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:  September 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   xNon-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
November 1, 2010 there were 27,030,286 Common Shares of Beneficial Interest
outstanding.
  
  INDEX
 
 PagePart
      I.
                          
                          Financial
      InformationItem
      1.
                          
                          Financial
      Statements (Unaudited):Consolidated
      Balance Sheets as of September 30, 2010 and December 31,
    2009
                          
                          3Consolidated
      Statements of Operations and Comprehensive Income (Loss) for the Three and
      Nine Months Ended September 30, 2010 and September 30,
2009
                          
                          4Consolidated
      Statements of Equity for the Nine Months Ended September 30, 2010 and
      September 30, 2009
                          
                          5Consolidated
      Statements of Cash Flows for the Nine Months Ended September 30, 2010 and
      September 30, 2009
                          
                          6Notes
      to Consolidated Financial Statements
                          
                          8Item
      2.
                          
                          Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
                          
                          34Item
      3.
                          
                          Quantitative
      and Qualitative Disclosure about Market Risk
                          
                          48Item
      4.
                          
                          Controls
      and Procedures
                          
                          49Part
      II.
                          
                          Other
      InformationItem
      6.
                          
                          Exhibits
                          
                          50Signatures
                          
                          
                          
                          50Exhibit
      Index
                          
                          
                          
                          51
  2
  Item
1. Financial Information
 WINTHROP
REALTY TRUST
 FORM
10-Q – SEPTEMBER 30, 2010
 CONSOLIDATED
BALANCE SHEETS
 (in
thousands, except per share data)
 
 September
      30,
                  
                  
                  December
      31,2010
                  
                  
                  2009(unaudited)
                  
                  
                  (unaudited)ASSETSInvestments
      in real estate, at costLand
                  
                  $
                  21,460
                  
                  
                  $
                  20,659Buildings
      and improvements
                  
                  
                  236,500
                  
                  
                  
                  228,419257,960
                  
                  
                  
                  249,078Less:
      accumulated depreciation
                  
                  
                  (34,416
                  )
                  
                  
                  (31,269
                  )Investments
      in real estate, net
                  
                  
                  223,544
                  
                  
                  
                  217,809Cash
      and cash equivalents
                  
                  
                  102,919
                  
                  
                  
                  66,493Restricted
      cash held in escrows
                  
                  
                  8,889
                  
                  
                  
                  9,505Loans
      receivable, net
                  
                  
                  77,964
                  
                  
                  
                  26,101Accounts
      receivable, net of allowances of $293 and $565,
    respectively
                  
                  
                  12,560
                  
                  
                  
                  14,559Securities
      carried at fair value
                  
                  
                  29,893
                  
                  
                  
                  52,394Loan
      securities carried at fair value
                  
                  
                  6,454
                  
                  
                  
                  1,661Available
      for sale securities, net
                  
                  
                  -
                  
                  
                  
                  203Preferred
      equity investment
                  
                  
                  3,972
                  
                  
                  
                  4,012Equity
      investments
                  
                  
                  92,691
                  
                  
                  
                  73,207Lease
      intangibles, net
                  
                  
                  24,496
                  
                  
                  
                  22,666Deferred
      financing costs, net
                  
                  
                  1,217
                  
                  
                  
                  1,495Assets
      held for sale
                  
                  
                  3,096
                  
                  
                  
                  3,087TOTAL
      ASSETS
                  
                  $
                  587,695
                  
                  
                  $
                  493,192LIABILITIESMortgage
      loans payable
                  
                  $
                  211,773
                  
                  
                  $
                  216,767Series
      B-1 Cumulative Convertible Redeemable Preferred Shares, $25 per share
      liquidation preference; 852,000 shares authorized and outstanding at
      September 30, 2010  and December 31, 2009
                  
                  
                  21,300
                  
                  
                  
                  21,300Revolving
      line of credit
                  
                  
                  25,450
                  
                  
                  
                  -Accounts
      payable and accrued liabilities
                  
                  
                  9,852
                  
                  
                  
                  7,401Dividends
      payable
                  
                  
                  4,424
                  
                  
                  
                  3,458Deferred
      income
                  
                  
                  33
                  
                  
                  
                  48Below
      market lease intangibles, net
                  
                  
                  2,348
                  
                  
                  
                  2,849TOTAL
      LIABILITIES
                  
                  
                  275,180
                  
                  
                  
                  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 September 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;  26,981,888 and
      20,375,483 issued and outstanding at September 30, 2010 and December 31,
      2009, respectively26,982
                  
                  
                  
                  20,375Additional
      paid-in capital
                  
                  
                  569,121
                  
                  
                  
                  498,118Accumulated
      distributions in excess of net income
                  
                  
                  (300,219
                  )
                  
                  
                  (301,317
                  )Accumulated
      other comprehensive loss
                  
                  
                  (93
                  )
                  
                  
                  (87
                  )Total
      Winthrop Realty Trust Shareholders’ Equity
                  
                  
                  295,791
                  
                  
                  
                  217,089Non-controlling
      interests
                  
                  
                  13,503
                  
                  
                  
                  12,111Total
      Equity
                  
                  
                  309,294
                  
                  
                  
                  229,200TOTAL
      LIABILITIES AND EQUITY
                  
                  $
                  587,695
                  
                  
                  $
                  493,192
 
 See Notes
to Consolidated Financial Statements and refer to Note 18 for information
regarding variable interest entities (VIEs) including VIEs for which the Trust
is the primary beneficiary.
  3
  WINTHROP
REALTY TRUST
 FORM
10-Q –SEPTEMBER 30, 2010
 CONSOLIDATED
STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
 (in
thousands, except per share data)
 
 Three
      Months Ended
                      September
      30,
                    
                    
                    Nine
      Months Ended
                      September
      30,2010
                    
                    
                    2009
                    
                    
                    2010
                    
                    
                    2009(unaudited)
                    
                    
                    (unaudited)
                    
                    
                    (unaudited)
                    
                    
                    (unaudited)RevenueRents
      and reimbursements
                    
                    $
                    9,298
                    
                    
                    $
                    10,140
                    
                    
                    $
                    28,162
                    
                    
                    $
                    30,609Interest
      and dividends
                    
                    
                    4,948
                    
                    
                    
                    2,496
                    
                    
                    
                    11,747
                    
                    
                    
                    6,46214,246
                    
                    
                    
                    12,636
                    
                    
                    
                    39,909
                    
                    
                    
                    37,071ExpensesProperty
      operating
                    
                    
                    1,812
                    
                    
                    
                    1,990
                    
                    
                    
                    5,585
                    
                    
                    
                    5,492Real
      estate taxes
                    
                    
                    952
                    
                    
                    
                    674
                    
                    
                    
                    2,012
                    
                    
                    
                    1,968Depreciation
      and amortization
                    
                    
                    2,393
                    
                    
                    
                    2,598
                    
                    
                    
                    7,092
                    
                    
                    
                    7,987Interest
                    
                    
                    3,809
                    
                    
                    
                    4,169
                    
                    
                    
                    11,126
                    
                    
                    
                    12,745Provision
      for loss on loans receivable
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    2,152General
      and administrative
                    
                    
                    2,300
                    
                    
                    
                    1,820
                    
                    
                    
                    6,123
                    
                    
                    
                    5,137State
      and local taxes
                    
                    
                    7
                    
                    
                    
                    14
                    
                    
                    
                    107
                    
                    
                    
                    21111,273
                    
                    
                    
                    11,265
                    
                    
                    
                    32,045
                    
                    
                    
                    35,692Other
      income (loss)Earnings
      (loss) from preferred equity investments
                    
                    
                    85
                    
                    
                    
                    86
                    
                    
                    
                    253
                    
                    
                    
                    (2,108
                    )Equity
      in (loss) earnings of equity investments
                    
                    
                    (409
                    )
                    
                    
                    211
                    
                    
                    
                    (1,328
                    )
                    
                    
                    (100,201
                    )Realized
      gain (loss) on sale of securities carried at fair value
                    
                    
                    (185
                    )
                    
                    
                    676
                    
                    
                    
                    588
                    
                    
                    
                    3,274Unrealized
      gain on securities carried at fair value
                    
                    
                    2,490
                    
                    
                    
                    12,578
                    
                    
                    
                    4,280
                    
                    
                    
                    14,010Impairment
      loss on real estate loan available for sale
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    (203
                    )Gain
      on extinguishment of debt
                    
                    
                    -
                    
                    
                    
                    445
                    
                    
                    
                    -
                    
                    
                    
                    5,682Unrealized
      gain on loan securities carried at fair value
                    
                    
                    581
                    
                    
                    
                    -
                    
                    
                    
                    3,593
                    
                    
                    
                    -Interest
      income
                    
                    
                    17
                    
                    
                    
                    31
                    
                    
                    
                    94
                    
                    
                    
                    1452,579
                    
                    
                    
                    14,027
                    
                    
                    
                    7,480
                    
                    
                    
                    (79,401
                    )Income
      (loss) from continuing operations
                    
                    
                    5,552
                    
                    
                    
                    15,398
                    
                    
                    
                    15,344
                    
                    
                    
                    (78,022
                    )Discontinued
      operationsIncome
      (loss) from discontinued operations
                    
                    
                    (1,569
                    )
                    
                    
                    74
                    
                    
                    
                    (2,160
                    )
                    
                    
                    201Consolidated
      net income (loss)
                    
                    
                    3,983
                    
                    
                    
                    15,472
                    
                    
                    
                    13,184
                    
                    
                    
                    (77,821
                    )Income
      attributable to non-controlling interest
                    
                    
                    (175
                    )
                    
                    
                    (315
                    )
                    
                    
                    (595
                    )
                    
                    
                    (651
                    )Net
      income (loss) attributable to Winthrop Realty Trust
                    
                    
                    3,808
                    
                    
                    
                    15,157
                    
                    
                    
                    12,589
                    
                    
                    
                    (78,472
                    )Income
      attributable to non-controlling redeemable preferred
    interest
                    
                    
                    (59
                    )
                    
                    
                    -
                    
                    
                    
                    (230
                    )
                    
                    
                    -Net
      income (loss) attributable to Common Shares
                    
                    $
                    3,749
                    
                    
                    $
                    15,157
                    
                    
                    $
                    12,359
                    
                    
                    $
                    (78,472
                    )Comprehensive
      income (loss)Consolidated
      net income (loss)
                    
                    $
                    3,983
                    
                    
                    
                    15,472
                    
                    
                    $
                    13,184
                    
                    
                    $
                    (77,821
                    )Change
      in unrealized gain on available for sale securities
                    
                    
                    -
                    
                    
                    
                    10
                    
                    
                    
                    2
                    
                    
                    
                    21Change
      in unrealized gain (loss) on interest rate derivative
                    
                    
                    (20
                    )
                    
                    
                    141
                    
                    
                    
                    (8
                    )
                    
                    
                    406Change
      in unrealized loss from equity investments
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    26,174Comprehensive
      income (loss)
                    
                    $
                    3,963
                    
                    
                    $
                    15,623
                    
                    
                    $
                    13,178
                    
                    
                    $
                    (51,220
                    )Per
      Common Share data - BasicIncome
      (loss) from continuing operations
                    
                    $
                    0.25
                    
                    
                    $
                    0.90
                    
                    
                    $
                    0.69
                    
                    
                    $
                    (4.97
                    )Income
      (loss) from discontinued operations
                    
                    
                    (0.07
                    )
                    
                    
                    -
                    
                    
                    
                    (0.10
                    )
                    
                    
                    0.01Net
      income (loss) attributable to Winthrop Realty Trust
                    
                    $
                    0.18
                    
                    
                    $
                    0.90
                    
                    
                    $
                    0.59
                    
                    
                    $
                    (4.96
                    )Per
      Common Share data - DilutedIncome
      (loss) from continuing operations
                    
                    $
                    0.25
                    
                    
                    $
                    0.90
                    
                    
                    $
                    0.69
                    
                    
                    $
                    (4.97
                    )Income
      (loss) from discontinued operations
                    
                    
                    (0.07
                    )
                    
                    
                    -
                    
                    
                    
                    (0.10
                    )
                    
                    
                    0.01Net
      income (loss) attributable to Winthrop Realty Trust
                    
                    $
                    0.18
                    
                    
                    $
                    0.90
                    
                    
                    $
                    0.59
                    
                    
                    $
                    (4.96
                    )Basic
      Weighted-Average Common Shares
                    
                    
                    21,412
                    
                    
                    
                    15,855
                    
                    
                    
                    21,064
                    
                    
                    
                    15,828Diluted
      Weighted-Average Common Shares
                    
                    
                    21,414
                    
                    
                    
                    15,855
                    
                    
                    
                    21,499
                    
                    
                    
                    15,828
 
 See Notes
to Consolidated Financial Statements.
  4
  WINTHROP
REALTY TRUST
 FORM
10-Q – SEPTEMBER 30, 2010
 CONSOLIDATED
STATEMENTS OF EQUITY
 (unaudited)
 (in
thousands)
 
 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
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      12,589
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      12,589Net
      income attributable to non-controlling interests
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      595
                      
                      
                      
                      595Distributions
      to non-controlling interests
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      (240
                      )
                      
                      
                      (240
                      )Contributions
      from non-controlling interests
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      1,037
                      
                      
                      
                      1,037Dividends
      paid or accrued on Common Shares of Beneficial Interest ($0.4875 per
      share)
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      (11,261
                      )
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      (11,261
                      )Dividends
      paid or accrued on Series C Preferred Shares ($1.21875 per
      share)
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      (230
                      )
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      (230
                      )Change
      in unrealized gain on available for sale securities
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      2
                      
                      
                      
                      -
                      
                      
                      
                      2Change
      in unrealized gain on interest rate derivatives
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      (8
                      )
                      
                      
                      -
                      
                      
                      
                      (8
                      )Conversion
      of Series C Preferred Shares to Common Shares
                      
                      
                      714
                      
                      
                      
                      714
                      
                      
                      
                      8,234
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      8,948Stock
      issued pursuant to dividend reinvestment plan
                      
                      
                      143
                      
                      
                      
                      143
                      
                      
                      
                      1,652
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      1,795Net
      proceeds from Common Share offering
                      
                      
                      5,750
                      
                      
                      
                      5,750
                      
                      
                      
                      61,117
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      66,867Balance,
      September 30, 2010
                      
                      
                      26,982
                      
                      
                      $
                      26,982
                      
                      
                      $
                      569,121
                      
                      
                      $
                      (300,219
                      )
                      
                      $
                      (93
                      )
                      
                      $
                      13,503
                      
                      
                      $
                      309,294
 
 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
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    (78,472
                    )
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    (78,472
                    )Cumulative
      effect, change in accounting principle
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    11,647
                    
                    
                    
                    (11,647
                    )
                    
                    
                    -
                    
                    
                    
                    -Net
      income attributable to non-controlling interests
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    651
                    
                    
                    
                    651Distributions
      to non-controlling interests
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    (743
                    )
                    
                    
                    (743
                    )Contributions
      from non-controlling interests
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    723
                    
                    
                    
                    723Dividends
      paid or accrued on Common Shares of Beneficial Interest ($0.75 per
      share)
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    (11,875
                    )
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    (11,875
                    )Change
      in unrealized gain on available for sale securities
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    21
                    
                    
                    
                    -
                    
                    
                    
                    21Change
      in unrealized gain on interest rate derivatives
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    406
                    
                    
                    
                    -
                    
                    
                    
                    406Change
      in unrealized loss from equity investments
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    26,174
                    
                    
                    
                    -
                    
                    
                    
                    26,174Stock
      issued pursuant to dividend reinvestment plan
                    
                    
                    107
                    
                    
                    
                    107
                    
                    
                    
                    940
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    1,047Balance,
      September 30, 2009
                    
