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:  March 31, 2009


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 ý No o





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
o No o





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 filerxNon-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 o No ý





As of May
1, 2009 there were 15,823,250 Common Shares of Beneficial Interest
outstanding.














INDEX





PagePart I.
                  Financial
      InformationItem
      1.
                  Financial
      Statements (Unaudited):Consolidated
      Balance Sheets as of March 31, 2009 and December 31, 2008
                  3Consolidated
      Statements of Operations and Comprehensive Income (Loss) for the Three
      Months Ended March 31, 2009 and March 31, 2008
                  4Consolidated
      Statements of Equity for the Three Months Ended March 31, 2009 and March
      31, 2008
                  5Consolidated
      Statements of Cash Flows for the Three Months Ended March 31, 2009 and
      March 31, 2008
                  6Notes
      to Consolidated Financial Statements
                  8Item
      2.
                  Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
                  32Item
      3.
                  Quantitative
      and Qualitative Disclosure about Market Risk
                  45Item
      4.
                  Controls
      and Procedures
                  46Part
      II.
                  Other
      InformationItem
      6.
                  Exhibits
                  47Signatures
                  
                  48Exhibit
      Index
                  
                  49






2





Item
1. Financial Information





WINTHROP
REALTY TRUST


FORM
10-Q - MARCH 31, 2009





CONSOLIDATED
BALANCE SHEETS





(Unaudited)


(In
thousands, except share and per share data)





March 31, 2009
                
                
                December 31, 2008(as adjusted)ASSETSInvestments
      in real estate, at costLand
                
                $
                21,344
                
                
                $
                21,344Buildings
      and improvements
                
                
                246,292
                
                
                
                246,362267,636
                
                
                
                267,706Less
      - accumulated depreciation
                
                
                (27,227
                )
                
                
                (25,901
                )Investments
      in real estate, net
                
                
                240,409
                
                
                
                241,805Cash
      and cash equivalents
                
                
                41,070
                
                
                
                59,238Restricted
      cash held in escrows
                
                
                5,711
                
                
                
                14,353Loans
      receivable, net of reserve of $2,873 and $2,445,
    respectively
                
                
                18,740
                
                
                
                22,876Accounts
      receivable, net of reserve of $290 and $225, respectively
                
                
                14,370
                
                
                
                14,028Securities
      carried at fair value
                
                
                43,982
                
                
                
                36,516Available
      for sale securities, net
                
                
                186
                
                
                
                184Preferred
      equity investment
                
                
                50,579
                
                
                
                50,624Equity
      investments
                
                
                73,499
                
                
                
                92,202Lease
      intangibles, net
                
                
                24,786
                
                
                
                25,929Deferred
      financing costs, net
                
                
                2,408
                
                
                
                3,218Deposit
      for purchase of Series B-1 Preferred Shares
                
                
                —
                
                
                
                17,081Other
      assets
                
                
                40
                
                
                
                40TOTAL
      ASSETS
                
                $
                515,780
                
                
                $
                578,094LIABILITIESMortgage
      loans payable
                
                $
                228,300
                
                
                $
                229,737Series
      B-1 Cumulative Convertible Redeemable Preferred Shares, $25 per share
      liquidation preference; 1,496,000 and 2,413,105 shares authorized and
      outstanding at March 31, 2009 and December 31, 2008,
      respectively
                
                
                37,400
                
                
                
                60,328Note
      payable
                
                
                —
                
                
                
                9,800Accounts
      payable and accrued liabilities
                
                
                8,386
                
                
                
                8,596Dividends
      payable
                
                
                3,971
                
                
                
                5,934Deferred
      income
                
                
                795
                
                
                
                795Below
      market lease intangibles, net
                
                
                3,412
                
                
                
                3,696TOTAL
      LIABILITIES
                
                
                282,264
                
                
                
                318,886COMMITMENTS
      AND CONTINGENCIESEQUITYWinthrop
      Realty Trust Shareholders' Equity:Common
      Shares, $1 par, unlimited shares authorized; 15,815,787 and 15,754,495
      outstanding at March 31, 2009 and December 31, 2008,
      respectively
                
                
                15,816
                
                
                
                15,754Additional
      paid-in capital
                
                
                461,559
                
                
                
                460,956Accumulated
      distributions in excess of net income
                
                
                (239,688
                )
                
                
                (213,284
                )Accumulated
      other comprehensive loss
                
                
                (15,233
                )
                
                
                (15,176
                )Total
      Winthrop Realty Trust Shareholders' Equity
                
                
                222,454
                
                
                
                248,250Non-controlling
      interests
                
                
                11,062
                
                
                
                10,958Total
      Equity
                
                
                233,516
                
                
                
                259,208TOTAL
      LIABILITIES AND EQUITY
                
                $
                515,780
                
                
                $
                578,094





See Notes
to Consolidated Financial Statements.





3





WINTHROP REALTY
TRUST


FORM
10-Q - MARCH 31, 2009





CONSOLIDATED
STATEMENTS OF OPERATIONS AND


COMPREHENSIVE
INCOME (LOSS)


(Unaudited)


(In
thousands, except per share data)





For the Three Months EndedMarch 31,2009
                                                          
                                                          
                                                          2008RevenueRents
      and reimbursements
                                                          
                                                          $
                                                          10,985
                                                          
                                                          
                                                          $
                                                          10,667Interest
      and dividends
                                                          
                                                          
                                                          1,752
                                                          
                                                          
                                                          
                                                          53312,737
                                                          
                                                          
                                                          
                                                          11,200ExpensesProperty
      operating
                                                          
                                                          
                                                          2,001
                                                          
                                                          
                                                          
                                                          1,867Real
      estate taxes
                                                          
                                                          
                                                          703
                                                          
                                                          
                                                          
                                                          739Depreciation
      and amortization
                                                          
                                                          
                                                          2,899
                                                          
                                                          
                                                          
                                                          3,058Interest
                                                          
                                                          
                                                          4,398
                                                          
                                                          
                                                          
                                                          5,831Impairment
      loss on available for sale securities
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          
                                                          100Provision
      for loss on loan receivable
                                                          
                                                          
                                                          428
                                                          
                                                          
                                                          
                                                          —General
      and administrative
                                                          
                                                          
                                                          1,446
                                                          
                                                          
                                                          
                                                          2,071State
      and local taxes
                                                          
                                                          
                                                          50
                                                          
                                                          
                                                          
                                                          12411,925
                                                          
                                                          
                                                          
                                                          13,790Other
      incomeEarnings
      from preferred equity investments
                                                          
                                                          
                                                          1,015
                                                          
                                                          
                                                          
                                                          2,330Equity
      in earnings (loss) of equity investments
                                                          
                                                          
                                                          (18,163
                                                          )
                                                          
                                                          
                                                          3,812Gain
      on sale of available for sale securities
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          
                                                          2,029Loss
      on sale of securities carried at fair value
                                                          
                                                          
                                                          (87
                                                          )
                                                          
                                                          
                                                          —Gain
      on sale of mortgage-backed securities  available for
      sale
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          
                                                          454Unrealized
      loss on securities carried at fair value
                                                          
                                                          
                                                          (11,148
                                                          )
                                                          
                                                          
                                                          —Gain
      on early extinguishment of debt
                                                          
                                                          
                                                          5,237
                                                          
                                                          
                                                          
                                                          —Interest
      income
                                                          
                                                          
                                                          72
                                                          
                                                          
                                                          
                                                          228(23,074
                                                          )
                                                          
                                                          
                                                          8,853Consolidated
      (loss) income from continuing operations
                                                          
                                                          
                                                          (22,262
                                                          )
                                                          
                                                          
                                                          6,263Income
      from discontinued operations
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          
                                                          49Consolidated
      net (loss) income
                                                          
                                                          
                                                          (22,262
                                                          )
                                                          
                                                          
                                                          6,312Income
      attributable to non-controlling interests
                                                          
                                                          
                                                          (171
                                                          )
                                                          
                                                          
                                                          —Net
      (loss) income attributable to Winthrop Realty Trust
                                                          
                                                          $
                                                          (22,433
                                                          )
                                                          
                                                          $
                                                          6,312Comprehensive
      income (loss)Net
      income (loss)
                                                          
                                                          $
                                                          (22,262
                                                          )
                                                          
                                                          $
                                                          6,312Change
      in unrealized loss on available for sale securities arising during the
      period
                                                          
                                                          
                                                          2
                                                          
                                                          
                                                          
                                                          2,023Change
      in unrealized gain on mortgage-backed securities available for sale
      arising during the period
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          
                                                          190Change
      in unrealized gain (loss) on interest rate derivatives arising during the
      period
                                                          
                                                          
                                                          138
                                                          
                                                          
                                                          
                                                          (651
                                                          )Change
      in unrealized loss from equity investments
                                                          
                                                          
                                                          (197
                                                          )
                                                          
                                                          
                                                          (9,635
                                                          )Less
      reclassification adjustment from (gains) losses included in net
      income
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          
                                                          (2,483
                                                          )Comprehensive
      income (loss)
                                                          
                                                          $
                                                          (22,319
                                                          )
                                                          
                                                          $
                                                          (4,244
                                                          )Per
      Common Share data - BasicIncome
      (loss) from continuing operations attributable to  Winthrop
      Realty Trust
                                                          
                                                          $
                                                          (1.42
                                                          )
                                                          
                                                          $
                                                          0.45Income
      from discontinued operations attributable to Winthrop Realty
      Trust
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          
                                                          —Net
      income (loss) attributable to Winthrop Realty Trust
                                                          
                                                          $
                                                          (1.42
                                                          )
                                                          
                                                          $
                                                          0.45Per
      Common Share data - DilutedIncome
      (loss) from continuing operations attributable to Winthrop Realty
      Trust
                                                          
                                                          $
                                                          (1.42
                                                          )
                                                          
                                                          $
                                                          0.44Income
      from discontinued operations attributable to Winthrop Realty
      Trust
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          
                                                          —Net
      income (loss) attributable to Winthrop Realty Trust
                                                          
                                                          $
                                                          (1.42
                                                          )
                                                          
                                                          $
                                                          0.44Basic
      Weighted-Average Common Shares
                                                          
                                                          
                                                          15,806
                                                          
                                                          
                                                          
                                                          13,416Diluted
      Weighted-Average Common Shares
                                                          
                                                          
                                                          15,806
                                                          
                                                          
                                                          
                                                          13,428Amounts
      attributable to Winthrop Realty Trust
      Common ShareholdersIncome
      (loss) from continuing operations
                                                          
                                                          $
                                                          (22,433
                                                          )
                                                          
                                                          $
                                                          6,263Income
      from discontinued operations
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          
                                                          49Net
      income (loss)
                                                          
                                                          $
                                                          (22,433
                                                          )
                                                          
                                                          $
                                                          6,312




See Notes
to Consolidated Financial Statements.





4





WINTHROP
REALTY TRUST


FORM
10-Q - MARCH 31, 2009





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, 2008
                
                
                15,754
                
                
                $
                15,754
                
                
                $
                460,956
                
                
                $
                (213,284
                )
                
                $
                (15,176
                )
                
                $
                10,958
                
                
                $
                259,208Net
      loss attributable to Winthrop Realty Trust
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                (22,433
                )
                
                
                —
                
                
                
                —
                
                
                
                (22,433
                )Net
      income attributable to non-controlling interests
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                171
                
                
                
                171Distributions
      to non-controlling interests
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                (130
                )
                
                
                (130
                )Contributions
      from non-controlling interests
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                63
                
                
                
                63Dividends
      paid or accrued on Common Shares of beneficial interest ($0.25 per
      share)
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                (3,971
                )
                
                
                —
                
                
                
                —
                
                
                
                (3,971
                )Change
      in unrealized gain on available for sale securities, net of
      reclassification adjustment for amounts included in net
    income
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                2
                
                
                
                —
                
                
                
                2Change
      in unrealized loss on interest rate derivatives
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                138
                
                
                
                —
                
                
                
                138Change
      in unrealized loss from equity investments
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                (197
                )
                
                
                —
                
                
                
                (197
                )Stock
      issued pursuant to dividend reinvestment plan
                
                
                62
                
                
                
                62
                
                
                
                603
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                665Balance,
      March 31, 2009
                
                
                15,816
                
                
                $
                15,816
                
                
                $
                461,559
                
                
                $
                (239,688
                )
                
                $
                (15,233
                )
                
                $
                11,062
                
                
                $
                233,516




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, 2007
                
                
                66,292
                
                
                $
                66,292
                
                
                $
                358,145
                
                
                $
                (134,531
                )
                
                $
                (8,090
                )
                
                $
                9,978
                
                
                $
                291,794Net
      loss attributable to Winthrop Realty Trust
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                6,312
                
                
                
                —
                
                
                
                —
                
                
                
                6,312Net
      income attributable to non-controlling interests
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —Distributions
      to non-controlling interests
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —Contributions
      from non-controlling interests
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —Dividends
      paid or accrued on Common Shares of beneficial interest ($0.065 per
      share)
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                (4,417
                )
                
                
                —
                
                
                
                —
                
                
                
                (4,417
                )Change
      in unrealized gain on available for sale securities, net of
      reclassification adjustment for amounts included in net
    income
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                (6
                )
                
                
                —
                
                
                
                (6
                )Change
      in unrealized gain on mortgage-backed securities held for sale, net of
      reclassification adjustment for amounts included in net
    income
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                (264
                )
                
                
                —
                
                
                
                (264
                )Change
      in unrealized loss on interest rate derivatives
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                (651
                )
                
                
                —
                
                
                
                (651
                )Change
      in unrealized loss from equity investments
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                (9,635
                )
                
                
                —
                
                
                
                (9,635
                )Stock
      issued pursuant to dividend reinvestment plan
                
                
                322
                
                
                
                322
                
                
                
                1,309
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                1,631Conversion
      of Series B-1 Preferred Shares to Common Shares
                
                
                1,333
                
                
                
                1,333
                
                
                
                4,463
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                5,796Balance,
      March 31, 2008
                
                
                67,947
                
                
                $
                67,947
                
                
                $
                363,917
                
                
                $
                (132,636
                )
                
                $
                (18,646
                )
                
                $
                9,978
                
                
                $
                290,560




See Notes
to Consolidated Financial Statements.





5





WINTHROP
REALTY TRUST


FORM
10-Q - MARCH 31, 2009





CONSOLIDATED
STATEMENTS OF CASH FLOWS


(Unaudited)


(In
thousands)





For the Three Months EndedMarch 31,2009
                
                
                2008Cash
      flows from operating activitiesNet
      income (loss)
                
                $
                (22,262
                )
                
                $
                6,312Adjustments
      to reconcile net income (loss) to net cash provided
      by  operating activitiesDepreciation
      and amortization (including amortization of deferred  financing
      costs)
                
                
                1,892
                
                
                
                2,021Amortization
      of lease intangibles
                
                
                1,313
                
                
                
                1,473Straight-lining
      of rental income
                
                
                324
                
                
                
                225Earnings
      of preferred equity investments less than (in excess of)
      distributions
                
                
                45
                
                
                
                116Earnings
      of equity investments less than (in excess of)
    distributions
                
                
                18,506
                
                
                
                (2,596
                )Restricted
      cash held in escrows
                
                
                714
                
                
                
                840Gain
      on sale of mortgage-backed securities available for sale
                
                
                —
                
                
                
                (454
                )Loss
      on sale of securities carried at fair value
                
                
                87
                
                
                
                —Gain
      on sale of available for sale securities
                
                
                —
                
                
                
                (2,029
                )Unrealized
      loss on securities carried at fair value
                
                
                11,148
                
                
                
                —Gain
      on early extinguishment of debt
                
                
                (5,237
                )
                
                
                —Impairment
      loss
                
                
                —
                
                
                
                100Provision
      for loss on loan receivable
                
                
                428
                
                
                
                —Bad
      debt expense (recovery)
                
                
                65
                
                
                
                (2
                )Interest
      receivable on loans
                
                
                4
                
                
                
                (41
                )Net
      change in accounts receivable
                
                
                (731
                )
                
                
                8,745Net
      change in accounts payable and accrued liabilities
                
                
                127
                
                
                
                (3,359
                )Net
      change in other assets
                
                
                —
                
                
                
                (71
                )Net
      cash provided by operating activities
                
                
                6,423
                
                
                
                11,280Cash
      flows from investing activitiesInvestments
      in real estate
                
                
                (949
                )
                
                
                (1,065
                )Proceeds
      from repayments of mortgage-backed securities available for
      sale
                
                
                —
                
                
                
                78,318Investment
      in equity investments
                
                
                —
                
                
                
                (5,087
                )Investment
      in real estate loans
                
                
                (1,596
                )
                
                
                —Proceeds
      from preferred equity investments
                
                
                —
                
                
                
                18,416Purchase
      of securities carried at fair value
                
                
                (25,668
                )
                
                
                —Purchase
      of available for sale securities
                
                
                —
                
                
                
                (4,850
                )Proceeds
      from sale of securities carried at fair value
                
                
                6,967
                
                
                
                —Proceeds
      from sale of available for sale securities
                
                
                —
                
                
                
                57,699Decrease
      (increase) in restricted cash held in escrows
                
                
                2,635
                
                
                
                (107
                )Issuance
      and acquisition of loans receivable
                
                
                —
                
                
                
                (2,465
                )Collection
      of loans receivable
                
                
                5,300
                
                
                
                133Net
      cash (used in) provided by investing activities
                
                
                (13,311
                )
                
                
                140,992





(Continued
on next page)





See Notes
to Consolidated Financial Statements.





