
                        
                        6.60
                        %
                        
                        
                        6,201
                        
                        
                        
                        6,266S.
      Burlington, VT
                        
                        March
      2011
                        
                        
                        —
                        
                        
                        
                        6.60
                        %
                        
                        
                        2,658
                        
                        
                        
                        2,686Chicago,
      IL
                        
                        March
      2016
                        
                        
                        —
                        
                        
                        
                        5.75
                        %
                        
                        
                        20,970
                        
                        
                        
                        21,118Lisle,
      IL
                        
                        June
      2016
                        
                        
                        —
                        
                        
                        
                        6.26
                        %
                        
                        
                        24,025
                        
                        
                        
                        24,176Lisle,
      IL
                        
                        March
      2017
                        
                        
                        —
                        
                        
                        
                        5.55
                        %
                        
                        
                        5,600
                        
                        
                        
                        5,600Orlando,
      FL
                        
                        July
      2017
                        
                        
                        —
                        
                        
                        
                        6.40
                        %
                        
                        
                        38,903
                        
                        
                        
                        39,148Chicago,
      IL
                        
                        April
      2012
                        
                        
                        —
                        
                        
                        
                        6.00
                        %
                        
                        
                        9,100
                        
                        
                        
                        9,300Various
      (1)
                        
                        June
      2011
                        
                        LIBOR+1.75
                        %
                        
                        
                        
                        (2)
                        
                        
                        23,150
                        
                        
                        
                        23,761$
                        213,375
                        
                        
                        $
                        216,767





(1)
            14
      properties collateralize the KeyBank
loan.


(2)
            Effective
      June 30, 2010, the Trust entered into an interest rate swap agreement in
      the notional amount of $20,000,000, effectively converting the floating
      interest rate to a fixed rate of 2.675% through June 30,
    2011.





The fair
value of the Trust’s mortgage loans payable are less than their current carrying
amounts by approximately $15,036,000 at June 30, 2010 and approximately
$25,704,000 at December 31, 2009.





10.
            Revolving
      Line of Credit




The Trust
has a line of credit with KeyBank pursuant to which the Trust can borrow on a
revolving basis up to $35,000,000.  The revolving credit line matures
December 16, 2010 with the option of the Trust to extend the term for an
additional year.  Amounts borrowed under the credit facility bear
interest at LIBOR plus 3.0%.  To the extent the Trust maintains cash
balances at KeyBank in excess of a certain threshold, the interest rate is
reduced to LIBOR plus 2.25%.


22


WINTHROP
REALTY TRUST


FORM
10-Q JUNE 30, 2010





NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS




The
revolving line of credit requires the Trust to maintain (i) a minimum
consolidated debt service coverage ratio, (ii) a maximum leverage ratio, (iii)
liquid assets of $17,500,000 and (iv) a minimum net
worth.  Additionally, the Trust is limited to payment of dividends not
to exceed 100% of adjusted earnings on a trailing 12-month basis, as defined,
except to the extent necessary to maintain its tax status as a
REIT.  The revolving credit line is recourse and as such is
effectively collateralized by all of the Trust’s assets.  The
revolving credit line requires monthly payments of interest only.  To
the extent that the amounts outstanding under the facility are in excess of the
borrowing base (as calculated), the Trust is required to make a principal
payment to reduce such excess. The Trust may prepay from time to time without
premium or penalty and re-borrow amounts prepaid.




At June
30, 2010 and December 31, 2009, there were no amounts outstanding under the
facility.  The Trust is required to pay a commitment fee on the unused
portion of the line, which amounted to approximately $22,000 and $44,000 for the
three and six months ended June 30, 2010 respectively, and $16,000 and $38,000
for the three and six months ended June 30, 2009, respectively.




11.
            Derivative Financial
      Instruments





The Trust
has exposure to fluctuations in market interest rates.  The Trust
seeks to limit its risk to interest rate fluctuations through match financing on
its assets as well as through hedging transactions.  Specifically, the
Trust enters into derivative financial instruments.





The
Trust’s objective in using interest rate derivatives is to add stability to
interest expense and to manage its exposure to interest rate
movements.  To accomplish this objective, the Trust primarily uses
interest rate swaps as part of its interest rate risk management
strategy.  Interest rate swaps designated as cash flow hedges involve
the receipt of variable rate amounts from a counterparty in exchange for the
Trust making fixed-rate payments over the life of the agreements without
exchange of the underlying notional amount.





The
effective portion of changes in fair value of the interest rate swap designated
and that qualifies as a cash flow hedge is recorded in accumulated other
comprehensive income and is subsequently reclassified into earnings in the
period that the hedged forecasted transaction affects
earnings.  During the six months ended June 30, 2010 and 2009, the
interest rate swap was used to hedge the variable cash flows associated with
existing variable-rate debt.  The Trust also assesses and documents,
both at the hedging instruments inception and on an ongoing basis, whether the
derivative instrument is highly effective in achieving offsetting changes in the
cash flows attributable to the hedged item.  The Trust has recorded
changes in fair value related to the effective portion of its interest rate swap
contracts designated and qualifying as cash flow hedges totaling $28,000 of
decreased interest expense for the three months ended June 30, 2010 and $12,000
of increased interest expense for the six months ended June 30, 2010 and
$165,000 and $341,000 of increased interest expense for the three and six months
ended June 30, 2009, respectively.





The table
below presents information about the Trust’s interest rate swaps at June 30,
2010 (dollars in thousands):





Maturity
                    
                    Swap
                      Rate
                    
                    
                    Notional
                      Amount
                      of Hedge
                    
                    
                    Cost
                      of
                      Hedge
                    
                    
                    Estimated Fair
                      Value of
                      Swap in Other
                      Comprehensive
                      Income
                    
                    
                    UnrealizedGain
                      on SettledSwap
                      in Other
                      Comprehensive
                      Income
                    
                    
                    Change in Swap
                      Valuations Includedin
                      OtherComprehensive
                      Income
                      For the Six Months
                      Ended June 30, 2010June
      2011
                    
                    
                    0.925
                    %
                    
                    $
                    20,000
                    (1)
                    
                    $
                    -
                    
                    
                    $
                    (73
                    )
                    
                    $
                    -
                    
                    
                    $
                    12





(1)
            In
      connection with the KeyBank Loan extension, the Trust was required to
      provide interest rate protection through the maturity of the extension
      (June 30, 2011).  The Trust obtained an interest rate swap with
      a $20,000 notional amount that will effectively convert the interest rate
      on the KeyBank Loan from a floating rate of LIBOR plus 1.75% to a fixed
      rate of 2.675%.


23


WINTHROP
REALTY TRUST


FORM
10-Q JUNE 30, 2010





NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS





12.
            Non-Controlling
      Redeemable Preferred Interest





The
following table reflects the activity of the Trust’s Series C Preferred Shares
interest for the six months ended June 30, 2010 (dollars in
thousands):





Balance
      at December 31, 2009
                  
                  $
                  12,169Conversion
      to Common Shares
                  
                  
                  (8,948
                  )Balance
      at June 30, 2010
                  
                  $
                  3,221





13.
            Common
      Shares





The
following table sets forth information relating to sales of Common Shares during
the six months ended June 30, 2010:





Date of Issuance
                    
                    Number of Shares Issued
                    
                    
                    Price per Share
                    
                    Type of Offering1/15/10
                    
                    
                    47,385
                    
                    
                    $
                    12.73
                    
                    DRIP
      (1)4/15/10
                    
                    
                    44,181
                    
                    
                    $
                    13.75
                    
                    DRIP
      (1)





(1)         The Trust’s Dividend Reinvestment and
Stock Purchase Plan.





14.
            Discontinued
      Operations





In
November 2009 the tenant at the Trust’s Athens, Georgia retail property notified
the Trust that it was exercising its right to purchase the property at the
expiration of the current lease term.  In accordance with the lease,
the purchase price is equal to the fair market value of the property at the time
of sale.  Both the Trust and the tenant engaged independent third
parties to determine the fair market value of the property.  In May
2010 the appraisal process was completed. As a result of the final appraisal a
$1,000,000 impairment charge was recorded during the three months ended June 30,
2010 based upon the updated fair market value of the property.





In August
2009 the First District Court of Wyandotte County, Kansas, appointed a receiver
to operate and manage the Trust’s apartment complex in Kansas City, Kansas
commonly referred to as Creekwood Apartments.  In October 2009 a
notice of foreclosure was issued on behalf of the first mortgage
holder.  The property was foreclosed in December 2009.





Out
of Period Adjustment





During
the quarter ended June 30, 2010, the Trust identified an error in its year ended
December 31, 2009 allocation of fair value attributable to the building
component of its   Athens, Georgia property which was assessed
for impairment in connection with its reclassification as held for sale and its
presentation in discontinued operations.  As a result, net loss was
understated by approximately $700,000 for the year ended December 31,
2009.  The Trust has determined that this amount is not material to
the year ended December 31, 2009 or the quarter ended June 30,
2010.  As such, a charge of approximately $700,000 has been recorded
in the consolidated statement of operations within discontinued operations as an
out of period adjustment in the second quarter of 2010.  There was no
impact on cash flow from operations for the quarter ended June 30,
2010.





15.
              Commitment
      and Contingencies




The Trust
is involved from time to time in litigation on various matters, including
disputes with tenants and disputes arising out of agreements to purchase or sell
properties.  Given the nature of the Trust’s business activities,
these lawsuits are considered routine to the conduct of its
business.  The result of any particular lawsuit cannot be predicted
because of the very nature of litigation, the litigation process and its
adversarial nature, and the jury system.  The Trust does not expect
that the liabilities, if any, that may ultimately result from such legal actions
will have a material adverse effect on its financial condition or results of
operations.


24


WINTHROP
REALTY TRUST


FORM
10-Q JUNE 30, 2010





NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS





During
the first quarter of 2010, the Trust exercised its option to acquire the land
underlying six of the properties currently ground leased by the Trust and which
are leased to The Kroger Co.  The consummation of the acquisition of the
six land parcels is expected to occur in the fourth quarter of 2010 at an
aggregate purchase price of approximately $4,209,000.





The lease
term with respect to the Trust’s property located in Churchill, Pennsylvania is
scheduled to expire on December 31, 2010.  CBS Corporation (“CBS”), the
lessee of the property, elected not to renew the lease and, in anticipation of
this pending lease termination and surrender of the property, a review of the
condition of the property was performed by the Trust.  In the Trust’s view,
the property is in need of substantial repairs and refurbishing in order for the
tenant to comply with the surrender conditions.  The Trust advised CBS of
these issues and no resolution was reached with CBS after numerous
discussions.  Accordingly, in May 2010 the Trust brought an action in
Pennsylvania State Court, Alleghany County against CBS seeking damages for,
among other things, CBS’ failure to restore the property to the condition
necessary to comply with its surrender obligations.  The case is currently
in the discovery phase.





16.
              Related-Party
      Transactions





FUR
Advisors





The
activities of the Trust are administered by FUR Advisors LLC (“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.  FUR Advisors is entitled to receive a base
management fee and an incentive fee in accordance with the terms of the Advisory
Agreement.  In addition, FUR Advisors or its affiliate is also
entitled to receive property and construction management fees subject to the
approval of the Independent Trustees of the Trust.





Winthrop
Management





Winthrop
Management L.P. (“Winthrop Management”), an affiliate of FUR Advisors and the
Trust’s executive officers, assumed property management responsibilities for
various properties owned by the Trust. Pursuant to the terms of the property
management agreement, Winthrop Management receives a property management fee
equal to 3% of the monthly revenues on the properties it manages.