                    
                    15,861
                    
                    
                    $
                    15,861
                    
                    
                    $
                    461,896
                    
                    
                    $
                    (291,984
                    )
                    
                    $
                    (222
                    )
                    
                    $
                    11,589
                    
                    
                    $
                    197,140
 
 See Notes
to Consolidated Financial Statements.
  5
  WINTHROP
REALTY TRUST
 FORM
10-Q – SEPTEMBER 30, 2010
 CONSOLIDATED
STATEMENTS OF CASH FLOWS
 (unaudited)
 (in
thousands)
 
 Nine
      Months Ended
                    September
      30,2010
                  
                  
                  2009Cash
      flows from operating activitiesNet
      income (loss)
                  
                  $
                  13,184
                  
                  
                  $
                  (77,821
                  )Adjustments
      to reconcile net income (loss) to net cash provided by operating
      activities:Depreciation
      and amortization (including amortization of deferred financing
      costs)
                  
                  
                  5,026
                  
                  
                  
                  5,562Amortization
      of lease intangibles
                  
                  
                  2,064
                  
                  
                  
                  3,647Straight-lining
      of rental income
                  
                  
                  378
                  
                  
                  
                  (514
                  )(Earnings)
      loss of preferred equity investments
                  
                  
                  (253
                  )
                  
                  
                  2,843Distributions
      from preferred equity investments
                  
                  
                  293
                  
                  
                  
                  2,291Loss
      of equity investments
                  
                  
                  1,328
                  
                  
                  
                  100,201Distributions
      from equity investments
                  
                  
                  3,793
                  
                  
                  
                  1,596Restricted
      cash held in escrows
                  
                  
                  1,207
                  
                  
                  
                  (1,009
                  )Gain
      on sale of securities carried at fair value
                  
                  
                  (588
                  )
                  
                  
                  (3,274
                  )Unrealized
      gain on securities carried at fair value
                  
                  
                  (4,280
                  )
                  
                  
                  (14,010
                  )Unrealized
      gain on loan securities carried at fair value
                  
                  
                  (3,593
                  )
                  
                  
                  -Impairment
      loss on real estate loan available for sale
                  
                  
                  -
                  
                  
                  
                  203Impairment
      loss on real estate held for sale
                  
                  
                  2,720
                  
                  
                  
                  -Gain
      on extinguishment of debt
                  
                  
                  -
                  
                  
                  
                  (5,682
                  )Provision
      for loss on loan receivable
                  
                  
                  -
                  
                  
                  
                  2,152Tenant
      leasing costs
                  
                  
                  (2,477
                  )
                  
                  
                  (2,081
                  )Bad
      debt recovery
                  
                  
                  (612
                  )
                  
                  
                  (73
                  )Net
      change in interest receivable
                  
                  
                  (236
                  )
                  
                  
                  (171
                  )Net
      change in accounts receivable
                  
                  
                  1,844
                  
                  
                  
                  1,110Loan
      discount accretion
                  
                  
                  (6,087
                  )
                  
                  
                  (406
                  )Net
      change in accounts payable and accrued liabilities
                  
                  
                  771
                  
                  
                  
                  (653
                  )Net
      cash provided by operating activities
                  
                  
                  14,482
                  
                  
                  
                  13,911Cash
      flows from investing activitiesIssuance
      and acquisition of loans receivable
                  
                  
                  (83,572
                  )
                  
                  
                  (15,501
                  )Investments
      in real estate
                  
                  
                  (3,003
                  )
                  
                  
                  (1,301
                  )Investment
      in equity investments
                  
                  
                  (24,605
                  )
                  
                  
                  (2,007
                  )Investment
      in real estate loan available for sale
                  
                  
                  -
                  
                  
                  
                  (35,000
                  )Purchase
      of securities carried at fair value
                  
                  
                  (3,056
                  )
                  
                  
                  (30,552
                  )Proceeds
      from preferred equity investments
                  
                  
                  -
                  
                  
                  
                  60Proceeds
      from sale of real estate loan available for sale
                  
                  
                  -
                  
                  
                  
                  34,797Proceeds
      from sale of securities carried at fair value
                  
                  
                  29,565
                  
                  
                  
                  22,866Proceeds
      from sale of available for sale securities
                  
                  
                  205
                  
                  
                  
                  -Proceeds
      from sale of loans receivable
                  
                  
                  12,876
                  
                  
                  
                  -Restricted
      cash held in escrows
                  
                  
                  (2,073
                  )
                  
                  
                  2,647Collection
      of loans receivable
                  
                  
                  14,900
                  
                  
                  
                  10,980Net
      cash used in investing activities
                  
                  
                  (58,763
                  )
                  
                  
                  (13,011
                  )
 
 (Continued
on next page)
 See Notes
to Consolidated Financial Statements.
  6
  WINTHROP
REALTY TRUST
 FORM
10-Q – SEPTEMBER 30, 2010
 CONSOLIDATED
STATEMENTS OF CASH FLOWS
 (unaudited)
 (in
thousands, continued)
 
 Nine Months Ended
                    September 30,2010
                  
                  
                  2009Cash
      flows from financing activitiesProceeds
      from mortgage loans payable
                  
                  $
                  -
                  
                  
                  $
                  49Proceeds
      from loan payable
                  
                  
                  -
                  
                  
                  
                  19,818Payment
      of loan payable
                  
                  
                  -
                  
                  
                  
                  (19,818
                  )Proceeds
      from revolving line of credit
                  
                  
                  25,450
                  
                  
                  
                  35,000Payment
      of revolving line of credit
                  
                  
                  -
                  
                  
                  
                  (35,000
                  )Principal
      payments of mortgage loans payable
                  
                  
                  (4,994
                  )
                  
                  
                  (4,332
                  )Restricted
      cash held in escrows
                  
                  
                  1,482
                  
                  
                  
                  3,970Payments
      of note payable
                  
                  
                  -
                  
                  
                  
                  (9,800
                  )Deferred
      financing costs
                  
                  
                  (165
                  )
                  
                  
                  (61
                  )Contribution
      from non-controlling interest
                  
                  
                  1,037
                  
                  
                  
                  723Distribution
      to non-controlling interest
                  
                  
                  (240
                  )
                  
                  
                  (743
                  )Issuance
      of Common Shares under Dividend Reinvestment Plan
                  
                  
                  1,795
                  
                  
                  
                  1,047Issuance
      of Common Shares through offering
                  
                  
                  66,867
                  
                  
                  
                  -Dividend
      paid on Common Shares
                  
                  
                  (10,187
                  )
                  
                  
                  (13,844
                  )Dividend
      paid on Series C Preferred Shares
                  
                  
                  (338
                  )
                  
                  
                  -Redemption
      of Series B-1 Preferred Shares
                  
                  
                  -
                  
                  
                  
                  (2,000
                  )Net
      cash provided by (used in) financing activities
                  
                  
                  80,707
                  
                  
                  
                  (24,991
                  )Net
      increase (decrease) in cash and cash equivalents
                  
                  
                  36,426
                  
                  
                  
                  (24,091
                  )Cash
      and cash equivalents at beginning of period
                  
                  
                  66,493
                  
                  
                  
                  59,238Cash
      and cash equivalents at end of period
                  
                  $
                  102,919
                  
                  
                  $
                  35,147Supplemental
      Disclosure of Cash Flow InformationInterest
      paid
                  
                  $
                  10,772
                  
                  
                  $
                  12,624Taxes
      paid
                  
                  $
                  98
                  
                  
                  $
                  124Supplemental
      Disclosure on Non-Cash Investing and  Financing
      ActivitiesDividends
      accrued on Common Shares
                  
                  $
                  4,385
                  
                  
                  $
                  3,965Dividends
      accrued on Series C Preferred Shares
                  
                  $
                  39
                  
                  
                  $
                  -Capital
      expenditures accrued
                  
                  $
                  1,643
                  
                  
                  $
                  190Redemption
      of Series B-1 Preferred Shares
                  
                  $
                  -
                  
                  
                  $
                  (17,081
                  )Deposit
      on redemption of Series B-1 Preferred Shares
                  
                  $
                  -
                  
                  
                  $
                  17,081Transfer
      of preferred equity investments to equity method
    investments
                  
                  $
                  -
                  
                  
                  $
                  (41,823
                  )Transfer
      of loans to equity method investments
                  
                  $
                  -
                  
                  
                  $
                  (15,805
                  )Transfer
      to equity method investments from loans and preferred equity
      investments
                  
                  $
                  -
                  
                  
                  $
                  57,628Transfer
      of loan assets to investments in real estate
                  
                  $
                  8,188
                  
                  
                  $
                  -Transfer
      of loan assets to investments in lease intangibles
                  
                  $
                  2,032
                  
                  
                  $
                  -Transfer
      to investments in real estate from loan assets
                  
                  $
                  (8,188
                  )
                  
                  $
                  -Transfer
      to lease intangibles from loan assets
                  
                  $
                  (2,032
                  )
                  
                  $
                  -
 
 See Notes
to Consolidated Financial Statements.
  7
  WINTHROP
REALTY TRUST
 FORM
10-Q SEPTEMBER 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 and multi-family 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 nine months
ended September 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 either (i)
owns 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 retail properties in Athens,
Georgia; Lafayette, Louisiana; Knoxville, Tennessee; and Sherman, Texas are
included in discontinued operations for the three and nine month periods ended
September 30, 2010 and 2009.  The Trust’s formerly owned Creekwood
Apartments property in Kansas City, Kansas is included in discontinued
operations for the three and nine month periods ended September 30,
2009.
  8
  WINTHROP
REALTY TRUST
 FORM
10-Q SEPTEMBER 30, 2010
 
 NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 
 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 Trust’s 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.
 
 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
                          
                          
                          Nine Months EndedSeptember 30,
                          
                          
                          September 30,2010
                          
                          
                          2009
                          
                          
                          2010
                          
                          
                          2009BasicIncome
      (loss) from continuing operations
                          
                          $
                          5,552
                          
                          
                          $
                          15,398
                          
                          
                          $
                          15,344
                          
                          
                          $
                          (78,022
                          )Allocation
      of undistributed earnings to Series B-1 Preferred Shares
                          
                          
                          -
                          
                          
                          
                          (839
                          )
                          
                          
                          -
                          
                          
                          
                          -Income
      attributable to non-controlling interest
                          
                          
                          (175
                          )
                          
                          
                          (315
                          )
                          
                          
                          (595
                          )
                          
                          
                          (651
                          )Preferred
      dividend of Series C Preferred Shares
                          
                          
                          (59
                          )
                          
                          
                          -
                          
                          
                          
                          (230
                          )
                          
                          
                          -Income
      (loss) from continuing operations applicable to Common
    Shares
                          
                          
                          5,318
                          
                          
                          
                          14,244
                          
                          
                          
                          14,519
                          
                          
                          
                          (78,673
                          )Income
      (loss) from discontinued operations
                          
                          
                          (1,569
                          )
                          
                          
                          74
                          
                          
                          
                          (2,160
                          )
                          
                          
                          201Net
      income (loss) applicable to Common Shares for earnings per share
      purposes
                          
                          $
                          3,749
                          
                          
                          $
                          14,318
                          
                          
                          $
                          12,359
                          
                          
                          $
                          (78,472
                          )Basic
      weighted-average Common Shares
                          
                          
                          21,412
                          
                          
                          
                          15,855
                          
                          
                          
                          21,064
                          
                          
                          
                          15,828Income
      (loss) from continuing operations
                          
                          $
                          0.25
                          
                          
                          $
                          0.90
                          
                          
                          $
                          0.69
                          
                          
                          $
                          (4.97
                          )Income
      (loss) from discontinued operations
                          
                          
                          (0.07
                          )
                          
                          
                          -
                          
                          
                          
                          (0.10
                          )
                          
                          
                          0.01Net
      income (loss) per Common Share
                          
                          $
                          0.18
                          
                          
                          $
                          0.90
                          
                          
                          $
                          0.59
                          
                          
                          $
                          (4.96
                          )DilutedIncome
      (loss) from continuing operations
                          
                          $
                          5,552
                          
                          
                          $
                          15,398
                          
                          
                          $
                          15,344
                          
                          
                          $
                          (78,022
                          )Allocation
      of undistributed earnings to Series B-1 Preferred Shares
                          
                          
                          -
                          
                          
                          
                          (839
                          )
                          
                          
                          -
                          
                          
                          
                          -Income
      attributable to non-controlling interest
                          
                          
                          (175
                          )
                          
                          
                          (315
                          )
                          
                          
                          (595
                          )
                          
                          
                          (651
                          )Preferred
      dividend of Series C Preferred Shares
                          
                          
                          (59
                          )
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -Income
      (loss) from continuing operations applicable to Common
    Shares
                          
                          
                          5,318
                          
                          
                          
                          14,244
                          
                          
                          
                          14,749
                          
                          
                          
                          (78,673
                          )Income
      (loss) from discontinued operations
                          
                          
                          (1,569
                          )
                          
                          
                          74
                          
                          
                          
                          (2,160
                          )
                          
                          
                          201Net
      income (loss) applicable to Common Shares for earnings per share
      purposes
                          
                          $
                          3,749
                          
                          
                          $
                          14,318
                          
                          
                          $
                          12,589
                          
                          
                          $
                          (78,472
                          )Basic
      weighted-average Common Shares
                          
                          
                          21,412
                          
                          
                          
                          15,855
                          
                          
                          
                          21,064
                          
                          
                          
                          15,828Series
      B-1 Preferred Shares (1)
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -Series
      C Preferred Shares (2)
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          433
                          
                          
                          
                          -Stock
      options (3)
                          
                          
                          2
                          
                          
                          
                          -
                          
                          
                          
                          2
                          
                          
                          
                          -Diluted
      weighted-average Common Shares
                          
                          
                          21,414
                          
                          
                          
                          15,855
                          
                          
                          
                          21,499
                          
                          
                          
                          15,828Income
      (loss) from continuing operations
                          
                          $
                          0.25
                          
                          
                          $
                          0.90
                          
                          
                          $
                          0.69
                          
                          
                          $
                          (4.97
                          )Income
      (loss) from discontinued operations
                          
                          
                          (0.07
                          )
                          
                          
                          -
                          
                          
                          
                          (0.10
                          )
                          
                          
                          0.01Net
      income (loss) per Common Share
                          
                          $
                          0.18
                          
                          
                          $
                          0.90
                          
                          
                          $
                          0.59
                          
                          
                          $
                          (4.96
                          )
  9
  WINTHROP
REALTY TRUST
 FORM
10-Q SEPTEMBER 30, 2010
 
 NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 
 (1)
                The
      Series B-1 Preferred Shares were anti-dilutive for the three and nine
      months ended September 30, 2010and 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 September 30, 2010 and were dilutive for the
      nine months ended September 30,
2010.
 (3)
                The
      Trust’s outstanding stock options are dilutive for the three and nine
      months ended September 30, 2010.  The stock options were
      anti-dilutive for the three and nine months ended September 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 July
2010 an amendment was issued to the accounting and disclosure requirements which
outlines specific disclosures that will be required for the allowance for credit
losses and all finance receivables. Finance receivables include loans, lease
receivables and other arrangements with a contractual right to receive money on
demand or on fixed or determinable dates. The new guidance will require
companies to provide detailed disclosures by portfolio segment and class to
enable users of the financial statement to understand the nature of credit risk,
how the risk is analyzed in determining the related allowance for credit losses
and changes to the allowance during the reporting period.  Certain
disclosures as of the end of the reporting period required under these
provisions will be effective for the Trust’s December 31, 2010 annual
reporting period. Additional disclosure rules about activity that occurs during
a reporting period will be effective for the Trust’s March 31, 2011 interim
reporting period. The Trust is currently evaluating the required disclosures
which are not expected to have a material impact on its consolidated financial
statements.
 