6





WINTHROP
REALTY TRUST


FORM
10-Q - MARCH 31, 2009





CONSOLIDATED
STATEMENTS OF CASH FLOWS


(Unaudited)


(In
thousands)


(Continued
from previous page)





For the Three Months EndedMarch 31,2009
                    
                    
                    2008Cash
      flows from financing activitiesRepayment
      of borrowings under repurchase agreements
                    
                    $
                    —
                    
                    
                    $
                    (75,175
                    )Proceeds
      from mortgage loans payable
                    
                    
                    49
                    
                    
                    
                    161Restricted
      cash held in escrows
                    
                    
                    5,293
                    
                    
                    
                    30Principal
      payments of mortgage loans payable
                    
                    
                    (1,486
                    )
                    
                    
                    (1,235
                    )Payments
      of note payable
                    
                    
                    (9,800
                    )
                    
                    
                    —Deferred
      financing costs
                    
                    
                    —
                    
                    
                    
                    (24
                    )Dividends
      paid on Common Shares
                    
                    
                    (5,934
                    )
                    
                    
                    (16,242
                    )Issuance
      of Common Shares under dividend reinvestment plan
                    
                    
                    665
                    
                    
                    
                    1,631Contribution
      from non-controlling interest
                    
                    
                    63
                    
                    
                    
                    —Distribution
      to non-controlling interest
                    
                    
                    (130
                    )
                    
                    
                    —Net
      cash used in financing activities
                    
                    
                    (11,280
                    )
                    
                    
                    (90,854
                    )Net
      increase (decrease) in cash and cash equivalents
                    
                    
                    (18,168
                    )
                    
                    
                    61,418Cash
      and cash equivalents at beginning of period
                    
                    
                    59,238
                    
                    
                    
                    36,654Cash
      and cash equivalents at end of period
                    
                    $
                    41,070
                    
                    
                    $
                    98,072Supplemental Disclosure of Cash Flow
      InformationInterest
      paid
                    
                    $
                    4,593
                    
                    
                    $
                    9,237—Taxes
      paid
                    
                    $
                    30
                    
                    
                    $
                    39Supplemental Disclosure of Non-Cash Investing and
      Financing ActivitiesDividends
      accrued on Common Shares
                    
                    $
                    3,971
                    
                    
                    $
                    4,417Capital
      expenditures accrued
                    
                    $
                    158
                    
                    
                    $
                    254Conversion
      of Series B-1 Preferred Shares into Common Shares
                    
                    $
                    —
                    
                    
                    $
                    5,796Redemption
      of Series B-1 Preferred Shares
                    
                    $
                    (17,081
                    )
                    
                    $
                    —Deposit
      on redemption of Series B-1 Preferred Shares
                    
                    $
                    17,081
                    
                    
                    $
                    —





See Notes
to Consolidated Financial Statements.





7





WINTHROP
REALTY TRUST


FORM
10-Q MARCH 31, 2009





NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS





1.
              Organization





Winthrop
Realty Trust  (the “REIT”) is an unincorporated association in the
form of a business trust organized in Ohio under a Declaration of Trust dated
August 1, 1961, as amended and restated on December 31, 2005, which has as its
stated principal business activity the ownership and management of, and lending
to, real estate and related investments.





The REIT
conducts its business through WRT Realty L.P., a Delaware limited partnership
(the “Operating Partnership”). The REIT is the sole general partner of, and owns
directly and indirectly, 100% of the limited partnership interest in the
Operating Partnership. The transfer of the REIT’s assets and liabilities to the
Operating Partnership had no effect on the REIT’s financial
statements.  All references to the “Trust” refer to the REIT 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 operating properties (“operating properties”); (ii)
origination and acquisition of loans and debt securities secured directly or
indirectly by commercial real property (“loan assets and loan securities”),
including collateral mortgage-backed securities and collateral debt obligation
securities; and (iii) equity and debt interests in other REITs (“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 presented 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
REIT’s Annual Report on Form 10-K for the year ended December 31, 2008
filed with the SEC.  In the opinion of management, all adjustments
(which include only normal recurring adjustments) considered necessary for fair
statements have been included.  The results of operations for the
three months ended March 31, 2009 are not necessarily indicative of the
operating results for the full year.





The
accompanying unaudited consolidated financial statements represent the
consolidated results of the REIT, its wholly-owned taxable REIT subsidiary, WRT
TRS Management Corp., the Operating Partnership, wholly-owned subsidiaries and
certain partially-owned entities in which the Operating Partnership owns either
(i) a controlling interest or (ii) is the primary beneficiary.  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.





Reverse Stock
Split





In
November 2008 the Trust effected a 1-for-5 reverse stock split (the
"Reverse Split") of its Common Shares of Beneficial Interest (“Common Shares”)
pursuant to which each five Common Shares issued and outstanding as of the close
of the market on November 28, 2008 were automatically combined into one
Common Share, subject to the elimination of fractional shares.  All
references to Common Shares outstanding, per Common Share amounts and stock
option data have been restated to reflect the effect of the Reverse Split
for all periods presented.





Reclassifications





Certain
prior year balances have been reclassified in order to conform to the current
year’s presentation.  Discontinued operations for the three month
period ended March 31, 2008 include the Trust’s property in Biloxi,
Mississippi.  Also during the quarter ended March 31, 2008, the Trust
placed its St. Louis, Missouri property back into continuing
operations.





8




WINTHROP
REALTY TRUST
 FORM
10-Q MARCH 31, 2009
 
 NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


Variable Interest
Entities





The Trust
has evaluated its investments to determine whether they constitute a
variable interest in a variable interest entity (“VIE”).  FIN 46
requires a VIE to be consolidated by its primary beneficiary
(“PB”).  The PB is the party that absorbs a majority of the VIE’s
anticipated losses and/or a majority of the expected returns.





In
December 2008 the Trust adopted FASB Staff Position FAS 140-4 (“FSP FAS 140-4”)
and FIN 46(R)-8 (“FIN 46R-8”), Disclosures by Public Entities
(Enterprises) about Transfers of Financial Assets and Interests in Variable
Interest Entities. Among other things FSP FAS 140-4 and FIN 46(R)-8
require enhanced disclosure with respect to variable interest entities
to provide financial statements users with an understanding of the significant
judgments and assumptions made by the Trust in its determination of whether it
must consolidate variable interest entities.





At March
31, 2009 the Trust has identified five convertible mezzanine loans related to
the Marc Realty portfolio to be variable interests in a VIE.  The
Trust has determined that it is the primary beneficiary of the underlying
borrowing entity of one of these mezzanine loans and consolidates this
investment.  The Trust has determined that it is not the primary
beneficiary of the underlying borrowing entities of the other four mezzanine
loans as it does not anticipate absorbing a majority of the expected losses due
to its preferred return position.  These loans, with a carrying value
of $3,923,000 net of other-than-temporary impairment charges of $3,331,000, are
accounted for as preferred equity in the Trust’s consolidated balance
sheet.


Earnings Per
Share





The Trust
has calculated earnings per share in accordance with SFAS No.128, “Earnings Per Share,”and EITF 03-06“Participating Securities and the Two
Class Method Under FASB Statement No. 128 Earnings Per
Share.”  SFAS No.128 requires that Common Share equivalents be
excluded from the weighted-average shares outstanding for the calculation of
basic earnings per share.  EITF 03-06 requires that computation of
earnings per share reflect the impact of participating
securities.  The holders of the Series B-1 Cumulative Convertible
Redeemable Preferred Shares (“Series B-1 Preferred Shares”) are entitled to
receive cumulative preferential dividends equal to the greater of (i) 6.5% of
the liquidation preference or (ii) cash dividends paid on the Common
Shares.





The
reconciliation of Common Shares outstanding for the basic and diluted earnings
per share calculation is as follows (in thousands, except per share
data):





Three
      Months Ended
                                March 31,2009
                              
                              
                              2008BasicIncome
      (loss) from continuing operationsattributable
      to Winthrop Realty Trust
                              
                              $
                              (22,433
                              )
                              
                              $
                              6,263Allocation
      of undistributed earnings to Series B-1 Preferred
      Shares
                              
                              
                              —
                              
                              
                              
                              (339
                              )Income
      from discontinued operations attributableto
      Winthrop Realty Trust
                              
                              
                              —
                              
                              
                              
                              49Net
      income (loss) attributable to Winthrop RealtyTrust
      applicable to Common Shares for earningsper
      share purposes
                              
                              $
                              (22,433
                              )
                              
                              $
                              5,973Basic
      weighted-average Common Shares
                              
                              
                              15,806
                              
                              
                              
                              13,416Income
      (loss) from continuing operationsattributable
      to Winthrop Realty Trust
                              
                              $
                              (1.42
                              )
                              
                              $
                              0.45Income
      from discontinued operations attributableto
      Winthrop Realty Trust
                              
                              
                              —
                              
                              
                              
                              —Net
      income (loss) attributable to Winthrop RealtyTrust
      per Common Share
                              
                              $
                              (1.42
                              )
                              
                              $
                              0.45DilutedIncome
      (loss) from continuing operationsattributable
      to Winthrop Realty Trust
                              
                              $
                              (22,433
                              )
                              
                              $
                              6,263Allocation
      of undistributed earnings toSeries
      B-1 Preferred Shares
                              
                              
                              —
                              
                              
                              
                              (339
                              )Income
      from discontinued operations attributableto
      Winthrop Realty Trust
                              
                              
                              —
                              
                              
                              
                              49Net
      income (loss) attributable to Winthrop RealtyTrust
      applicable to Common Shares for earningsper
      share purposes
                              
                              $
                              (22,433
                              )
                              
                              $
                              5,973Basic
      weighted-average Common Shares
                              
                              
                              15,806
                              
                              
                              
                              13,416Series
      B-1 Preferred Shares (1)
                              
                              
                              —
                              
                              
                              
                              —Stock
      options (2)
                              
                              
                              —
                              
                              
                              
                              12Diluted
      weighted-average Common Shares
                              
                              
                              15,806
                              
                              
                              
                              13,428Income
      (loss) from continuing operationsattributable
      to Winthrop Realty Trust
                              
                              $
                              (1.42
                              )
                              
                              $
                              0.44Income
      from discontinued operations attributableto
      Winthrop Realty Trust
                              
                              
                              —
                              
                              
                              
                              —Net
      income (loss) attributable to Winthrop RealtyTrust
      per Common Share
                              
                              $
                              (1.42
                              )
                              
                              $
                              0.44




9




WINTHROP
REALTY TRUST
 FORM
10-Q MARCH 31, 2009
 
 NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


(1)
            The
      Trust’s Series B-1 Preferred Shares were anti-dilutive for the three
      months ended March 31, 2009 and 2008 and are not included in the
      weighted-average shares outstanding for the calculation of diluted
      earnings per Common Share.


(2)
            The
      Trust’s outstanding stock options were anti-dilutive for the three months
      ended March 31, 2009 and are not included in the weighted average shares
      outstanding for the calculation of diluted earnings per Common
      Share.





Recently Issued Accounting
Standards




In
November 2008, EITF Issue No. 08-6, “Equity Method Investment Accounting
Considerations”(“EITF 08-6”), was ratified.  EITF 08-6
addresses questions about the potential effect of FASB Statement No. 141R,
“Business Combinations,”and FASB Statement No. 160, “Non-controlling Interests in
Consolidated Financial Statements – An Amendment of ARB No. 51, on Equity Method
Accounting Under APB 18.”EITF 08-6 generally continues
existing practices under APB 18, including the use of a cost-accumulation
approach to initial measurement of the investment.  EITF 08-6 does not
require the investor to perform a separate impairment test on the underlying
assets of an equity method investment.  However, an equity method
investor is required to recognize its proportionate share of impairment charges
recognized by the investee, adjusted for basis differences, if any, between the
investee’s carrying amount for the impaired assets and the cost allocated to
such assets by the investor.  The investor is also required to perform
an overall other-than-temporary impairment test of its investment in accordance
with APB 18.  EITF 08-6 was effective for fiscal years beginning on or
after December 15, 2008 and interim periods within those fiscal years, and is
applied prospectively.  The implementation of EITF 08-6 on January 1,
2009 did not have a material impact on the Trust’s consolidated financial
statements.


In June
2008 FASB Staff Position No. EITF 03-6-1, "Determining Whether Instruments
Granted in Share-Based Payment Transactions Are Participating Securities"
( "FSP EITF 03-6-1" ) was issued which states that share-based payment awards
which entitle their holders to receive non-forfeitable dividends before vesting
should be considered participating securities. As participating securities,
these instruments should be included in the calculation of basic earnings per
share.  FAS EITF 03-6-1 is effective for financial statements issued
for fiscal years beginning after December 15, 2008, and interim periods within
those years.  The Trust has adopted FSP EITF 03-6-1 which had no impact on
the Trust’s calculation of basic earnings per share.




In June
2008 EITF Issue 07-5, “Determining Whether an Instrument (or embedded Feature)
is Indexed to an Entity’s Own Stock” (“FSP EITF 07-5”) was
ratified.  Paragraph 11(a) of SFAS 133 specifies that a contract that
would otherwise meet the definition of a derivative but is both (a) indexed to
the company’s own stock and (b) classified in shareholder’s equity in the
statement of financial position would not be considered a derivative financial
instrument.  FSP EITF 07-5 provides a new two-step model to be applied
in determining whether a financial instrument or an embedded feature is indexed
to an issuer’s own stock and thus be able to qualify for the SFAS 133 paragraph
11(a) scope exception.  FSP EITF 07-5 is effective on January 1,
2009.  The Trust has adopted FSP EITF 07-5 which had no impact on its
consolidated financial statements.




In May
2008 FASB Staff Position No. APB 14-1, "Accounting for Convertible Debt
Instruments That May Be Settled in Cash Upon Conversion (Including
Partial Settlement)" ("FSP APB
14-1"), was issued which clarifies that convertible debt instruments that may be
settled in cash upon conversion (including partial cash settlement) are not
addressed by paragraph 12 of APB Opinion No. 14, "Accounting for Convertible Debt and
Debt Issued with Stock Purchase Warrants." Additionally, FSP APB 14-1
specifies that issuers of such instruments should separately account for the
liability and equity components in a manner that will reflect the entity’s
nonconvertible debt borrowing rate when interest cost is recognized in
subsequent periods. FSP APB 14-1 is effective for financial statements issued
for fiscal years beginning after December 15, 2008, and interim periods within
those fiscal years. The Trust has adopted FSP APB 14-1 which had no impact on
its consolidated financial statements.





10




WINTHROP
REALTY TRUST
 FORM
10-Q MARCH 31, 2009
 
 NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


In March
2008 Statement No. 161, “Disclosures about Derivative
Instruments and Hedging Activities” (“SFAS 161”), was issued which is
intended to improve financial reporting about derivative instruments and hedging
activities by requiring enhanced disclosures to enable investors to better
understand their effects on an entity’s financial position, financial
performance and cash flows. This statement is effective for fiscal years
beginning on or after November 15, 2008.  The Trust has adopted SFAS
161 which did not have a material impact on its consolidated financial
statements.





In
February 2008 FASB Staff Position (“FSP”) on “Accounting Transfers of Financial
Assets and Repurchase Financing Transactions” (“FSP FAS 140-3.”), was
issued which addresses the issue of whether or not repurchase financing
transactions should be viewed as two separate transactions or as one “linked”
transaction. FSP FAS 140-3 is effective for fiscal years beginning after
November 15, 2008 and applies only to original transfers made after that date;
early adoption is not allowed. The Trust has adopted FSP FAS 140-3 which had no
impact on its consolidated financial statements.





In
December 2007 Statement No. 141 (revised 2007), “Business Combinations” (“SFAS
141(R)”), was issued. The objective of SFAS 141(R) is to improve the relevance,
representational faithfulness, and comparability of the information that a
reporting entity provides in its financial reports about a business combination
and its effects. To accomplish that, SFAS 141(R) establishes principles and
requirements for how the acquirer: (i) recognizes and measures in its financial
statements the identifiable assets acquired, the liabilities assumed, and any
non-controlling interest in the acquiree, (ii) recognizes and measures the
goodwill acquired in the business combination or a gain from a bargain purchase,
(iii) determines what information to disclose to enable users of the financial
statements to evaluate the nature and financial effects of the business
combination and (iv) provides that transaction costs will be expensed. This
statement applies prospectively to business combinations for which the
acquisition date is on or after the first annual reporting period beginning on
or after December 15, 2008; early adoption is not allowed.  The Trust has
adopted SFAS 141(R) which had no impact on its consolidated financial
statements.