The
following table sets forth the fees and reimbursements paid by the Trust for the
three and six months ended June 30, 2010 and 2009 to FUR Advisors and Winthrop
Management (in thousands):





For the Three Months Ended
                            June 30,
                          
                          
                          For the Six Months Ended
                            June 30,2010
                          
                          
                          2009
                          
                          
                          2010
                          
                          
                          2009Base
      Asset Management
                          
                          $
                          1,169
                          
                          
                          $
                          791
                          
                          
                          $
                          2,193
                          
                          
                          $
                          1,572WRP
      Sub-Management LLC Credit
                          
                          
                          (48
                          )
                          
                          
                          (68
                          )
                          
                          
                          (100
                          )
                          
                          
                          (137
                          )Property
      Management
                          
                          
                          57
                          
                          
                          
                          73
                          
                          
                          
                          116
                          
                          
                          
                          140Construction
      Management
                          
                          
                          1
                          
                          
                          
                          -
                          
                          
                          
                          1
                          
                          
                          
                          3$
                          1,179
                          
                          
                          $
                          796
                          
                          
                          $
                          2,210
                          
                          
                          $
                          1,578


25


WINTHROP
REALTY TRUST


FORM
10-Q JUNE 30, 2010





NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS





Base
Asset Management Fee





Effective
January 1, 2010, the Advisory Agreement was amended so that the determination of
the issuance price of Common Shares reverted back to the pre 2009
definition.  This change will result in an increase to the annual
advisory fee payable to FUR Advisors of approximately $2,100,000 over what would
have been paid without the amendment, which increase will be phased in with 54%
of the increase being paid during 2010 and then 100% of the increase being paid
commencing in 2011.





17.
              Business
      Segments





FASB
guidance on segment reporting establishes standards for the way that public
business enterprises report information about operating segments in financial
statements and requires that those enterprises report selected financial
information about operating segments in interim financial reports issued to
shareholders.





Based on
the Trust’s method of internal reporting, management determined that it has
three operating segments: (i) the ownership
of operating properties; (ii) the origination and acquisition of loans and debt
securities secured directly or indirectly by commercial and multi-family real
property – collectively, loan assets; and (iii) the ownership of equity and debt
securities in other REITs – REIT securities.  The accounting policies
of the segments are identical to those described in Note 2.





The
operating properties segment includes all of the Trust’s wholly and partially
owned operating properties.  Prior to July 1, 2009, the loan assets
segment included all of the Trust’s activities related to real estate loans,
which consisted primarily of the Trust’s investment in Lex-Win Concord LLC and
the tenant improvement and capital expenditure loans to properties in the Marc
Realty portfolio. As of July 1, 2009, in conjunction with the restructuring of
its preferred equity investment in Marc Realty, the Trust’s preferred equity
investments and tenant improvement and capital expenditure loans in the Marc
Realty portfolio are now classified as equity investments and are included in
the operating properties segment.  The REIT securities segment
includes all of the Trust’s activities related to the ownership of securities in
other publicly traded real estate companies.  In addition to its three
business segments, the Trust reports non-segment specific income and expense
under corporate income (expense).





The
following table summarizes the Trust’s assets by business segment for the
periods ended June 30, 2010 and December 31, 2009 (in thousands):





June 30, 2010
                    
                    
                    December 31, 2009Operating
      properties
                    
                    $
                    314,831
                    
                    
                    $
                    313,682Loan
      assets
                    
                    
                    73,925
                    
                    
                    
                    31,774REIT
      securities
                    
                    
                    43,754
                    
                    
                    
                    52,597CorporateCash
      and cash equivalents
                    
                    
                    37,913
                    
                    
                    
                    66,493Restricted
      cash
                    
                    
                    8,574
                    
                    
                    
                    9,504Other
                    
                    
                    15,416
                    
                    
                    
                    19,142Total
      Assets
                    
                    $
                    494,413
                    
                    
                    $
                    493,192





The Trust
defines net operating income for each segment presented as all items of income
and expense directly derived from or incurred by each business segment before
depreciation, amortization and interest expense.  Interest on cash
reserves, general and administrative expenses and other non-segment specific
income and expense items are reported under corporate income
(expense).  The following table presents a summary of revenues from
operating properties, loan assets and REIT securities and expenses incurred by
each segment for the three and six months ended June 30, 2010 and June 30, 2009
(in thousands):


26


WINTHROP
REALTY TRUST


FORM
10-Q JUNE 30, 2010





NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS





For the Three Months Ended
                  
                  
                  For the Six Months EndedJune 30, 2010
                  
                  
                  June 30, 2009
                  
                  
                  June 30,2010
                  
                  
                  June 30, 2009Operating
      PropertiesRents
      and reimbursements
                  
                  $
                  9,636
                  
                  
                  $
                  10,105
                  
                  
                  $
                  19,156
                  
                  
                  $
                  20,760Operating
      expenses
                  
                  
                  (1,822
                  )
                  
                  
                  (1,643
                  )
                  
                  
                  (3,781
                  )
                  
                  
                  (3,502
                  )Real
      estate taxes
                  
                  
                  (340
                  )
                  
                  
                  (621
                  )
                  
                  
                  (1,060
                  )
                  
                  
                  (1,294
                  )Equity
      in loss of Sealy Northwest Atlanta
                  
                  
                  (174
                  )
                  
                  
                  (204
                  )
                  
                  
                  (349
                  )
                  
                  
                  (242
                  )Equity
      in loss of Sealy Airpark Nashville
                  
                  
                  (224
                  )
                  
                  
                  (314
                  )
                  
                  
                  (433
                  )
                  
                  
                  (572
                  )Equity
      in loss of Sealy Newmarket
                  
                  
                  (230
                  )
                  
                  
                  (177
                  )
                  
                  
                  (449
                  )
                  
                  
                  (363
                  )Equity
      in income of Marc Realty investment
                  
                  
                  231
                  
                  
                  
                  -
                  
                  
                  
                  307
                  
                  
                  
                  -Net
      operating income
                  
                  
                  7,077
                  
                  
                  
                  7,146
                  
                  
                  
                  13,391
                  
                  
                  
                  14,787Depreciation
      and amortization expense
                  
                  
                  (2,434
                  )
                  
                  
                  (2,634
                  )
                  
                  
                  (4,796
                  )
                  
                  
                  (5,485
                  )Interest
      expense
                  
                  
                  (3,207
                  )
                  
                  
                  (3,472
                  )
                  
                  
                  (6,400
                  )
                  
                  
                  (6,944
                  )Operating
      properties net income
                  
                  
                  1,436
                  
                  
                  
                  1,040
                  
                  
                  
                  2,195
                  
                  
                  
                  2,358Loan
      AssetsInterest
                  
                  
                  2,837
                  
                  
                  
                  829
                  
                  
                  
                  5,299
                  
                  
                  
                  1,207Equity
      in earnings (loss) of preferred equity investment of Marc
      Realty
                  
                  
                  85
                  
                  
                  
                  (1,023
                  )
                  
                  
                  168
                  
                  
                  
                  (8
                  )Impairment
      loss on preferred equity investment
                  
                  
                  -
                  
                  
                  
                  (2,186
                  )
                  
                  
                  -
                  
                  
                  
                  (2,186
                  )Equity
      in loss of Lex-Win Concord
                  
                  
                  -
                  
                  
                  
                  (49,884
                  )
                  
                  
                  -
                  
                  
                  
                  (67,565
                  )Impairment
      loss of Lex-Win Concord
                  
                  
                  -
                  
                  
                  
                  (31,670
                  )
                  
                  
                  -
                  
                  
                  
                  (31,670
                  )Unrealized
      gain on loan securities carried at fair value
                  
                  
                  3,625
                  
                  
                  
                  -
                  
                  
                  
                  3,012
                  
                  
                  
                  -Equity
      in income of ROIC Riverside
                  
                  
                  5
                  
                  
                  
                  -
                  
                  
                  
                  5
                  
                  
                  
                  -Provision
      for loss on loans receivable
                  
                  
                  -
                  
                  
                  
                  (1,724
                  )
                  
                  
                  -
                  
                  
                  
                  (2,152
                  )Unrealized
      loss on available for sale loans
                  
                  
                  -
                  
                  
                  
                  (203
                  )
                  
                  
                  -
                  
                  
                  
                  (203
                  )Net
      operating income (loss)
                  
                  
                  6,552
                  
                  
                  
                  (85,861
                  )
                  
                  
                  8,484
                  
                  
                  
                  (102,577
                  )General
      and administrative expense
                  
                  
                  (26
                  )
                  
                  
                  (22
                  )
                  
                  
                  (36
                  )
                  
                  
                  (22
                  )Loan
      assets net income (loss)
                  
                  
                  6,526
                  
                  
                  
                  (85,883
                  )
                  
                  
                  8,448
                  
                  
                  
                  (102,599
                  )REIT
      SecuritiesInterest
      and dividends
                  
                  
                  753
                  
                  
                  
                  1,385
                  
                  
                  
                  1,500
                  
                  
                  
                  2,759Gain
      on sale of  securities carried at fair value
                  
                  
                  78
                  
                  
                  
                  2,685
                  
                  
                  
                  773
                  
                  
                  
                  2,598Unrealized
      gain (loss) on securities carried at fair value
                  
                  
                  (750
                  )
                  
                  
                  12,580
                  
                  
                  
                  1,790
                  
                  
                  
                  1,432Net
      operating income
                  
                  
                  81
                  
                  
                  
                  16,650
                  
                  
                  
                  4,063
                  
                  
                  
                  6,789Interest
      expense
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (75
                  )REIT
      securities net income
                  
                  
                  81
                  
                  
                  
                  16,650
                  
                  
                  
                  4,063
                  
                  
                  
                  6,714Net
      Income (Loss)
                  
                  
                  8,043
                  
                  
                  
                  (68,193
                  )
                  
                  
                  14,706
                  
                  
                  
                  (93,527
                  )Reconciliations
      to GAAP Net Income (Loss):Corporate
      Income (Expense)Interest
      income
                  
                  
                  40
                  
                  
                  
                  42
                  
                  
                  
                  77
                  
                  
                  
                  114Interest
      expense
                  
                  
                  (459
                  )
                  
                  
                  (829
                  )
                  
                  
                  (917
                  )
                  
                  
                  (1,557
                  )Gain
      on extinguishment of debt
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  5,237General
      and administrative
                  
                  
                  (1,890
                  )
                  
                  
                  (1,853
                  )
                  
                  
                  (3,789
                  )
                  
                  
                  (3,295
                  )State
      and local taxes
                  
                  
                  (85
                  )
                  
                  
                  (147
                  )
                  
                  
                  (100
                  )
                  
                  
                  (197
                  )Income
      (loss) from continuing operations before non-controlling
      interest
                  
                  
                  5,649
                  
                  
                  
                  (70,980
                  )
                  
                  
                  9,977
                  
                  
                  
                  (93,225
                  )Non-controlling
      interest
                  
                  
                  (175
                  )
                  
                  
                  (165
                  )
                  
                  
                  (420
                  )
                  
                  
                  (336
                  )Income
      (loss) from continuing operations attributable to Winthrop Realty
      Trust
                  
                  
                  5,474
                  
                  
                  
                  (71,145
                  )
                  
                  
                  9,557
                  
                  
                  
                  (93,561
                  )Loss
      from discontinued operations attributable to Winthrop Realty
      Trust
                  
                  
                  (898
                  )
                  
                  
                  (51
                  )
                  
                  
                  (776
                  )
                  
                  
                  (68
                  )Net
      Income (Loss) Attributable to Winthrop Realty Trust
                  
                  $
                  4,576
                  
                  
                  $
                  (71,196
                  )
                  
                  $
                  8,781
                  
                  
                  $
                  (93,629
                  )Capital
      ExpendituresOperating
      properties
                  
                  $
                  1,090
                  
                  
                  $
                  287
                  
                  
                  $
                  1,717
                  
                  
                  $
                  582


27


WINTHROP
REALTY TRUST


FORM
10-Q JUNE 30, 2010





NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS





18.
              Variable Interest
      Entities





Consolidated Variable
Interest Entities





The lease
agreement executed in January 2010 on the Andover, Massachusetts property gives
the tenant an option to purchase the building for a fixed price of $10,500,000.
The option is exercisable at the tenant's discretion at any point during the
lease term.  As a result of the fixed price purchase option contained
in this lease agreement, the Trust has determined that its Andover,
Massachusetts property is a variable interest entity for which the Trust is the
primary beneficiary since it has the power to direct activities that most
significantly impact the economics of the property.