 In
January 2010 an amendment was issued 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 and cash equivalents, restricted
cash in escrows, derivative financial instruments, 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).
  10
  WINTHROP
REALTY TRUST
 FORM
10-Q SEPTEMBER 30, 2010
 
 NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 
 The table
below presents the Trust’s assets and liabilities which are measured at fair
value on a recurring basis as of September 30, 2010, according to the level in
the fair value hierarchy within which those measurements fall(in
thousands):
 
 RecurringBasis
                    
                    QuotedPricesin
                      ActiveMarketsfor
                      IdenticalAssets
                      andLiabilities
                      (Level1)
                    
                    
                    SignificantOther
                      Observable
                      Inputs
                      (Level2)
                    
                    
                    SignificantOther
                      Unobservable
                      Inputs
                      (Level3)
                    
                    
                    TotalAssetsCash
      and cash equivalents
                    
                    $
                    102,919
                    
                    
                    $
                    -
                    
                    
                    $
                    -
                    
                    
                    $
                    102,919Restricted
      cash held in escrows
                    
                    
                    8,889
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    8,889Securities
      carried at fair value
                    
                    
                    29,893
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    29,893Loan
      securities carried at fair value
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    6,454
                    
                    
                    
                    6,454$
                    141,701
                    
                    
                    $
                    -
                    
                    
                    $
                    6,454
                    
                    
                    $
                    148,155LiabilitiesDerivative
      liabilities
                    
                    $
                    -
                    
                    
                    $
                    93
                    
                    
                    $
                    -
                    
                    
                    $
                    93
 
 The table
below presents the Trust’s assets and liabilities which are 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):
 
 RecurringBasis
                    
                    QuotedPricesin
                      ActiveMarketsfor
                      IdenticalAssets
                      andLiabilities
                      (Level1)
                    
                    
                    SignificantOther
                      Observable
                      Inputs
                      (Level2)
                    
                    
                    SignificantOther
                      Unobservable
                      Inputs
                      (Level3)
                    
                    
                    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 September 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.
 
 NineMonthsEndedSeptember30,2010
                      
                      SecuritiesCarriedat
                        FairValue
                      
                      
                      LoanSecurities
                        CarriedatFairValueFair
      value, January 1, 2010
                      
                      $
                      692
                      
                      
                      $
                      1,661Purchases,
      issuances and settlements, net
                      
                      
                      (692
                      )
                      
                      
                      1,200Unrealized
      gain, net
                      
                      
                      -
                      
                      
                      
                      3,593Fair
      value,  September 30, 2010
                      
                      $
                      -
                      
                      
                      $
                      6,454
  11
  WINTHROP
REALTY TRUST
 FORM
10-Q SEPTEMBER 30, 2010
 
 NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 
 Non-recurring
Measurements
 
 The table
below presents as of September 30, 2010 the Trust’s assets and liabilities which
are 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-RecurringBasis
                    
                    QuotedPricesin
                      ActiveMarketsfor
                      IdenticalAssets
                      andLiabilities
                      (Level1)
                    
                    
                    SignificantOther
                      Observable
                      Inputs
                      (Level2)
                    
                    
                    SignificantOther
                      Unobservable
                      Inputs
                      (Level3)
                    
                    
                    TotalAssets
      held for sale
                    
                    $
                    -
                    
                    
                    $
                    -
                    
                    
                    $
                    3,007
                    
                    
                    $
                    3,007$
                    -
                    
                    
                    $
                    -
                    
                    
                    $
                    3,007
                    
                    
                    $
                    3,007
 
 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
loan securities and REIT securities acquired subsequent to September 30,
2008.
 
 The Trust
recognized a net unrealized gain of $3,071,000 and $7,873,000 for the three and
nine months ended September 30, 2010,
respectively, and a net unrealized gain of $12,578,000 and $14,010,000 for the
three and nine months ended September 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 September 30, 2010and December 31, 2009 the Trust's financial assets for which the fair
value option was elected (in thousands):
 
 FinancialInstrumentsatFairValue
                    
                    September30,2010
                    
                    
                    December31,2009AssetsSecurities
      carried at fair value:REIT
      Debentures
                    
                    $
                    -
                    
                    
                    $
                    18,794REIT
      Preferred shares
                    
                    
                    28,252
                    
                    
                    
                    23,950REIT
      Common shares
                    
                    
                    1,641
                    
                    
                    
                    9,650Loan
      securities carried at fair value
                    
                    
                    6,454
                    
                    
                    
                    1,661$
                    36,347
                    
                    
                    $
                    54,055
  12
  WINTHROP
REALTY TRUST
 FORM
10-Q SEPTEMBER 30, 2010
 
 NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 
 The table
below presents as of September 30, 2010the difference between fair values and the aggregate contractual amounts
due for which the fair value option has been elected (in
thousands):
 
 FairValueat
                        September30,2010
                      
                      
                      AmountDue
                        UponMaturity
                      
                      
                      DifferenceAssetsLoan
      securities carried at fair value
                      
                      $
                      6,454
                      
                      
                      $
                      9,767
                      
                      
                      $
                      3,313$
                      6,454
                      
                      
                      $
                      9,767
                      
                      
                      $
                      3,313
 
 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):
 
 FairValueat
                      December31,2009
                    
                    
                    AmountDue
                      UponMaturity
                    
                    
                    DifferenceAssetsSecurities
      carried at fair value:REIT
      Debentures
                    
                    $
                    18,794
                    
                    
                    $
                    21,191
                    
                    
                    $
                    2,397Loan
      securities carried at fair value
                    
                    
                    1,661
                    
                    
                    
                    7,494
                    
                    
                    
                    5,833$
                    20,455
                    
                    
                    $
                    28,685
                    
                    
                    $
                    8,230
 
 4.
              Acquisitions,
      Dispositions, and Other Activity
 
 Public
Offering
 
 On September 27, 2010 the
Trust closed a public offering of 5,750,000 Common Shares at a price of $12.25
per share before underwriter discounts and received net proceeds of
approximately $67,000,000.
 
 Loan Asset
Acquisitions
 
 1701 E. Woodfield Road, Schaumburg,
Illinois – First Mortgage Loan - 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. The property is currently owned in a
joint venture with Marc Realty. 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 principal balance to $5,000,000 bearing interest at 8%
per annum. On September 28, 2010 the borrower repaid the Trust’s outstanding
$5,000,000 balance of the loan and all accrued interest from proceeds of a new
first mortgage loan.
 
 500-512 Seventh Avenue, New York,
New York – B Note -On July 9, 2010 the Trust acquired for $19,825,000 a
$23,499,000 performing B Note (the “B Note”) in a first mortgage loan which is
subordinate to a $253,679,000 A note in the mortgage loan. The A Note and B Note
are collateralized by a 1,188,000 square foot office building located at 500-512
Seventh Avenue, New York, New York.  The B Note bears interest at
7.19% and matures on July 11, 2016. On August 4, 2010, the Trust sold a 50% pari
passu participation interest in the B Note (the “B-2 Participation”) 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 B-2 Participation.
 
 San Marbeya Apartments, Tempe,
Arizona-First Mortgage Loan- 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.
  13
  WINTHROP
REALTY TRUST
 FORM
10-Q SEPTEMBER 30, 2010
 
 NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 
 Rockwell – Shirley, New York
– Mezzanine Loan - On
August 31, 2010 the Trust acquired from Concord Debt Holdings, LLC (“Concord”)
for $235,000 a $1,497,000 performing mezzanine loan. The loan is collateralized
by a 129,660 square foot industrial/warehouse complex in Shirley, New York. The
loan is subordinate to $17,045,000 of senior debt, has an interest rate of 12%
and matures on May 1, 2016.
 
 Newbury Apartments, Meriden,
Connecticut - Mezzanine
Loan - On September 2, 2010 the Trust acquired from Concord for $550,000
a non-performing mezzanine loan with a face amount of $3,500,000, which bears
interest at 12% per annum and matures on February 1, 2012. The loan is
collateralized by a 180 unit multi-family apartment complex located in Meriden,
Connecticut.  The loan is subordinate to a non-performing mortgage loan
with a principal balance of approximately $23,875,000.  On October 29,
2010, the Trust foreclosed on the equity interests in the property owner
resulting in the Trust becoming the owner of the property subject to the
mortgage loan.  The Trust is currently negotiating with the mortgage lender
with respect to the current defaults on the mortgage loan.
  Loan Asset Repayment on a
Non-Performing Loan
 
 Driver Building, San Diego,
California - On August 27, 2010, the Trust received $6,540,000 in full
repayment on a first mortgage loan collateralized by an office building located
in San Diego, California.
 
 Loan
Foreclosure
 
 Deer Valley Medical Center, Deer
Valley, Arizona -On August 6, 2010 WRT-DV LLC (“WRT-DV”) foreclosed on
an 85,597 square foot, Class A medical office building known as the Deer Valley
Professional Center located in Phoenix, Arizona in which WRT-DV held a first
mortgage loan with a carrying amount of $10,257,000. The loan investment balance
was transferred to land, building, tenant improvements, deferred lease cost for
the in-place leases and to intangibles for the value of the above market leases.
The Trust amortizes the value allocated to the in-place leases over the
remaining lease term. The value allocated to the above market leases are
amortized over the remaining lease term as an adjustment to rental
income.  The property’s operating results are now included in the
Trust’s operating properties business segment.
 
 Loan Securities
Acquisition
 
 Scripps Center, Costa Mesa,
California – Rake
Bonds - On July 16, 2010 the Trust acquired from Concord for $1,200,000
two rake bonds with an aggregate face amount of $2,273,000.  The rake
bonds are subordinate to $17,715,000 of senior debt all of which is
collateralized by a 229,000 square foot office complex referred to as the
Scripps Center located in Costa Mesa, California. The bonds bear interest at
rates ranging from Libor plus 1.39% to Libor plus 1.59% and mature on December
1, 2010.
  Investments in Joint
Ventures
  Deer Valley Medical Center - On July 21,
2010, prior to the Deer Valley loan foreclosure, the Trust admitted Fenway VI
LLC (“Fenway”), an unrelated third party, as a non-controlling member in WRT-DV,
the entity which holds the Deer Valley assets, in exchange for a capital
contribution of $157,000. Pursuant to the terms of the operating agreement, the
Trust receives a priority return on $7,900,000 of our invested capital, with the
balance of the capital being allocated 96.5% to the Trust and 3.5% to
Fenway.
 
 Peter Cooper Village/Stuyvesant Town
(“PCVST”) Investment - On August 6, 2010 the Trust and affiliates of
Pershing Square Capital Management, L.P. (“Pershing Square”) formed a joint
venture, PSW NYC LLC (“PSW NYC”), for which the Trust invested an initial
capital contribution of $10,125,000.   Concurrent with its
formation, PSW NYC, which is owned 22.5% by the Trust and 77.5% by Pershing
Square, acquired 100% of the $300,000,000 face amount of certain Mezzanine Loans
(the “Mezz Loans”) for a purchase price of $45,000,000. The Mezz Loans are
indirectly collateralized by PCVST, an 11,227 unit apartment complex in New York
City. The Mezz loans represent the senior-most mezzanine loan interests in the
property and along with the $3,000,000,000 first mortgage loan secured by the
property, are currently in default.
  14
  WINTHROP
REALTY TRUST
 FORM
10-Q SEPTEMBER 30, 2010
 
 NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 
 PSW NYC
initiated foreclosure on the equity interests in the property’s owner. However,
on September 16, 2010, based on a lawsuit initiated by the first mortgage
lenders against PSW NYC, the New York State Supreme Court (the “Trial Court”)
ordered an injunction which precluded PSW NYC from foreclosing. PSW NYC has
appealed the decision to the Appellate Division of the New York Supreme
Court.  The Appellate Division denied PSW NYC’s request that the first
mortgage lender be stayed from foreclosing on the property pending the
appeal.  Accordingly, if the first mortgage lender were to have
foreclosed, PSW NYC would have been left with only a damage claim.  On
October 27, 2010, PSW NYC and the first mortgage lender agreed to settle the
dispute and PSW NYC sold its interest in the Mezz Loans to an affiliate of the
first mortgage lender for $45,000,000 and the matter was voluntarily
dismissed.
 
 Lex-Win Concord LLC (“Lex-Win”) and
Concord Reorganization - On August 26, 2010 the Trust finalized a
settlement agreement which triggered simultaneous transactions that changed the
organizational structure, economics, and governance of the Trust’s equity
investment in Lex-Win and Lex-Win’s wholly owned subsidiary Concord. The
settlement agreement was implemented to resolve a legal action against Concord
filed in May 2009 by a wholly-owned subsidiary of Inland American Real Estate
Trust, Inc. (“Inland”).
 
 As a
result of the reorganization, Lex-Win was dissolved and transferred 100% of its
interest in Concord to its members, the Trust and Lexington Realty Trust
(“Lexington”). The underlying business assets of the former Lex-Win were
separated into two distinct legal investment entities with identical ownership
structures which are the reorganized Concord and a newly formed entity, CDH CDO
LLC (“CDH CDO”). The Trust now holds 33.3% common member interests in each joint
venture together with Lexington, and Inland.
 
 Terms of
the reorganization included a subsidiary of Concord selling 100% of the stock of
Concord Debt Funding Trust (“CDFT”) to the newly formed CDH CDO for $9,500,000.
The consideration was funded by Inland’s initial capital contribution to CDH CDO
and was used by the subsidiary to partially repay its lenders.
 
 There was
no financial statement impact to the Trust as a result of the reorganization
since the investment has been written down to zero as of June 30, 2009, the
Trust has made no additional contributions and it has not recognized any
additional income or loss as a result of the reorganization. In addition,
Concord remains in violation of certain debt covenants to its lenders at
September 30, 2010. Concord’s debt is non-recourse to the Trust and Concord’s
lenders’ sole recourse with respect to defaults is limited to the value of
Concord’s assets.
 
 Operating Properties – Other
Activities
 
 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. The property’s insurance carrier was
immediately notified. The Trust has accrued approximately $225,000 to cover the
costs associated with the damage and a claim is in process.
 