In
December 2007 Statement No. 160, “Non-controlling Interests in
Consolidated Financial Statements - an Amendment of ARB No. 51”(“SFAS
160”), was issued which establishes and expands accounting and reporting
standards for entities that have outstanding minority interests, which are
re-characterized as non-controlling interests, in a subsidiary. It requires
consolidated net income to be reported at amounts that include the amounts
attributable to both the parent and the non-controlling interest. It also
requires disclosure, on the face of the consolidated statement of income, of the
amounts of consolidated net income attributable to the parent and to the
non-controlling interest.  Previously, net income attributable to the
non-controlling interest generally was reported as an expense in arriving at
consolidated net income. SFAS 160 results in more transparent reporting of the
net income attributable to non-controlling interests and is effective for fiscal
years, and interim periods within those fiscal years, beginning on or after
December 15, 2008. The effective date of this Statement is the same as that of
the related Statement 141(R); early adoption is not allowed. The
adoption of SFAS 160 on January 1, 2009 resulted in (i) the reclassification of
minority interests in consolidated subsidiaries to non-controlling interests in
consolidated subsidiaries, a component of permanent equity on our consolidated
balance sheets, (ii) the reclassification of minority interest expense to net
income attributable to non-controlling interests on our consolidated statements
of operations, and (iii) additional disclosures, including a consolidated
statement of changes in partners’ equity in quarterly reporting
periods.


In April
2009 FASB Staff Position No. FAS 115-2 and FAS 124-2, “Recognition and Presentation of
Other-Than-Temporary Impairments” (“FSP FAS 115-2” and “FAS 124-2”) was
issued.  This FSP expands and increases the frequency of existing
disclosures about other-than-temporary impairments for debt securities. It
requires a more detailed, risk-oriented breakdown of major security types and
related information currently required by SFAS No. 115. In addition, FSP 115-2
and 124-2 requires that the annual disclosures in SFAS No. 115 and FSP FAS 115-1
and FAS 124-1, “The Meaning of
Other-Than-Temporary Impairment and Its Application to Certain
Investments,” be made for interim periods (including the aging of
securities with unrealized losses). This FSP also requires new disclosures to
help users of financial statements understand the significant inputs used in
determining a credit loss, as well as a rollforward of that amount each period.
FSP FAS 115-2 and FAS 124-2 is effective for interim and annual reporting
periods ending after June 15, 2009, with early adoption permitted for periods
ending after March 15, 2009.  The Trust did not elect early adoption and is
evaluating the impact of the adoption of FSP FAS 115-2 and FAS 124-2 on its
consolidated financial statements.








11


WINTHROP
REALTY TRUST
 FORM
10-Q MARCH 31, 2009
 
 NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS





In April
2009 FSP FAS 157-4, “Determining Fair Value When the
Volume and Level of Activity for the Asset or Liability Have Significantly
Decreased and Identifying Transactions That Are Not Orderly”(“FSP FAS 157-4”) was
issued.  This FSP provides additional guidance for estimating fair value in
accordance with SFAS No. 157, “Fair Value Measurements,”
when the volume and level of activity for the asset or liability have
significantly decreased. FSP FAS 157-4 includes guidance on identifying
circumstances that indicate a transaction is not orderly.  This FSP
emphasizes that even if there has been a significant decrease in the volume and
level of activity for the asset or liability and regardless of the valuation
technique(s) used, the objective of a fair value measurement remains the same –
that is, the price that would be received to sell an asset or paid to transfer a
liability in an orderly transaction (that is, not a forced liquidation or
distressed sale) between market participants at the measurement date under
current market conditions. Accordingly, this FSP does not apply to quoted prices
for an identical asset or liability in an active market (that is, a Level 1
input). This FSP is effective for interim and annual reporting periods ending
after June 15, 2009, early adoption is permitted for periods ending after March
15, 2009. The Trust did not elect early adoption and is evaluating the impact of
the adoption of FSP FAS 157-4 on its consolidated financial
statements.





In April
2009, FASB Staff Position No. FAS 107-1 and APB 28-1, “Interim Disclosures about Fair Value
of Financial Instruments” (“FSP FAS 107-1 and APB
28-1”), was issued.  This FSP amends SFAS No. 107, “Disclosures about FairValue of Financial
Instruments,” to require disclosures about fair value of financial
instruments for interim reporting periods of publicly traded companies as well
as in annual financial statements. This FSP also amends APB Opinion No. 28,
“Interim Financial
Reporting,”to require those
disclosures in summarized financial information at interim reporting
periods.  FSP FAS 107-1 and APB 28-1 applies to all financial instruments
within the scope of SFAS No. 107 held by publicly traded companies.  FSP
FAS 107-1 and APB 28-1 require disclosure in interim reporting periods and
annual reporting periods of the fair value of all financial instruments for
which it is practicable to estimate that value, whether recognized or not
recognized in the statement of financial position, as required under SFAS No.
107, including disclosure of the method(s) and significant assumptions used to
estimate the fair value of financial instruments, including any changes
therein.  This FSP is effective for interim reporting periods ending after
June 15, 2009, with early adoption permitted for periods ending after March 15,
2009 and does not require disclosures for earlier periods presented for
comparative purposes at initial adoption. In periods after initial adoption,
this FSP requires comparative disclosures only for periods ending after initial
adoption.  The Trust did not elect early adoption and is evaluating the
impact of the adoption of FSP FAS 107-1 and APB 28-1 on its consolidated
financial statements.





3.
              Fair
      Value Measurement





On
January 1, 2008 the Trust adopted Statement of Financial Accounting Standards
No. 157, “Fair Value
Measurements” (“SFAS No. 157”). SFAS No. 157 defines fair value,
establishes a framework for measuring fair value, and expands disclosures about
fair value measurements. SFAS No. 157 applies to reported balances that are
required or permitted to be measured at fair value under existing accounting
pronouncements. Accordingly, the standard does not require any new fair value
measurements of reported balances.  Cash equivalents, derivative
financial instruments, available for sale securities, and securities carried at
fair value are reported at fair value.





SFAS No.
157 emphasizes that fair value is a market-based measurement, not an
entity-specific measurement. Therefore, a fair value measurement should be
determined based on the assumptions that market participants would use in
pricing the asset or liability. As a basis for considering market participant
assumptions in fair value measurements, SFAS No. 157 establishes 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).





Level 1
inputs utilize unadjusted quoted prices in active markets for identical assets
or liabilities that the Trust has the ability to access. Level 2 inputs are
inputs other than quoted prices included in Level 1 that are observable for the
asset or liability, either directly or indirectly. Level 2 inputs may include
quoted prices for similar assets and liabilities in active markets, as well as
inputs that are observable for the asset or liability other than quoted prices,
such as interest rates, foreign exchange rates, and yield curves that are
observable at commonly quoted intervals. Level 3 inputs are unobservable inputs
for the asset or liability which are typically based on an entity’s own
assumptions, as there is little, if any, related market activity. In instances
where the determination of the fair value measurement is based on inputs from
different levels of the fair value hierarchy, the level in the fair value
hierarchy within which the entire fair value measurement falls is based on the
lowest level input that is significant to the fair value measurement in its
entirety. The Trust’s assessment of the significance of a particular input to
the fair value measurement in its entirety requires judgment, and considers
factors specific to the asset or liability.





12




WINTHROP
REALTY TRUST
 FORM
10-Q MARCH 31, 2009
 
 NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


Level 1
securities include highly liquid government bonds, mortgage products and
exchange-traded equities. If quoted market prices are not available, then fair
values are estimated by using pricing models, quoted prices of securities with
similar characteristics, or discounted cash flows. Examples of such instruments,
which would generally be classified within Level 2 of the valuation hierarchy,
include certain derivative financial instruments. In cases where there is
limited activity or less transparency around inputs to the valuation, securities
are classified within Level 3 of the valuation hierarchy. Securities classified
within Level 3 include, for example, residual interests in securitizations and
other less liquid securities.





In
October 2008 FASB Staff Position FAS 157-3 ("FSP FAS 157-3"), “Determining the Fair Value of a
Financial Asset When the Market For That Asset is Not Active,” was
adopted which provides clarification that determination of fair value in an
inactive market depends on facts and circumstances and may require the use of
significant judgment to determine whether certain individual transactions are
forced liquidations or distressed sales. In cases where the volume and level of
trading activity for an asset has declined significantly, the available prices
vary significantly over time or among market participants, or the prices are not
current, observable inputs might not be relevant and could require significant
adjustment. In addition, FSP FAS 157-3 also clarifies that broker or pricing
service quotes may be appropriate inputs when measuring fair value, but are not
necessarily determinative if an active market does not exist for the financial
asset. Regardless of the valuation techniques used, FSP FAS 157-3 requires that
an entity include appropriate risk adjustments that market participants would
make for nonperformance and liquidity risks. The Trust has always considered
nonperformance and liquidity risks in its analysis of loan and collateral
underlying its securities and does not believe the adoption of FSP FAS 157-3 had
a material impact on its consolidated financial statements.





The
following is a description of the valuation methodologies used for instruments
measured at fair value, as well as the general classification of such
instruments pursuant to the valuation hierarchy.





Recurring
Measurements





Cash
Equivalents





The
Trust’s cash equivalents are classified within Level 1 of the fair value
hierarchy because they are valued using quoted market prices. The types of
instruments that are valued based on quoted market prices in active markets
include most U.S. government treasury bills with original maturities of less
than 90 days and money market securities acquired through overnight
sweeps.





Available
for Sale Securities





Where
quoted prices are available in an active market, securities are classified
within Level 1 of the valuation hierarchy. At March 31, 2009 all of the Trust’s
available for sale securities are classified within Level 1 of the valuation
hierarchy.




Securities
Carried at Fair Value





At March
31, 2009 all of the Trust’s securities carried at fair value are classified
within Level 1 of the fair value hierarchy.





Derivative
Financial Instruments





The Trust
uses interest rate swaps to manage its interest rate risk. The valuation of
these instruments is determined using both quantitative and qualitative
valuation techniques including discounted cash flow analysis on the expected
cash flows of each derivative as well as potential credit risks with the swap
counterparty. This analysis reflects the contractual terms of the derivatives,
including the period to maturity, and uses observable market-based inputs,
including interest rate curves, and implied volatilities. The fair values of
interest rate swaps are determined using the market standard methodology of
netting the discounted future fixed cash receipts (or payments) and the
discounted expected variable cash payments (or receipts). The variable cash
payments (or receipts) are based on an expectation of future interest rates
(forward curves) derived from observable market interest rate
curves.





13




WINTHROP
REALTY TRUST
 FORM
10-Q MARCH 31, 2009
 
 NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


To comply
with the provisions of SFAS No. 157, the Trust incorporates credit valuation
adjustments to appropriately reflect both its own nonperformance risk and the
respective counterparty’s nonperformance risk in the fair value measurements. In
adjusting the fair value of its derivative contracts for the effect of
nonperformance risk, the Trust has considered the impact of netting as well as
any applicable credit enhancements, such as collateral postings, thresholds,
mutual puts and guarantees.





Although
the Trust has determined that the majority of the inputs used to value its
derivatives fall within Level 2 of the fair value hierarchy, the credit
valuation adjustments associated with its derivatives utilize Level 3 inputs,
such as estimates of current credit spreads, to evaluate the likelihood of
default by itself and its counterparties. However, as of March 31, 2009, the
Trust assessed the significance of the impact of the credit valuation
adjustments on the overall valuation of its derivative positions and has
determined that the credit valuation adjustments are not significant to the
overall valuation of its derivatives. As a result, the Trust has determined that
the derivative valuations in their entirety should be classified in Level 2 of
the fair value hierarchy.





The table
below presents the Trust’s assets and liabilities as of March 31,
2009,  measured at fair value, aggregated by the level in the fair
value hierarchy within which those measurements fall(in
thousands):





Recurring Basis
              
              Quoted
      Prices in Active
                Markets
      for Identical Assets
                and
      Liabilities (Level 1)
              
              
              Significant
      Other
                Observable
      Inputs
                (Level
      2)
              
              
              Significant
                Unobservable
                Inputs
      (Level 3)
              
              
              TotalAssetsCash
      equivalents (1)
              
              $
              15,000
              
              
              $
              —
              
              
              $
              —
              
              
              $
              15,000Available
      for sale securities
              
              
              186
              
              
              
              —
              
              
              
              —
              
              
              
              186Securities
      carried at fair value
              
              
              43,982
              
              
              
              —
              
              
              
              —
              
              
              
              43,982$
              59,168
              
              
              $
              —
              
              
              $
              —
              
              
              $
              59,168LiabilitiesDerivative
      liabilities
              
              $
              —
              
              
              $
              589
              
              
              $
              —
              
              
              $
              589





(1)
            Does
      not include cash on hand of approximately $26,070 at March 31,
      2009.





The table
below presents the Trust’s assets and liabilities measured at fair value on a
recurring basis as of December 31, 2008, aggregated by the level in the fair
value hierarchy within which those measurements fall(in
thousands):





Recurring Basis
              
              Quoted
      Prices in Active
                Markets
      for Identical Assets
                and
      Liabilities (Level 1)
              
              
              SignificantOther
                ObservableInputs
                (Level
      2)
              
              
              Significant
                Unobservable
                Inputs
      (Level 3)
              
              
              TotalAssetsCash
      equivalents (1)
              
              $
              43,272
              
              
              $
              —
              
              
              $
              —
              
              
              $
              43,272Available
      for sale securities
              
              
              184
              
              
              
              —
              
              
              
              —
              
              
              
              184Securities
      carried at fair value
              
              
              36,516
              
              
              
              —
              
              
              
              —
              
              
              
              36,516$
              79,972
              
              
              $
              —
              
              
              $
              —
              
              
              $
              79,972LiabilitiesDerivative
      liabilities
              
              $
              —
              
              
              $
              765
              
              
              $
              —
              
              
              $
              765





(1)
            Does
      not include cash on hand of approximately $15,966 at December 31,
      2008.





14


WINTHROP
REALTY TRUST
 FORM
10-Q MARCH 31, 2009
 
 NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


Non-Recurring
Measurements





Preferred
Equity and Equity Investments





The valuation of preferred equity and
equity investments is determined using widely accepted valuation techniques
including discounted cash flow analysis on the expected cash flows of each asset
as well as the income capitalization approach considering prevailing market
capitalization rates.  The Trust reviews each investment based on the
highest and best use of the investment and market participation
assumptions.  The significant assumptions include the discount rate
used in the income capitalization valuation and interest rate
volatility.  The Trust has determined that the significant inputs used
to value its equity investments with a fair value of $55,183,000 at March 31,
2009 fall within Level 3.  The Trust determined that there were no
valuation adjustments on these assets during the first quarter of 2009.
The Trust has determined that the
significant inputs used to value certain of its preferred equity investments
with a fair value of $0 at March 31, 2009 fall within Level 3.  The
Trust had no valuation adjustments on these assets during the first quarter of
2009.





As of
December 31, 2008, the table below presents the Trust’s assets and liabilities
measured at fair value as events dictate, aggregated by the level in the fair
value hierarchy within which those measurements fall (in
thousands):





Non-Recurring Basis
                
                Quoted
      Prices in
                  ActiveMarkets
      for
                  Identical
      Assets and
                  Liabilities
      (Level 1)
                
                
                Significant
      Other
                  Observable
                  Inputs
      (Level 2)
                
                
                Significant
                  Unobservable
                  Inputs
      (Level 3)
                
                
                TotalEquity
      investments
                
                $
                —
                
                
                $
                —
                
                
                $
                73,061
                
                
                $
                73,061Preferred
      equity investments
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —$
                —
                
                
                $
                —
                
                
                $
                73,061
                
                
                $
                73,061





Fair
Value Option





SFAS No.
159, “The Fair Value Option
For Financial Assets and Financial Liabilities,”(“SFAS 159”)
provides a fair value option election that allows companies to irrevocably elect
fair value as the initial and subsequent measurement attribute for certain
financial assets and liabilities. Changes in fair value for assets and
liabilities for which the election is made will be 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.  SFAS 159
permits the fair value option election on an instrument by instrument basis at
initial recognition of an asset or liability or upon an event that gives rise to
a new basis of accounting for that instrument.  The Trust has elected
the fair value option for all securities acquired subsequent to September 30,
2008.





For the
three months ended March 31, 2009, the Trust recognized a net unrealized loss of
$11,148,000 as a result of the change in fair value of the financial assets for
which the fair value option was elected, which is recorded as an unrealized loss
in the Trust’s statement of operations.  Income related to securities
carried at fair value are recorded as interest and dividend income.





The
following table presents the Trust's financial instruments for which the fair
value option was elected (in thousands):





Financial
      instruments, at fair value
                  
                  March
      31, 2009AssetsSecurities
      carried at fair value:Senior
      debentures
                  
                  $
                  20,994Preferred
      shares
                  
                  
                  13,729Common
      shares
                  
                  
                  9,259$
                  43,982




15




WINTHROP
REALTY TRUST
 FORM
10-Q MARCH 31, 2009
 
 NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


The
following table presents the difference between fair values and the aggregate
contractual amounts due (senior debentures) for which the fair value option has
been elected (in thousands):





Fair
      Value at
                        March
      31, 2009
                      
                      
                      Amount
      Due
                        Upon
      Maturity
                      
                      
                      DifferenceAssetsSecurities
      carried at fair value:Senior
      debentures
                      
                      $
                      20,994
                      
                      
                      $
                      31,341
                      
                      
                      $
                      10,347





4.
              Acquisitions,
      Loan Originations, Dispositions and
Financings





Preferred
Stock





In
January 2009 the Trust acquired for $17,081,000 917,105 Series B-1 Preferred
Shares at a discount from their liquidation value of $25 per
share.  The Trust determined that the repurchase of the Series B-1
Preferred Shares qualified as extinguishment of debt pursuant to the guidance of
FAS 140, “Accounting For the
Transfer and Servicing of Financial Assets and Liabilities,” (“FAS 140”)
and recorded a gain from the early extinguishment of debt pursuant to APB 26 of
approximately $5,237,000, net of unamortized issuance costs of
$609,000.  As of March 31, 2009, there are 1,496,000 Series B-1
Preferred Shares outstanding.