The
carrying amounts of the Trust's Andover property include building of $4,814,000,
lease intangibles of $1,585,000 and mortgage debt of $6,201,000. Prior to the
execution of the lease agreement, the Andover property was not considered a VIE
but it has been consolidated since its acquisition.  For this reason,
no gain or loss has been recognized in connection with the Trust's determination
that it is the primary beneficiary of the VIE.





Variable Interest Entities
Not Consolidated





Equity
Method Investments





Lex-Win Concord LLC – The
Trust has a 50% equity interest in Lex-Win.  The Trust has determined
that Lex-Win is a VIE because the equity investment at risk is not sufficient
for Lex-Win to finance its activities without additional subordinated financial
support.





Lexington
Realty Trust (“Lexington”) and the Trust, two of the variable interest holders,
hold identical 50%/50% membership interests.  By design and in
practice, they share equally in the economics and the decision-making. Further,
Lexington and the Trust, which are otherwise unrelated parties, each have 50% of
the voting rights of the equity of Lex-Win and each represents 50% of the boards
and committees making decisions with respect to the entity. An affiliate of FUR
Advisors is responsible for day-to-day administration and operations of Lex-Win,
but decisions that most significantly impact the entity’s economic performance
are jointly decided through their voting interests and equal board and committee
representation. Lexington and the Trust are deemed to have shared power, such
that neither party is considered to have the power to direct the activities of
the VIE.  In addition, there is no principal agency relationship
through transfer restrictions that would indicate a primary beneficiary
exists.


28


WINTHROP
REALTY TRUST


FORM
10-Q JUNE 30, 2010





NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS





At June
30, 2010, the carrying value of the Trust’s investment in Lex-Win is zero. The
Trust does not have the current intent to provide financial or other support to
Lex-Win and the obligations of Lex-Win are non-recourse to the Trust. The Trust
has always accounted for its investment in Lex-Win as an equity method
investment.





Marc Realty Equity Investment
– The Trust has concluded that the 12 Marc Realty equity investments are
variable interests in VIEs.  This assessment is primarily based on the
fact that the underlying entities do not have sufficient equity at risk to
permit them to finance their activities without additional subordinated
financial support.


While the
Trust maintains certain protective rights under the terms of the agreements
governing the Marc Realty investments, the power to direct the activities that
most significantly impact the economics of the Marc Realty investments is vested
in Marc Realty as the managing member.  As such, management has
concluded that the Trust is not the primary beneficiary of these Marc Realty
investments.  The Trust's investment in the Marc Realty equity
investments at June 30, 2010 was $61,000,000.





Loans
Receivable and Loan Securities





The Trust
has reviewed its loans receivable and loan securities and certain of these
assets have been identified as variable interests in a VIE because the equity
investment at risk is not considered sufficient for the entity to finance its
activities without additional subordinated financial support.





Certain
loans receivable and loan securities which have been determined to be VIEs are
performing assets, meeting their debt service requirements, and the borrowers
hold title to the collateral. In these cases the borrower has the power to
direct the activities that most significantly impact the economic performance of
the VIE, including management and leasing activities. In the event of default
under these loans the Trust only has protective rights and has the risk to
absorb losses only to the extent of its loan investment. The borrower has been
determined to be the primary beneficiary for these performing
assets.





Certain
other loans receivable which are in default have been determined to be VIEs. The
Trust is the process of exercising its remedies through foreclosure (judicial or
non-judicial, as applicable) proceedings on these assets.  In certain
cases a receiver has not yet been appointed and in other instances a
court-appointed receiver manages the property under a court order pending the
final disposition of the foreclosure. The receiver manages the property’s day to
day operations.   The Trust can consult and work with the
receiver but in the end the only recourse is to petition the court to direct the
activities of the receiver. The receiver acts independently and ultimately is
answerable only to the court. Although it is expected that foreclosure and
transfer of ownership of the loan collateral to the Trust is a likely outcome of
the foreclosure proceeding, the receiver has control of the activities of the
collateral until such time as the receiver is discharged following the
consummation of the foreclosure proceeding. Therefore, until the Trust has
control of the property and the ability to direct the operations that most
significantly impact the economics of the investment, the Trust is not
considered to be the primary beneficiary.





The Trust
has determined that it does not currently have the power to direct the
activities of the ventures collateralizing any of its loans receivable and loan
securities.  For this reason, management believes that it does not
control, nor is it the primary beneficiary of these ventures. Accordingly, the
Trust accounts for these investments under the guidance for loans receivable and
real estate debt investments.





19.
            Subsequent
      Events





On July
1, 2010 the Trust acquired for $8,200,000 a $10,408,000 performing first
mortgage loan collateralized by a 174,400 square foot office building located at
1701 E. Woodfield Road, Schaumburg, Illinois, a suburb of Chicago.
Simultaneously with the acquisition of this loan, the venture made a principal
payment on the loan of $3,200,000 (50% of which was contributed by each of the
Trust and Marc Realty) and the loan was modified to reduce the balance to
$5,000,000, which bears interest at 8% per annum and matures on July 1,
2011.





On July
9, 2010 the Trust acquired for $19,825,000 a $23,499,000 performing B Note
participation interest collateralized by a 1,188,000 square foot office building
located at 500-512 Seventh Avenue, New York, New York. The B Note participation
is subordinate to a $253,679,000 A Note. This loan bears interest at 10.9% and
matures on July 11, 2016.  On August 4, 2010, the Trust sold a 50%
pari passu participation interest in the B Note for a purchase price of
$9,859,000 which represented one-half of the purchase price paid for the B Note
less one-half of any principal payments received prior to the sale of the
participation interest.


29


WINTHROP
REALTY TRUST


FORM
10-Q JUNE 30, 2010





NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS





On July
16, 2010 the Trust acquired two rake bonds with a face amount of $2,273,000 for
$1,200,000.  The rake bonds are subordinate to $17,715,000 of senior
debt all of which is secured by a 229,000 square foot office complex in Costa
Mesa, California.




On July
23, 2010 the Trust acquired for $26,990,000 a $31,106,000 performing first
mortgage loan.  The loan is collateralized by a 276 unit apartment
complex referred to as San Marbeya Apartments located in Tempe,
Arizona.  The loan has a blended interest rate of 5.88% and matures on
January 1, 2015.





On July
25, 2010, the River City property experienced flooding in its basement level and
the parking garage due to the Chicago River overflowing the seawall protecting
the property.  The flooding caused substantial damage to the property’s
mechanical and electrical systems resulting in the tenants in the commercial
space being without power for several days other than Verizon which had its own
back-up generator.  The properties insurance carrier was immediately
notified and a claim is in process.  It is expected that the properties
insurance coverage will be sufficient to cover all of the costs associated with
the damage.




On August
6, 2010, the Trust acquired in a joint venture with affiliates of Pershing
Square Capital Management, L.P. (“Pershing Square”) 100% of the $300,000,000
face amount of Mezzanine Loans 1, 2, and 3, (the “Mezz Loans”) which are
indirectly secured by Peter Cooper Village/Stuyvesant Town.  The joint
venture, which is owned 22.5% by the Trust and 77.5% by Pershing Square,
acquired the Mezz Loans for a purchase price of $45,000,000.  The Mezz
Loans represent the senior-most mezzanine loan interests in the
property.  They, along with the $3 billion first mortgage loan secured
by the property, are currently in default.  Peter Cooper
Village/Stuyvesant Town is an 11,227 unit apartment complex consisting of 56
buildings, comprising approximately 10,300,000 of net rentable square feet on 80
acres in New York City.  In addition to the residential component, the
complex contains approximately 100,000 square feet of retail space,
approximately 20,000 square feet of professional office space, and six parking
garages with 2,260 licensed spaces totaling approximately 400,000 square
feet.  The joint venture has initiated foreclosure on the equity
interests in the property’s owner.


30


WINTHROP
REALTY TRUST


FORM
10-Q JUNE 30, 2010





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 our Annual Report on Form 10-K for the year ended December
31, 2009 under “Forward Looking Statements” and “Item IA - Risk Factors,” as
well as our other filings with the SEC. For these statements, we claim 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 include a discussion of our
unaudited consolidated financial statements and footnotes thereto for the six
months ended June 30, 2010 as compared with the six months ended June 30, 2009.
These unaudited financial statements are prepared in conformity with accounting
principles generally accepted in the United States of America which 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 amounts of revenues and expenses
during the reporting periods. Actual results could differ from those
estimates.





Overview





We are a
real estate investment trust engaged in the business of owning and managing real
property and real estate related assets. Our business objective is to maximize
long term shareholder value through a total return value approach to real estate
investing.  As a result of our emphasis on total return, while we seek
to achieve a stable, predictable dividend for our shareholders, we do not select
or manage our investments for short-term dividend growth, but rather towards
achieving overall superior total return.  We believe this approach
will ultimately result in long term increased share value.





Weare a diversified REITand as suchwe are able to
invest in deals which a dedicated REIT with narrow investment parameters wouldbe unable to
consider.In addition,
because of our size we are able to makeinvestments in deals that are
smaller and would generally be disregarded by large institutional
investors.  With the exception of those asset types and locations in
which we have self imposed restrictions on investing, wehave a broadrange for investmentopportunities.  This
includesdifferent investment types,
sectors, and geographic areasallat varying levels in the capital
stack.





As a
diversified REIT, we operate in three strategic business segments: (i) operating
properties; (ii) loan assets; and (iii) REIT securities. We acquire assets
through direct ownership as well as through strategic alliances and
ventures.  Our primary sources of income are rental income and tenant
recoveries from leases of our operating properties, interest income and discount
accretion from our loan assets, and interest and dividend income and
appreciation from our investments in REIT securities.





Recent
Developments





Most recently, as described
below, we have begunto implement our previously announced strategy of
acquiring both performing and non-performing first mortgage and mezzanine debt
as well as originating new mezzanine debt and preferred equity. We believe that
in the current market investments in real estate related debt at these levels
provides the best return on a risk adjusted basis. We believe that ourrecent acquisitionsas described in
detail belowwill be accretive to our
Funds from Operations (FFO) and cash flow.Althoughthese newly acquired assetsarein the form of a loanwe believe each
investment
provides the potential for equity like returns.Specifically, in those
recent investments which are nonperforming we have acquired the loanwiththe understanding that a
foreclosure on the collateral by us is possible.