 Acquisitions &
Dispositions of REIT Securities
 
 During
the quarter ended September 30, 2010 the Trust sold REIT securities and received
net proceeds of approximately $16,391,000. The Trust previously recognized
unrealized gains on the securities of $4,868,000 and as a result recognized a
loss on the sale of these securities of approximately $185,000 exclusive of any
interest or dividends earned.
  15
  WINTHROP
REALTY TRUST
 FORM
10-Q SEPTEMBER 30, 2010
 
 NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 
 5.
              Loans
      Receivable
 
 The
following table summarizes the Trust’s loans receivable at September 30, 2010
and December 31, 2009 (in thousands):
 
 Carrying AmountProperty
                            
                            Location
                            
                            InterestRate
                            
                            
                            Maturity
                            
                            September30,
                              2010
                            
                            
                            December31,
                              2009Metropolitan
      Tower (1)
                            
                            New
      York, NY
                            
                            Libor
      + 1.5
                            %
                            
                            Nov
      2010
                            
                            $
                            9,216
                            
                            
                            $
                            6,638Beverly
      Hilton (1)
                            
                            Beverly
      Hills, CA
                            
                            Libor
      + 1.74
                            %
                            
                            Aug
      2011
                            
                            
                            7,163
                            
                            
                            
                            5,384Newbury
      Apartments (1) (4)
                            
                            Meriden,
      CT
                            
                            
                            12.00
                            %
                            
                            Feb 2012
                            
                            
                            550
                            
                            
                            
                            -160
      Spear
                            
                            San
      Francisco, CA
                            
                            
                            (2
                            )
                            
                            Jun
      2012
                            
                            
                            5,898
                            
                            
                            
                            4,281160
      Spear – Mezzanine
                            
                            San
      Francisco, CA
                            
                            
                            15.00
                            %
                            
                            Jun
      2012
                            
                            
                            3,028
                            
                            
                            
                            1,212Siete
      Square
                            
                            Phoenix,
      AZ
                            
                            
                            (3
                            )
                            
                            Jun
      2012
                            
                            
                            2,486
                            
                            
                            
                            5,505Crossroads
      (1) (5)
                            
                            Englewood,
      CO
                            
                            
                            6.07
                            %
                            
                            Jul
      2013
                            
                            
                            8,439
                            
                            
                            
                            -San
      Marbeya Apartments (1)
                            
                            Tempe,
      AZ
                            
                            
                            5.88
                            %
                            
                            Jan
      2015
                            
                            
                            27,073
                            
                            
                            
                            -Rockwell
      Automation
                            
                            Shirley,
      NY
                            
                            
                            12.00
                            %
                            
                            May
      2016
                            
                            
                            251
                            
                            
                            
                            -500
      - 512 Seventh Avenue
                            
                            New
      York, NY
                            
                            
                            7.19
                            %
                            
                            Jul
      2016
                            
                            
                            9,946
                            
                            
                            
                            -180
      North Michigan (1)
                            
                            Chicago,
      IL
                            
                            
                            8.50
                            %
                            
                            Sep
      2016
                            
                            
                            1,484
                            
                            
                            
                            717Wellington
      Tower (1)
                            
                            New
      York, NY
                            
                            
                            6.79
                            %
                            
                            Jul
      2017
                            
                            
                            2,430
                            
                            
                            
                            2,364$
                            77,964
                            
                            
                            $
                            26,101
 
 (1)
                  The
      Trust determined that certain loans receivable are 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 September 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 September 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
      Trust holds a B Participation in this loan.  Interest on the B
      Participation equals the difference between (i) interest on the entire
      outstanding loan principal balance ($7,219 at September 30, 2010) at a
      rate of 9.8375% per annum less (ii) interest payable on the outstanding
      principal balance of the A Participation ($3,000 at September 30, 2010) at
      a rate of 8.0% per annum.  As a result, the effective yield on
      the Trust’s $2,460 cash investment is
19.4%.
 (4)
                  The
      loan was in default and the Trust foreclosed on the equity interest on
      October 29, 2010.
 (5)
                  The
      loan was in default and the Trust foreclosed the property on November 3,
      2010.
 
 The
carrying amount of loans receivable includes accrued interest of $433,000 and
$197,000 at September 30, 2010 and December 31, 2009, respectively, and
cumulative discount accretion of $7,108,000 and $1,021,000 at September 30, 2010
and December 31, 2009, respectively.  For the three and nine months
ended September 30, 2010, the Trust recorded discount accretion into interest
income of $2,345,000 and $6,087,000 respectively.  There was no
discount accretion for the three and nine months ended September 30, 2009. The
fair value of the Trust’s loans receivable, exclusive of interest receivables
was approximately $96,376,000 at September 30, 2010.
  Loan
Revenue Recognition
  Interest
income on performing loans is recognized on the accrual basis over the life of
the investments using the effective interest method. Costs of acquiring loans
are expensed as incurred.
  16
  WINTHROP
REALTY TRUST
 FORM
10-Q SEPTEMBER 30, 2010
 
 NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
  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 nine months ended September 30, 2010 and 2009, the Trust did not
recognize any interest income on impaired loans subsequent to the date of their
impairment.  The Trust had no impaired loans for the three and nine
months ended September 30, 2010.  As of September 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 nine months ended
September 30, 2010. During the three and nine months ended September 30, 2009,
the Trust recorded a provision for loan loss of $2,152,000 related to loans in
the Marc Realty portfolio.
 
 As of
September 30, 2010 there was no loan loss reserve.
 
 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 September 30,
2010 are summarized in the table below (in thousands):
 
 Cost
                    
                    
                    FairValueREIT
      Preferred shares
                    
                    $
                    14,867
                    
                    
                    $
                    28,252REIT
      Common shares
                    
                    
                    1,223
                    
                    
                    
                    1,64116,090
                    
                    
                    
                    29,893Loan
      securities
                    
                    
                    2,861
                    
                    
                    
                    6,454$
                    18,951
                    
                    
                    $
                    36,347
 
 For the
three and nine months ended September 30, 2010, the Trust recognized unrealized
gains on securities carried at fair value of $3,071,000 and $7,873,000
respectively.  For the three and nine months ended September 30, 2009,
the Trust recognized unrealized gains on securities carried at fair value of
$12,578,000 and $14,010,000 respectively.
  17
  WINTHROP
REALTY TRUST
 FORM
10-Q SEPTEMBER 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
                            
                            
                            FairValueREIT
      Debentures
                            
                            $
                            13,597
                            
                            
                            $
                            18,794REIT
      Preferred shares
                            
                            
                            14,231
                            
                            
                            
                            23,950REIT
      Common shares
                            
                            
                            8,234
                            
                            
                            
                            9,65036,062
                            
                            
                            
                            52,394Loan
      securities
                            
                            
                            1,661
                            
                            
                            
                            1,661$
                            37,723
                            
                            
                            $
                            54,055
 
 During
the three and nine months ended September 30, 2010 securities were sold for
total proceeds of approximately $16,391,000 and $29,565,000,
respectively.  The Trust had previously recognized unrealized gains of
$4,868,000 and $6,810,000 for the three and nine months ended September 30,
2010, respectively, and as a result the Trust recognized losses of $185,000 for
the three months ended September 30, 2010 and gains of $588,000 for the
nine months ended September 30, 2010.
 
 During
the three and nine months ended September 30, 2009 securities were sold for
total proceeds of approximately $6,107,000 and $22,866,000, respectively. The
Trust had previously recognized unrealized gains of $1,099,000 and $1,419,000
for the three and nine months ended September 30, 2009, respectively, and as a
result the Trust recognized gains of $676,000 and $3,274,000 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 $253,000
for the three and nine months ended September 30, 2010 and recognized earnings
from preferred equity investments of $86,000 for the three months ended
September 30, 2009 and a loss of $2,108,000 for the nine months ended September
30, 2009 which included impairment losses of $2,186,000 in the second quarter of
2009.  The results for the three and nine months ended September 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.
  18
  WINTHROP
REALTY TRUST
 FORM
10-Q SEPTEMBER 30, 2010
 
 NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 
 8.
              Equity
      Investments
 
 The
Trust’s equity investments consist of the following at September 30, 2010 and
December 31, 2009 (in thousands):
 
 VenturePartner(1)
                            
                            EquityInvestment
                            
                            Nominal%Ownershipat
                              September30,2010(2)
                            
                            
                            September30,
                              2010
                            
                            
                            December31,
                              2009Marc Realty (2)
                            
                            8
      South Michigan LLC
                            
                            
                            50.0
                            %
                            
                            $
                            7,149
                            
                            
                            $
                            6,859Marc Realty (2)
                            
                            11
      East Adams Street LLC
                            
                            
                            49.0
                            %
                            
                            
                            3,273
                            
                            
                            
                            2,963Marc Realty (2)
                            
                            29
      East Madison Street LLC
                            
                            
                            50.0
                            %
                            
                            
                            7,820
                            
                            
                            
                            7,750Marc Realty (2)
                            
                            Michigan
      30 LLC
                            
                            
                            50.0
                            %
                            
                            
                            11,855
                            
                            
                            
                            11,881Marc Realty (2)
                            
                            High
      Point Plaza LLC
                            
                            
                            50.0
                            %
                            
                            
                            6,147
                            
                            
                            
                            5,986Marc Realty (2)
                            
                            Brooks
      Building LLC
                            
                            
                            50.0
                            %
                            
                            
                            7,356
                            
                            
                            
                            7,346Marc Realty (2)
                            
                            1701
      Woodfield LLC
                            
                            
                            50.0
                            %
                            
                            
                            4,222
                            
                            
                            
                            1,582Marc Realty (2)
                            
                            River
      Road LLC
                            
                            
                            50.0
                            %
                            
                            
                            4,177
                            
                            
                            
                            4,075Marc Realty (2)
                            
                            3701
      Algonquin Road LLC
                            
                            
                            50.0
                            %
                            
                            
                            2,956
                            
                            
                            
                            2,827Marc Realty (2)
                            
                            Enterprise
      Center LLC
                            
                            
                            50.0
                            %
                            
                            
                            3,062
                            
                            
                            
                            3,094Marc Realty (2)
                            
                            900
      Ridgebrook LLC
                            
                            
                            50.0
                            %
                            
                            
                            1,764
                            
                            
                            
                            1,661Marc Realty (2)
                            
                            Salt
      Creek LLC
                            
                            
                            50.0
                            %
                            
                            
                            2,299
                            
                            
                            
                            1,536Sealy
                            
                            Northwest
      Atlanta Partners LP
                            
                            
                            60.0
                            %
                            
                            
                            2,648
                            
                            
                            
                            3,189Sealy
                            
                            Airpark
      Nashville GP
                            
                            
                            50.0
                            %
                            
                            
                            3,413
                            
                            
                            
                            4,618Sealy
                            
                            Newmarket
      GP LLC
                            
                            
                            68.0
                            %
                            
                            
                            7,091
                            
                            
                            
                            7,840Lexington (2)
      (3)
                            
                            Lex-Win
      Concord LLC
                            
                            
                            —
                            
                            
                            
                            -
                            
                            
                            
                            -Inland/Lexington
      (2)
      (3)
                            
                            Concord
      Debt Holdings LLC
                            
                            
                            33.3
                            %
                            
                            
                            -
                            
                            
                            
                            -Inland/Lexington
      (2)
      (3)
                            
                            CDH
      CDO LLC
                            
                            
                            33.3
                            %
                            
                            
                            -
                            
                            
                            
                            -ROIC
                            
                            WRT-ROIC
      Riverside LLC
                            
                            
                            50.0
                            %
                            
                            
                            7,883
                            
                            
                            
                            -Pershing Square(2)
                            
                            PSW
      NYC LLC
                            
                            
                            22.5
                            %
                            
                            
                            9,576
                            
                            
                            
                            -$
                            92,691
                            
                            
                            $
                            73,207
 
 (1)
              The
      Trust has various venture partners. Further detail is provided for the
      equity investments under their respective headings
  below.
 (2)
              The
      Trust has determined that all of the equity investments, other than those
      with Sealy and ROIC are VIEs.  The Trust has determined that it
      is not the primary beneficiary of these
  investments.
 (3)
              See
      Note 4 for discussion of the reorganization of the Trust’s investment in
      Concord. The Lex-Win entity has been dissolved and the assets previously
      held through Lex-Win are now separated and held through Concord and CDH
      CDO.
  19
  WINTHROP
REALTY TRUST
 FORM
10-Q SEPTEMBER 30, 2010
 
 NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 
 The
following table reflects the activity of the Trust’s equity investments for the
nine months ended September 30, 2010 (in thousands):
 
 MarcRealty
                          
                          
                          Sealy
                          
                          
                          Concord(1)
                          
                          
                          WRT-
                            ROIC
                          
                          
                          PSWNYC
                          
                          
                          TotalBalance
      at December 31, 2009
                          
                          $
                          57,560
                          
                          
                          $
                          15,647
                          
                          
                          $
                          -
                          
                          
                          $
                          -
                          
                          
                          $
                          -
                          
                          
                          $
                          73,207Contributions
                          
                          
                          6,140
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          7,800
                          
                          
                          
                          10,665
                          
                          
                          
                          24,605Equity
      in income (loss)
                          
                          
                          1,494
                          
                          
                          
                          (1,972
                          )
                          
                          
                          -
                          
                          
                          
                          239
                          
                          
                          
                          (1,089
                          )
                          
                          
                          (1,328
                          )Distributions/capital
      returns
                          
                          
                          (3,114
                          )
                          
                          
                          (523
                          )
                          
                          
                          -
                          
                          
                          
                          (156
                          )
                          
                          
                          -
                          
                          
                          
                          (3,793
                          )Balance
      at September 30, 2010
                          
                          $
                          62,080
                          
                          
                          $
                          13,152
                          
                          
                          $
                          -
                          
                          
                          $
                          7,883
                          
                          
                          $
                          9,576
                          
                          
                          $
                          92,691
 
 (1)
              Includes
      equity investments in Lex-Win, Concord, and CDH
  CDO.
 
 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. As a result, effective with the third quarter of 2009, the
Trust recognizes its pro-rata share of income or loss on 12 separate equity
investments.
 
 The Trust
recorded net income from the Marc Realty equity investments of $1,187,000 and
$1,494,000 for the three and nine months ended September 30, 2010
respectively.  Additionally, the Trust received cash distributions of
$3,114,000 from the investments during the nine months ended September 30,
2010.
 
 The
combined summarized balance sheets of the Trust’s Marc Realty venture
investments are as follows (in thousands):
 
 September30,
                      2010
                    
                    
                    December31,
                      2009ASSETSReal
      estate, net
                    
                    $
                    172,208
                    
                    
                    $
                    174,310Cash
      and cash equivalents
                    
                    
                    1,783
                    
                    
                    
                    1,100Receivables
      and other assets
                    
                    
                    28,400
                    
                    
                    
                    25,287Total
      Assets
                    
                    $
                    202,391
                    
                    
                    $
                    200,697LIABILITIES
      AND MEMBERS’ CAPITALMortgage
      and notes payable
                    
                    $
                    86,966
                    
                    
                    $
                    94,969Other
      liabilities
                    
                    
                    13,050
                    
                    
                    
                    12,722Members’
      Capital
                    
                    
                    102,375
                    
                    
                    
                    93,006Total
      Liabilities and Members’ Capital
                    
                    $
                    202,391
                    
                    
                    $
                    200,697Trust’s
      share of equity
                    
                    $
                    51,233
                    
                    
                    $
                    46,497Basis
      differentials (1)
                    
                    
                    13,347
                    
                    
                    
                    13,563Other-than-temporary
      impairment
                    
                    
                    (2,500
                    )
                    
                    
                    (2,500
                    )Carrying
      value of the Trust’s investments in the equity investments
                    
                    $
                    62,080
                    
                    
                    $
                    57,560
  20


WINTHROP
REALTY TRUST
 FORM
10-Q SEPTEMBER 30, 2010
 
 NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 
 (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
                              
                              
                              For the Nine Months EndedSeptember30,
                                2010
                              
                              
                              September30,
                                2009
                              
                              
                              September30,
                                2010
                              
                              
                              September30,
                                2009(1)Total
      revenue
                              
                              $
                              10,134
                              
                              
                              $
                              10,101
                              
                              
                              $
                              30,515
                              
                              
                              $
                              10,101ExpensesOperating
                              
                              
                              4,040
                              
                              
                              
                              4,299
                              
                              
                              
                              12,501
                              
                              
                              
                              4,299Interest
                              
                              
                              1,176
                              
                              
                              
                              1,155
                              
                              
                              
                              3,544
                              
                              
                              
                              1,155Real
      estate taxes
                              
                              
                              1,482
                              
                              
                              
                              1,527
                              
                              
                              
                              4,446
                              
                              
                              
                              1,527Depreciation
      and amortization
                              
                              
                              2,534
                              
                              
                              
                              2,298
                              
                              
                              
                              7,228
                              
                              
                              
                              2,298Other
      expense
                              
                              
                              585
                              
                              
                              
                              461
                              
                              
                              
                              1,634
                              
                              
                              
                              461Total
      expenses
                              
                              
                              9,817
                              
                              
                              
                              9,740
                              
                              
                              
                              29,353
                              
                              
                              
                              9,740Gain
      from extinguishment of debt
                              
                              
                              2,205
                              
                              
                              
                              
                              
                              
                              
                              2,205Other
      Income
                              
                              
                              -
                              
                              
                              