Acquisitions &
Dispositions of REIT securities





During
the three months ended March 31, 2009 the Trust acquired senior debentures with
a face value of approximately $25,401,000 at a cost of approximately
$16,433,000, preferred shares at a cost of approximately $8,947,000 and common
shares at a cost of approximately $288,000.





During
the three months ended March 31, 2009 the Trust sold senior debentures with an
original cost basis of $4,324,000 and a fair value of $4,560,000 and received
net proceeds of approximately $4,538,000, preferred shares with an original cost
basis of $1,644,000 and a fair value of $1,857,000 for net proceeds of
approximately $1,792,000 and common shares with an original cost basis of
$410,000 and a fair value of $637,000 for net proceeds of approximately
$637,000.  The difference between the original cost basis and the fair
value represents the unrealized gain or loss recognized pursuant to SFAS 159
during the holding period of the securities.  The Trust recognized a
net loss on the sale of these securities of approximately $87,000, exclusive of
any interest or dividends earned.





River
City





The Trust
received a one-year extension of its mortgage loan of $9,500,000 on its River
City property.  The terms of the extension require monthly payments of
interest only at a fixed rate of 6% with a new maturity of March 28,
2010.  The renewal was subject to a $200,000 principal payment which
was made in April.





Note Payable
Payoff





At
December 31, 2008 the Trust had a $9,800,000 loan payable to Citibank, which
bore interest at LIBOR plus 2.5% and matured in December 2011.  The
loan was made in connection with the Trust’s purchase during 2008 of 3,500,000
common shares of Lexington Realty Trust (“Lexington”).  The loan
required monthly payments of interest only and was subject to margin calls if
the loan balance compared to the fair value of the common shares exceeded
57.5%.  The Trust paid the loan off in full in March
2009.





5.
              Loans
      Receivable





All of
the Trust’s loans identified as being impaired under the provisions of SFAS No.
114 are collateral dependent loans and are evaluated for impairment by comparing
the fair value of the underlying collateral less costs to sell to the carrying
value of each loan.  Due to the unique nature of each individual
property collateralizing the Trust’s loans, the Trust uses the income approach
through internally developed valuation models to estimate the fair value of the
collateral.  This approach requires the Trust to make significant
judgments with respect to discount rates and the timing and amounts of estimated
future cash flows that are considered Level 3 inputs in accordance with SFAS No.
157.  These cash flows include costs of completion, operating costs
and lot and unit sale prices.





16




WINTHROP
REALTY TRUST
 FORM
10-Q MARCH 31, 2009
 
 NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


The
following table summarizes the Trust’s loans receivable at March 31, 2009 and
December 31, 2008 (in thousands):





Carrying
      Amount (6)March
      31,
                  
                  
                  December
      31,Property
                  
                  Location
                  
                  
                  Interest
      Rate
                  
                  
                  Maturity
                  
                  
                  2009
                  
                  
                  2008Marc
      Realty – Various (1) (2)
                  
                  Chicago,
      IL
                  
                  
                  
                  8.5
                  %
                  
                  
                  (1
                  )
                  
                  $
                  18,839
                  
                  
                  $
                  17,547Loan
      loss reserve
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  (1,607
                  )
                  
                  
                  (1,179
                  )Lex-Win
      Concord LLC (3)
                  
                  Various
                  
                  
                  
                  —
                  
                  
                  Dec
      2009
                  
                  
                  
                  —
                  
                  
                  
                  5,000600
      West Jackson LLC (4)
                  
                  Chicago,
      IL
                  
                  
                  
                  6.5
                  %
                  
                  Jun
      2009
                  
                  
                  
                  1,508
                  
                  
                  
                  1,508Vision
      Term Loan (5)
                  
                  
                  —
                  
                  
                  
                  15.0
                  %
                  
                  Dec
      2011
                  
                  
                  
                  1,266
                  
                  
                  
                  1,266Loan
      loss reserve
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  (1,266
                  )
                  
                  
                  (1,266
                  )$
                  18,740
                  
                  
                  $
                  22,876





(1)
            Represents
      several tenant improvement and capital expenditure loans for properties in
      the Marc Realty portfolio. These loans mature from July 2012 through March
      2016.  During the three months ended March 31, 2009, the Trust
      recorded a loan loss reserve of $428 related to loans on three properties
      in the Marc Realty portfolio.


(2)
            Collateralized
      by a subordinate mortgage or the ownership interests in the property
      owner.


(3)
            The
      Trust made an unsecured working capital loan of $5,000 to Lex-Win Concord
      in December 2008.  This amount was repaid in January
      2009.  In connection with the repayments, we reconsidered
      Lex-Win Concord’s VIE status and concluded that Lex-Win Concord continues
      not to be a VIE.


(4)
            Represents
      a second mortgage on the property.


(5)
            Due
      to the uncertainty regarding collectability of this loan, in 2007 the
      Trust recorded a loan loss reserve of approximately $1,266 representing
      the loan receivable and accrued
interest.


(6)
            The
      carrying amount includes accrued interest of $119 and $123 at March 31,
      2009 and December 31, 2008,
respectively.





For the
three months ended March 31, 2009, the Trust has not recognized any interest
income on impaired loans subsequent to the date of their
impairment.  Cash payments received on impaired loans are classified
as debt recovery.  As of March 31, 2009, the Trust has received $9,000
which has been recorded as a recovery on impaired loans which had a carrying
value of $0 at March 31, 2009.





6.
              Securities





Securities Carried at Fair
Value





Securities
carried at fair value represents senior debentures, preferred shares, and common
shares for which the Trust has elected the fair value option of SFAS
159.





Securities
carried at fair value at March 31, 2009 are summarized in the table below (in
thousands):





Cost
                  
                  
                  Fair
      ValueSenior
      debentures
                  
                  $
                  20,330
                  
                  
                  $
                  20,994Preferred
      shares
                  
                  
                  14,709
                  
                  
                  
                  13,729Common
      shares
                  
                  
                  20,744
                  
                  
                  
                  9,259$
                  55,783
                  
                  
                  $
                  43,982




17


WINTHROP
REALTY TRUST
 FORM
10-Q MARCH 31, 2009
 
 NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


For the
three months ended March 31, 2009, the Trust recognized an unrealized loss on
securities carried at fair value of $11,148,000.





Securities
carried at fair value at December 31, 2008 are summarized in the table below (in
thousands):





Cost
                  
                  
                  Fair
      ValueSenior
      debentures
                  
                  $
                  8,221
                  
                  
                  $
                  8,631Preferred
      shares
                  
                  
                  7,405
                  
                  
                  
                  8,352Common
      shares
                  
                  
                  20,866
                  
                  
                  
                  19,533$
                  36,492
                  
                  
                  $
                  36,516





For the
year ended December 31, 2008, the Trust recognized an unrealized gain on
securities carried at fair value of $24,000.





Available for Sale
Securities





Available
for sale securities represents securities for which the Trust has not elected
the fair value option of SFAS 159.  These securities are accounted for
pursuant to Statement of Financial Accounting Standards No. 115, “Accounting For Certain Investments
in Debt and Equity Securities.”





Available
for sale securities at March 31, 2009 are summarized in the table below (in
thousands):





Cost
                  
                  
                  Fair
                    ValuePreferred
      shares
                  
                  $
                  204
                  
                  
                  $
                  186





For the
three months ended March 31, 2009, the Trust recognized an unrealized gain in
other comprehensive income of $2,000.  As of March 31, 2009, there was
a cumulative unrealized loss in other comprehensive income of $18,000 related to
these securities.





Available
for sale securities at December 31, 2008 are summarized in the table below (in
thousands):





Cost
                
                
                Fair
                  ValuePreferred
      shares
                
                $
                204
                
                
                $
                184





For the
year ended December 31, 2008, the Trust recognized an unrealized loss in other
comprehensive income of $20,000.





During
the three months ended March 31, 2009 and March 31, 2008, securities were sold
for total proceeds of approximately $6,967,000 and $57,699,000,
respectively.  The Trust recognized a gross realized loss of $87,000
on the sale of these securities during the three months ended March 31, 2009 and
recognized a gross realized gain of $2,029,000 on the sale of securities during
the three months ended March 31, 2008.  The Trust utilizes the
specific identification method for calculating gain or loss on the sale of
securities.





7.
              Preferred Equity Investments –
      Marc Realty





At March
31, 2009, the Marc Realty portfolio consisted of two participating second
mortgage loans and 19 convertible mezzanine loans, together with an equity
investment in each mezzanine borrower, in the aggregate amount of approximately
$49,497,000, net of impairments of $7,513,000.  The second mortgage
and mezzanine loans contain conversion rights which may be exercised by either
the Trust or Marc Realty.  Each loan is collateralized by the
applicable borrower's ownership interest in a limited liability company (each a
"Property Owner") that in turn owns an office building or complex primarily in
the Chicago business district or suburban area.  Each borrower holds a
100% interest in the applicable Property Owner. Eighteen of the loans bear
interest at 7.65%, three of the loans bear interest at 8.5%, all of the loans
mature on April 18, 2012 and require monthly payments of interest
only.  The Trust recognized earnings from preferred equity
investments, exclusive of Class B equity payments, of $1,015,000 and $1,371,000
for the three months ended March 31, 2009 and 2008, respectively.





18


WINTHROP
REALTY TRUST
 FORM
10-Q MARCH 31, 2009
 
 NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


In
connection with the equity interest acquired in each of the borrowers, the Trust
is entitled to participate in capital proceeds derived from the sale or
refinancing of the applicable property, to the extent that such proceeds exceed
all of the debt encumbering the property, including a return to Marc Realty of
its deemed equity (i.e. the agreed value of the applicable property at inception
of the loans, less all debt encumbering the property, including any loan made by
the Trust) plus a 7.65% or 8.5% return thereon, as applicable.





On March
20, 2008, one of the properties in the Marc Realty portfolio, 999 East Touhy,
Chicago, in which the Trust held a 7.65% convertible mezzanine loan and a
preferred interest, was sold to an unaffiliated third party.  The
Trust received $1,706,000, exclusive of interest, on its original investment of
$736,000.  The Trust recognized additional equity income of $959,000
with respect to this sale.





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





As
      of
                        March
      31, 2009
                      
                      
                      As
      of
                        December
      31, 2008Condensed
      Balance SheetsInvestment
      in real estate, net
                      
                      $
                      167,262
                      
                      
                      $
                      167,386Prepaid
      expenses and deposits
                      
                      
                      5,008
                      
                      
                      
                      7,239Cash
      and cash equivalents
                      
                      
                      3,910
                      
                      
                      
                      3,371Receivables
      and other assets
                      
                      
                      30,333
                      
                      
                      
                      30,485Total
      Assets
                      
                      $
                      206,513
                      
                      
                      $
                      208,481Nonrecourse
      mortgage debt
                      
                      $
                      288,837
                      
                      
                      $
                      285,524Other
      liabilities
                      
                      
                      21,483
                      
                      
                      
                      24,481Total
      Liabilities
                      
                      
                      310,320
                      
                      
                      
                      310,005Partners’
      Deficit
                      
                      
                      (103,807
                      )
                      
                      
                      (101,524
                      )Total
      Liabilities and Partners’ Deficit
                      
                      $
                      206,513
                      
                      
                      $
                      208,481On
      the Trust’s Consolidated Balance Sheets:Preferred
      Equity Investment
                      
                      $
                      50,579
                      
                      
                      $
                      50,624





A basis
difference exists between the carrying value of the Trust’s preferred equity
investment and its share of the Property Owner’s reported net assets as a result
of (i) the acquisition of its investment in Marc Realty at the then determined
fair value which was different from its share of the net depreciated assets as
recorded by the Property Owners on the historical books of the venture and (ii)
other-than-temporary impairment charges of $7,513,000.





For
      the Three Months EndedMarch
      31, 2009
                      
                      
                      March
      31, 2008Condensed
      Statements of OperationsRevenues
                      
                      $
                      16,020
                      
                      
                      $
                      15,497Operating
      expense
                      
                      
                      (7,117
                      )
                      
                      
                      (8,119
                      )Interest
      expense
                      
                      
                      (4,570
                      )
                      
                      
                      (4,266
                      )Real
      estate taxes
                      
                      
                      (2,609
                      )
                      
                      
                      (2,569
                      )Depreciation
      and amortization
                      
                      
                      (3,249
                      )
                      
                      
                      (3,033
                      )Other
      expenses, net
                      
                      
                      (711
                      )
                      
                      
                      (629
                      )Loss
      from continuing operations
                      
                      
                      (2,236
                      )
                      
                      
                      (3,119
                      )Discontinued
      operationsLoss
      from discontinued operations
                      
                      
                      —
                      
                      
                      
                      (1,047
                      )Gain
      on sale of property
                      
                      
                      —
                      
                      
                      
                      3,344Income
      from discontinued operations
                      
                      
                      —
                      
                      
                      
                      2,297Net
      loss
                      
                      $
                      (2,236
                      )
                      
                      $
                      (822
                      )On
      the Trust’s Consolidated Statements of Operationsand
      Comprehensive Income:Equity
      in earnings of Preferred Equity Investment
                      
                      $
                      1,015
                      
                      
                      $
                      2,330




19




WINTHROP
REALTY TRUST
 FORM
10-Q MARCH 31, 2009
 
 NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS





8.
            Equity
      Investments





The
Trust’s equity investments at March 31, 2009 and December 31, 2008 are
summarized below (in thousands):





Lex-Win
                  Concord
                
                
                Sealy
                  Northwest
                  Atlanta
                
                
                Sealy
                  Airpark
                  Nashville
                
                
                Sealy
                  Newmarket
                
                
                Lex-Win
                  Acquisition
                
                
                TotalBalance
      December 31, 2008
                
                $
                73,061
                
                
                $
                3,780
                
                
                $
                6,510
                
                
                $
                8,756
                
                
                $
                95
                
                
                $
                92,202Investments
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —Distributions/capital
      returns
                
                
                —
                
                
                
                (134
                )
                
                
                (209
                )
                
                
                —
                
                
                
                —
                
                
                
                (343
                )Equity
      in othercomprehensive
      loss
                
                
                (197
                )
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                (197
                )Equity
      in loss
                
                
                (17,681
                )
                
                
                (38
                )
                
                
                (258
                )
                
                
                (186
                )
                
                
                —
                
                
                
                (18,163
                )Balance
      March 31, 2009
                
                $
                55,183
                
                
                $
                3,608
                
                
                $
                6,043
                
                
                $
                8,570
                
                
                $
                95
                
                
                $
                73,499





Concord





General





In March
2006, the Trust together with Newkirk Realty Trust, Inc. (“Newkirk”) formed
Concord Debt Holdings, LLC (“Concord”) for the purpose of acquiring and
originating a diversified portfolio of real estate loans and
securities.  In connection with the merger of Newkirk into Lexington,
Lexington acquired Newkirk’s interest in Concord.  Both the Trust and
Lexington committed to invest $162,500,000 in Concord, all of which was
contributed as of March 31, 2009.





Lex-Win
Concord LLC (“Lex-Win Concord”) was created on August 2, 2008.  In
connection with the formation of Lex-Win Concord, both the Trust and Lexington
contributed to Lex-Win Concord their 50% interests in Concord and WRP Management
LLC (“WRP Management”), the entity that provides management services to Concord
Real Estate CDO 2006-1, Ltd. (“CDO-1”).  In conjunction with this
formation, the limited liability company agreement of Concord was amended and
restated to admit Inland America Concord Sub LLC (“Inland”) with a redeemable
preferred membership interest in Concord.  Inland has committed to
invest up to $100,000,000 in Concord over a 12-18 month period, subject to
certain conditions, of which $76,000,000 was contributed as of March 31,
2009.  Lex-Win Concord holds 100% of the common membership interests
in Concord and serves as its managing member.





Lex-Win
Concord determined that, at the time of its formation and transfer of interests
from the Trust and Lexington to Lex-Win Concord, both Concord and Lex-Win
Concord were under the common control of the Trust and Lexington.  As
a result, Lex-Win Concord has accounted for the formation of and the related
transfer of membership interests under the guidance of FASB Statement No. 141,
“Business
Combinations”(“SFAS 141”), for entities under common
control.  Among other things, SFAS 141 requires that Lex-Win Concord,
the entity receiving equity interests, initially recognize the assets and
liabilities at their carrying amounts at the date of transfer and report results
of operations as though the transfer occurred at the beginning of the
period.  In addition, SFAS 141 requires that financial statements for
prior years be restated to present comparative
information.  Accordingly, the results of operations presented herein
comprise those of Concord and Lex-Win Concord for the three months ended March
31, 2009 and 2008.





20




WINTHROP
REALTY TRUST
 FORM
10-Q MARCH 31, 2009
 
 NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


With
respect to the Trust's investment in Lex-Win Concord, the Trust determined that
Lex-Win Concord is not a VIE pursuant to FIN 46(R). The Trust further evaluated
its investment in Lex-Win Concord pursuant to the requirements of EITF 04-5 and
SOP 78-9, “ Accounting for
Investments in Real Estate Ventures” ("SOP 78-9") and determined that it
and Lexington share equally in the control of Lex-Win Concord and in Concord's
operations. Accordingly, the Trust accounts for its investment under the equity
method.