31


WINTHROP
REALTY TRUST


FORM
10-Q JUNE 30, 2010





During the quarter ended June 30, 2010, as a result
of increased deal flow, weconsummated four transactionswith an
aggregate purchase priceof approximately
$32,700,000.Subsequent to June 30, 2010,
we have entered
into fivemore
transactionswith an aggregate purchase
price of
approximately$53,506,000of
which $25,450,000 was financed from our line of credit.





We havecontinuedour practice of teaming up
with parties who we believe have specific expertise with respect to a proposed
investment
opportunity.  Forour investment in
Riverside
Plazain
Riverside, California we entered into a joint venture agreement with Retail
Opportunity
Investment Corp., a company which has considerable experience in managing,
repositioning, and leasing retail properties on the west coast.  For
our investment
in Deer Valley Medical Center located in Deer Valley, Arizona, we admitted
Fenway VI LLC (“Fenway”) as a member in WRT-DV
LLC.  Fenway is a well respected property manager and owner in
Southern California and the Southwest regions.





Wewillcontinue to remain flexibleandto adapt our strategyand acquisition
targetsas
market conditions change.





Comparability of Financial
Data from Period to Period





The
comparability of financial data from period to period is affected by several
items including i) the timing of our property acquisitions and leasing
activities, ii) the purchases and sales of assets and investments, iii) when
material other-than-temporary impairment losses on assets in our portfolio are
taken and iv) the reclassification of assets.  In this regard, the
comparability of financial results for the three and six months ended June 30,
2010 with those periods in 2009 were impacted by the write-down of our
investment in Lex-Win Concord during the second quarter of 2009 and the
reclassification of certain Marc Realty assets from an aggregated preferred
equity investment to 12 individual common equity investments as of July 1,
2009.





Loan
Assets





Our loan
asset portfolio has grown considerably since the third quarter of 2009 and
includes a combination of whole loans, B-notes and mezzanine loans. As of June
30, 2010 our portfolio of loan assets totaled $73,925,000 and generated interest
earnings of $5,299,000 for the six months ended June 30, 2010.





Recent Transactions -
Our recent acquisitions listed below are a direct result of an investment
approach which targets loan investments with significant underlying collateral
value, future income return potential and in certain cases, non-performing loans
with the possibility, if not the likelihood, that our debt position will be
converted into equity participation.





Driver Building, San Diego,
California – First Mortgage Loan - On May 14, 2010 we acquired at par a
non-performing $6,540,000 first mortgage loan. The loan is collateralized by an
80,300 square foot office building referred to as the Robert F. Driver Building
located in San Diego, California. This loan which bears interest at 7.47% and
matured on March 1, 2010, is in maturity default.  We have commenced
foreclosure on the property with a foreclosure sale expected to occur in
September 2010.





Crossroads Building, Englewood
Colorado– First Mortgage Loan -On June 11, 2010 we acquired for
$8,100,000 a $10,031,000 non-performing first mortgage loan. The loan is
collateralized by an 118,200 square foot office building referred to as the
Crossroads II at Meridian, located in Englewood, Colorado, a suburb of Denver.
This loan is in default and the Trust has commenced foreclosure on the property
with a foreclosure sale expected to occur in the fourth quarter of
2010.


32


WINTHROP
REALTY TRUST


FORM
10-Q JUNE 30, 2010





Deer Valley Medical Center, Deer
Valley, Arizona – First Mortgage Loan -On June 28, 2010 we through
WRT-DV LLC (“WRT-DV”), a newly formed wholly owned subsidiary, acquired for
$10,257,000 a $20,491,000 non-performing first mortgage loan. The loan is
collateralized by a newly constructed 85,600 square foot office building with
its own 4-story enclosed parking garage referred to as the Deer Valley Medical
Center located in Deer Valley, Arizona, a suburb of Phoenix. In connection with
the purchase of the building, WRT-DV also assumed a tenant improvement capital
obligation not to exceed $2,500,000 with respect to the lease with a division of
United Healthcare.  This loan
was in maturity default and the property was foreclosed on August 6,
2010.  In July 2010, WRT-DV admitted Fenway VI LLC (“Fenway”),
an unrelated third party, as a member.  Pursuant to the terms of the
operating agreement, we receive a priority return on $7.9 million of our
invested capital, with the balance of the capital being allocated 96.5% to us
and 3.5% to Fenway.  We have effectively all control rights with
respect to WRT-DV.





Riverside Shopping Center,
Riverside, California –On June 28, 2010 we and Retail Opportunity
Investment Corp. (“ROIC”) each contributed $7,800,000 and formed a 50%-50% joint
venture entity which acquired at par a 12% $15,600,000 B participation in a
performing $70,000,000 first mortgage loan.  The first mortgage loan
is collateralized by a 405,000 square foot retail center located in Riverside,
California and matures on December 1, 2012.  The B participation is
subordinate to $54,400,000 A participation.





Subsequent
to the quarter ended June 30, 2010 the following transactions
occurred.





1701 E. Woodfield Road, Schaumburg,,
Illinois – First Mortgage Loan - On July 1, 2010 we acquired for
$8,200,000 a $10,200,000 performing first mortgage loan collateralized by a
174,400 square foot office building located at 1701 E. Woodfield Road,
Schaumburg, Illinois, a suburb of Chicago. The property is currently part of our
Marc Realty joint venture.  Simultaneously with the acquisition of this
loan, the venture made a principal payment on the loan of $3,200,000 (50% of
which was contributed by each of us and Marc Realty) and the loan was modified
to reduce the balance to $5,000,000, which bears interest at 8% per annum and
matures on July 1, 2011.





500-512 Seventh Avenue, New York,
New York – B Note ParticipationOn July 9, 2010 we acquired
for $19,825,000 a $23,499,000 performing B Note participation interest
collateralized by a 1,188,000 square foot office building located at 500-512
Seventh Avenue, New York, New York. Our B Note participation is subordinate to a
$253,670,000 A Note. This loan bears interest at 10.9% and matures on July11,
2016.





On August
4, 2010, we sold a 50% pari passu participation interest in the B Note for a
purchase price of $9,859,000 which represented one-half of the purchase price
paid by us for the B Note less one-half of any principal payments received by us
prior to the sale of the participation interest.




Scripps Center, Costa Mesa,
California – Rake Bonds – On July 16, 2010 we acquired two rake bonds
with a face amount of $2,273,000 for $1,200,000.  The rake bonds are
subordinate to $17,715,000 of senior debt all of which is secured by a 229,000
square foot office complex in Costa Mesa, California.





San Marbeya Apartments, Tempe,
Arizona-First Mortgage Loan- On July 23, 2010 we acquired for $26,990,000
a $31,106,000 performing first mortgage loan.  The loan is
collateralized by a 276 unit apartment complex referred to as San Marbeya
Apartments located in Tempe, Arizona.  The loan has a blended interest
rate of 5.88% and matures on January 1, 2015.




Peter Cooper Village/Stuyvesant
Town, New York, New York – Mezzanine Loans - On August 6, 2010, we
acquired in a joint venture with affiliates of Pershing Square Capital
Management, L.P. (“Pershing Square”) 100% of the $300,000,000 face amount of
Mezzanine Loans 1, 2, and 3, (the “Mezz Loans”) which are indirectly secured by
Peter Cooper Village/Stuyvesant Town.  The joint venture, which is
owned 22.5% by us and 77.5% by Pershing Square, acquired the Mezz Loans for a
purchase price of $45,000,000.  The Mezz Loans represent the
senior-most mezzanine loan interests in the property.  They, along
with the $3 billion first mortgage loan secured by the property, are currently
in default.  Peter Cooper Village/Stuyvesant Town is an 11,227 unit
apartment complex consisting of 56 buildings, comprising approximately
10,300,000 of net rentable square feet on 80 acres in New York
City.  In addition to the residential component, the complex contains
approximately 100,000 square feet of retail space, approximately 20,000 square
feet of professional office space, and six parking garages with 2,260 licensed
spaces totaling approximately 400,000 square feet.  The joint venture
has initiated foreclosure on the equity interests in the property’s
owner.





Debt
Maturities





At June
30, 2010, our balance sheet contains mortgage debt payable of $213,375,000.
During the second quarter of 2010 we extended the KeyBank Loan with a balance of
$23,150,000 at June 30, 2010 which is collateralized by 14 properties through
June 2011. As of June 30, 2010 we have no debt outstanding that is maturing in
2010.




We have a
$35,000,000 line of credit with KeyBank pursuant to which we can borrow on a
revolving basis.  The revolving credit line matures December 16, 2010
with our option to extend the term for an additional year.  At June
30, 2010 there were no amounts outstanding under the facility. In July we drew
down $25,450,000 in connection with new loan acquisitions.




We
continually evaluate our debt maturities and, based on our current assessment,
we believe there are viable financing and refinancing alternatives for debts as
they mature that will not materially adversely impact our liquidity or our
expected financial results.


33


WINTHROP
REALTY TRUST


FORM
10-Q JUNE 30, 2010




Operating
Properties




During
2010 we expect that our operating property portfolio, which consists of 39
properties containing 8.3 million square feet, will continue to have leasing and
expense containment issues.




During
the quarter ended June 30, 2010 we made no property acquisitions although it is
likely we will become equity holders in the collateral of certain of our
recently acquired loan assets.  There were no dispositions of
operating properties during the current quarter.




Consolidated Operating
Properties-At
June 30, 2010 our consolidated operating properties were 95% leased compared to
96% at March 31, 2010. The decrease of 1% is primarily the result of lower
occupancy at our River City property located in Chicago, Illinois and at one of
our Lisle, Illinois properties. The remaining properties’ occupancy remains
stable.




Assets Held for Sale -
Operating Property - In 2009 the tenant at our Athens, Georgia retail
property notified us that it was exercising its right to purchase the property
at the expiration of the current lease term.  In accordance with the
lease, the purchase price is equal to the fair market value of the property at
the time of sale.  We and the tenant have each engaged independent
third parties to determine the fair market value of the property.  In
May 2010 the results of the appraisal process was completed. As a result of the
final appraisal, during the three months ended June 30, 2010, a $1,000,000
impairment charge was recorded based on the updated fair market value of the
property.





During
the quarter ended June 30, 2010, we identified an error in our year ended
December 31, 2009 allocation of fair value attributable to the building
component of our Athens, Georgia property which was assessed for impairment in
connection with the reclassification as held for sale and the presentation in
discontinued operations.  As a result, net loss was understated by
approximately $700,000 for the year ended December 31, 2009.  We have
determined that this amount is not material to the year ended December 31, 2009
or the quarter ended June 30, 2010.  As such, a charge of
approximately $700,000 has been recorded in the consolidated statement of
operations within discontinued operations as an out of period adjustment in the
second quarter of 2010.  There was no impact on cash flow from
operations for the quarter ended June 30, 2010.




Equity Investments in
Operating Properties




Sealy -As of June 30, 2010, we
continue to hold equity interests in three real estate ventures with Sealy &
Co which have an aggregate of approximately 2.1 million rentable square feet
consisting of 18 office flex buildings and 13 light distribution and service
center properties. The investment properties are located in Northwest Atlanta,
Georgia, Atlanta, Georgia and Nashville, Tennessee and had occupancies of 71%,
69% and 89%, respectively, at June 30, 2010.  This compares to
occupancy of 70%, 80%, and 86% at March 31, 2010.  Occupancy rates
include all signed leases, including those undergoing tenant
improvements.  With respect to the Atlanta, Georgia property, the
decline in occupancy was due to the loss of a single tenant.  Our
Northwest Atlanta, Georgia property continues to have historically low occupancy
but is performing in line with the market and we have not lost any tenants to
competing properties.  Finally, our Nashville, Tennessee property has
experienced an increase in occupancy as several competitors continue to suffer
from flood damage.  The properties are being aggressively marketed for
lease.  Although
reporting a loss of $628,000 and $1,231,000 for the three and six months ended
June 30, 2010 due primarily to depreciation and amortization, the properties
generated sufficient cash flow to service debt and meet capital expenditure
needs.  We received cash distributions from operations of
$210,000 and $314,000 for the three and six months ended June 30, 2010,
respectively.