                              
                              
                              
                              
                              64Total
      Other Income
                              
                              
                              2,205
                              
                              
                              
                              -
                              
                              
                              
                              2,269
                              
                              
                              
                              -Net
      income
                              
                              $
                              2,522
                              
                              
                              $
                              361
                              
                              
                              $
                              3,431
                              
                              
                              $
                              361Trust’s
      share of net income
                              
                              $
                              1,259
                              
                              
                              $
                              178
                              
                              
                              $
                              1,710
                              
                              
                              $
                              178Amortization
      of basis differential
                              
                              
                              (72
                              )
                              
                              
                              (56
                              )
                              
                              
                              (216
                              )
                              
                              
                              (56
                              )Income
      from equity investments
                              
                              $
                              1,187
                              
                              
                              $
                              122
                              
                              
                              $
                              1,494
                              
                              
                              $
                              122
 
 (1)
                Represents
      the period from the restructuring date of July 1, 2009 to September 30,
      2009.
  Sealy
 
 As of
September 30, 2010 the Trust owns between 50-68% of three office flex parks
located in the 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.
  21
  
 WINTHROP
REALTY TRUST
 FORM
10-Q SEPTEMBER 30, 2010
 
 NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
  The
combined summarized balance sheets of the Sealy venture equity investments are
as follows (in thousands):
 
 September 30,
                            2010
                          
                          
                          December 31,
                            2009ASSETSReal
      estate, net
                          
                          $
                          150,050
                          
                          
                          $
                          153,565Cash
      and cash equivalents
                          
                          
                          481
                          
                          
                          
                          971Receivables
      and other assets
                          
                          
                          13,192
                          
                          
                          
                          14,658Total
      Assets
                          
                          $
                          163,723
                          
                          
                          $
                          169,194LIABILITIES
      AND MEMBERS’ CAPITALMortgage
      and notes payable
                          
                          $
                          139,750
                          
                          
                          $
                          139,750Other
      liabilities
                          
                          
                          2,319
                          
                          
                          
                          3,373Members’
      Capital
                          
                          
                          21,654
                          
                          
                          
                          26,071Total
      Liabilities and Members’ Capital
                          
                          $
                          163,723
                          
                          
                          $
                          169,194Carrying
      value of the Trust’s investments in the equity investments
                          
                          $
                          13,152
                          
                          
                          $
                          15,647
  22
  WINTHROP
REALTY TRUST
 FORM
10-Q SEPTEMBER 30, 2010
  NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
  The
combined summarized statements of operations of the Sealy venture equity
investments are as follows (in thousands):
 For the Three Months Ended
                        
                        
                        For the Nine Months EndedSeptember30,
                          2010
                        
                        
                        September30,
                          2009
                        
                        
                        September30,
                          2010
                        
                        
                        September30,
                          2009Total
      revenue
                        
                        $
                        3,913
                        
                        
                        $
                        4,308
                        
                        
                        $
                        12,457
                        
                        
                        $
                        13,155ExpensesOperating
                        
                        
                        709
                        
                        
                        
                        447
                        
                        
                        
                        2,483
                        
                        
                        
                        2,084Real
      estate taxes
                        
                        
                        448
                        
                        
                        
                        456
                        
                        
                        
                        1,341
                        
                        
                        
                        1,437Interest
                        
                        
                        2,103
                        
                        
                        
                        2,103
                        
                        
                        
                        6,241
                        
                        
                        
                        6,241Depreciation
      and amortization
                        
                        
                        1,617
                        
                        
                        
                        1,773
                        
                        
                        
                        5,008
                        
                        
                        
                        5,406Other
      expenses
                        
                        
                        252
                        
                        
                        
                        283
                        
                        
                        
                        751
                        
                        
                        
                        821Total
      expenses
                        
                        
                        5,129
                        
                        
                        
                        5,062
                        
                        
                        
                        15,824
                        
                        
                        
                        15,989Net
      loss
                        
                        $
                        (1,216
                        )
                        
                        $
                        (754
                        )
                        
                        $
                        (3,367
                        )
                        
                        $
                        (2,834
                        )Trust’s
      share of net loss
                        
                        $
                        (741
                        )
                        
                        $
                        (411
                        )
                        
                        $
                        (1,972
                        )
                        
                        $
                        (1,588
                        )
 
 WRT-ROIC
Riverside
 
 On June
28, 2010 the Trust entered into a 50%-50% joint venture with Retail Opportunity
Investment Corporation (“ROIC”) which purchased the Riverside Plaza loan. At
September 30, 2010, this loan was performing according to its
terms.
 
 Peter Cooper
Village/Stuyvesant Town (“PCVST”)
 
 On August
6, 2010, the Trust entered into a joint venture, with affiliates of Pershing
Square, PSW NYC. (See discussion in Note 4). The Trust made aggregate capital
contributions of $10,665,000 during the quarter ended September 30, 2010 and has
committed to fund an additional $550,000 in the fourth quarter of 2010 to pay
for legal and professional fees related to the PCVST investment.
 
 9.
              Debt
 
 Mortgage Loans
Payable
 
 The Trust
had outstanding mortgage loans payable detailed in the table below of
$211,773,000 and $216,767,000 at September 30, 2010 and December 31, 2009,
respectively.  The mortgage loan payments of principal and interest
are generally due monthly, quarterly or semi-annually.
  23
  WINTHROP
REALTY TRUST
 FORM
10-Q SEPTEMBER 30, 2010
  NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
  Location of
                              Collateral
                            
                            Maturity
                            
                            Spread Over
                              LIBOR/Prime
                            
                            
                            Interest Rate at
                              September 30, 2010
                            
                            
                            Balance at
                              September 30,
                              2010
                            
                            
                            Balance at
                              December 31,
                              2009Andover,
      MA
                            
                            Mar
      2011
                            
                            
                            —
                            
                            
                            
                            6.60
                            %
                            
                            $
                            6,169
                            
                            
                            $
                            6,266S.
      Burlington, VT
                            
                            Mar
      2011
                            
                            
                            —
                            
                            
                            
                            6.60
                            %
                            
                            
                            2,644
                            
                            
                            
                            2,686Various
      (1)
                            
                            Jun
      2011
                            
                            LIBOR+1.75%
                            
                            
                            
                            (2
                            )
                            
                            
                            22,844
                            
                            
                            
                            23,761Chicago,
      IL
                            
                            Apr
      2012
                            
                            
                            —
                            
                            
                            
                            6.00
                            %
                            
                            
                            9,100
                            
                            
                            
                            9,300Amherst,
      NY
                            
                            Oct
      2013
                            
                            
                            —
                            
                            
                            
                            5.65
                            %
                            
                            
                            16,222
                            
                            
                            
                            16,526Indianapolis,
      IN
                            
                            Apr  2015
                            
                            
                            —
                            
                            
                            
                            5.82
                            %
                            
                            
                            4,263
                            
                            
                            
                            4,317Chicago,
      IL
                            
                            Mar
      2016
                            
                            
                            —
                            
                            
                            
                            5.75
                            %
                            
                            
                            20,900
                            
                            
                            
                            21,118Houston,
      TX
                            
                            Apr
      2016
                            
                            
                            —
                            
                            
                            
                            6.37
                            %
                            
                            
                            61,266
                            
                            
                            
                            63,869Lisle,
      IL
                            
                            Jun
      2016
                            
                            
                            —
                            
                            
                            
                            6.26
                            %
                            
                            
                            23,981
                            
                            
                            
                            24,176Lisle,
      IL
                            
                            Mar
      2017
                            
                            
                            —
                            
                            
                            
                            5.55
                            %
                            
                            
                            5,600
                            
                            
                            
                            5,600Orlando,
      FL
                            
                            Jul
      2017
                            
                            
                            —
                            
                            
                            
                            6.40
                            %
                            
                            
                            38,784
                            
                            
                            
                            39,148$
                            211,773
                            
                            
                            $
                            216,767
 (1)
              The
      loan, which we refer to as the KeyBank loan, is collateralized by 14
      properties.
 (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 $10,505,000 at September 30, 2010 and approximately
$25,704,000 at December 31, 2009.
 
 10.
              Revolving
      Line of Credit
  The Trust
has a line of credit pursuant to which the Trust can borrow on a revolving basis
up to $35,000,000.  The Trust exercised its option to extend the term
of the revolving credit line to December 16, 2011.  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%.
  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.
  The
outstanding balance under the facility was $25,450,000 at September 30, 2010. At
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 $8,000 and $52,000 for the
three and nine months ended September 30, 2010 respectively, and $22,000 and
$61,000 for the three and nine months ended September 30, 2009,
respectively.
  The Trust
is in compliance of its financial covenants under its revolving line of credit
as of September 30, 2010.
  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.
  24
  WINTHROP
REALTY TRUST
 FORM
10-Q SEPTEMBER 30, 2010
 
 NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 
 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 that is
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 nine months ended September 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 instrument’s 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
contract designated and qualifying as a cash flow hedge totaling $20,000 and
$8,000 of decreased interest expense for the three and nine months ended
September 30, 2010, respectively and $178,000 and $519,000 of increased interest
expense for the three and nine months ended September 30, 2009,
respectively.
 
 The table
below presents information about the Trust’s interest rate swap at September 30,
2010 (in thousands):
 
 Maturity
                      
                      Swap Rate
                      
                      
                      Notional
                        Amount of
                        Hedge
                      
                      
                      Cost of Hedge
                      
                      
                      Estimated Fair
                        Value of Swapin
                        Other
                        Comprehensive
                        Income
                      
                      
                      UnrealizedGain
                        on SettledSwap
                        in Other
                        Comprehensive
                        Income
                      
                      
                      Change in Swap
                        ValuationsIncluded
                        in Other
                        Comprehensive
                        Income for theNine
                        MonthsEnded
                        September30, 2010June 2011
                      
                      
                      0.925
                      %
                      
                      $
                      20,000
                      (1)
                      
                      $
                      -
                      
                      
                      $
                      (93
                      )
                      
                      $
                      -
                      
                      
                      $
                      (8
                      )
 
 (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%.
 
 12.
              Non-Controlling
      Redeemable Preferred Interest
 
 The
following table reflects the activity of the Trust’s Series C Preferred Shares
interest for the nine months ended September 30, 2010 (in
thousands):
  AmountBalance
      at December 31, 2009
                    
                    $
                    12,169Conversion
      to Common Shares
                    
                    
                    (8,948
                    )Balance
      at September 30, 2010
                    
                    $
                    3,221
  25
  WINTHROP
REALTY TRUST
 FORM
10-Q SEPTEMBER 30, 2010
 
 NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
  13.
                Common
      Shares
  The
following table sets forth information relating to sales of Common Shares during
the nine months ended September 30, 2010:
  Date of Issuance
                      
                      Number of Shares
                        Issued
                      
                      
                      Price perShare
                      
                      Type of OfferingJanuary
      15, 2010
                      
                      
                      47,385
                      
                      
                      $
                      12.73
                      
                      DRIP
      (1)April
      15, 2010
                      
                      
                      44,181
                      
                      
                      $
                      13.75
                      
                      DRIP
      (1)July
      15, 2010
                      
                      
                      50,439
                      
                      
                      $
                      12.15
                      
                      DRIP
      (1)September
      27, 2010
                      
                      
                      5,750,000
                      
                      
                      $
                      12.25
                      (2)
                      Public
      Offering
 
 (1)
              The
      Trust’s Dividend Reinvestment and Stock Purchase
  Plan.
 (2)
              Before underwriting
      discount.
 
 14.
              Discontinued
      Operations
 
 In
October 2009 a tenant of the Trust’s retail net leased properties, The Kroger
Company (“Kroger”), notified the Trust of its intention not to exercise its
lease renewal options on six buildings containing approximately 281,000 square
feet of retail space. Concurrently, Kroger also notified the Trust that it would
be exercising its option to purchase the Athens, Georgia property resulting in
the Trust classifying this property in discontinued operations effective with
the fourth quarter of 2009.  Since that time, management has been
actively marketing the remaining locations for lease or sale.
 
 The
Lafayette, Louisiana and Sherman, Texas locations have been classified as
discontinued operations as of September 30, 2010.  During the quarter
ended September 30, 2010, management determined that the potential market rents
are not sufficient to cover prospective ground lease payments plus the costs to
convert these properties to multi-tenant facilities. Therefore the Trust has
decided to permit the ownership of the property to revert back to the land owner
as of November 1, 2010. The Trust recorded a $704,000 impairment charge related
to these investments which is included in discontinued operations for the three
months ended September 30, 2010.
 
 The
Knoxville, Tennessee location has also been classified as discontinued
operations as of September 30, 2010.  During the quarter ended
September 30, 2010, management determined that after having exercised its
purchase option under its ground lease and acquiring the land in October 2010
the best course of action is to pursue a sale of the real estate. As a result,
the Trust recorded a $626,000 impairment charge which is included in
discontinued operations for the three months ended September 30,
2010.
 
 With
respect to Kroger’s purchase of the Athens, Georgia property, in accordance with
a three party agreement between the Trust, Kroger and the land owner, an
appraisal process was conducted to determine the fair market value of the
property. Accordingly, the Trust recorded an impairment loss of $1,000,000
during the quarter ended June 30, 2010. As a result of the finalization of the
appraisal process during the quarter ended September 30, 2010, the Trust
recorded an additional impairment charge of $390,000 during such
period.
 
 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.
  26
 
 WINTHROP
REALTY TRUST
 FORM
10-Q SEPTEMBER 30, 2010
  NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
  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 nine months ended September 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.
 
 Concord CDO-1
Litigation
 
 In
January 2010, the trustee for Concord Real Estate CDO 2006-1, Ltd. (“CDO-1”)
refused to cancel the CDO-1 bonds held by CDFT, now a subsidiary of CDH CDO, 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 or early 2011.  If the Court
upholds the ruling, it is anticipated that the Trust will receive a distribution
of approximately $877,000.
 
 Land Purchase
Commitments
 
 During
the first quarter of 2010, the Trust exercised its option to acquire the land
underlying six of the properties ground leased by the Trust and which were
leased to Kroger as of September 30, 2010. The consummation of the acquisition
of the six land parcels was consummated on November 1, 2010 and the parcels were
acquired for an aggregate purchase price of approximately
$4,209,000.
 