At
December 31, 2008, as the result of market conditions, including the changes in
interest rate spreads and lack of financing available, the Trust assessed
whether the fair value of its equity investment in Lex-Win Concord was below the
carrying value after giving effect to the operating loss for the quarter at
Concord.  In making this determination, the Trust considered the
length of time and extent to which the decline has occurred, the lack of
indication by the credit markets as to when there will be a recovery, the
expectation that Lex-Win Concord will not pay distributions to the Trust in the
near future and the cash position of Lex-Win Concord.  The Trust
determined the fair value of Lex-Win Concord utilizing a leveraged cash flow
methodology whereby cash flows were projected through 2016, the expected term of
CDO-1. Those cash flows were then modified based on changes to varying
assumptions and cash flow scenarios were calculated.  Each cash flow
scenario was discounted at various market rates of return and a probability was
assigned to each scenario.  Based on the foregoing, all of which
requires significant judgment, and after giving effect to the operating loss for
the quarter at Concord, the Trust concluded that the decline in value was other
than temporary and the Trust recognized an impairment loss of $36,543,000. The
Trust performed a similar assessment at March 31, 2009 and determined that no
additional impairment loss was necessary during the three months ended March 31,
2009.





On
December 31, 2008, the Trust and Lexington each advanced proceeds of $5,000,000
to Lex-Win Concord pursuant to short-term demand notes bearing interest at
1.36%.  These notes were subsequently repaid to each of the Trust and
Lexington in January 2009.





Valuation
of Concord Assets





Loan
Securities





Concord
has a portfolio of loan securities which includes investments in CDO
securities, CMBS, and rake bonds. Such bonds are accounted for as available for
sale securities and, accordingly, are marked to market on a quarterly basis
based upon management’s assessment of fair value.




Concord
evaluates its portfolio of available for sale debt securities for
other-than-temporary impairment in accordance with EITF 99-20, “Recognition of Interest Income and
Impairment on Purchased Beneficial Interests and Beneficial Interests That
Continue to Be Held by a Transferor in Securitized Financial Assets”
("EITF 99-20"),  FASB Statement No. 115, Accounting for Certain Investments
in Debt and Equity Securities("SFAS 115") and the related interpretation
of FASB Staff Position FAS 115-1/124-1, “The Meaning of Other-Than-Temporary
Impairment and Its Application to Certain Investments”(“FSP FAS
115-1”).  At each measurement date, management first determines
whether the securities are impaired by comparing the carrying value of each
security to the estimated fair value of each security as determined in
accordance with SFAS No. 157.  Next, for impaired securities,
management determines whether such impairment is other-than-temporary in
nature.  Determining whether a security is other-than-temporarily
impaired requires significant judgment.  Management considers both
quantitative and qualitative factors, including those described in SFAS 115 and
SEC Staff Accounting Bulletin Topic 5M, Other-Than-Temporary Impairment of
Certain Investments in Debt and Equity Securities(“SAB Topic
5M”).  Among other things, this evaluation includes consideration of
the length of time and extent to which the fair value of a security has been
less than its cost basis, Concord’s intent and ability to hold the securities
until a forecasted recovery in value and the financial prospects of the loans
and collateral underlying the securities. If, based on these and other
considerations, management determines that impairment is other-than-temporary in
nature, Concord recognizes an impairment loss equal to the difference between
the investment’s cost basis and its fair value.





21






WINTHROP
REALTY TRUST
 FORM
10-Q MARCH 31, 2009
 
 NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


Due to
the persistent lack of liquidity in the credit markets over the past two years,
Concord’s assets experienced continued declines in the fair value of its
available for sale securities.  Through December 31, 2008, Concord has
recorded other-than-temporary impairment on its loan securities of
$84,860,000.  Management has identified additional declines in fair
value of $2,931,000 on its loan securities at March 31,
2009.  Based on its analysis of qualitative and quantitative factors,
Concord has recognized an impairment loss of $881,000 as this decline has
been considered to be other-than-temporary in nature.  The
remaining decline of $2,050,000 is considered temporary and such amounts have
been included in other comprehensive income.




Concord
recognizes income on its portfolio of loan securities in accordance with EITF
99-20. Subject to various requirements, discounts attributable to previously
recognized other-than-temporary impairment charges are recognized in interest
income on the effective interest method based upon the excess of all estimated
prospective cash flows over the investment balance in the loan security at the
measurement date.  For these securities, Concord will accrete the
impairment discount over the remaining life of the securities using the
effective interest method, resulting in income recognition of $639,000 for the
three months ended March 31, 2009.  Concord did not recognize in
earnings any material amounts relating to the accretion of other-than-temporary
impairment charges for the three months ended March 31, 2008.





As of
December 31, 2008 Concord adopted FASB Staff Position EITF 99-20-1, “Amendments to the Impairment
Guidance of EITF Issue No. 99-20”(“FSP 99-20-1”), which is effective for
interim and annual periods ending after December 15, 2008.  FSP
99-20-1 retains the objective of other-than-temporary impairment assessment and
disclosures as discussed in SFAS 115 and other related guidance.  The
adoption did not have a material effect on its consolidated financial
statements.




Real
Estate Debt Investments





Concord
has historically considered its real estate debt investments as held for
investment or held to maturity.  Such investments are recorded at
cost.  Discounts and premiums on purchased assets are amortized over
the life of the investment using the effective interest method.  The
amortization is reflected as an adjustment to interest income.  Other
costs incurred in connection with acquiring loans, such as marketing and
administrative costs, are charged to expense as incurred.





Concord
considers a real estate debt investment (“loan”) impaired when, based upon
current information and events, it is probable that it will be unable to collect
all amounts due for both principal and interest according to the contractual
terms of the loan agreement. Concord recognizes loan impairments in accordance
with the guidance under SFAS No. 114, “Accounting by Creditors for
Impairment of a Loan,”(“SFAS 114”)which requires that a
creditor recognize impairment of a loan if the present value of expected future
cash flows discounted at the loan's effective interest rate or, alternatively,
the observable market price of the loan or the fair value of the collateral is
less than the recorded investment in the loan.  Concord believes its
loans are collateral dependent and, accordingly, utilizes the fair value of the
loan collateral when assessing its loans for impairment.  If the fair
value of the collateral is equal to or greater than the recorded investment in
the loan, no impairment is recognized.  Specific valuation allowances
are established for impaired loans based on the fair value of collateral on an
individual loan basis. The fair value of the collateral is determined by
selecting the most appropriate valuation methodology. The methodologies include
the evaluation of operating cash flow from the collateral during the projected
holding period, and the estimated sales value of the collateral computed by
applying an expectedcapitalization rate to the
stabilized net operating income of the specific property, less selling costs,
discounted at market discount rates.





If upon
completion of the valuation, the fair value of the underlying collateral
securing the impaired loan is less than the net carrying value of the loan, a
reserve is created with a corresponding charge to the provision for loan losses.
The reserve for each loan is maintained at a level believed adequate to absorb
probable losses.





22




WINTHROP
REALTY TRUST
 FORM
10-Q MARCH 31, 2009
 
 NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


In
addition an unallocated loss contingency reserve is established to cover
performing loans and loan losses are recorded when (i) available information
indicates that it is probable a loss has occurred in the portfolio and (ii) the
amount of the loss can be reasonably estimated in accordance with SFAS No. 5,
“Accounting for
Contingencies” (“SFAS 5”). Required reserve balances for the performing
loan portfolio are derived from probabilities of principal loss and loss given
default estimates assigned to the portfolio as part of Concord’s quarterly
internal risk rating assessment. Probabilities of principal loss and severity
factors are based on industry and/or internal experience and may be adjusted for
significant factors that, based on management’s judgment, impact the
collectability of the loans. Pursuant to SFAS 114 and SFAS 5, Concord recognized
a provision for loan losses for the three months ended March 31, 2009 of
$2,500,000, of which the Trust’s share was $1,250,000, increasing the reserve
for losses on real estate debt investments to $33,553,000 at March 31,
2009.  Concord recognized no loss provision for the three months ended
March 31, 2008.




In March
2009, Concord received an approximate $35,000,000 margin call from Column
Financial, Inc. (“Column”).  On April 14, 2009, Concord restructured
its repurchase agreement with Column such that (i) no additional loans may be
obtained under the facility, (ii) Column withdrew its March 2009 margin call and
is not permitted to make a margin call except in a limited instance until March
31, 2010, (iii) the agreement terminates on December 31, 2010, and (iv) Concord
is required to maintain certain financial ratios.  The modification
also requires Concord to reduce the outstanding loan balance by $10,700,000 in
April 2009 and an additional $47,500,000 by May 31,
2009.  Additionally, Concord must reduce the outstanding balance under
the repurchase agreement by an additional $21,275,000 to $80,000,000 by
September 30, 2009 and to $60,000,000 by December 31, 2009.  In order
to comply with the required reductions of the outstanding balance, Concord
expects to sell certain assets pledged under the Column
agreement.  Accordingly, Concord has identified eight loans to be
sold.  In accordance with Financial Accounting Standards No. 65,
“Accounting for Certain
Mortgage Banking Activities,” Concord has reported these loans as held
for sale at the lower of cost or fair value and has recorded a loss reserve on
real estate debt investments held for sale of $36,908,000 during the three
months ended March 31, 2009.




Should
Concord be unable to sell assets or consummate other activities it is pursuing
to meet its obligations, Concord may incur a default under its debt agreements
which would negatively affect the Trust’s ability to recover its entire
investment in Concord which was recorded at $55,183,000 at March 31,
2009.


During
April 2009, in conjunction with the restructuring of its repurchase agreement,
Concord sold a real estate debt investment with a face amount of $17,000,000 for
its adjusted fair value of $10,700,000.  Proceeds from the sale were
used to reduce the amount due on the Column repurchase agreement.





Summary
financial information of Lex-Win Concord is as follows (in
thousands):





As
      of
                    March
      31, 2009
                  
                  
                  As
      of
                    December
      31, 2008Condensed
      Balance SheetsCash
      and restricted cash
                  
                  $
                  3,639
                  
                  
                  $
                  15,134Real
      estate debt investments, net of loss reserves
                  
                  
                  661,996
                  
                  
                  
                  863,144Real
      estate debt investments held for sale
                  
                  
                  164,228
                  
                  
                  
                  -Available
      for sale securities, net
                  
                  
                  119,640
                  
                  
                  
                  118,491Other
      assets
                  
                  
                  9,234
                  
                  
                  
                  10,353Total
      assets
                  
                  $
                  958,737
                  
                  
                  $
                  1,007,122Repurchase
      agreements
                  
                  $
                  240,604
                  
                  
                  $
                  240,604Revolving
      credit facility
                  
                  
                  79,300
                  
                  
                  
                  80,000Collateralized
      debt obligations
                  
                  
                  347,525
                  
                  
                  
                  347,525Accounts
      payable and other liabilities
                  
                  
                  31,193
                  
                  
                  
                  43,230Non-controlling
      redeemable preferred interest
                  
                  
                  76,558
                  
                  
                  
                  76,441Members’
      capital
                  
                  
                  212,900
                  
                  
                  
                  248,262Accumulated
      other comprehensive loss
                  
                  
                  (29,448
                  )
                  
                  
                  (29,054
                  )Non-controlling
      interest
                  
                  
                  105
                  
                  
                  
                  114Total
      liabilities and members’ capital
                  
                  $
                  958,737
                  
                  
                  $
                  1,007,122On
      the Trust’s Consolidated Balance Sheets:Equity
      investment in venture
                  
                  $
                  55,183
                  
                  
                  $
                  73,061




23




WINTHROP
REALTY TRUST
 FORM
10-Q MARCH 31, 2009
 
 NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


For
      the Three Months EndedMarch
      31, 2009
                  
                  
                  March
      31, 2008Condensed
      Statement of OperationsInterest
      and other income
                  
                  $
                  12,529
                  
                  
                  $
                  20,039Interest
      expense
                  
                  
                  (4,632
                  )
                  
                  
                  (10,853
                  )Impairment
      loss on available for sale securities
                  
                  
                  (881
                  )
                  
                  
                  (5,377
                  )Provision
      for loss reserves on real estate debtinvestments
                  
                  
                  (2,500
                  )
                  
                  
                  —Impairment
      loss on real estate debt investments heldfor
      sale
                  
                  
                  (36,908
                  )
                  
                  
                  —Gain
      on extinguishment of debt
                  
                  
                  —
                  
                  
                  
                  5,150General
      and administrative
                  
                  
                  (1,093
                  )
                  
                  
                  (809
                  )Consolidated
      net (loss) income
                  
                  
                  (33,485
                  )
                  
                  
                  8,150Income
      attributable to redeemable preferred interest
                  
                  
                  (1,874
                  )
                  
                  
                  —Income
      attributable to non-controlling interest
                  
                  
                  (3
                  )
                  
                  
                  —Net
      (loss) income attributable to Lex-Win Concord
                  
                  $
                  (35,362
                  )
                  
                  $
                  8,150On
      the Trust’s Consolidated Statement of Operationsand
      Comprehensive Income:Equity
      in earnings (loss) of equity investment
                  
                  $
                  (17,681
                  )
                  
                  $
                  4,076





On March
31, 2008, Concord purchased from the Trust $10,000,000 of its CDO-1 notes at a
discount for $4,850,000 and recognized a gain, net of deferred costs, on the
extinguishment of debt totaling $5,150,000 after writing off a pro-rata share of
deferred financing costs. The Trust had purchased the debt from an unaffiliated
third party for $4,850,000 on March 24, 2008.





Information
pertaining to Concord’s credit facilities collateralized by the real estate debt
investments and available for sale securities as of March 31, 2009 and December
31, 2008 is as follows (in thousands):





March
      31, 2009
                                                    
                                                    
                                                    December
      31, 2008Debt
                                                      Carrying
                                                      Value
                                                    
                                                    
                                                    Collateral
                                                      Carrying
                                                      Value
      (3)
                                                    
                                                    
                                                    Debt
                                                      Carrying
                                                      Value
                                                    
                                                    
                                                    Collateral
                                                      Carrying
                                                      Value
      (3)(in
      thousands)Royal
      Bank of Scotland, PLC, successor in interest to Greenwich Capital
      Financial Products, Inc., matures on February 1, 2012, interest is
      variable based on 1-month LIBOR rate plus 1% or 1.56% and
      2.04%.
                                                    
                                                    $
                                                    59,613
                                                    
                                                    
                                                    $
                                                    71,530
                                                    
                                                    
                                                    $
                                                    59,613
                                                    
                                                    
                                                    $
                                                    71,417Royal
      Bank of Scotland, PLC, successor in interest to Greenwich Capital
      Financial Products, Inc., matures on December 15, 2009, interest is
      variable based on 1-month LIBOR rate plus 1% or 1.52% and
      1.51%.
                                                    
                                                    
                                                    21,516
                                                    
                                                    
                                                    
                                                    36,452
                                                    
                                                    
                                                    
                                                    21,516
                                                    
                                                    
                                                    
                                                    36,452Column
      Financial, Inc., variable interest based on 1-month LIBOR plus 1%, the
      rate was 1.47% at December 31, 2008. (1)
                                                    
                                                    
                                                    —
                                                    
                                                    
                                                    
                                                    —
                                                    
                                                    
                                                    
                                                    15,000
                                                    
                                                    
                                                    
                                                    25,880Column
      Financial, Inc., expiration December 31, 2010, interest is variable based
      on 1-month LIBOR plus 0.85% to 1.35%, the weighted average was 1.54%, and
      1.49%, respectively. (2)
                                                    
                                                    
                                                    159,475
                                                    
                                                    
                                                    
                                                    250,405
                                                    
                                                    
                                                    
                                                    144,475
                                                    
                                                    
                                                    
                                                    261,981Total
      repurchase agreements
                                                    
                                                    $
                                                    240,604
                                                    
                                                    
                                                    $
                                                    358,387
                                                    
                                                    
                                                    $
                                                    240,604
                                                    
                                                    
                                                    $
                                                    395,730





24




WINTHROP
REALTY TRUST
 FORM
10-Q MARCH 31, 2009
 
 NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


(1)
            In
      February 2009 the repurchase agreement was terminated and the asset which
      was subject to this repurchase agreement was added to the multiple loan
      asset repurchase agreement.  The multiple loan asset repurchase
      agreement was modified to provide that the interest rate, maturity date
      and advance rate, with respect to the asset added to the multiple loan
      asset repurchase facility, would remain as it was under the specific
      repurchase agreement.


(2)
            On
      April 14, 2009, the multiple loan asset repurchase agreement was modified
      as discussed above.


(3)
            Collateral
      carrying value equals face value less bond discounts, unrealized losses
      and other-than-temporary impairment losses and increased by premiums and
      unrealized gains.





Repurchase
Facilities





Under the
terms of the repurchase facility with Column, Concord was required to maintain
minimum liquidity, comprised of cash and cash equivalents, of at least
$10,000,000 at all times.  At certain times during the year ended
December 31, 2008 and at certain times during the three months ended March 31,
2009, Concord’s cash balance declined to an amount below the $10,000,000 minimum
liquidity requirements.  In February 2009 this requirement was
eliminated from the Column repurchase facility and Concord’s prior failure to
comply was waived.