The Sealy
properties have $139,750,000 of mortgage debt with no maturities until January
2012.




Marc Realty - As of June 30,
2010, we, together with Marc Realty, held equity interests in 12 properties
which consist of an aggregate of approximately 1,977,000 rentable square feet of
office and retail space which were 83.5% occupied at June 30, 2010 and March 31,
2010.


34


WINTHROP
REALTY TRUST


FORM
10-Q JUNE 30, 2010




Five
downtown Chicago properties contain approximately 959,000 rentable square feet
of the aggregate Marc Realty portfolio and accounted for $37,473,000 of our June
30, 2010 carrying value.  These five properties had occupancy of 86.8%
at June 30, 2010, compared to 89.2% occupancy at March 31, 2010.  They
offer significant stability to our overall investment due to their size,
locality, tenant composition and consistent results during times of difficult
market conditions.  The balance of the portfolio, representing seven
properties and $23,527,000 of our June 30, 2010 carrying value, contain
approximately 1,018,000 square feet.  This part of the portfolio is
located in the Chicago suburbs and was 80.4% occupied at June 30, 2010 compared
to 78.1% occupied at March 31, 2010.




The Marc
Realty properties are encumbered with $92,288,000 of mortgage debt currently,
with no debt maturing in 2010, $29,860,000 maturing in 2011 and the remainder in
2012 or later.




REIT
Securities




We have
had significant returns from our REIT securities after having invested
approximately $71,867,000 since the fourth quarter of 2008.  Because of our
view of the market, we have reduced our investment activity in REIT securities
and are now realizing those returns through the sale of the securities. 
Accordingly, during the quarter ended June 30, 2010 we sold securities on which
we had previously recognized unrealized gains of approximately $551,000,
generating net proceeds of approximately $1,767,000 and recorded realized gains
of $78,000 on the sales.  Additionally, during the quarter we recognized
unrealized losses of $750,000 on our remaining REIT securities.
  Subsequent
to June 30, 2010 we sold our REIT debenture securities for total proceeds of
$15,818,000.




Liquidity and Capital
Resources





At June
30, 2010, we held $37,913,000 in unrestricted cash and cash equivalents and
$43,754,000 in equity and debt REIT securities.  In addition, in July
2010 we drew $25,450,000 on our $35,000,000 revolving line of
credit.





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
the short term. We anticipate that cash on hand, borrowings under our credit
facility, and issuance of equity and debt securities will provide the necessary
capital required for our future investment and financing
activities.  As a REIT, we must distribute annually at least 90% of
our REIT taxable income. As a result of this dividend requirement, we, like
other REITs, are unable to reinvest all of our operating cash flow and are
dependent on raising capital through equity and debt issuances or forming
ventures with investors to obtain funds with which to expand our
business.





Our
primary sources of funds include:





·
            the
      use of cash and cash equivalents;


·
            rents
      and reimbursements received from our operating
  properties;


·
            payments
      received under our loan assets;


·
            the
      issuance of equity and debt
securities;


·
            interest
      and dividends received from investments in REIT
  securities;


·
            cash
      distributions from joint ventures;


·
            borrowings
      under our credit facility; and


·
            asset
      specific borrowings.


35


WINTHROP
REALTY TRUST


FORM
10-Q JUNE 30, 2010





Cash
Flows





Our
liquidity based upon cash and cash equivalents decreased by approximately
$28,580,000 from $66,493,000 at December 31, 2009 to $37,913,000 at June 30,
2010.





Our cash
flow activities for the six months ended June 30, 2010 are summarized as follows
(in thousands):





Net
      cash flow provided by operating activities
                    
                    $
                    11,869Net
      cash flow used in investing activities
                    
                    
                    (32,813
                    )Net
      cash flow used in financing activities
                    
                    
                    (7,636
                    )Decrease
      in cash and cash equivalents
                    
                    $
                    (28,580
                    )





Operating
Activities





For the
six months ended June 30, 2010, our operating activities generated net income of
$9,201,000 and positive cash flow of $11,869,000.  Our cash provided
by operations reflects our net income adjusted by: (i) non-cash items of
$2,966,000; (ii) $2,483,000 of distributions from non-consolidated interests;
and (iii) a net decrease due to changes in other operating assets and
liabilities of $2,781,000.  See our discussion of Results of
Operations below for additional details on our operations.





Investing
Activities





Cash used
in investing activities of $32,813,000 for the six months ended June 30, 2010
was comprised primarily of the following:





·
            $24,896,000
      for the acquisition of three new loans
  receivable;


·
            $7,800,000
      for investment in our Riverside loan joint
  venture;


·
            $5,073,000
      for investment in our Marc Realty equity
  investments;


·
            $2,113,000
      to fund a tenant improvement escrow for the Deer Valley Medical
      Center;


·
            $1,856,000
      for purchases of securities carried at fair
  value;


·
            $1,753,000
      for investment in capital and tenant improvements at our operating
      properties; and


·
            $1,555,000
      for additional loan advances on the 160 Spear and 180 North Michigan
      properties.





These
uses of cash flow were offset primarily by:





·
            $13,174,000
      in proceeds from the sale of securities carried at fair value;
      and


·
            $3,000,000
      in proceeds from the sale at par value of the Siete Square A
      Participation;





Financing
Activities





Cash used
in financing activities of $7,636,000 for the six months ended June 30, 2010 was
comprised primarily of the following:





·
            $6,746,000
      for dividend payments on our Common
Shares;


·
            $3,392,000
      for mortgage loan repayments; and


·
            $279,000
      for dividend payments on our Series C Preferred
  Shares.


36


WINTHROP
REALTY TRUST


FORM
10-Q JUNE 30, 2010





Common
Share Dividends





In paying
dividends we seek to have our quarterly dividends track cash flow from
operations.  While we intend to continue paying dividends each quarter,
they will depend on the actual cash flow, financial condition, capital
requirements, utilization of available capital losses and net operating loss
carry forwards, distribution requirements for REITs under the Internal Revenue
Code, and such other factors as our Board of Trustees deem relevant.  
Subject to the foregoing, we expect to continue distributing our current cash
flow from operations after reserving normal and customary amounts thereby
allowing us to maintain adequate capital reserves.   In addition, when
deemed prudent or necessitated by applicable distribution requirements for REITs
under the Internal Revenue Code, we may make one or more special distributions
during any particular year.  Additionally, during a favorable
investing environment, we expect that we will utilize our carry forward capital
losses to shelter gains from the disposition of our assets so we may use the
proceeds for investment.  We expect to continue applying these
standards with respect to our dividends on a quarterly basis which could cause
the dividends to increase or decrease depending on these various
factors.





We paid a
quarterly dividend of $0.1625 per Common Share for the fourth quarter of 2009 in
January 2010, for the first quarter of 2010 in April 2010 and for the second
quarter of 2010 in July 2010.





Results of
Operations




Our
results are discussed below by business segment:





Ø
            Operating
      Properties – our wholly and partially owned operating properties including
      from and after July 1, 2009, our 12 Marc Realty equity
      investments;


Ø
            Loan
      Assets – our senior and mezzanine real estate loans as well as commercial
      mortgage-backed securities including, prior to July 1, 2009, our Marc
      Realty equity investments;


Ø
            REIT
      Securities – our ownership of equity and debt securities in other real
      estate investment trusts; and


Ø
            Corporate
      – non-segment specific results which include interest on cash reserves,
      general and administrative expenses and other non-segment specific income
      and expense items.





The
following table summarizes our assets by business segment (in
thousands):





June 30,
                        2010
                      
                      
                      December 31,
                        2009Operating
      properties
                      
                      $
                      314,831
                      
                      
                      $
                      313,682Loan
      assets
                      
                      
                      73,925
                      
                      
                      
                      31,774REIT
      securities
                      
                      
                      43,754
                      
                      
                      
                      52,597CorporateCash
      and cash equivalents
                      
                      
                      37,913
                      
                      
                      
                      66,493Restricted
      cash
                      
                      
                      8,574
                      
                      
                      
                      9,504Other
      assets
                      
                      
                      15,416
                      
                      
                      
                      19,142Total
      Assets
                      
                      $
                      494,413
                      
                      
                      $
                      493,192




The
decrease in REIT securities was primarily the result of the sale of securities
carried at fair value for proceeds of $13,174,000.




The
increase in loan assets was due primarily to our $32,697,000 investment to
acquire four loans during the second quarter of 2010 and an additional
$4,100,000 of deposits made on two loan acquisitions which were consummated in
July 2010.




The
decrease in other assets resulted primarily from a $2,689,000 reduction in
accounts receivable and prepaid expenses and a $907,000 reduction in assets of
discontinued operations.


37


WINTHROP
REALTY TRUST


FORM
10-Q JUNE 30, 2010





Comparison
of Six Months ended June 30, 2010 versus Six Months ended June 30,
2009





The
following table summarizes our results from continuing operations by business
segment for the six months ended June 30, 2010 and 2009 (in
thousands):





2010
                  
                  
                  2009Operating
      properties (1)
                  
                  $
                  2,195
                  
                  
                  $
                  2,358Loan
      assets (1)
                  
                  
                  8,448
                  
                  
                  
                  (102,599
                  )REIT
      securities
                  
                  
                  4,063
                  
                  
                  
                  6,714Corporate
      income (expenses)
                  
                  
                  (4,729
                  )
                  
                  
                  302Income
      (loss) from continuing operations
                  
                  $
                  9,977
                  
                  
                  $
                  (93,225
                  )





(1)
            As
      of July 1, 2009, in restructuring our preferred equity investment in Marc
      Realty, 12 of our investments in the Marc Realty portfolio were classified
      as equity investments and are included in the operating properties
      segment.