 Tenant
Matters
 
 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.  Rental revenues from the Churchill property
were $781,000 and $2,342,000 for the three and nine months ended September 30,
2010.
  27
  WINTHROP
REALTY TRUST
 FORM
10-Q SEPTEMBER 30, 2010
 
 NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
  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 nine months ended September 30, 2010 and 2009 to FUR Advisors and
Winthrop Management (in thousands):
 
 For the Three Months Ended
                      
                      
                      For the Nine Months EndedSeptember 30,
                        2010
                      
                      
                      September 30,
                        2009
                      
                      
                      September 30,
                        2010
                      
                      
                      September 30,
                        2009Base
      Asset Management
                      
                      $
                      1,324
                      
                      
                      $
                      800
                      
                      
                      $
                      3,517
                      
                      
                      $
                      2,372WRP
      Sub-Management LLC Credit
                      
                      
                      (34
                      )
                      
                      
                      (60
                      )
                      
                      
                      (134
                      )
                      
                      
                      (197
                      )Property
      Management
                      
                      
                      54
                      
                      
                      
                      58
                      
                      
                      
                      170
                      
                      
                      
                      198Construction
      Management
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      1
                      
                      
                      
                      3$
                      1,344
                      
                      
                      $
                      798
                      
                      
                      $
                      3,554
                      
                      
                      $
                      2,376
 
 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
such that the fee is to be calculated on the actual issuance price of Common
Shares instead of a fixed price for Common Shares issued prior to January 1,
2009.  This change will result in an increase without giving effect to
any additional shares issuances, 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.
  28
 
 WINTHROP
REALTY TRUST
 FORM
10-Q SEPTEMBER 30, 2010
 
 NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 
 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 September 30, 2010 and December 31, 2009 (in
thousands):
  September 30,
                      2010
                    
                    
                    December 31,
                      2009Operating
      properties
                    
                    $
                    323,272
                    
                    
                    $
                    313,682Loan
      assets
                    
                    
                    105,849
                    
                    
                    
                    31,774REIT
      securities
                    
                    
                    29,893
                    
                    
                    
                    52,597CorporateCash
      and cash equivalents
                    
                    
                    102,919
                    
                    
                    
                    66,493Restricted
      cash
                    
                    
                    8,889
                    
                    
                    
                    9,504Other
                    
                    
                    16,873
                    
                    
                    
                    19,142Total
      Assets
                    
                    $
                    587,695
                    
                    
                    $
                    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 nine months ended September 30, 2010 and September 30, 2009 (in
thousands):
  29
  WINTHROP
REALTY TRUST
 FORM
10-Q SEPTEMBER 30, 2010
  NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
  For the Three Months Ended
                    
                    
                    For the Nine Months EndedSeptember 30,
                      2010
                    
                    
                    September 30,
                      2009
                    
                    
                    September 30,
                      2010
                    
                    
                    September 30,
                      2009Operating
      PropertiesRents
      and reimbursements
                    
                    $
                    9,298
                    
                    
                    $
                    10,140
                    
                    
                    $
                    28,162
                    
                    
                    $
                    30,609Operating
      expenses
                    
                    
                    (1,812
                    )
                    
                    
                    (1,990
                    )
                    
                    
                    (5,585
                    )
                    
                    
                    (5,492
                    )Real
      estate taxes
                    
                    
                    (952
                    )
                    
                    
                    (674
                    )
                    
                    
                    (2,012
                    )
                    
                    
                    (1,968
                    )Equity
      in (loss) income of Sealy Northwest Atlanta
                    
                    
                    (192
                    )
                    
                    
                    19
                    
                    
                    
                    (541
                    )
                    
                    
                    (223
                    )Equity
      in loss of Sealy Airpark Nashville
                    
                    
                    (248
                    )
                    
                    
                    (289
                    )
                    
                    
                    (681
                    )
                    
                    
                    (861
                    )Equity
      in loss of Sealy Newmarket
                    
                    
                    (301
                    )
                    
                    
                    (141
                    )
                    
                    
                    (750
                    )
                    
                    
                    (504
                    )Equity
      in income of Marc Realty investment
                    
                    
                    1,187
                    
                    
                    
                    122
                    
                    
                    
                    1,494
                    
                    
                    
                    122Net
      operating income
                    
                    
                    6,980
                    
                    
                    
                    7,187
                    
                    
                    
                    20,087
                    
                    
                    
                    21,683Depreciation
      and amortization expense
                    
                    
                    (2,393
                    )
                    
                    
                    (2,598
                    )
                    
                    
                    (7,092
                    )
                    
                    
                    (7,987
                    )Interest
      expense
                    
                    
                    (3,196
                    )
                    
                    
                    (3,453
                    )
                    
                    
                    (9,596
                    )
                    
                    
                    (10,397
                    )Operating
      properties net income
                    
                    
                    1,391
                    
                    
                    
                    1,136
                    
                    
                    
                    3,399
                    
                    
                    
                    3,299Loan
      AssetsInterest
                    
                    
                    4,185
                    
                    
                    
                    1,040
                    
                    
                    
                    9,484
                    
                    
                    
                    2,247Equity
      in earnings of preferred equity investment of Marc Realty
                    
                    
                    85
                    
                    
                    
                    86
                    
                    
                    
                    253
                    
                    
                    
                    78Impairment
      loss on preferred equity investment
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    (2,186
                    )Equity
      in income (loss) of Lex-Win Concord
                    
                    
                    -
                    
                    
                    
                    500
                    
                    
                    
                    -
                    
                    
                    
                    (67,065
                    )Impairment
      loss on Lex-Win Concord
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    (31,670
                    )Unrealized
      gain on loan securities carried at fair value
                    
                    
                    581
                    
                    
                    
                    -
                    
                    
                    
                    3,593
                    
                    
                    
                    -Equity
      in income of ROIC Riverside
                    
                    
                    234
                    
                    
                    
                    -
                    
                    
                    
                    239
                    
                    
                    
                    -Equity
      in loss of PSW NYC
                    
                    
                    (1,089
                    )
                    
                    
                    -
                    
                    
                    
                    (1,089
                    )
                    
                    
                    -Provision
      for loss on loans receivable
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    (2,152
                    )Unrealized
      loss on available for sale loans
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    (203
                    )Net
      operating income (loss)
                    
                    
                    3,996
                    
                    
                    
                    1,626
                    
                    
                    
                    12,480
                    
                    
                    
                    (100,951
                    )General
      and administrative expense
                    
                    
                    (186
                    )
                    
                    
                    (190
                    )
                    
                    
                    (222
                    )
                    
                    
                    (212
                    )Loan
      assets net income (loss)
                    
                    
                    3,810
                    
                    
                    
                    1,436
                    
                    
                    
                    12,258
                    
                    
                    
                    (101,163
                    )REIT
      SecuritiesInterest
      and dividends
                    
                    
                    763
                    
                    
                    
                    1,456
                    
                    
                    
                    2,263
                    
                    
                    
                    4,215(Loss)
      gain on sale of  securities carried at fair
value
                    
                    
                    (185
                    )
                    
                    
                    676
                    
                    
                    
                    588
                    
                    
                    
                    3,274Unrealized
      gain on securities carried at fair value
                    
                    
                    2,490
                    
                    
                    
                    12,578
                    
                    
                    
                    4,280
                    
                    
                    
                    14,010Net
      operating income
                    
                    
                    3,068
                    
                    
                    
                    14,710
                    
                    
                    
                    7,131
                    
                    
                    
                    21,499Interest
      expense
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    (75
                    )REIT
      securities net income
                    
                    
                    3,068
                    
                    
                    
                    14,710
                    
                    
                    
                    7,131
                    
                    
                    
                    21,424Net
      Income (Loss)
                    
                    
                    8,269
                    
                    
                    
                    17,282
                    
                    
                    
                    22,788
                    
                    
                    
                    (76,440
                    )Reconciliations
      to GAAP Net Income (Loss):Corporate
      Income (Expense)Interest
      income
                    
                    
                    17
                    
                    
                    
                    31
                    
                    
                    
                    94
                    
                    
                    
                    145Interest
      expense
                    
                    
                    (613
                    )
                    
                    
                    (716
                    )
                    
                    
                    (1,530
                    )
                    
                    
                    (2,273
                    )Gain
      on extinguishment of debt
                    
                    
                    -
                    
                    
                    
                    445
                    
                    
                    
                    -
                    
                    
                    
                    5,682General
      and administrative
                    
                    
                    (2,114
                    )
                    
                    
                    (1,630
                    )
                    
                    
                    (5,901
                    )
                    
                    
                    (4,925
                    )State
      and local taxes
                    
                    
                    (7
                    )
                    
                    
                    (14
                    )
                    
                    
                    (107
                    )
                    
                    
                    (211
                    )Income
      (loss) from continuing operations before non-controlling
      interest
                    
                    
                    5,552
                    
                    
                    
                    15,398
                    
                    
                    
                    15,344
                    
                    
                    
                    (78,022
                    )Non-controlling
      interest
                    
                    
                    (175
                    )
                    
                    
                    (315
                    )
                    
                    
                    (595
                    )
                    
                    
                    (651
                    )Income
      (loss) from continuing operations attributable to Winthrop Realty
      Trust
                    
                    
                    5,377
                    
                    
                    
                    15,083
                    
                    
                    
                    14,749
                    
                    
                    
                    (78,673
                    )Income
      (loss) from discontinued operations attributable to Winthrop Realty
      Trust
                    
                    
                    (1,569
                    )
                    
                    
                    74
                    
                    
                    
                    (2,160
                    )
                    
                    
                    201Net
      Income (Loss) Attributable to Winthrop Realty Trust
                    
                    $
                    3,808
                    
                    
                    $
                    15,157
                    
                    
                    $
                    12,589
                    
                    
                    $
                    (78,472
                    )Capital
      ExpendituresOperating
      properties
                    
                    $
                    2,929
                    
                    
                    $
                    550
                    
                    
                    $
                    4,646
                    
                    
                    $
                    1,132
  30
  WINTHROP
REALTY TRUST
 FORM
10-Q SEPTEMBER 30, 2010
  NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
  18.
              Variable Interest
      Entities
 
 Consolidated Variable
Interest Entities
 
 Andover Operating Property -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 $6,315,000,
lease intangibles of $1,553,000 and mortgage debt of $6,169,000. 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.
 
 Deer Valley Medical Center Operating
Property – The Trust has concluded that its venture, WRT-DV, is a
VIE.  This assessment is primarily based on the fact that the equity
investment at risk is not sufficient to finance its activities without
additional subordinated financial support.
 
 Pursuant
to the terms of WRT-DV’s operating agreement, the Trust receives a priority
return on $7,900,000 of its invested capital, with the balance of the capital
being allocated 96.5% to the Trust and 3.5% to its joint venture partner,
Fenway.  The Trust has effectively all control rights with respect to
WRT-DV. Therefore the Trust has determined it is the primary beneficiary and
consolidates the venture which owns the operating property.
 
 The
carrying amounts of the Deer Valley property include land and building of
$8,157,000 and lease intangibles of $1,998,000.   There is no
mortgage debt associated with this property.
 
 Variable Interest Entities
Not Consolidated
 
 Equity
Method Investments
 
 Concord and CDH CDO – The
Trust has a one-third equity interests in each of the separate entities that
resulted from the Trust’s reorganization of its Lex-Win investment, Concord and
CDH CDO (the “Concord Investments”).  The Trust has determined that
each of the Concord Investments are variable interests in VIE’s because the
equity investment at risk is not sufficient to finance their activities without
additional subordinated financial support.
 
 Lexington,
Inland and the Trust, three of the variable interest holders, hold identical
one-third membership interests in each of the Concord Investment entities. By
design and in practice, they share equally in the economics and the
decision-making. Further, Lexington, Inland and the Trust which are otherwise
unrelated parties, each have one-third of the voting rights of the equity of the
Concord Investments. An affiliate of FUR Advisors is responsible for day-to-day
administration and operations of the Concord investments, but decisions that
most significantly impact the entity’s economic performance are jointly decided
through their voting interests.  Each member is deemed to have shared
power, such that no 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.
 
 At
September 30, 2010, the carrying value of the Trust’s Concord Investments is
zero. The Trust does not have the current intent to provide financial or other
support to the Concord Investments and the obligations of the Concord
Investments are non-recourse to the Trust.
 
 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.
  31
  WINTHROP
REALTY TRUST
 FORM
10-Q SEPTEMBER 30, 2010
 
 NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 
 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 September 30, 2010 was $62,080,000.
 
 PSW NYC –The Trust has
concluded that its 22.5% investment in PSW NYC is a variable interest in a VIE.
This assessment is primarily based on the fact that the entity does not have
sufficient equity at risk to permit them to finance their activities without
additional subordinated financial support. The Trust does not have the power to
direct the activities that most significantly impact the economics of PSW NYC
and management has therefore concluded that the Trust is not the primary
beneficiary.
 
 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.
 
 The
borrowing entity for 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 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, as the
Trust does not believe it has the ability to direct the activities 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
 
 Legacy Partners Realty Fund
II - On October 22, 2010 the Trust acquired for $9,750,000 a
performing corporate loan which had an outstanding balance of principal and
accrued interest of approximately $39,000,000.  Immediately upon
consummation of the acquisition of the loan, the loan was restructured to: (i)
provide the borrower with the right to payoff the loan after the first 12 months
at a discounted amount of $9,750,000; (ii) modify the interest rate to an amount
equal to a 15% annual return on the $9,750,000; (iii) extend the term until
October 31, 2014; (iv) collateralize the loan with a first mortgage on a 16.35
acre parcel of land in San Jose, California, a $3,000,000 letter of credit and
other assets.
 
 Westwood Business Park - On
October 29, 2010 the Trust acquired for $4,100,000 a first mortgage secured by
four class B office buildings, containing 91,100 square feet of office space in
Phoenix, Arizona. Upon acquisition of the loan, the borrower made a principal
payment of $600,000 and the loan was restructured to reduce the then outstanding
principal to $3,500,000 and to provide for a future funding component which
allows the borrower to draw up to $400,000 to fund 50% of the tenant improvement
and leasing commission costs on new leases. The loan bears interest at 11% and
matures on October 31, 2011, subject to a six month extension.  A
principal of the borrower has guaranteed $1,000,000 of the principal amount plus
all future funding advances.
  32
 
 WINTHROP
REALTY TRUST
 FORM
10-Q SEPTEMBER 30, 2010
 
 NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
  Moffett Towers, Sunnyvale,
California -   On October 29, 2010 the Trust acquired at
par a $21,158,000 senior participation in a B Note secured by a first mortgage
lien on a 951,000 square foot, recently constructed class A office complex
located in Sunnyvale, California.  The loan bears interest at 7.98%,
matures on January 31, 2012 and is subject to one six-month
extension.
  33
 
 WINTHROP
REALTY TRUST
 FORM
10-Q SEPTEMBER 30, 2010
  ITEM 2.
                MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OFOPERATIONS
 
 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 updated by 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 nine
months ended September 30, 2010 as compared with the nine months ended September
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 intransactions which a dedicated REIT with
narrow investment parameters wouldbe unable to consider.In addition, because of our
size we are able to make investments in transactions 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 investment
opportunities.  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.
 
 Acquisitions
 
 We continue to broaden our portfolio
with theacquisition of additionalassets. During the quarter ended
September 30, 2010weinvestedapproximately $67,125,000 in new loan
assets.Our recent acquisitions which are detailed in Item 1.,
Notes 4 and 19, 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.
  34
  WINTHROP
REALTY TRUST
 FORM
10-Q SEPTEMBER 30, 2010
  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. During the
quarter ended September 30, 2010 we acquired approximately $67,125,000 of loan
assets.  As of September 30, 2010 our portfolio of loan assets totaled
$105,849,000 and generated interest earnings of $9,484,000 for the nine months
ended September 30, 2010, as compared to interest earnings of $2,247,000 for the
nine months ended September 30, 2009.
 
 Operating
Properties
  During
2010 we expect that our operating property portfolio, which consists of 37
properties containing 8.2 million square feet, will continue to have leasing and
expense containment issues.
 
 We expect
that rental income from our operating properties will decline in 2011 as a
result of the non-renewal of six properties in our retail portfolio as well as
the expiring lease at our Churchill property for which the previous contractual
rents are above current market rents. Rental revenues for the nine months ended
September 30, 2010 included $3,308,000 from the seven properties for which the
tenants did not exercise renewal options.
 