Under the
repurchase facilities with Royal Bank of Scotland PLC, Concord has a similar
$10,000,000 minimum liquidity requirement.  In February 2009 Concord
received a waiver of the covenant violation from the Royal Bank of Scotland
through June 30, 2009.





KeyBank
Credit Facility





On March
7, 2008 Concord entered into a $100,000,000 secured revolving credit facility
with KeyBank National Association (“KeyBank”).  The credit facility
enables Concord to finance existing unlevered assets as well as new assets
acquired by Concord.  The initial maximum aggregate borrowing under
the loan is $100,000,000.  Borrowings under the facility bear interest
at spreads over LIBOR ranging from 1.75% to 2.25%, depending on the underlying
loan asset or loan security for which such borrowing is made.  At
March 31, 2009, the weighted average interest rate was 2.72%, and the carrying
value of loan assets and loan securities securing the facility was approximately
$135,982,000.  The facility matures March 2010 subject to a one-year
extension.





Under the
terms of the line of credit facility with KeyBank, Concord is required to
maintain minimum liquidity, comprised of cash and cash equivalents, of at least
$10,000,000 at all times.  At certain times during the year ended
December 31, 2008 and at certain times during the three months ended March 31,
2009, Concord’s cash balances declined to an amount below the $10,000,000
liquidity requirements.  On February 24, 2009 Concord received from
KeyBank a waiver of the covenant violation through June 30, 2009.




25




WINTHROP
REALTY TRUST


FORM
10-Q MARCH 31, 2009
 
 NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 
 Collateralized
Debt Obligations
 
 The
following table outlines borrowings under CDO-1’s collateralized debt
obligations as of March 31, 2009 and December 31, 2008 (in
thousands):
 March 31, 2009
                          
                          
                          December 31, 2008Debt
                            Outstanding
                          
                          
                          Weighted-
                            Average
                            Interest Rate
                          
                          
                          Collateral
                            Par Value
                          
                          
                          Debt
                            Outstanding
                          
                          
                          Weighted-
                            Average
                            Interest Rate
                          
                          
                          Collateral
                            Par ValueCDO-1
      – Issued seven investment grade tranches on
                            December
      21, 2006. Reinvestment period through December 21,
      2011.  Matures on December 21, 2016. Interest rate variable
      based on one-month LIBOR
                          
                          $
                          347,525
                          
                          
                          
                          1.003
                          %
                          
                          $
                          464,903
                          
                          
                          $
                          347,525
                          
                          
                          
                          0.95
                          %
                          
                          $
                          464,831
 
 9.
              Debt
 
 Mortgage Loan
Payable
 
 The Trust
had outstanding mortgage loans payable of $228,300,000 and $229,737,000 at March
31, 2009 and December 31, 2008, respectively.  The mortgage loan
payments of principal and interest are generally due monthly, quarterly or
semi-annually and are collateralized by applicable real estate of the
Trust.  The Trust’s mortgage loans payable at March 31, 2009 and
December 31, 2008 are summarized as follows (in thousands):
 
 Maturity
                        
                        Spread Over
                          LIBOR/Prime
                        
                        
                        Interest Rate at
                          March 31, 2009
                        
                        
                        Balance at
                          March 31,
                          2009
                        
                        
                        Balance at
                          December 31, 2008Fixed Interest Rate:Amherst,
      NY
                        October
      2013
                        
                        
                        —
                        
                        
                        
                        5.65
                        %
                        
                        $
                        16,815
                        
                        
                        $
                        16,913Indianapolis,
      IN
                        April  2015
                        
                        
                        —
                        
                        
                        
                        5.82
                        %
                        
                        
                        4,367
                        
                        
                        
                        4,384Houston,
      TX
                        April
      2016
                        
                        
                        —
                        
                        
                        
                        6.45
                        %
                        
                        
                        66,267
                        
                        
                        
                        67,009Andover,
      MA
                        February
      2011
                        
                        
                        —
                        
                        
                        
                        6.60
                        %
                        
                        
                        6,348
                        
                        
                        
                        6,389S.
      Burlington, VT
                        February
      2011
                        
                        
                        —
                        
                        
                        
                        6.60
                        %
                        
                        
                        2,721
                        
                        
                        
                        2,738Chicago,
      IL
                        March
      2016
                        
                        
                        —
                        
                        
                        
                        5.75
                        %
                        
                        
                        21,320
                        
                        
                        
                        21,391Lisle,
      IL
                        June
      2016
                        
                        
                        —
                        
                        
                        
                        6.26
                        %
                        
                        
                        24,379
                        
                        
                        
                        24,452Lisle,
      IL
                        March
      2017
                        
                        
                        —
                        
                        
                        
                        5.55
                        %
                        
                        
                        5,600
                        
                        
                        
                        5,600Kansas
      City, KS
                        June
      2012
                        
                        
                        —
                        
                        
                        
                        7.04
                        %
                        
                        
                        6,817
                        
                        
                        
                        6,768Orlando,
      FL
                        July
      2017
                        
                        
                        —
                        
                        
                        
                        6.40
                        %
                        
                        
                        39,488
                        
                        
                        
                        39,610Chicago,
      IL
                        March
      2010
                        
                        
                        —
                        
                        
                        
                        6.00
                        %
                        
                        
                        9,500
                        
                        
                        
                        9,500Variable Interest Rate:Various
      (1)
                        June
      2009
                        
                        LIBOR+1.75%
                        
                        
                        
                        (2
                        )
                        
                        
                        24,678
                        
                        
                        
                        24,983$
                        228,300
                        
                        
                        $
                        229,737
 
 (1)
              The
      loan is secured by 14 properties and the Trust has two one-year options to
      extend this loan.  The Trust has provided the lender written
      notice of its request to exercise its
extension.
 (2)
              The
      Trust entered into an interest rate swap agreement in the notional amount
      of $26,000, effectively converting the floating interest rate to a fixed
      rate of 5.8% through December 2009.  At March 31, 2009 the
      principal balance is covered by the swap
  agreement.
  26
  WINTHROP
REALTY TRUST
 FORM
10-Q MARCH 31, 2009
 
 NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
  Note
Payable
 
 At
December 31, 2008, the Trust had a $9,800,000 note payable to Citibank, bearing
interest at LIBOR plus 2.5% and maturing in December 2011.  The loan
was made in connection with the Trust’s purchase during 2008 of 3,500,000 common
shares of Lexington Realty Trust, and was repaid in March 2009.
 
 10.
              Revolving
      Line of Credit
  The Trust
has a line of credit with KeyBank pursuant to which the Trust can borrow on a
revolving basis up to $35,000,000.  The revolving credit line matures
December 16, 2010 with the option by the Trust to extend the term for an
additional year.  Amounts borrowed under the credit facility bear
interest at LIBOR plus 3.0%.  To the extent the Trust maintains cash
balances at KeyBank in excess of a certain threshold, the interest rate is
reduced to LIBOR plus 2.25%.  There were no advances under the line
during the quarter ended March 31, 2009.  The Trust is required to pay
a commitment fee on the unused portion of the line, which amounted to
approximately $22,000 and $44,000 for the three months ended March 31, 2009 and
2008, respectively.
  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.  The
revolving credit line is secured by substantially all of the Trust’s
assets.  The revolving credit line requires monthly payments of
interest only.  To the extent that the amounts outstanding under the
facility are in excess of the borrowing base (as calculated), the Trust is
required to make a principal payment to reduce such excess. The Trust may prepay
from time to time without premium or penalty and re-borrow amounts
prepaid.  At March 31, 2009 and December 31, 2008, the Trust was in
compliance with its covenants and there were no amounts outstanding under the
facility.
  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
our assets as well as through hedging transactions.  Specifically, the
Trust enters into derivative financial instruments.
  The
Trust’s objective in using interest rate derivatives is to add stability to
interest expense and to manage its exposure to interest rate
movements.  To accomplish this objective, the Trust primarily uses
interest rate swaps as part of its interest rate risk management
strategy.  Interest rate swaps designated as cash flow hedges involve
the receipt of variable rate amounts from a counterparty in exchange for the
Trust making fixed-rate payments over the life of the agreements without
exchange of the underlying notional amount.
  The
effective portion of changes in fair value of the interest rate swap designated
and that qualifies as a cash flow hedge is recorded in Accumulated Other
Comprehensive Income and is subsequently reclassified into earnings in the
period that the hedged forecasted transaction affects
earnings.  During the three months ended March 31, 2009 and 2008, the
interest rate swap was used to hedge the variable cash flows associated with
existing variable-rate debt.  The Trust also assesses and documents,
both at the hedging instruments inception and on an ongoing basis, whether the
derivative instrument is highly effective in achieving offsetting changes in the
cash flows attributable to the hedged item.  The Trust has recorded
changes in fair value related to the effective portion of its interest rate swap
contract designated and qualifying as cash flow hedges totaling $176,000 of
increased interest expense and $583,000 of decreased interest expense for the
three months ended March 31, 2009 and 2008, respectively, as a component of
other liabilities and accumulated other comprehensive loss withn the Trust’s
consolidated balance sheets.
  The table
below presents information about the Trust’s interest rate swap at March 31,
2009 (dollars in thousands):
 
 Maturity
                      
                      Swap
                        Rate
                      
                      
                      Notional
                        Amount
                        of Hedge
                      
                      
                      Cost
                        of Hedge
                      
                      
                      Estimated Fair Value
                        of Swap in Other
                        Comprehensive
                        Income
                      
                      
                      Unrealized Gain on
                        Settled Swap in Other
                        Comprehensive
                        Income
                      
                      
                      Change in Swap Valuations
                        Included in Other
                        Comprehensive Income
                        For the Quarter Ended
                        March 31, 2009December
      2009
                      
                      
                      4.05
                      %
                      
                      $
                      26,000
                      (1)
                      
                      $
                      —
                      
                      
                      $
                      (589
                      )
                      
                      $
                      101
                      
                      
                      $
                      138
 
 (1)
              Represents
      a swap agreement related to the variable interest rate loan collateralized
      by various properties.
 
 12.
              Series
      B-1 Preferred Shares
 
 In
January 2009the
Trustacquired
917,105 Series B-1 Preferred Shares at a discount from their liquidation value
of $25 per share.  As a result, the Trust recorded a gain from the
early extinguishment of debt of approximately $5,237,000 for the three months
ended March 31, 2009.  As of May 1, 2009, there are 1,496,000 Series
B-1 Preferred Shares outstanding.
  27
  WINTHROP
REALTY TRUST
 FORM
10-Q MARCH 31, 2009
 
 NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 
 13.
              Common
      Shares
 
 The
following table sets forth information relating to sales of Common Shares during
the three months ended March 31, 2009:
 
 Date of Issuance
                          
                          Number of Shares Issued
                          
                          
                          Price per Share
                          
                          Type of Offering1/15/09
                          
                          
                          61,292
                          
                          
                          
                          $
      10.85
                          
                          DRIP(1)
 
 (1)         The
Trust’s Dividend Reinvestment and Stock Purchase Plan.
 
 14.
              Discontinued
      Operations
 
 In
December 2008 the Trust sold a shopping center asset located in Biloxi,
Mississippi aggregating approximately 51,000 square feet for a net sales price
to the Trust of approximately $2,678,000.  The Trust recorded a
$1,807,000 gain on the sale and the results of operations of this property are
classified as discontinued operations for the three months ended March 31,
2008.
 
 On August
8, 2008 a petition for the condemnation of a shopping center asset located in
St. Louis, Missouri aggregating 46,000 square feet was dismissed by a Missouri
Court.  As a result, the operations for this property, which were
previously classified as discontinued operations, are classified as income from
continuing operations for the three months ended March 31, 2008 and
2009.
 
 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 the consolidated financial
statements.
  16.
              Related-Party
      Transactions
 
 The
following table sets forth the fees and reimbursements paid by the Trust for the
three months ended March 31, 2009 and  2008 to FUR Advisors and
Winthrop Management L.P. (in thousands):
 
 2009
                    
                    
                    2008Asset
      management (1)
                    
                    $
                    781
                    (3)
                    
                    $
                    1,323
                    (4)Property
      management (2)
                    
                    
                    67
                    
                    
                    
                    61Construction
      management (2)
                    
                    
                    3
                    
                    
                    
                    —$
                    851
                    
                    
                    $
                    1,384
 
 (1)
              Payable
      to FUR Advisors.
 (2)
              Payable
      to Winthrop Management L.P.
 (3)
              Before
      credits of $69, discussed below.
 (4)
              Before
      credits of $63, discussed below.
  28
  WINTHROP
REALTY TRUST
 FORM
10-Q MARCH 31, 2009
 
 NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 FUR
Advisors
 The
activities of the Trust and its subsidiaries 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 addition, FUR
Advisors or its affiliate is also entitled to receive property and construction
management fees.
 
 Base
Management Fee
 
 In March
2009 the base management fee was modified effective as of January 1,
2009.  As modified, the asset based fee calculation has been
eliminated and the equity based fee is based on a price of $11.00 per Common
Share outstanding at January 1, 2009 and $25.00 per Series B-1 Preferred Share
with respect to the 1,496,000 Series B-1 Preferred Shares outstanding after
giving effect to the repurchases of Series B-1 Preferred Shares during the
fourth quarter of 2008 and the first quarter of 2009.  Any additional
future conversions, redemptions or repurchases of the Series B-1 Preferred
Shares will not reduce the base equity for purposes of the base management fee
calculation.  Any future issuances of Common Shares or preferred
shares will increase the equity as per the existing agreement for purposes of
the base management fee calculation.
 
 Incentive
Fee
 
 The
incentive fee entitles FUR Advisors to receive (a) an amount equal to 20% of all
distributions paid to beneficiaries of Common Shares after December 31, 2003 in
excess of the Threshold Amount, hereinafter defined, and, (b) upon
the  termination of the Advisory Agreement, an amount equal to 20% of
the “liquidation value” of the Trust in excess of the Threshold Amount at the
termination date. As defined in the Advisory Agreement, the Threshold Amount is
equal to (x) $314,787,000, increased by the net issuance price of all Common
Shares, with an adjustment for preferred shares converted, issued after January
1, 2009, and decreased by the redemption price of all Common Shares redeemed
after January 1, 2009, plus (y) a return on the amount, as adjusted, set forth
in (x) equal to 7% per annum compounded annually. The incentive fee is reduced
by any direct damages to the Trust if the Advisory Agreement is terminated by
the Trust for cause.
 
 If the
Advisory Agreement were terminated, the actual incentive fee payable would be
based on an appraised valuation or the liquidation proceeds received for the
Trust’s assets, which may be substantially in excess of the amount calculated
based on the market price of the Common Shares.
 
 Winthrop
Management L.P.
 
 Winthrop
Management L.P., 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 L.P. receives a property management fee equal to 3% of the
monthly revenues.
 
 Credits
 
 WRP
Sub-Management LLC (“WRP Sub-Management”), an affiliate of FUR Advisors,
provides accounting, collateral management and loan brokerage services to
Concord and its subsidiaries, including CDO-1.  WRP Sub-Management
received reimbursement of direct and indirect expenses totaling $400,000 and
$471,000 for the three months ended March 31, 2009 and 2008, respectively, in
accordance with the terms of the agreement.  Of these amounts,
$138,000 and $125,000 were paid to reimburse it for costs associated with
providing accounting and other “back-office” services for the benefit of Concord
(the “Affiliate Amount”).  Because the Trust pays an advisory fee to
FUR Advisors whereas Lexington, the other member in Concord, does not, the
advisory fee payable to FUR Advisors by the Trust is reduced by 50% of the
Affiliate Amount to ensure equal treatment of the Trust and Lexington with
respect to the reimbursements paid by Concord.  For the three months
ended March 31, 2009 and 2008, the Trust received and utilized a credit of
$69,000 and $63,000, respectively, against the base management
fee.
  29
  WINTHROP
REALTY TRUST
 FORM
10-Q MARCH 31, 2009
 
 NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 
 On March
24, 2008, the Trust acquired for the benefit of Concord two classes of
securities issued by CDO-1 with a face value of $10,000,000 for approximately
$4,850,000 and transferred legal ownership of these securities to Concord on
March 31, 2008 and received reimbursement equal to the acquisition
cost.
 
 17.
              Business
      Segments
 
 SFAS No.
131 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 loan securities; and (iii) the ownership of equity and debt
securities in other REITs – REIT securities.  The accounting policies
of the segments are identical to those described in Note 2.
 