Operating
Properties





The
following table summarizes results from continuing operations for our operating
properties business segment for the six months ended June 30, 2010 and 2009 (in
thousands):





2010
                  
                  
                  2009Rents
      and reimbursements
                  
                  $
                  19,156
                  
                  
                  $
                  20,760Operating
      expenses
                  
                  
                  (3,781
                  )
                  
                  
                  (3,502
                  )Real
      estate taxes
                  
                  
                  (1,060
                  )
                  
                  
                  (1,294
                  )Equity
      in loss of Sealy Northwest Atlanta
                  
                  
                  (349
                  )
                  
                  
                  (242
                  )Equity
      in loss of Sealy Airpark Nashville
                  
                  
                  (433
                  )
                  
                  
                  (572
                  )Equity
      in loss of Sealy Newmarket
                  
                  
                  (449
                  )
                  
                  
                  (363
                  )Equity
      in income of Marc Realty investments
                  
                  
                  307
                  
                  
                  
                  -Operating
      income
                  
                  
                  13,391
                  
                  
                  
                  14,787Depreciation
      and amortization expense
                  
                  
                  (4,796
                  )
                  
                  
                  (5,485
                  )Interest
      expense
                  
                  
                  (6,400
                  )
                  
                  
                  (6,944
                  )Net
      income
                  
                  $
                  2,195
                  
                  
                  $
                  2,358





Operating
income from our operating properties, which we define as all items of income and
expense directly   derived from or incurred by this business
segment before depreciation, amortization and interest expense, decreased by
$1,396,000 over the prior year period.  The decrease was due primarily
to:





·
            a
      decrease of $491,000 in rents and reimbursements at our Andover,
      Massachusetts property due to the expiration of the lease in place at
      December 31, 2009.  This space was leased effective March 18,
      2010;


·
            a
      decrease of $340,000 in rents and reimbursements from our net lease
      portfolio due to the reduced rent pursuant to a restructuring and 10-year
      extension of the lease for our Plantation, Florida property as of April 1,
      2009;


·
            A
      decrease of $188,000 in rents and reimbursements at our Chicago, Illinois
      (Ontario) property due to an approximate 4% decrease in average occupancy
      for the six months ended June 30, 2010 as compared to the six months ended
      June 30, 2009;


38


WINTHROP
REALTY TRUST


FORM
10-Q JUNE 30, 2010





·
            a
      decrease of $177,000 in rents and reimbursements at our Jacksonville,
      Florida property due to the loss of two tenants in 2009 who occupied
      approximately 80% of the property. This space was leased effective
      February 1, 2010;


·
            a
      decrease of $410,000 in rents and reimbursements from two of our Lisle,
      Illinois properties due to an approximate 18.8% decrease in average
      occupancy at one of the properties and an approximate 12.4% decrease at
      the other property for the six months ended June 30, 2010 as compared to
      the six months ended June 30, 2009;


·
            $248,000
      and $130,000 of operating expenses incurred during 2010 at our Burlington,
      Vermont and Andover, Massachusetts properties, respectively, which were
      net leased during 2009;


·
            $180,000
      of expenses incurred at our Churchill, Pennsylvania property in 2010;
      and


·
            a
      $54,000 increase in losses from our Sealy equity investments due primarily
      to a $107,000 increase in loss related to the Northwest Atlanta, office
      complex which experienced a 12% decrease in occupancy at June 30, 2010
      from June 30, 2009.  Losses from the Sealy portfolio are
      primarily the result of non-cash depreciation and amortization
      expenses.  We received cash distributions of $314,000 from the
      Sealy equity investments for the six months ended June 30,
      2010.





Partially
offset by:





·
            a
      $351,000 bad debt recovery at our Burlington, Vermont property with
      respect to a tenant bankruptcy claim;
and


·
            Income
      of $307,000 in 2010 representing our share of operations from our 12 Marc
      Realty equity investments for the six months ended June 30,
      2010.  We received cash distributions of $1,940,000 from the
      Marc Realty equity investments during the six months ended June 30,
      2010.





Depreciation
and amortization expense decreased by $689,000 primarily as a result of values
assigned to leases in place at the time of acquisition being fully amortized
during 2009.  Also, during 2010 interest expenses related to our
operating properties decreased by $544,000 primarily as a result of normal
amortization of mortgage loans payable.





Loan
Assets





The
following table summarizes results from our loan assets business segment for the
six months ended June 30, 2010 and 2009 (in thousands):





2010
                  
                  
                  2009Interest
      income
                  
                  $
                  5,299
                  
                  
                  $
                  1,207Equity
      in earnings (loss) of preferred equity  investment of Marc
      Realty
                  
                  
                  168
                  
                  
                  
                  (8
                  )Impairment
      loss on preferred equity investment
                  
                  
                  -
                  
                  
                  
                  (2,186
                  )Equity
      in loss of Lex-Win Concord
                  
                  
                  -
                  
                  
                  
                  (67,565
                  )Impairment
      loss of Lex-Win Concord
                  
                  
                  -
                  
                  
                  
                  (31,670
                  )Unrealized
      gain on loan securities carried at fair value
                  
                  
                  3,012
                  
                  
                  
                  -Equity
      in income of ROIC Riverside
                  
                  
                  5
                  
                  
                  
                  -Unrealized
      loss on available for sale loans
                  
                  
                  -
                  
                  
                  
                  (203
                  )Provision
      for loss on loan receivable
                  
                  
                  -
                  
                  
                  
                  (2,152
                  )Operating
      income (loss)
                  
                  
                  8,484
                  
                  
                  
                  (102,577
                  )General
      and administrative expense
                  
                  
                  (36
                  )
                  
                  
                  (22
                  )Net
      income (loss)
                  
                  $
                  8,448
                  
                  
                  $
                  (102,599
                  )





Operating
income from loan assets, which we define as all items of income and expense
directly derived from or incurred by this business segment before general and
administrative expense, increased by $111,061,000 from a loss of $102,577,000
for the six months ended June 30, 2009 to income of $8,484,000 for the six
months ended June 30, 2010.  The increase was due primarily
to:


39


WINTHROP
REALTY TRUST


FORM
10-Q JUNE 30, 2010





·
            a
      $99,235,000 reduction in losses recognized on our equity investment in
      Lex-Win Concord.  Our equity investment in Lex-Win Concord was
      written down to zero as of June 30, 2009.  We had no income or
      loss recognition for this investment for the six months ended June 30,
      2010;


·
            a
      $4,092,000 increase in interest income due primarily to $4,809,000
      recognized on loan assets acquired subsequent to June 30, 2009 which was
      partially offset by a reduction of $696,000 of interest on our tenant
      improvement and capital expenditure loans related to the Marc Realty
      investments which are now reported in the operating properties segment as
      of July 1, 2009;


·
            a
      $3,012,000 unrealized gain on loan securities carried at fair value
      recognized in the six months ended June 30, 2010;
  and


·
            a
      $2,362,000 increase in earnings from our preferred equity investment in
      Marc Realty.





REIT Securities





The
following table summarizes results from our REIT securities business segment for
the six months ended June 30, 2010 and 2009 (in thousands):





2010
                  
                  
                  2009Interest
      and dividends
                  
                  $
                  1,500
                  
                  
                  $
                  2,759Gain
      on sale of securities carried at fair value
                  
                  
                  773
                  
                  
                  
                  2,598Unrealized
      gain on securities carried at fair value
                  
                  
                  1,790
                  
                  
                  
                  1,432Operating
      income
                  
                  
                  4,063
                  
                  
                  
                  6,789Interest
      expense
                  
                  
                  -
                  
                  
                  
                  (75
                  )Net
      income
                  
                  $
                  4,063
                  
                  
                  $
                  6,714





Operating
income from REIT securities, which we define as all items of income and expense
directly derived from or incurred by this business segment before interest
expense, decreased by $2,726,000 from $6,789,000 for the six months ended June
30, 2009 to $4,063,000 for the six months ended June 30, 2010.  The
decrease was due primarily to:





·
            a
      $1,259,000 decrease in interest and dividend income primarily due to the
      sale of various securities; and


·
            a
      $773,000 realized gain on the sale of securities carried at fair value for
      the six months ended June 30, 2010 as compared to a gain of $2,598,000
      recognized in the same period last
year.





Partially
offset by:





·
            a
      $358,000 increase in unrealized gain on securities carried at fair
      value.





Corporate





The
following table summarizes results from our corporate business segment for the
six months ended June 30, 2010 and 2009 (in thousands):





2010
                  
                  
                  2009Interest
      income
                  
                  $
                  77
                  
                  
                  $
                  114General
      and administrative
                  
                  
                  (3,789
                  )
                  
                  
                  (3,295
                  )Interest
      expense
                  
                  
                  (917
                  )
                  
                  
                  (1,557
                  )Gain
      on extinguishment of debt
                  
                  
                  -
                  
                  
                  
                  5,237State
      and local taxes
                  
                  
                  (100
                  )
                  
                  
                  (197
                  )Operating
      income (loss)
                  
                  $
                  (4,729
                  )
                  
                  $
                  302


40


WINTHROP
REALTY TRUST


FORM
10-Q JUNE 30, 2010





The
decrease in operating income from corporate operations for the comparable
periods was due primarily to:





·
            a
      $5,237,000 gain on early extinguishment of debt recognized in 2009
      resulting from our January 2009 purchase of 917,105 of  Series
      B-1 Preferred Shares at a discount to their liquidation value;
      and


·
            a
      $494,000 increase in general and administrative expenses due primarily to
      an increase in the base management fee of
  $658,000;





Partially
offset by:





·
            a
      $640,000 decrease in corporate interest expense due to lower aggregate
      payments in 2010 on our Series B-1 Preferred Shares as a result of fewer
      Series B-1 Preferred Shares outstanding during
  2010.





State
income taxes were $100,000 and $197,000 for the six months ended June 30, 2010
and 2009, respectively, due primarily to our estimate of taxable income for
state purposes, after deductions for dividends paid and after the utilization of
net operating loss carry forwards, where applicable.





Discontinued
Operations





Discontinued
operations consists of our Athens, Georgia retail property where the tenant
notified us of its intent to exercise its purchase option at the expiration of
the current lease term and our apartment complex in Kansas City, Kansas which
was foreclosed in December 2009.





During
the quarter ended June 30, 2010, we identified an
error in our
year ended December 31, 2009 allocation of fair value attributable to the
building component of our Athens, Georgia
property which was assessed for impairment in connection with
the reclassification as held for sale and the presentation in
discontinued operations.  As a result, net loss was understated by
approximately $700,000 for the year ended December 31, 2009.  We havedetermined
that this amount is not material to the year ended December 31, 2009 or the
quarter ended June 30, 2010.  As such, a charge of approximately
$700,000 has been recorded in the consolidated statement of operations within
discontinued operations as an out of period adjustment in the second quarter of
2010.  There was no impact on cash flow from operations for the
quarter ended June 30, 2010





Loss from
discontinued operations increased by $708,000 from $68,000 for the six months
ended June 30, 2009 to $776,000 for the six months ended June 30,
2010.





The
operations of the foregoing properties are classified as discontinued operations
for all periods presented.





Comparison
of Three Months ended June 30, 2010 versus Three Months ended June 30,
2009





The
following table summarizes our results from continuing operations by business
segment for the three months ended June 30, 2010 and 2009 (in
thousands):





2010
                  
                  
                  2009Operating
      properties (1)
                  
                  $
                  1,436
                  
                  
                  $
                  1,040Loan
      assets (1)
                  
                  
                  6,526
                  
                  
                  
                  (85,883
                  )REIT
      securities
                  
                  
                  81
                  
                  
                  
                  16,650Corporate
      income (expenses)
                  
                  
                  (2,394
                  )
                  
                  
                  (2,787
                  )Income
      (loss) from continuing operations
                  
                  $
                  5,649
                  
                  
                  $
                  (70,980
                  )





(2)
            As
      of July 1, 2009, in restructuring our preferred equity investment in Marc
      Realty, 12 of our investments in the Marc Realty portfolio were classified
      as equity investments and are included in the operating properties
      segment.