 During
the quarter ended September 30, 2010 we made no property acquisitions
althoughwe converted
our distressed Deer Valley first mortgage loan to equity ownership and allocated
our loan cost of approximately $10,220,000 between our real estate assets and
related lease intangibles. Although there were no dispositions of
operating properties during the current quarter three properties were
transferred into discontinued operations.  (See Item 1, Note
14.)
  Consolidated Operating Properties -At September 30, 2010 our consolidated operating properties were 94.2%
leased compared to 94.8% at June 30, 2010. We experienced a small decline in
occupancy at our Indianapolis, Indiana property which was offset by increased
occupancy at our Chicago, Illinois (Ontario) property and one of our Lisle,
Illinois properties. The remaining properties’ occupancy remains
stable.
  Equity Investments in
Operating Properties
  Sealy -As of September 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 75%, 67% and 88%, respectively, at September 30, 2010 as compared to
occupancy of 71%, 69% and 89%, at June 30, 2010.  Occupancy rates
include all signed leases, including those undergoing tenant
improvements.  Our Georgia properties continue to have historically
low occupancy but are 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 $741,000 and
$1,972,000 for the three and nine months ended September 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 $209,000 and $523,000 for the three and nine
months ended September 30, 2010, respectively.
  The Sealy
properties have $139,750,000 of mortgage debt at September 30, 2010 with no
maturities until January 2012.
  Marc Realty - As of September
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 81.7% and 83.5% occupied at September 30,
2010 and June 30, 2010, respectively.
  35
  WINTHROP
REALTY TRUST
 FORM
10-Q SEPTEMBER 30, 2010
  Five
downtown Chicago properties contain approximately 959,000 rentable square feet
of the aggregate Marc Realty portfolio and accounted for $37,453,000 of our
September 30, 2010 carrying value. These five properties had occupancy of 82.9%
at September 30, 2010, compared to 86.8% occupancy at June 30,
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 $24,627,000 of our September 30, 2010 carrying
value, contain approximately 1,018,000 square feet.  This part of the
portfolio is located in the Chicago suburbs and was 80.6% occupied at September
30, 2010 compared to 80.4% occupied at June 30, 2010.
  The Marc
Realty properties are encumbered with $86,966,000 of mortgage debt currently,
with no debt maturing in 2010, $19,367,000 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 September 30, 2010
we sold securities on which we had previously recognized unrealized gains of
approximately $4,877,000, generating net proceeds of approximately $16,391,000
and recorded realized losses of $185,000 on the sales.  Additionally,
during the quarter we recognized unrealized gains of $2,490,000 on our remaining
REIT securities.
 
 Debt
Maturities
 
 We have a
$35,000,000 line of credit the term of which we extended for one year to
December 16, 2011.  At September 30, 2010 we had borrowed $25,450,000
under the facility. This amount was drawn down in July in connection with new
loan acquisitions.
 
 At
September 30, 2010, our balance sheet contains mortgage debt payable of
$211,773,000. During the second quarter of 2010 we exercised our option to
extend the loan which is collateralized by our 14 properties through June 2011.
As of September 30, 2010 we have no outstanding mortgage debt that is maturing
until March 2011. The debt maturing in March 2011 is collateralized by our
Andover, Massachusetts property and our South Burlington, Vermont property. We
are currently seeking to refinance these loans.
 
 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.
 
 Liquidity
and Capital Resources
 
 At
September 30, 2010, we held $102,919,000 in unrestricted cash and cash
equivalents and $29,893,000 in REIT securities.  In addition, as of
September 30, 2010 we have $9,550,000 available to draw 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.
  36
  WINTHROP
REALTY TRUST
 FORM
10-Q SEPTEMBER 30, 2010
  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.
 
 Public
Offering
 
 On September 27, 2010 we
closed a public offering of 5,750,000Common Sharesat a price of $12.25 per
sharebefore
underwriter discount,and received net proceeds of
approximately $67,000,000which we intend to use for
the acquisition of additional investments as opportunities
arise.
 
 Cash
Flows
 
 Our
liquidity based upon cash and cash equivalents increased by approximately
$36,426,000 from $66,493,000 at December 31, 2009 to $102,919,000 at September
30, 2010.
 
 Our cash
flow activities for the nine months ended September 30, 2010 are summarized as
follows (in thousands):
 
 Net
      cash flow provided by operating activities
                    
                    $
                    14,482Net
      cash flow used in investing activities
                    
                    
                    (58,763
                    )Net
      cash flows provided by financing activities
                    
                    
                    80,707Increase
      in cash and cash equivalents
                    
                    $
                    36,426
  Operating
Activities
 
 For the
nine months ended September 30, 2010, our operating activities generated net
income of $13,184,000 and positive cash flow of $14,482,000.  Our cash
provided by operations reflects our net income adjusted by: (i) non-cash items
of $3,397,000; (ii) $4,086,000 of distributions from non-consolidated interests;
and (iii) a net decrease due to changes in other operating assets and
liabilities of $6,221,000.  See our discussion of Results of
Operations below for additional details on our operations.
 
 Investing
Activities
 
 Cash used
in investing activities of $58,763,000 for the nine months ended September
30, 2010 was comprised primarily of the following:
 
 ·
              $81,001,000
      for the acquisition of eight new loans
  receivable;
 ·
              $2,571,000
      for additional loan advances on the 160 Spear and 180 North Michigan
      properties;
 ·
              $10,665,000
      for investment in our PSW NYC joint
venture;
 ·
              $7,800,000
      for investment in our Riverside loan joint
  venture;
 ·
              $6,140,000
      for investment in our Marc Realty equity
  investments;
 ·
              $2,113,000
      to fund a tenant improvement escrow for the Deer Valley Medical
      Center;
 ·
              $3,056,000
      for purchases of REIT securities carried at fair value;
  and
 ·
              $3,003,000
      for investment in capital and tenant improvements at our operating
      properties.
  37
 
 WINTHROP
REALTY TRUST
 FORM
10-Q SEPTEMBER 30, 2010
 
 These
uses of cash flow were offset primarily by:
 
 ·
              $29,565,000
      in proceeds from the sale of securities carried at fair
    value;
 ·
              $9,876,000
      in proceeds from the sale at par value of 50% interest in the 500-512
      Seventh Avenue B Participation;
 ·
              $3,000,000
      in proceeds from the sale at par value of the Siete Square A
      Participation;
 ·
              $6,540,000
      received on full satisfaction of the Driver loan;
  and
 ·
              $8,200,000
      received on full satisfaction of the 1701 E. Woodfield Road
      loan.
 
 Financing
Activities
 
 Cash
provided by financing activities of $80,707,000 for the nine months ended
September 30, 2010 was comprised primarily of the following:
 
 ·
              $66,867,000
      in proceeds from the issuance of 5,750,000 Common Shares pursuant to our
      public offering; and
 ·
              $25,450,000
      drawn down on our Revolving Line of
Credit.
 
 These
sources of cash flow were offset primarily by:
 
 ·
              $10,187,000
      for dividend payments on our Common
Shares;
 ·
              $4,994,000
      for mortgage loan repayments; and
 ·
              $338,000
      for dividend payments on our Series C Preferred
  Shares.
 
 Future
Cash Commitments
 
 Land
Purchases
 
 During
the first quarter of 2010, we exercised our option to acquire the land
underlying six of the properties currently under ground leases which are leased
to the Kroger Company.  The consummation of the acquisition of the six land
parcels was consummated on November 1, 2010 at an aggregate purchase price of
approximately $4,209,000.
 
 Capital
Contributions
 
 In
addition to our initial capital contribution of $10,125,000 to PSW NYC to cover
the acquisition of the Mezz Loans, we made additional capital contributions of
$540,000 during the quarter ended September 30, 2010.  We expect to
fund an approximate $550,000 of additional contributions in the fourth quarter
of 2010.
 
 We
continue to make capital contributions in our joint ventures with Marc Realty to
fund capital improvements.  Although we are not required to make this
funding we anticipate future contributions will be required.  We believe
that cash on hand will provide the necessary capital to meet these
commitments.
 
 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.
  38
  WINTHROP
REALTY TRUST
 FORM
10-Q SEPTEMBER 30, 2010
  During
2010 we have paid a quarterly dividend of $0.1625 per Common Share for the
fourth quarter of 2009 and for the each of the first, second and third quarters
of 2010.
 
 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 nine months ended September 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.
 
 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):
 
 September 30,
                      2010
                    
                    
                    December 31,
                      2009Operating
      properties
                    
                    $
                    323,272
                    
                    
                    $
                    313,682Loan
      assets
                    
                    
                    105,849
                    
                    
                    
                    31,774REIT
      securities
                    
                    
                    29,893
                    
                    
                    
                    52,597CorporateCash
      and cash equivalents
                    
                    
                    102,919
                    
                    
                    
                    66,493Restricted
      cash
                    
                    
                    8,889
                    
                    
                    
                    9,504Other
                    
                    
                    16,873
                    
                    
                    
                    19,142Total
      Assets
                    
                    $
                    587,695
                    
                    
                    $
                    493,192
 
 The
increase in loan assets was due primarily to our $80,965,000 of investments to
acquire eight loans during the second and third quarters of 2010, a $10,665,000
investment in our PSW NYC venture and a $7,800,000 investment in our Riverside
loan joint venture. Loan assets were reduced by $14,900,000 as a result of two
loans being paid off in full and by $12,876,000 as a result of the sale of
portions of two loans. Loan assets were further reduced by $10,220,000 as a
result of our foreclosure on the Deer Valley property which collateralized one
of our loan assets. As a result of the foreclosure, this asset is now included
in our operating properties segment.
 
 The
decrease in REIT securities was primarily the result of the sale of securities
carried at fair value for proceeds of $29,565,000.
  39
  WINTHROP
REALTY TRUST
 FORM
10-Q SEPTEMBER 30, 2010
  The
decrease in other assets resulted primarily from a $1,999,000 reduction in
accounts receivable and prepaid expenses.
 
 Comparison
of Nine Months ended September 30, 2010 versus Nine Months ended September 30,
2009
 
 The
following table summarizes our results from continuing operations by business
segment for the nine months ended September 30, 2010 and 2009 (in
thousands):
  For the Nine Months EndedSeptember 30,
                      2010
                    
                    
                    September 30,
                      2009Operating
      properties (1)
                    
                    $
                    3,399
                    
                    
                    $
                    3,299Loan
      assets (1)
                    
                    
                    12,258
                    
                    
                    
                    (101,163
                    )REIT
      securities
                    
                    
                    7,131
                    
                    
                    
                    21,424Corporate
      income (expenses)
                    
                    
                    (7,444
                    )
                    
                    
                    (1,582
                    )Income
      (loss) from continuing operations
                    
                    $
                    15,344
                    
                    
                    $
                    (78,022
                    )
 
 (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 nine months ended September 30, 2010 and
2009 (in thousands):
  For the Nine Months EndedSeptember 30,
                      2010
                    
                    
                    September 30,
                      2009Rents
      and reimbursements
                    
                    $
                    28,162
                    
                    
                    $
                    30,609Operating
      expenses
                    
                    
                    (5,585
                    )
                    
                    
                    (5,492
                    )Real
      estate taxes
                    
                    
                    (2,012
                    )
                    
                    
                    (1,968
                    )Equity
      in loss of Sealy Northwest Atlanta
                    
                    
                    (541
                    )
                    
                    
                    (223
                    )Equity
      in loss of Sealy Airpark Nashville
                    
                    
                    (681
                    )
                    
                    
                    (861
                    )Equity
      in loss of Sealy Newmarket
                    
                    
                    (750
                    )
                    
                    
                    (504
                    )Equity
      in income of Marc Realty investments
                    
                    
                    1,494
                    
                    
                    
                    122Operating
      income
                    
                    
                    20,087
                    
                    
                    
                    21,683Depreciation
      and amortization expense
                    
                    
                    (7,092
                    )
                    
                    
                    (7,987
                    )Interest
      expense
                    
                    
                    (9,596
                    )
                    
                    
                    (10,397
                    )Net
      income
                    
                    $
                    3,399
                    
                    
                    $
                    3,299
 
 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 $1,596,000
compared to the prior year period.  The decrease was due primarily
to:
 
 ·
              a
      decrease of $613,000 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 a reduction in rent pursuant to a restructuring which
      provided for a decrease in rent and a 10-year extension of the lease for
      our Plantation, Florida property as of April 1,
  2009;
 ·
              a
      decrease of $364,000 in rents and reimbursements at our Chicago, Illinois
      (Ontario) property due to an approximate 5.0% decrease in average
      occupancy for the nine months September 30, 2010 as compared to the nine
      months ended September 30, 2009;
  40




WINTHROP
REALTY TRUST


FORM
10-Q SEPTEMBER 30, 2010





·
            a
      decrease of $627,000 in rents and reimbursements from two of our Lisle,
      Illinois properties due to an approximate 20.5% decrease in average
      occupancy at one of the properties and an approximate 11.0% decrease at
      the other property for the nine months ended September 30, 2010 as
      compared to the nine months ended September 30,
  2009;


·
            a
      decrease of $530,000 in rents and reimbursements at our River City
      property primarily as a result of reduced escalation charges in
      2010;


·
            operating
      expenses of $374,000 and $161,000 incurred during 2010 at our Burlington,
      Vermont and Andover, Massachusetts properties, respectively, which were
      net leased during 2009;


·
            an
      increase of $300,000 in legal and professional fees incurred as a result
      of the litigation with our tenant at our Churchill, Pennsylvania property
      in 2010; and


·
            a
      $384,000 increase in losses from our Sealy equity investments due
      primarily to a $318,000 increase in loss related to the Northwest Atlanta,
      office complex which experienced a 7% decrease in occupancy at September
      30, 2010 from September 30, 2009.  Losses from the Sealy
      portfolio are primarily the result of non-cash depreciation and
      amortization expenses.  We received cash distributions of
      $523,000 from the Sealy equity investments for the nine months ended
      September 30, 2010.





Partially
offset by:





·
            a
      $1,372,000 increase in equity earnings in 2010 representing our share of
      operations from our 12 Marc Realty equity investments for the nine months
      ended September 30, 2010.  The increase is primarily the result
      of forgiveness of debt income of $2,207,000 at the 1701 East Woodfield
      property of which our share was $1,103,000.  We received cash
      distributions of $3,114,000 from the Marc Realty equity investments during
      the nine months ended September 30, 2010;
and


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




Depreciation
and amortization expense decreased by $895,000 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 expense related to our
operating properties decreased by $801,000 primarily as a result of normal
amortization of mortgage loans payable.


41




WINTHROP
REALTY TRUST


FORM
10-Q SEPTEMBER 30, 2010





Loan
Assets





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





For the Nine Months EndedSeptember 30,
                        2010
                      
                      
                      September 30,
                        2009Interest
      income
                      
                      $
                      9,484
                      
                      
                      $
                      2,247Equity
      in earnings (loss) of preferred equity  investment in Marc
      Realty
                      
                      
                      253
                      
                      
                      
                      78Impairment
      loss on preferred equity investment
                      
                      
                      -
                      
                      
                      
                      (2,186
                      )Equity
      in loss of Lex-Win Concord
                      
                      
                      -
                      
                      
                      
                      (67,065
                      )Impairment
      loss of Lex-Win Concord
                      
                      
                      -
                      
                      
                      
                      (31,670
                      )Unrealized
      gain on loan securities carried at fair value
                      
                      
                      3,593
                      
                      
                      
                      -Equity
      in income of ROIC Riverside
                      
                      
                      239
                      
                      
                      
                      -Equity
      in loss of PSW NYC
                      
                      
                      (1,089
                      )Unrealized
      loss on available for sale loans
                      
                      
                      -
                      
                      
                      
                      (2,152
                      )Provision
      for loss on loan receivable
                      
                      
                      -
                      
                      
                      
                      (203
                      )Operating
      income (loss)
                      
                      
                      12,480
                      
                      
                      
                      (100,951
                      )General
      and administrative expense
                      
                      
                      (222
                      )
                      
                      
                      (212
                      )Net
      income (loss)
                      
                      $
                      12,258
                      
                      
                      $
                      (101,163
                      )





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 $113,431,000 from a loss of $100,951,000
for the nine months ended September 30, 2009 to income of $12,480,000 for the
nine months ended September 30, 2010.  The increase was due primarily
to:





·
            a
      $98,735,000 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 nine months ended September
      30, 2010;


·
            a
      $7,237,000 increase in interest income due primarily to $5,945,000
      recognized on loan assets acquired subsequent to September 30, 2009 which
      was partially offset by a reduction of $689,000 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
      $3,593,000 unrealized gain on loan securities carried at fair value
      recognized in the nine months ended September  30, 2010;
      and


·
            a
      reduction of impairment from the prior year resulting in a $2,361,000
      increase in earnings from our preferred equity investment in Marc
      Realty;





Partially
offset by:





·
            a
      $1,089,000 loss recognized on our 2010 investment in our PSW NYC
      venture.