 The
operating properties segment includes all of the Trust’s wholly and partially
owned operating properties.  The loan assets and loan securities
segment includes all of the Trust’s activities related to real estate loans,
which consists primarily of the Trust’s investment in Concord and Marc
Realty.  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 our 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 March 31, 2009 and December 31, 2008 (in thousands):
 
 March 31,
                      2009
                    
                    
                    December 31,
                      2008Operating
      properties
                    
                    $
                    283,416
                    
                    
                    $
                    286,780Loan
      assets and loan securities
                    
                    
                    124,502
                    
                    
                    
                    146,560REIT
      securities
                    
                    
                    44,263
                    
                    
                    
                    36,796CorporateCash
      and cash equivalents
                    
                    
                    41,070
                    
                    
                    
                    59,238Other
                    
                    
                    22,529
                    
                    
                    
                    48,720Total
      Assets
                    
                    $
                    515,780
                    
                    
                    $
                    578,094
 
 The Trust
defines net operating income for each segment presented as the segment’s revenue
and other income less operating expenses.  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 loan securities and REIT securities and expenses incurred by each
segment for the three months ended March 31, 2009 and March 31, 2008 (in
thousands):
  30
  WINTHROP
REALTY TRUST
 FORM
10-Q MARCH 31, 2009
 
 NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 
 For
      the Three Months EndedMarch 31,
                    2009
                  
                  
                  March 31,
                    2008Operating
      PropertiesRents
      and reimbursements
                  
                  $
                  10,985
                  
                  
                  $
                  10,667Operating
      expenses
                  
                  
                  (2,001
                  )
                  
                  
                  (1,867
                  )Real
      estate taxes
                  
                  
                  (703
                  )
                  
                  
                  (739
                  )Equity
      in loss of Sealy Northwest Atlanta
                  
                  
                  (38
                  )
                  
                  
                  (138
                  )Equity
      in loss of Sealy Airpark Nashville
                  
                  
                  (258
                  )
                  
                  
                  (283
                  )Equity
      in loss of Sealy Newmarket
                  
                  
                  (186
                  )
                  
                  
                  —Net
      operating income
                  
                  
                  7,799
                  
                  
                  
                  7,640Loan
      Assets and Loan SecuritiesInterest
                  
                  
                  378
                  
                  
                  
                  506Equity
      in earnings of preferred equity investment of Marc Realty
                  
                  
                  1,015
                  
                  
                  
                  2,330Equity
      in earnings (loss) of Lex-Win Concord
                  
                  
                  (17,681
                  )
                  
                  
                  4,076Provision
      for loss on loans receivable
                  
                  
                  (428
                  )
                  
                  
                  —Gain
      on sale of mortgage backed securities
                  
                  
                  —
                  
                  
                  
                  454Net
      operating (loss) income
                  
                  
                  (16,716
                  )
                  
                  
                  7,366REIT
      SecuritiesDividends
                  
                  
                  1,374
                  
                  
                  
                  27Gain
      on sale of available for sale securities
                  
                  
                  —
                  
                  
                  
                  2,029Loss
      on sale of securities carried at fair value
                  
                  
                  (87
                  )
                  
                  
                  —Unrealized
      loss on securities carried at fair value
                  
                  
                  (11,148
                  )
                  
                  
                  —Equity
      in earnings of Lex-Win Acquisition
                  
                  
                  —
                  
                  
                  
                  157Impairment
      loss on available for sale securities
                  
                  
                  —
                  
                  
                  
                  (100
                  )Net
      operating (loss) income
                  
                  
                  (9,861
                  )
                  
                  
                  2,113Net
      Operating (Loss) Income
                  
                  
                  (18,778
                  )
                  
                  
                  17,119Less
      - Depreciation and Amortization
                  
                  
                  2,899
                  
                  
                  
                  3,058Less
      - Interest ExpenseOperating
      properties
                  
                  
                  3,595
                  
                  
                  
                  3,783Loan
      assets and loan securities
                  
                  
                  —
                  
                  
                  
                  206REIT
      securities
                  
                  
                  75
                  
                  
                  
                  —Corporate
      Income (Expense)Interest
      income
                  
                  
                  72
                  
                  
                  
                  228Interest
      expense
                  
                  
                  (728
                  )
                  
                  
                  (1,842
                  )Gain
      on extinguishment of debt
                  
                  
                  5,237
                  
                  
                  
                  —General
      and administrative (1)
                  
                  
                  (1,446
                  )
                  
                  
                  (2,071
                  )State
      and local taxes
                  
                  
                  (50
                  )
                  
                  
                  (124
                  )Income
      (loss) from continuing operations before non-controlling
                    interest
                  
                  
                  (22,262
                  )
                  
                  
                  6,263Non-controlling
      interest
                  
                  
                  (171
                  )
                  
                  
                  —Income
      (loss) from continuing operations attributable to Winthrop
                    Realty
      Trust
                  
                  
                  (22,433
                  )
                  
                  
                  6,263Income
      from discontinued operations attributable to Winthrop
                    Realty
      Trust
                  
                  
                  —
                  
                  
                  
                  49Net
      Income (Loss) attributable to Winthrop Realty Trust
                  
                  $
                  (22,433
                  )
                  
                  $
                  6,312Capital
      ExpendituresOperating
      properties
                  
                  $
                  295
                  
                  
                  $
                  829
 
 (1)
              After
      credits – See Note 16.
  31
 
 WINTHROP
REALTY TRUST
 FORM
10-Q MARCH 31, 2009
 
 ITEM
      2.
              MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS
 
 Certain
statements contained herein constitute forward-looking statements as such term
is defined in Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as
amended.   Forward-looking statements are not guarantees of
performance.   They involve risks, uncertainties and
assumptions.   Our future results, financial condition and
business may differ materially from those expressed in these forward-looking
statements.   You can find many of these statements by looking
for words such as “approximates,” “believes,” “expects,” “anticipates,”
“intends,” “plans,” “would,” “may” or similar expressions in this quarterly
report on Form 10-Q.   These forward-looking statements are
subject to numerous assumptions, risks and uncertainties.  Many of the
factors that will determine these items are beyond our ability to control or
predict.   Factors that may cause actual results to differ
materially from those contemplated by the forward-looking statements include,
but are not limited to, those set forth in our Annual Report on Form 10-K for
the year ended December 31, 2008 under “Forward Looking Statements” and
“Item 1A – Risk Factors” as well as our other filings with the
SEC.  For these statements, we claim the protection of the safe harbor
for forward-looking statements contained in the Private Securities Litigation
Reform Act of 1995.  We expressly disclaim any responsibility to
update forward-looking statements, whether as a result of new information,
future events or otherwise.   Accordingly, investors should use
caution in relying on forward-looking statements, which are based on
information, judgments and estimates at the time they are made, to anticipate
future results or trends.
  Management’s
Discussion and Analysis of Financial Condition and Results of Operations
includes a discussion of our consolidated financial statements for the three
months ended March 31, 2009 as compared to the three months ended March 31,
2008.   The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the amounts of revenues
and expenses during the reporting periods.   Actual results could
differ from those estimates.
  This item
should be read in conjunction with the financial statements, footnotes thereto
and other items contained elsewhere in this report.
 
 Overview
 
 We are a
real estate investment trust engaged in the business of owning 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.  We seek to achieve this objective by acquiring investments
with both recurring cash flow in order to sustain our dividend, along with
investments that we believe have appreciation potential. We operate in three
strategic business segments: (i) operating properties; (ii) loan assets and loan
securities; and (iii) REIT equity and debt securities. We acquire assets through
direct ownership as well as through strategic alliances and ventures, and have
entered into two significant venture arrangements. Our venture with Marc Realty,
a Chicago area real estate company, is our primary vehicle for investments in
the Chicago metropolitan area. In addition, since its formation in March 2006,
we have acquired substantially all of our loan assets and loan securities
through Concord Debt Holdings LLC, which we refer to as Concord, a joint venture
with Lexington Realty Trust, which we refer to as Lexington, and, since August
2008, Inland America Concord Sub LLC, which we refer to as Inland.
 
 As of
March 31, 2009, we held interests in approximately 9.7 million rentable
square feet of office, retail, multi-tenant and mixed use space through our 21
wholly owned operating properties and our ventures with Marc Realty and Sealy
& Co., Ltd., which we refer to as Sealy.  As of March 31, 2009 our
properties were approximately 96.0% leased.  Our primary sources of income
are rental income and tenant recoveries from leases of our operating properties,
interest income from our loan assets and loan securities, and interest and
dividend income and possible appreciation from our investments in REIT
securities.  The comparability of financial data from period to period
is affected by several items including the timing of our property acquisition
and leasing activities and the purchases and sales of assets and
investments.
 
  32
  WINTHROP
REALTY TRUST
 FORM
10-Q MARCH 31, 2009
 
 The
weakness in the economy since late 2007 and the subsequent disruption of the
capital and credit markets throughout 2008 and the first quarter of 2009 has
affected profitability and limited the availability of financing and the ability
to raise equity capital.  During the first quarter of 2009 we
continued to focus our attention primarily on maintaining our liquidity and
reducing our exposure to short-term debt, while at the same time seeking
investments with current returns. With respect to our debt exposure, each of our
investment platforms and investments is essentially a stand-alone business, such
that any potential problems or liabilities which might occur are limited to that
specific platform or investment.  Consequently, our exposure is in
each case limited to our equity in that particular investment and not to us as a
whole.  Inclusive of extension rights, none of our loans are scheduled
to mature in 2009.  As of March 31, 2009 there is $4,565,000 of
scheduled principal payments on mortgage loans remaining in 2009.  The
remaining balance of approximately $223,735,000 is scheduled to be paid down or
mature in 2010 or later.
 
 Capital
and Credit Market Deterioration
 
 As
the capital and credit market deterioration has worsened, we have performed
additional assessments to determine our exposure to bankruptcies, which could
negatively affect the tenancy at our operating properties as well as negatively
impact borrowers’ cash flow and thus their ability to meet their obligations
under our loan assets and loan securities.   We have also
monitored the impact of the currently limited availability of financing and
equity offerings.  Because there is little funding available in the
capital and credit markets, there are fewer buyers in the market and buyers are
seeking significantly higher returns, placing significant downward pressure on
current real estate values.   Consequently, there is a risk that
our borrowers will be unable to obtain replacement financing or sell the
collateral underlying our loan assets and loan securities upon maturity which
could lead to more loan defaults and/or negotiated extensions to existing loans
beyond their current expirations.  In addition, we further reviewed
our risk associated with counterparties to our hedging instruments and credit
facilities. We believe our greatest risk to operating results and liquidity is
the recent unprecedented volatility in capital and credit markets, which, if not
stabilized, may create additional losses in the upcoming years.
  A
continued weakness in the economy could further impair our ability to raise
future capital through equity and debt offerings, thereby requiring us to obtain
additional capital through other means. Further, the declining availability of
financing has had, and will likely continue to have, an impact on our ability to
finance additional acquisitions and, ultimately, the value of real estate
generally.
 
 We have
historically used the public equity markets and secured financing as our primary
sources of capital.  We expect to continue to fund our investments
through one or a combination of cash reserves, borrowings under our credit
facility, property loans, or the issuance of debt or equity.  In
addition, as our investments reach a level in value to the point where we may be
unlikely to achieve better than market returns, we may exit the investment and
redeploy the capital to what we believe to be higher yielding
opportunities.
  Liquidity and Capital
Resources
 
 Liquidity
is a measure of our ability to meet potential cash requirements, including
commitments to repay borrowings, fund and maintain investments and other general
business needs. We believe that cash flow from operations will continue to
provide adequate capital to fund our operating and administrative expenses,
regular debt service obligations and all dividend payments in accordance with
REIT requirements in the short-term. We anticipate that cash on hand, borrowings
under our credit facility and issuance of equity and debt securities, as well as
other alternatives, will provide the necessary capital required for our
investment 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,
in addition to cash reserves, are dependent on raising capital through equity
and debt issuances or forming ventures with institutional or high net worth
investors to obtain additional funds with which to expand our
business.
 
 Our
primary sources of funds include:
 
 ·
              cash
      and cash equivalents;
 ·
              rents
      and reimbursements received from our operating
  properties;
 ·
              payments
      received under our loan assets and loan
  securities;
 ·
              the
      issuance of equity and debt
securities;
  33
  WINTHROP
REALTY TRUST
 FORM
10-Q MARCH 31, 2009
 
 ·
              interest
      and dividends received from investments in REIT
  securities;
 ·
              cash
      distributions from joint ventures;
 ·
              borrowings
      under our credit facilities; and
 ·
              asset
      specific borrowings.
 
 At March
31, 2009, we had cash and cash equivalents of $41,070,000.  In
addition, we had other liquid assets consisting of securities carried at fair
value and available for sale securities totaling $44,168,000, and we have
$35,000,000 available under our line of credit.
 
 Cash
Flows
 
 Operating
Activities
 
 Cash
provided by operating activities of $6,423,000 for the three months ended March
31, 2009 was comprised of $28,053,000 of adjustments for non-cash items
including depreciation and amortization expense, the effect of straight-lining
of rental income, equity in losses of partially-owned entities and unrealized
losses on securities carried at fair value, and $1,403,000 of distributions from
non-consolidated interests which were partially offset by a net decrease due to
changes in other operating assets and liabilities of $600,000 and a net loss of
$22,433,000.  See our discussion of our Results of Operations below
for additional details on our operations.
 
 Investing
Activities
 
 Cash used
in investing activities of $13,311,000 for the three months ended March 31,
2009 was comprised primarily of the following:
 
 ·
              $25,668,000
      for purchases of securities carried at fair
  value;
 ·
              $1,596,000
      for additional loan advances related to the Marc Realty portfolio;
      and
 ·
              $949,000
      for tenant improvements and lease
commissions.
 
 These
uses of investing cash flows were offset primarily by:
 
 ·
              $6,967,000
      in proceeds from the sale of securities carried at fair
    value;
 ·
              $5,300,000
      in proceeds from the repayment of loans receivable;
  and
 ·
              $2,635,000
      in proceeds from the release of cash escrows, primarily related to the
      release of funds from the qualified intermediary for the sale of our
      Biloxi, Mississippi property.
 
 Financing
Activities
 
 Cash used
in financing activities of $11,280,000 for the three months ended March 31,
2009 was comprised primarily of the following:
 
 ·
              $9,800,000
      for payments of loans payable;
 ·
              $5,934,000
      for dividend payments on our Common Shares;
and
 ·
              $1,486,000
      for mortgage loan repayments.
 
 These
uses of financing cash flows were offset primarily by:
 
 ·
              $5,293,000
      of  restricted cash held in escrow that was released, primarily
      related to the application of funds held as cash collateral and utilized
      to pay off the CitiBank note payable;
and
 ·
              $665,000
      of dividends reinvested by shareholders in our Dividend Reinvestment
      and Stock Purchase Plan.
  34
  WINTHROP
REALTY TRUST
 FORM
10-Q MARCH 31, 2009
 
 
 Significant
financial transactions during the first quarter of 2009 include:
 
 ·
              the
      acquisition on January 6, 2009 of 917,105 of our Series B-1 Preferred
      Shares with a liquidation value of $22,928,000 for $17,081,000 in cash,
      representing a discount to their liquidation
  value;
 ·
              the
      March 2009 repayment of a $9,800,000 note
  payable;
 ·
              the
      acquisition of senior debentures with a face value of $25,401,000 for a
      cost of $16,433,000, preferred shares at a cost of $8,947,000 and common
      shares at a cost of $288,000; and
 ·
              the
      extension of the maturity date of the former $9,500,000 mortgage loan
      on our River City property for a period of one
  year.
 
 Dividends
 
 Since
December 2005 we have paid regular dividends to our shareholders.  In
paying dividends we have always sought to have our dividends track cash flow
from operations, both recurring and nonrecurring.  As a result, while we
intend to continue paying dividends each quarter, future dividend declarations
will be at the discretion of our Board of Trustees and will depend on the actual
cash flow of the Trust, its financial condition, capital requirements, the
distribution requirements for REITs under the Internal Revenue Code of 1986 and
such other factors as our Board of Trustees deem relevant.   Subject
to the foregoing, we expect to continue distributing our current cash flow after
reserving normal and customary amounts thereby allowing us to maintain our
capital.   Toward that end, the Board of Trustees elected to reduce
our dividend to $0.25 per share for the first quarter of 2009, which represented
a reduction from $0.325 per share for the first quarter of 2008.  This
represents our existing budgeted recurring cash flow generated by assets
currently owned and excludes any potential cash flow from our investment in
Concord, as well as potential future cash flow generated from the investment of
the substantial cash and cash equivalents on hand.  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 cash
flow.
 
 We paid a
regular quarterly dividend $0.40625 per Series B-1 Preferred Share in the first
quarter of 2009.  We declared a special dividend of $0.05 per Common Share
in December 2008, which was paid in January 2009.
 
 Results of
Operations
  Our
results are discussed below by business segment:
 
 Ø
              Operating
      Properties – our wholly and partially owned operating
      properties;
 Ø
              Loan
      Assets and Loan Securities – our activities related to senior and
      mezzanine real estate loans as well as commercial mortgage-backed
      securities including our investment in Concord and our Marc Realty venture
      properties;
 Ø
              REIT
      Securities – our activities related to the ownership of equity and debt
      securities in other real estate companies;
and
 Ø
              Non-segment
      specific results are discussed under Corporate – includes 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):
 
 March 31, 2009
                      
                      
                      December 31, 2008Operating
      properties
                      
                      $
                      283,416
                      
                      
                      $
                      286,780Loan
      assets and loan securities
                      
                      
                      124,502
                      
                      
                      
                      146,560REIT
      securities
                      
                      
                      44,263
                      
                      
                      
                      36,796CorporateCash
      and cash equivalents
                      
                      
                      41,070
                      
                      
                      
                      59,238Other
                      
                      
                      22,529
                      
                      
                      
                      48,720Total
      Assets
                      
                      $
                      515,780
                      
                      
                      $
                      578,094
  35
  WINTHROP
REALTY TRUST
 FORM
10-Q MARCH 31, 2009
  Total
assets decreased $62,314,000, or 10.8%, from $578,094,000 at December 31, 2008
to $515,780,000 at March 31, 2009.  The decrease was due primarily to
a decrease of $22,058,000 in loan assets and loan securities, a decrease of
$26,191,000 in other assets and a decrease of $18,168,000 in cash and cash
equivalents.  The decrease in loan assets and loan securities is due
primarily to a decrease of $17,878,000 in the carrying value of our equity
investment in Concord as a result of the operating loss incurred by Concord for
the quarter.  The decrease in other assets resulted from the release
of approximately $8,642,000 of funds held in escrow, primarily the result of
$2,678,000 released from the qualified intermediary for the sale of our Biloxi,
Mississippi property and $5,227,000 released from the CitiBank cash collateral
account and utilized to pay off the $9,800,000 note payable, and the utilization
of the $17,081,000 deposit for the re-acquisition of the Series B-1 Preferred
Shares.
  The
results of operations and changes in financial position for the Trust and
Concord are discussed below.
 