41


WINTHROP
REALTY TRUST


FORM
10-Q JUNE 30, 2010





Operating
Properties





The
following table summarizes results from continuing operations for our operating
properties business segment for the three months ended June 30, 2010 and 2009
(in thousands):





2010
                  
                  
                  2009Rents
      and reimbursements
                  
                  $
                  9,636
                  
                  
                  $
                  10,105Operating
      expenses
                  
                  
                  (1,822
                  )
                  
                  
                  (1,643
                  )Real
      estate taxes
                  
                  
                  (340
                  )
                  
                  
                  (621
                  )Equity
      in loss of Sealy Northwest Atlanta
                  
                  
                  (174
                  )
                  
                  
                  (204
                  )Equity
      in loss of Sealy Airpark Nashville
                  
                  
                  (224
                  )
                  
                  
                  (314
                  )Equity
      in loss of Sealy Newmarket
                  
                  
                  (230
                  )
                  
                  
                  (177
                  )Equity
      in income of Marc Realty investments
                  
                  
                  231
                  
                  
                  
                  -Operating
      income
                  
                  
                  7,077
                  
                  
                  
                  7,146Depreciation
      and amortization expense
                  
                  
                  (2,434
                  )
                  
                  
                  (2,634
                  )Interest
      expense
                  
                  
                  (3,207
                  )
                  
                  
                  (3,472
                  )Net
      income
                  
                  $
                  1,436
                  
                  
                  $
                  1,040





Operating
income from our operating properties for the three months ended June 30, 2010
decreased by $69,000 over the prior year period.  The decrease was due
primarily to:





·
            a
      decrease of $122,000 in rents and reimbursements at our Andover,
      Massachusetts property due to the expiration of the lease in place at
      December 31, 2009.  This space was leased effective March 18,
      2010;


·
            A
      decrease of $129,000 in rents and reimbursements at our Chicago, Illinois
      (Ontario) property due to an approximate 5% decrease in average occupancy
      for the three months ended June 30, 2010 as compared to the three months
      ended June 30, 2009;


·
            a
      decrease of $280,000 in rents and reimbursements from two of our Lisle,
      Illinois properties due to an approximate 22.9% decrease in average
      occupancy at one of the properties and an approximate 13.8% decrease at
      the other property for the three months ended June 30, 2010 as compared to
      the three months ended June 30,
2009;


·
            $128,000
      and $33,000 of operating expenses incurred during 2010 at our Burlington,
      Vermont and Andover, Massachusetts properties, respectively, which were
      net leased during 2009; and


·
            $174,000
      of expenses incurred at our Churchill, Pennsylvania property in
      2010.





Partially
offset by:





·
            a
      $351,000 bad debt recovery at our Burlington, Vermont property with
      respect to a tenant bankruptcy
claim;


·
            income
      of $231,000 in 2010 representing our share of operations from our 12 Marc
      Realty equity investments for the three months ended June 30,
      2010.  We received cash distributions of $1,454,000 from the
      Marc Realty equity investments during the three months ended June 30,
      2010, and


·
            a
      $67,000 decrease in losses from our Sealy equity investments due primarily
      to a $90,000 decrease in loss related to our Nashville, Tennessee office
      complex primarily as a result of decreased operating expenses for the
      three months ended June 30, 2010 as compared to the three month ended June
      30, 2009.  Losses from the Sealy portfolio are primarily the
      result of non-cash depreciation and amortization expenses.  We
      received cash distributions of $210,000 from the Sealy equity investments
      for the three months ended June 30,
2010.


42




WINTHROP
REALTY TRUST


FORM
10-Q JUNE 30, 2010





Depreciation
and amortization expense decreased by $200,000 primarily as a result of values
assigned to leases in place at the time of acquisition being fully amortized
during 2009.  Also, during 2010 interest expenses related to our
operating properties decreased by $265,000 primarily as a result of normal
amortization of the mortgage loans payable.


43




WINTHROP
REALTY TRUST
 FORM
10-Q JUNE 30, 2010


Loan
Assets





The
following table summarizes results from our loan assets business segment for the
three months ended June 30, 2010 and 2009 (in thousands):





2010
                  
                  
                  2009Interest
      income
                  
                  $
                  2,837
                  
                  
                  $
                  829Equity
      in earnings (loss) of preferred equity investment of Marc
      Realty
                  
                  
                  85
                  
                  
                  
                  (1,023
                  )Impairment
      loss on preferred equity investment
                  
                  
                  -
                  
                  
                  
                  (2,186
                  )Equity
      in loss of Lex-Win Concord
                  
                  
                  -
                  
                  
                  
                  (49,884
                  )Impairment
      loss of Lex-Win Concord
                  
                  
                  -
                  
                  
                  
                  (31,670
                  )Unrealized
      gain on loan securities carried at fair value
                  
                  
                  3,625
                  
                  
                  
                  -Equity
      in income of ROIC Riverside
                  
                  
                  5
                  
                  
                  
                  -Unrealized
      loss on available for sale loans
                  
                  
                  -
                  
                  
                  
                  (203
                  )Provision
      for loss on loan receivable
                  
                  
                  -
                  
                  
                  
                  (1,724
                  )Operating
      income (loss)
                  
                  
                  6,552
                  
                  
                  
                  (85,861
                  )General
      and administrative expense
                  
                  
                  (26
                  )
                  
                  
                  (22
                  )Net
      income (loss)
                  
                  $
                  6,526
                  
                  
                  $
                  (85,883
                  )





Operating
income from loan assets increased by $92,413,000 from a loss of $85,861,000 for
the three months ended June 30, 2009 to income of $6,552,000 for the three
months ended June 30, 2010.  The increase was due primarily
to:





·
            a
      $81,554,000 reduction in losses recognized on our equity investment in
      Lex-Win Concord.  Our equity investment in Lex-Win Concord was
      written down to zero as of June 30, 2009.  We had no income or
      loss recognition for this investment for the three months ended June 30,
      2010;


·
            a
      $3,625,000 unrealized gain on loan securities carried at fair value
      recognized during the three months ended June 30,
  2010;


·
            a
      $2,008,000 increase in interest income due primarily to $2,361,000
      recognized on loan assets acquired subsequent to June 30, 2009 which was
      partially offset by a reduction of $349,000 of interest on our tenant
      improvement and capital expenditure loans related to the Marc Realty
      investments which are now reported in the operating properties segment as
      of July 1, 2009; and


·
            a
      $3,294,000 increase in earnings from our preferred equity investment in
      Marc Realty.





REIT Securities





The
following table summarizes results from our REIT securities business segment for
the three months ended June 30, 2010 and 2009 (in thousands):


2010
                  
                  
                  2009Interest
      and dividends
                  
                  $
                  753
                  
                  
                  $
                  1,385Gain
      on sale of securities carried at fair value
                  
                  
                  78
                  
                  
                  
                  2,685Unrealized
      gain (loss) on securities carried at fair value
                  
                  
                  (750
                  )
                  
                  
                  12,580Operating
      income
                  
                  
                  81
                  
                  
                  
                  16,650Interest
      expense
                  
                  
                  -
                  
                  
                  
                  -Net
      income
                  
                  $
                  81
                  
                  
                  $
                  16,650





Operating
income from REIT securities decreased by $16,569,000 from $16,650,000 for the
three months ended June 30, 2009 to $81,000 for the three months ended June 30,
2010.  The decrease was due primarily to:





·
            a
      $13,330,000 decrease in unrealized gain on securities carried at fair
      value;


44


WINTHROP
REALTY TRUST


FORM
10-Q JUNE 30, 2010




·
            a
      $632,000 decrease in interest and dividend income primarily due to the
      sale of certain securities; and


·
            a
      $78,000 realized gain on the sale of securities carried at fair value for
      the three months ended June 30, 2010 as compared to a gain of $2,685,000
      recognized in the same period last
year.





Corporate





The
following table summarizes results from our corporate business segment for the
three months ended June 30, 2010 and 2009 (in thousands):





2010
                  
                  
                  2009Interest
      income
                  
                  $
                  40
                  
                  
                  $
                  42General
      and administrative
                  
                  
                  (1,890
                  )
                  
                  
                  (1,853
                  )Interest
      expense
                  
                  
                  (459
                  )
                  
                  
                  (829
                  )State
      and local taxes
                  
                  
                  (85
                  )
                  
                  
                  (147
                  )Operating
      income (loss)
                  
                  $
                  (2,394
                  )
                  
                  $
                  (2,787
                  )





The
decrease in operating loss from corporate operations for the comparable periods
was due primarily to:





·
            a
      $370,000 decrease in corporate interest expense due to lower aggregate
      payments in 2010 on our Series B-1 Preferred Shares as a result of fewer
      Series B-1 Preferred Shares outstanding during
  2010.





State
income taxes were $85,000 and $147,000 for the three months ended June 30, 2010
and 2009, respectively, due primarily to our estimate of taxable income for
state purposes, after deductions for dividends paid and after the utilization of
net operating loss carry forwards, where applicable.





Critical Accounting Policies
and Estimates





A summary
of our critical accounting policies is included in our Annual Report on Form
10-K for the year ended December 31, 2009.





Recently Issued Accounting
Standards





See Item
1. Financial Statements – Note 2.





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 partially mitigate the potential negative
effects of interest rate fluctuations on our cash flow and
earnings.





Our
liabilities include both fixed and variable rate debt.  As discussed
in Item 2 – Management’s Discussion and Analysis of Financial Conditions and
Results of Operations, we seek to limit our risk to interest rate fluctuations
through match financing on our loan assets as well as through hedging
transactions.  In this regard, we entered into the following
agreements:




·
            We
      entered into an interest rate swap agreement, with a notional amount of
      $20,000,000, which commenced June 30, 2010 and will expire June 30, 2011
      which effectively converts the interest rate on that portion of principal
      from a floating rate of 1.75% to a fixed rate of
  2.675%.





The fair
value of our debt, based on discounted cash flows at the current rate at which
similar loans would be made to borrowers with similar credit ratings for the
remaining term of such debt, was less than its carrying value of $213,375,000 at
June 30, 2010 and $216,767,000 at December 31, 2009 by approximately $15,036,000
at June 30, 2010 and approximately $25,704,000 at December 31,
2009.


45




WINTHROP
REALTY TRUST
 FORM
10-Q JUNE 30, 2010


The
following table shows what the annual effect a change in the LIBOR rate would
have on interest expense based upon the unhedged balances in variable rate debt
at June 30, 2010 (in thousands):





Change
      in LIBOR(2)-0.35%
                  
                  
                  
                  1%
                  
                  
                  
                  2%
                  
                  
                  
                  3%Change
      in consolidated interest expense
                  
                  $
                  (11
                  )
                  
                  $
                  31
                  
                  
                  $
                  63
                  
                  
                  $
                  94Pro-rata
      share of change in interest expense of debt on non-consolidated
      entities (1)
                  
                  
                  (27
                  )
                  
                  
                  77
                  
                  
                  
                  210
                  
                  
                  
                  398(Increase)
      decrease in net income
                  
                  $
                  (38
                  )
                  
                  $
                  108
                  
                  
                  $
                  273
                  
                  
                  $
                  492





(1)
            Represents
      our pro-rata share of a change in interest expense in our Marc Realty
      equity investments.  The amount does not reflect our equity
      investment in Concord which has been written down to
  zero.


(2)
            The
      one-month LIBOR rate at June 30, 2010 was
0.35%.





We may
utilize various financial instruments to mitigate the potential negative 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, our variable rate
loan assets with a face value aggregating $32,504,000 outstanding as of June 30,
2010 and December 31, 2009, partially mitigate our exposure to change in
interest rates.




Market
Value Risk




Our hedge
transactions using derivative instruments also involve certain additional risks
such as counterparty credit risk, the enforceability of hedging contracts and
the risk that unanticipated and significant changes in interest rates will cause
a significant loss of basis in the contract.  At the present time, the
one counterparty of these arrangements is KeyBank.  We do not
anticipate that this counterparty will fail to meet its
obligations.  There can be no assurance that we will adequately
protect against the foregoing risks and that we will ultimately realize an
economic benefit.