42


WINTHROP
REALTY TRUST


FORM
10-Q SEPTEMBER 30, 2010





REIT Securities





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





For the Nine Months EndedSeptember 30,
                        2010
                      
                      
                      September 30,
                        2009Interest
      and dividends
                      
                      $
                      2,263
                      
                      
                      $
                      4,215Gain
      on sale of securities carried at fair value
                      
                      
                      588
                      
                      
                      
                      3,274Unrealized
      gain on securities carried at fair value
                      
                      
                      4,280
                      
                      
                      
                      14,010Operating
      income
                      
                      
                      7,131
                      
                      
                      
                      21,499Interest
      expense
                      
                      
                      -
                      
                      
                      
                      (75
                      )Net
      income
                      
                      $
                      7,131
                      
                      
                      $
                      21,424





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 $14,368,000 from $21,499,000 for the
nine  months ended September  30, 2009 to $7,131,000 for the
nine months ended September 30, 2010.  The decrease was due primarily
to:





·
            a
      $9,730,000 decrease in unrealized gain on securities carried at fair
      value;


·
            a
      $1,952,000 decrease in interest and dividend income primarily due to the
      sale of various securities; and


·
            a
      $588,000 realized gain on the sale of securities carried at fair value for
      the nine months ended September 30, 2010 as compared to a gain of
      $3,274,000 recognized in the same period last
  year.





Corporate





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





For the Nine Months EndedSeptember 30,
                      2010
                    
                    
                    September 30,
                      2009Interest
      income
                    
                    $
                    94
                    
                    
                    $
                    145Interest
      expense
                    
                    
                    (1,530
                    )
                    
                    
                    (2,273
                    )Gain
      on extinguishment of debt
                    
                    
                    -
                    
                    
                    
                    5,682General
      and administrative
                    
                    
                    (5,901
                    )
                    
                    
                    (4,925
                    )State
      and local taxes
                    
                    
                    (107
                    )
                    
                    
                    (211
                    )Operating
      loss
                    
                    $
                    (7,444
                    )
                    
                    $
                    (1,582
                    )





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





·
            a
      $5,682,000 gain on extinguishment of debt recognized in 2009 resulting
      from our 2009 purchases of  1,017,105 Series B-1 Preferred
      Shares at a discount to their liquidation value;
  and


·
            a
      $976,000 increase in general and administrative expenses due primarily to
      an increase in the base management fee of $1,207,000 partially offset by a
      reduction in corporate legal expenses of
  $359,000.





Partially
offset by:





·
            a
      $743,000 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 $107,000 and $211,000 for the nine months ended September 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.


43


WINTHROP
REALTY TRUST


FORM
10-Q SEPTEMBER 30, 2010





Discontinued
Operations





Discontinued
operations consists of our Athens, Georgia; Lafayette, Louisiana; Knoxville,
Tennessee; and Sherman, Texas retail properties and our apartment complex in
Kansas City, Kansas which was foreclosed in December 2009.





Loss from
discontinued operations increased by $2,361,000 from income of $201,000 for the
nine months ended September 30, 2009 to a loss of $2,160,000 for the nine months
ended September 30, 2010.  The loss in 2010 is due primarily to
impairment charges of $2,720,000 recognized during the period.





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





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





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





For the Three Months EndedSeptember 30,
                      2010
                    
                    
                    September 30,
                      2009Operating
      properties
                    
                    $
                    1,391
                    
                    
                    $
                    1,136Loan
      assets
                    
                    
                    3,810
                    
                    
                    
                    1,436REIT
      securities
                    
                    
                    3,068
                    
                    
                    
                    14,710Corporate
      income (expenses)
                    
                    
                    (2,717
                    )
                    
                    
                    (1,884
                    )Income
      (loss) from continuing operations
                    
                    $
                    5,552
                    
                    
                    $
                    15,398





Operating
Properties





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




For the Three Months EndedSeptember 30,
                        2010
                      
                      
                      September 30,
                        2009Rents
      and reimbursements
                      
                      $
                      9,298
                      
                      
                      $
                      10,140Operating
      expenses
                      
                      
                      (1,812
                      )
                      
                      
                      (1,990
                      )Real
      estate taxes
                      
                      
                      (952
                      )
                      
                      
                      (674
                      )Equity
      in income (loss) of Sealy Northwest Atlanta
                      
                      
                      (192
                      )
                      
                      
                      19Equity
      in loss of Sealy Airpark Nashville
                      
                      
                      (248
                      )
                      
                      
                      (289
                      )Equity
      in loss of Sealy Newmarket
                      
                      
                      (301
                      )
                      
                      
                      (141
                      )Equity
      in income of Marc Realty investments
                      
                      
                      1,187
                      
                      
                      
                      122Operating
      income
                      
                      
                      6,980
                      
                      
                      
                      7,187Depreciation
      and amortization expense
                      
                      
                      (2,393
                      )
                      
                      
                      (2,598
                      )Interest
      expense
                      
                      
                      (3,196
                      )
                      
                      
                      (3,453
                      )Net
      income
                      
                      $
                      1,391
                      
                      
                      $
                      1,136




Operating
income from our operating properties for the nine months ended September 30,
2010 decreased by $207,000 over the prior year period.  The decrease
was due primarily to:





·
            a
      decrease of $458,000 in rents and reimbursements from our River City
      property as a result of an approximate 6.3% decreases in average occupancy
      for the three month ended September 30, 2010 as compared to the three
      months ended September 30,
2009;


44


WINTHROP
REALTY TRUST


FORM
10-Q SEPTEMBER 30, 2010





·
            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 at a lower rental rate;


·
            A
      decrease of $176,000 in rents and reimbursements at our Chicago, Illinois
      (Ontario) property due to an approximate 6.3% decrease in average
      occupancy for the three months ended September 30, 2010 as compared to the
      three months ended September 30,
2009;


·
            a
      decrease of $217,000 in rents and reimbursements from two of our Lisle,
      Illinois properties due to an approximate 24.0% decrease in average
      occupancy at one of the properties and an approximate 8.1% decrease at the
      other property for the three months ended September 30, 2010 as compared
      to the three months ended September 30,
2009;


·
            operating
      expenses of $125,000 and $32,000 incurred during 2010 at our Burlington,
      Vermont and Andover, Massachusetts properties, respectively, which were
      net leased during 2009;


·
            a
      $330,000 increase in losses from our Sealy equity investments due
      primarily to a $211,000 increase in loss related to our Northwest Atlanta,
      Georgia office complex primarily as a result of a decrease in occupancy
      for the three months ended September 30, 2010 as compared to the three
      month ended September 30, 2009.  Losses from the Sealy portfolio
      are primarily the result of non-cash depreciation and amortization
      expenses.  We received cash distributions of $209,000 from the
      Sealy equity investments for the three months ended September 30,
      2010;and


·
            an
      increase of $127,000 of expenses incurred as a result of our litigation
      with our tenant at our Churchill, Pennsylvania property in
      2010.





Partially
offset by:





·
            a
      $225,000 bad debt recovery at our Jacksonville, Florida property with
      respect to a tenant bankruptcy
claim;


·
            a
      $164,000 increase in rents and reimbursements at our Jacksonville, Florida
      as a result of leasing space that was vacated in 2009;
  and


·
            an
      increase of $1,065,000 in equity income in 2010 representing our share of
      operations from our 12 Marc Realty equity investments for the three months
      ended September 30, 2010.  The increase is primarily the result
      of forgiveness of debt income of $2,207,000 at the 1701 East Woodfield
      property of which our share was $1,103,000.  We received cash
      distributions of $1,174,000 from the Marc Realty equity investments during
      the three months ended September 30,
2010.





Depreciation
and amortization expense decreased by $205,000 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 expense related to our
operating properties decreased by $257,000 primarily as a result of normal
amortization of the mortgage loans payable.


45


WINTHROP
REALTY TRUST


FORM
10-Q SEPTEMBER 30, 2010





Loan
Assets





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


For the Three Months EndedSeptember 30,
                      2010
                    
                    
                    September 30,
                      2009Interest
      income
                    
                    $
                    4,185
                    
                    
                    $
                    1,040Equity
      in earnings of preferred equity  investment in Marc
      Realty
                    
                    
                    85
                    
                    
                    
                    86Equity
      in earnings of Lex-Win Concord
                    
                    
                    -
                    
                    
                    
                    500Unrealized
      gain on loan securities carried at fair value
                    
                    
                    581
                    
                    
                    
                    -Equity
      in income of ROIC Riverside
                    
                    
                    234
                    
                    
                    
                    -Equity
      in loss of PSW NYC
                    
                    
                    (1,089
                    )
                    
                    
                    -Operating
      income
                    
                    
                    3,996
                    
                    
                    
                    1,626General
      and administrative expense
                    
                    
                    (186
                    )
                    
                    
                    (190
                    )Net
      income
                    
                    $
                    3,810
                    
                    
                    $
                    1,436




Operating
income from loan assets increased by $2,370,000 from $1,626,000 for the three
months ended September 30, 2009 to $3,996,000 for the three months ended
September 30, 2010.  The increase was due primarily to:





·
            a
      $581,000 unrealized gain on loan securities carried at fair value
      recognized during the three months ended September 30, 2010;
      and


·
            a
      $3,145,000 increase in interest income due primarily to $2,794,000
      recognized on loan assets acquired subsequent to September 30,
      2009.





Partially
offset by:





·
            a
      $1,089,000 loss recognized on our 2010 investment in our PSW NYC
      venture.





REIT Securities





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


For the Three Months EndedSeptember 30,
                              2010
                            
                            
                            September 30,
                              2009Interest
      and dividends
                            
                            $
                            763
                            
                            
                            $
                            1,456Gain
      (loss) on sale of securities carried at fair value
                            
                            
                            (185
                            )
                            
                            
                            676Unrealized
      gain on securities carried at fair value
                            
                            
                            2,490
                            
                            
                            
                            12,578Operating
      income
                            
                            
                            3,068
                            
                            
                            
                            14,710Interest
      expense
                            
                            
                            -
                            
                            
                            
                            -Net
      income
                            
                            $
                            3,068
                            
                            
                            $
                            14,710




Operating
income from REIT securities decreased by $11,642,000 from $14,710,000 for the
three months ended September 30, 2009 to $3,068,000 for the three months ended
September 30, 2010.  The decrease was due primarily to:





·
            a
      $10,088,000 decrease in unrealized gain on securities carried at fair
      value;


·
            a
      $693,000 decrease in interest and dividend income primarily due to the
      sale of certain securities; and


46


WINTHROP
REALTY TRUST


FORM
10-Q SEPTEMBER 30, 2010




·
            a
      $185,000 realized loss on the sale of securities carried at fair value for
      the three months ended September 30, 2010 as compared to a gain of
      $676,000 recognized in the same period last
  year.





Corporate





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




For the Three Months EndedSeptember 30,
                        2010
                      
                      
                      September 30,
                        2009Interest
      income
                      
                      $
                      17
                      
                      
                      $
                      31Interest
      expense
                      
                      
                      (613
                      )
                      
                      
                      (716
                      )Gain
      on extinguishment of debt
                      
                      
                      -
                      
                      
                      
                      445General
      and administrative
                      
                      
                      (2,114
                      )
                      
                      
                      (1,630
                      )State
      and local taxes
                      
                      
                      (7
                      )
                      
                      
                      (14
                      )Operating
      loss
                      
                      $
                      (2,717
                      )
                      
                      $
                      (1,884
                      )




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





·
            a
      $445,000 gain on extinguishment of debt recognized in 2009 resulting from
      our purchase of 100,000 Series B-1 Preferred Shares at a discount to their
      liquidation value; and


·
            a
      $484,000 increase in general and administrative expenses due primarily to
      an increase in the base management fee of
  $549,000.





Partially
offset by:





·
            a
      $103,000 decrease in corporate interest expense due to lower aggregate
      payments in 2010 of $250,000 on our Series B-1 Preferred Shares as a
      result of fewer Series B-1 Preferred Shares outstanding during 2010 which
      was partially offset by a $152,000 increase in interest expense on our
      KeyBank line of credit as a result of our $25,450,000 borrowing in July
      2010.





State
income taxes were $7,000 and $14,000 for the three months ended September 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.


47





WINTHROP
REALTY TRUST


FORM
10-Q SEPTEMBER 30, 2010





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. 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 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 Libor
plus 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 $211,773,000 at
September 30, 2010 and $216,767,000 at December 31, 2009 by approximately
$10,505,000 at September 30, 2010 and approximately $25,704,000 at December 31,
2009.





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 September 30, 2010 (in thousands):





Change in LIBOR(2)-0.26%
                      
                      
                      
                      1%
                      
                      
                      
                      2%
                      
                      
                      
                      3%Change
      in consolidated interest expense
                      
                      $
                      (73
                      )
                      
                      $
                      283
                      
                      
                      $
                      566
                      
                      
                      $
                      849Pro-rata
      share of change in interest expenseof debt on
      non-consolidated entities (1)
                      
                      
                      (20
                      )
                      
                      
                      77
                      
                      
                      
                      237
                      
                      
                      
                      424(Increase)
      decrease in net income
                      
                      $
                      (93
                      )
                      
                      $
                      360
                      
                      
                      $
                      803
                      
                      
                      $
                      1,273





(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 September 30, 2010 was
  0.25625%.





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 and loan securities with a face value aggregating $34,767,000
outstanding as of September 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.


48





WINTHROP
REALTY TRUST


FORM
10-Q SEPTEMBER 30, 2010





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
September 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
September 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.


49




WINTHROP
REALTY TRUST
 FORM
10-Q SEPTEMBER 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:
      November 8, 2010
                By:
                /s/ Michael L. AshnerMichael
      L. AshnerChief
      Executive OfficerDate:
      November 8, 2010
                By:
                /s/ Thomas C. StaplesThomas
      C. StaplesChief
      Financial Officer


50


WINTHROP
REALTY TRUST


FORM
10-Q SEPTEMBER 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
                          
                          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.
                          
                          -10.2
                          
                          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
                          
                          -10.3
                          
                          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, 2009.10.4
                          
                          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,
      2010


51




WINTHROP
REALTY TRUST


FORM
10-Q SEPTEMBER 30, 2010




10.5
                
                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.
                
                -10.6
                
                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.
                
                -10.7
                
                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.
                
                -10.8
                
                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.
                
                -10.9
                
                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.
                
                -10.10
                
                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.
                
                -10.11
                
                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.
                
                -10.12
                
                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.
                
                -10.13
                
                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.
                
                -10.14
                
                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
                
                -10.15
                
                Agreement,
      dated as of July 1, 2009, among Gerald Nudo, Laurence Weiner and WRT
      Realty L.P.
                
                -10.16
                
                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.
                
                -10.17
                
                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.
                
                -


52





WINTHROP
REALTY TRUST


FORM
10-Q SEPTEMBER 30, 2010





10.18
                
                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.
                
                -10.19
                
                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.
                
                -10.20
                
                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.
                
                -10.21
                
                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.
                
                -10.22
                
                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.
                
                -10.23
                
                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.
                
                -10.24
                
                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
                
                -10.25
                
                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.
                
                -10.26
                
                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.
                
                -10.27
                
                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, 2009
                
                -10.28
                
                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, 2009
                
                -31
                
                Certifications
      Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
                
                *32
                
                Certification
      Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
                
                *




* filed
herewith


53