ITEM
      4.
            CONTROLS
      AND PROCEDURES





We
maintain disclosure controls and procedures that are designed to ensure that
information required to be disclosed in our reports filed with the 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 our management, including our Chief Executive Officer
(CEO) and Chief Financial Officer (CFO), as appropriate, to allow timely
decisions regarding required disclosure.





As of
June 30, 2010, an evaluation was performed under the supervision and with the
participation of our management, including the CEO and CFO, of the effectiveness
of the design and operation of our disclosure controls and procedures (as
defined in Rules 13a-15(e) under the Securities Exchange Act of 1934).
Based on that evaluation, our management, including the CEO and CFO, concluded
that our disclosure controls and procedures were effective as of June 30,
2010.





Other Matters




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


46




WINTHROP
REALTY TRUST
 FORM
10-Q JUNE 30, 2010
 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.





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 TrustDate:  August
      9, 2010
                By:
                /s/ Michael L. AshnerMichael
      L. AshnerChief
      Executive OfficerDate:  August
      9, 2010
                By:
                /s/ Thomas C. StaplesThomas
      C. StaplesChief
      Financial Officer


47


WINTHROP
REALTY TRUST
 FORM
10-Q JUNE 30, 2010




EXHIBIT
INDEX





Exhibit
                    
                    Description
                    
                    Page
                      Number3.1
                    
                    Second
      Amended and Restated Declaration of Trust as of May 21, 2009 -
      Incorporated by reference to Exhibit 3.1 to the Trust’s Quarterly Report
      on Form 10-Q for the period ended June 30, 2009.3.2
                    
                    By-laws
      of Winthrop Realty Trust as amended and restated on November 3, 2009 -
      Incorporated by reference to Exhibit 3.1 to the Trust’s Current Report on
      Form 8-K filed November 6, 2009
                    
                    -3.3
                    
                    Amendment
      to By-laws - Incorporated by reference to Exhibit 3.1 to the Trust’s
      Current Report on Form 8-K filed March 6, 2010
                    
                    -4.1
                    
                    Form
      of certificate for Common Shares of Beneficial
      Interest.  Incorporated by reference to Exhibit 4.1 to the
      Trust’s Annual Report on Form 10-K for the year ended December 31,
      2008
                    
                    -4.2
                    
                    Warrant
      to purchase 500,000 shares of Beneficial Interest of Trust - Incorporated
      by reference to Exhibit 4(l) to the Trust’s Annual Report on Form 10-K for
      the year ended December 31, 1998.
                    
                    -4.3
                    
                    Agreement
      of Limited Partnership of WRT Realty L.P., dated as of January 1, 2005 -
      Incorporated by reference to Exhibit 4.1 to the Trust’s Form 8-K filed
      January 4, 2005.
                    
                    -4.4
                    
                    Amended
      and Restated Certificate of Designations for Series B-1 Cumulative
      Convertible Redeemable Preferred Shares of Beneficial Interest (“Series
      B-1 Certificate of Designations”) - Incorporated by reference to Exhibit
      4.1 to the Trust’s Form 8-K filed June 21, 2005.
                    
                    -4.5
                    
                    Amendment
      No. 1 to Series B-1 Certificate of Designations - Incorporated by
      reference to Exhibit 4.1 to the Trust’s Form 8-K filed November 13,
      2007.
                    
                    -4.6
                    
                    Certificate
      of Designations for Series C Cumulative Convertible Redeemable Preferred
      Shares of Beneficial Interest - Incorporated by reference to Exhibit 4.1
      to the Trust’s Form 8-K filed November 2, 2009.10.1
                    
                    Indemnification
      Agreement with Neil Koenig, dated as of April 29, 2002 - Incorporated by
      reference to Exhibit 10.Q to the Trust’s Annual Report on Form 10-K for
      the year ended December 31, 2002.
                    
                    -10.2
                    
                    Stock
      Purchase Agreement between the Trust and FUR Investors, LLC, dated as of
      November 26, 2003, including Annex A thereto, being the list of Conditions
      to the Offer - Incorporated by reference to Exhibit 10.1 to the Trust’s
      Form 8-K filed December 1, 2003.
                    
                    -10.3
                    
                    Second
      Amended and Restated Advisory Agreement dated March 5, 2009, between the
      Trust, WRT Realty L.P. and FUR Advisors LLC. Incorporated by reference to
      Exhibit 10.3 to the Trust’s Annual Report on Form 10-K for the year ended
      December 31, 2008
                    
                    -10.4
                    
                    Amendment
      No. 1 to Second Amended and Restated Advisory Agreement - Incorporated by
      reference to Exhibit 10.30 to the Trust’s Quarterly Report on Form 10-Q
      for the period ended March 31, 2009.


48




WINTHROP
REALTY TRUST
 FORM
10-Q JUNE 30, 2010


10.5
                  
                  Amendment
      No. 2 to Second Amended and Restated Advisory Agreement - Incorporated by
      reference to Exhibit 10.1 to the Trust’s Form 8-K filed January 29,
      201010.6
                  
                  Exclusivity
      Services Agreement between the Trust and Michael L. Ashner - Incorporated
      by reference to Exhibit 10.4 to the Trust’s Form 8-K filed December 1,
      2003.
                  
                  -10.7
                  
                  Amendment
      No. 1 to Exclusivity Agreement, dated November 7, 2005 - Incorporated by
      reference to Exhibit 10.7 to the Trust’s Form 8-K filed November 10,
      2005.
                  
                  -10.8
                  
                  Covenant
      Agreement between the Trust and FUR Investors, LLC - Incorporated by
      reference to Exhibit 10.5 to the Trust’s Form 8-K filed December 1,
      2003.
                  
                  -10.9
                  
                  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 - Incorporated by reference to
      Exhibit 10.1 to the Trust’s Form 8-K filed November 23,
    2004.
                  
                  -10.10
                  
                  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 - Incorporated by reference to
      Exhibit 10.11 to the Trust’s Quarterly report on Form 10-Q for the period
      ended June 30, 2006.
                  
                  -10.11
                  
                  Form
      of Mortgage, dated November 18, 2004, in favor of Keybank National
      Association - Incorporated by reference to Exhibit 10.2 to the Trust’s
      Form 8-K filed November 23, 2004.
                  
                  -10.12
                  
                  Ownership
      Interest Pledge Agreement, dated November 18, 2004, from FT-Fin
      Acquisition LLC to Keybank National Association - Incorporated by
      reference to Exhibit 10.3 to the Trust’s Form 8-K filed November 23,
      2004.
                  
                  -10.13
                  
                  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 - Incorporated by reference to Exhibit 10.4 to the Trust’s Form 8-K
      filed November 23, 2004.
                  
                  -10.14
                  
                  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 - Incorporated by reference to Exhibit
      10.5 to the Trust’s Form 8-K filed November 23, 2004.
                  
                  -10.15
                  
                  Amended
      and Restated Omnibus Agreement, dated March 16, 2005, among Gerald Nudo,
      Laurence Weiner and WRT Realty L.P. - Incorporated by reference to Exhibit
      10.1 to the Trust’s Form 8-K filed March 18, 2005
                  
                  -10.16
                  
                  Agreement,
      dated as of July 1, 2009, among Gerald Nudo, Laurence Weiner and WRT
      Realty L.P.
                  
                  -10.17
                  
                  Securities
      Purchase Agreement, dated February 16, 2005, between First Union Real
      Estate Equity and Mortgage Investments and Kimco Realty Corporation -
      Incorporated by reference to Exhibit 10 to the Trust’s Form 8-K filed
      February 18, 2005.
                  
                  -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 - Incorporated by reference
      to Exhibit 10.1 to the Trust’s Form 8-K filed March 3,
    2005.
                  
                  -


49




WINTHROP
REALTY TRUST
 FORM
10-Q JUNE 30, 2010


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 - Incorporated by reference to
      Exhibit 10.1 to the Trust’s Form 8-K filed June 21, 2005.
                  
                  -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  - Incorporated by reference to Exhibit 10.2 to
      the Trust’s Form 8-K filed June 21, 2005.
                  
                  -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 - Incorporated by reference to Exhibit 10.3 to the Trust’s Form
      8-K filed June 21, 2005.
                  
                  -10.22
                  
                  Securities
      Purchase Agreement, dated November 7, 2005, between the Trust and Vornado
      Investments L.L.C. (“Vornado”) - Incorporated by reference to Exhibit 10.1
      to the Trust’s Form 8-K filed November 10, 2005.
                  
                  -10.23
                  
                  Registration
      Rights Agreement, dated November 7, 2005, between the Trust and Vornado -
      Incorporated by reference to Exhibit 10.2 to the Trust’s Form 8-K filed
      November 10, 2005.
                  
                  -10.24
                  
                  Loan
      Agreement, dated as of December 16, 2005, between WRT Realty L.P. and
      KeyBank, National Association - Incorporated by reference to Exhibit 10.1
      to the Trust’s Form 8-K filed December 21, 2005.
                  
                  -10.25
                  
                  Guaranty
      from Winthrop Realty Trust in favor of KeyBank, National Association-
      Incorporated by reference to Exhibit 10.2 to the Trust’s Form 8-K filed
      December 21, 2005.
                  
                  -10.26
                  
                  Second
      Amendment to Loan Agreement, dated as of December 16, 2008- Incorporated
      by reference to Exhibit 10.1 to the Trust’s Form 8-K filed December 22,
      2008.
                  
                  -10.27
                  
                  Third
      Amendment to Loan Agreement, dated as of December 16, 2008- Incorporated
      by reference to Exhibit 10.2 to the Trust’s Form 8-K filed December 22,
      2008
                  
                  -10.28
                  
                  Agreement
      between Michael L. Ashner and Winthrop Realty Trust dated July 23, 2006 -
      Incorporated by reference to Exhibit 10.2 to the Trust’s Form 8-K filed
      July 25, 2006.
                  
                  -10.29
                  
                  Winthrop
      Realty Trust 2007 Long Term Stock Incentive Plan - Incorporated by
      reference to the Trust’s Definitive Proxy Statement on Schedule 14A filed
      with the Securities and Exchange Commission on March 30,
    2007.
                  
                  -10.30
                  
                  Second
      Amended and Restated Limited Liability Company Agreement of Concord Debt
      Holdings LLC, dated August 2, 2008, between Lex-Win Concord LLC and Inland
      American (Concord) Sub LLC  - Incorporated by reference to
      Exhibit 10.1 to the Trust’s Form 8-K filed August 4, 2008
                  
                  -10.31
                  
                  Limited
      Liability Company Agreement of Lex-Win Concord LLC, dated August 2, 2008,
      among WRT Realty L.P., The Lexington Master Limited Partnership and WRP
      Sub-management LLC - Incorporated by reference to Exhibit 10.2 to the
      Trust’s Form 8-K filed August 4, 2008
                  
                  -


50


WINTHROP
REALTY TRUST
 FORM
10-Q JUNE 30, 2010


10.32
                  
                  Form
      of Series B-1 and Series C Preferred Share Purchase Agreement, dated
      November 1, 2009 - Incorporated by reference to Exhibit 10.1 to the
      Trust’s Form 8-K filed November 2, 200910.33
                  
                  Investor
      Rights Agreement (Series C Preferred Shares), dated November 1, 2009,
      between Winthrop Realty Trust and the investors party thereto - -
      Incorporated by reference to Exhibit 10.2 to the Trust’s Form 8-K filed
      November 2, 200931
                  
                  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


51