 Comparison
of Three Months ended March 31, 2009 versus Three Months ended March 31,
2008
 
 The
following table summarizes our results by business segment for the three months
ended March 31, 2009 and 2008 (in thousands):
 
 2009
                      
                      
                      2008Operating
      properties
                      
                      $
                      1,305
                      
                      
                      $
                      799Loan
      assets and loan securities
                      
                      
                      (16,716
                      )
                      
                      
                      7,160REIT
      securities
                      
                      
                      (9,936
                      )
                      
                      
                      2,113Corporate
      income (expenses)
                      
                      
                      3,085
                      
                      
                      
                      (3,809
                      )Consolidated  (loss)
      income from continuing operations
                      
                      $
                      (22,262
                      )
                      
                      $
                      6,263
 
 Operating
Properties
  2009
                    
                    
                    2008Rents
      and reimbursements
                    
                    $
                    10,985
                    
                    
                    $
                    10,667Operating
      expenses
                    
                    
                    (2,001
                    )
                    
                    
                    (1,867
                    )Real
      estate taxes
                    
                    
                    (703
                    )
                    
                    
                    (739
                    )Equity
      in loss of Sealy Northwest Atlanta
                    
                    
                    (38
                    )
                    
                    
                    (138
                    )Equity
      in loss of Sealy Newmarket
                    
                    
                    (186
                    )
                    
                    
                    —Equity
      in loss of Sealy Airpark Nashville
                    
                    
                    (258
                    )
                    
                    
                    (283
                    )Operating
      income
                    
                    
                    7,799
                    
                    
                    
                    7,640Depreciation
      expense
                    
                    
                    (2,899
                    )
                    
                    
                    (3,058
                    )Interest
      expense
                    
                    
                    (3,595
                    )
                    
                    
                    (3,783
                    )Net
      income
                    
                    $
                    1,305
                    
                    
                    $
                    799
 
 The
increase in operating income from our operating properties for the comparable
periods was due primarily to:
 
 ·
              a
      $318,000 increase in rents and reimbursements due primarily
      to:
 -
              an
      increase of $197,000 at our River City property due to higher occupancy in
      2009;
 -
              an
      increase of $145,000 at our Ontario property due to new leasing activity
      in 2009;
 -
              a
      decrease of $104,000 at our Lisle, Illinois properties due to lower
      occupancy in 2009;
 ·
              a
      $134,000 increase in operating expenses due primarily to increased cost at
      our River City property; and
  36
  WINTHROP
REALTY TRUST
 FORM
10-Q MARCH 31, 2009
 
 ·
              a
      $61,000 increase in losses from our Sealy equity investments due primarily
      to a $186,000 loss related to our Newmarket office complex in Atlanta,
      Georgia which we acquired in August 2008.  Losses from the Sealy
      portfolio are primarily the result of non-cash depreciation and
      amortization expenses.  We received cash distributions of
      $343,000 from the Sealy’s equity investments for the three months ended
      March 31, 2009.
 
 Depreciation
and interest expenses related to our operating properties remained relatively
constant with the  comparable prior year period.
 
 Loan
Assets and Loan Securities
 
 2009
                    
                    
                    2008Interest
                    
                    $
                    378
                    
                    
                    $
                    506Equity
      in earnings of preferred equity investment
                    
                    
                    1,015
                    
                    
                    
                    2,330Equity
      in (loss) earnings of Lex-Win Concord
                    
                    
                    (17,681
                    )
                    
                    
                    4,076Gain
      on sale of mortgage backed securities
                    
                    
                    —
                    
                    
                    
                    454Provision
      for loss on loan receivable
                    
                    
                    (428
                    )
                    
                    
                    —Operating
      (loss) income
                    
                    
                    (16,716
                    )
                    
                    
                    7,366Interest
      expense
                    
                    
                    —
                    
                    
                    
                    (206
                    )Net
      (loss) income
                    
                    $
                    (16,716
                    )
                    
                    $
                    7,160
 
 The
decrease in operating income from loan assets and loan securities for the
comparable periods was due primarily to:
 
 ·
              a
      $21,757 ,000 decrease in equity in earnings from Concord due primarily
      to:
 -
              a
      $36,908,000 increase in unrealized losses on real estate loans held for
      sale at Concord of which the
 Trust’s
share was $18,454,000;
 -
              a
      $2,500,000 provision for loan loss reserves at Concord of which the
      Trust’s share was $1,250,000;
 ·
              a
      $1,315,000 decrease in equity in earnings from our preferred equity
      investment, Marc Realty, primarily due to a decrease of $959,000 of gains
      on sales of real estate;
 ·
              a
      $454,000 gain on sale of mortgage backed securities recognized in the
      quarter ended March 31, 2008; and
 ·
              a
      $428,000 provision for loss on loans receivable related to three
      properties in our Marc Realty
portfolio.
 
 REIT Securities
 
 2009
                    
                    
                    2008Interest
      and dividends
                    
                    $
                    1,374
                    
                    
                    $
                    27Gain
      (loss) on sale of securities
                    
                    
                    (87
                    )
                    
                    
                    2,029Impairment
      loss on available for sale securities
                    
                    
                    —
                    
                    
                    
                    (100
                    )Unrealized
      loss on securities carried at fair value
                    
                    
                    (11,148
                    )
                    
                    
                    —Equity
      in loss of Lex-Win Acquisition, LLC
                    
                    
                    —
                    
                    
                    
                    157Operating
      income
                    
                    
                    (9,861
                    )
                    
                    
                    2,113Interest
      expense
                    
                    
                    (75
                    )
                    
                    
                    —Net
      income (loss)
                    
                    $
                    (9,936
                    )
                    
                    $
                    2,113
 
 The
decrease in operating income from REIT securities for the comparable periods was
due primarily to:
 
 ·
              a
      $11,148,000 increase in unrealized losses on securities carried at fair
      value;
  37
  WINTHROP
REALTY TRUST
 FORM
10-Q MARCH 31, 2009
 
 ·
              a
      $2,116,000 decrease in gain on sale of securities;
  and
 ·
              an
      increase of $1,347,000 in dividend income due primarily to interest and
      dividends received in 2009 on our REIT investment portfolio of which we
      invested $25,625,000 for the three months ended March 31,
      2009.
  Corporate
 
 2009
                        
                        
                        2008Interest
      income
                        
                        $
                        72
                        
                        
                        $
                        228General
      and administrative
                        
                        
                        (1,446
                        )
                        
                        
                        (2,071
                        )Interest
      expense
                        
                        
                        (728
                        )
                        
                        
                        (1,842
                        )Gain
      on extinguishment of debt
                        
                        
                        5,237
                        
                        
                        
                        —State
      and local taxes
                        
                        
                        (50
                        )
                        
                        
                        (124
                        )Operating
      income (loss)
                        
                        $
                        3,085
                        
                        
                        $
                        (3,809
                        )
 
 The
increase in corporate operations for the comparable periods was due primarily
to:
 
 ·
              a
      $5,237,000 gain on early extinguishment of debt resulting from our January
      2009 purchase of 917,105 of our Series B-1 Preferred Shares at a discount
      to their liquidation value;
 ·
              a
      $1,114,000 decrease in corporate interest expense due primarily to lower
      aggregate payments in 2009 on our Series B-1 Preferred Shares as a result
      of fewer Series B-1 Preferred Shares outstanding during
    2009;
 ·
              a
      $625,000 decrease in general and administrative expenses due primarily to
      the reduction in the base management fee as a result of the modification
      to the agreement effective January 1, 2009;
and
 ·
              a
      $156,000 decrease in corporate interest income earned on our cash and cash
      equivalents due primarily to lower yields on U.S. Treasury securities
      during the first three months of 2009 versus
  2008.
 
 State
income taxes were $50,000 and $124,000 for the three months ended March 31, 2009
and 2008, respectively, due primarily to our anticipated taxable income for
state purposes, after deductions for dividends paid and after the utilization of
net operating loss carryforwards, where applicable.
 
 Off-Balance Sheet
Investments
 
 We have
two significant off-balance sheet investments – our Marc Realty and Lex-Win
Concord investment platforms.   Marc Realty is discussed at Item
1. Financial Statements - Note 7 and Lex-Win Concord is discussed at Item 1.
Financial Statements - Note 8 and below.
  Concord
 
 Liquidity and Capital
Resources
 
 Concord
began experiencing declines in the fair value of its loan securities in the
fourth quarter of 2007 consistent with liquidity concerns impacting the
commercial bond and real estate markets and the overall economy.  As a
result of these declines in values of loan assets and loan securities, Concord
was required to satisfy significant margin calls under its repurchase
facilities.  Additionally, with the lack of available financing in the
market, replacement financing became unavailable and the likelihood of loan
defaults increased.  The market in which Concord’s loan securities
trade has effectively evaporated.  Moreover, the need for liquidity by
those investors and banks that trade loan securities has continued to cause the
current values of loan securities to decrease.
  38
  WINTHROP
REALTY TRUST
 FORM
10-Q MARCH 31, 2009
 
 The real
estate markets have been significantly impacted by the continued deterioration
of the global credit markets and other macro economic
factors.  Although the significant majority of Concord’s borrowers
remain in relatively strong financial standing, the current recession has
resulted in three defaults of borrower obligations and has cast uncertainty as
to whether Concord will recover its entire investment in certain loans and
available for sale securities.
 
 Declining
collateral values could result in the need for Concord to fund further margin
calls and could potentially have a negative impact on Concord’s consolidated
cash flows, results of operations and financial position.  Such
declines could also adversely affect Concord's financial ratios, which need to
be maintained for compliance with the covenants of its warehouse repurchase
facilities and revolving line of credit.  Concord could be subject to
accelerated maturities of its outstanding borrowings.  In addition,
certain of Concord’s credit facilities contain cross-default provisions that
could result in the accelerated maturities of outstanding borrowings in the
event Concord is in default of the terms of other facilities.
 
 Since its
inception, Concord sought to produce a stable income stream from its investments
in loan assets and loan securities by managing credit risk and interest rate
risk through the issuance of CDO’s.  However, thedisruption in the capital
and credit markets adversely affected the ability to issue CDOs with the result
that the availability of new financing has effectively been
eliminated.
 
 Due to
current market conditions, Concord has less financial flexibility than
desired.  If real estate and capital markets continue to decline or
Concord is unable to maintain adequate liquidity or equity, Concord may be
unable to successfully execute its business plan.  In response to
these potential issues, Concord will focus on maximizing the value of its
existing assets, and toward that end, has worked to increase its liquidity and
reduce exposure to maturing debt.  Concord is pursuing certain
activities, which it may or may not be able to consummate, including the sale of
previously repurchased CDO notes, the sale or refinancing of unencumbered assets
and a request of Inland to fund capital under its commitments.
  In March
2009, Concord received an approximate $35,000,000 margin call from Column
Financial, Inc. (“Column”).  On April 14, 2009, Concord restructured
its repurchase agreement with Column such that (i) no additional loans may be
obtained under the facility, (ii) Column withdrew its March 2009 margin call and
is not permitted to make a margin call except in a limited instance until March
31, 2010, (iii) the agreement terminates on December 31, 2010, and (iv) Concord
is required to maintain certain financial ratios.  The modification
also requires Concord to reduce the outstanding loan balance by $10,700,000 in
April 2009 and an additional $47,500,000 by May 31,
2009.  Additionally, Concord must reduce the outstanding balance under
the repurchase agreement by an additional $21,275,000 to $80,000,000 by
September 30, 2009 and to $60,000,000 by December 31, 2009.  In order
to comply with the required reductions of the outstanding balance, Concord
expects to sell certain assets pledged under the Column
agreement.  Accordingly, Concord has identified eight loans to be
sold.  Discussions continue with Concord’s other repurchase
counterparty and its lender, as it relates to loan covenant
modifications.
  Should
Concord be unable to sell assets or consummate other activities it is pursuing
to meet its obligations, Concord may incur a default under its debt agreements
which would negatively affect the Trust’s ability to recover its entire
investment in Concord which was recorded at $55,183,000 at March 31,
2009.
 At March
31, 2009, excluding the Column Financial, Inc. repurchase agreement, Concord
currently has $21,516,000 of repurchase agreements maturing in December 2009
with the remaining repurchase agreement balance of $59,613,000 maturing in
February 2012.
 
 Results of Operations for
Lex-Win Concord
 
 Comparison
Three Months Ended March 31, 2009 to Three Months Ended March 31, 2008 (in
thousands):
 
 2009
                      
                      
                      2008Interest
      Income
                      
                      $
                      12,525
                      
                      
                      $
                      19,933ExpensesInterest
                      
                      
                      4,632
                      
                      
                      
                      10,853Impairment
      loss on available for sale securities
                      
                      
                      881
                      
                      
                      
                      5,377Provision
      for loss reserve on real estate debt investments
                      
                      
                      2,500
                      
                      
                      
                      —Impairment
      loss on real estate debt investments held forsale
                      
                      
                      36,908
                      
                      
                      
                      —General
      and administrative
                      
                      
                      1,093
                      
                      
                      
                      809(33,489
                      )
                      
                      
                      2,894Interest
      income on bank deposits
                      
                      
                      4
                      
                      
                      
                      106Gain
      on extinguishment of debt
                      
                      
                      —
                      
                      
                      
                      5,150Consolidated
      net income (loss)
                      
                      
                      (33,485
                      )
                      
                      
                      8,150Income
      attributable to the redeemable preferred interest
                      
                      
                      (1,874
                      )
                      
                      
                      —Income
      attributable to the non-controlling interest
                      
                      
                      (3
                      )
                      
                      
                      —Net
      (loss) income attributable to Lex-Win Concord
                      
                      $
                      (35,362
                      )
                      
                      $
                      8,150
  39
  WINTHROP
REALTY TRUST
 FORM
10-Q MARCH 31, 2009
 
 The
decrease in net income was due primarily to the recognition of a $36,908,000
loan loss on real estate loans held for sale resulting from the change in
classification of eight loan assets subject to the Column repurchase agreement
from held to maturity to held for sale as well as a $2,500,000 increase in loan
loss reserves.
 
 ·
              Interest
      income generated on the investment portfolio decreased $7,408,000, or
      37.2%, from the prior year period due to a decline in LIBOR as well as a
      decrease in the average investment balance outstanding as a result of the
      $44,000,000 repayment of a mezzanine loan during the first quarter of
      2008;
 ·
              Interest
      expense decreased $6,221,000, or 57.3%, versus the prior year period due
      primarily to a decline in LIBOR as well as a decrease in the average debt
      balance outstanding as a result of margin calls and
      repayments;
 ·
              The
      impairment of available for sale securities is due to declines in the fair
      value of the loan securities, Concord recorded other-than-temporary
      impairment charges of $881,000 during the three months ended March 31,
      2009.  In addition, Concord recognized a provision for loss
      reserves on real estate debt investments of $2,500,000 for the three
      months ended March 31, 2009;
 ·
              On
      April 14, 2009, Concord restructured its repurchase agreement with Column
      such that (i) no additional loans may be obtained under the facility, (ii)
      Column withdrew its March 2009 margin call and is not permitted to make a
      margin call except in a limited instance until March 31, 2010, (iii) the
      agreement terminates on December 31, 2010, and (iv) Concord is required to
      maintain certain financial ratios.  The modification also
      requires Concord to reduce the outstanding loan balance by $10,700,000 in
      April 2009 and an additional $47,500,000 by May 31,
      2009.  Additionally, Concord must reduce the outstanding balance
      under the repurchase agreement to $80,000,000 by September 30, 2009 and to
      $60,000,000 by December 31, 2009.  In order to comply with the
      required reductions of the outstanding balance, Concord expects to sell
      certain assets pledged under the Column agreement.  Accordingly,
      Concord has identified eight loans to be sold.  In accordance
      with Financial Accounting Standards No. 65, “Accounting for Certain
      Mortgage Banking Activities,” Concord has reported these loans as
      held for sale at the lower of cost or fair value and has recorded a loss
      reserve on real estate debt investments held for sale of $36,908,000
      during the three months ended March 31, 2009.  During April
      2009, in conjunction with the restructuring, Concord sold a real estate
      debt investment with a face amount of $17,000,000 for its adjusted fair
      value of $10,700,000.  Proceeds from the sale were used to repay
      Column; and
 ·
              General
      and administrative expense increased by $284,000 primarily due to
      increases in audit and other professional fees which were primarily offset
      by a reduction in loan origination
fees.
  The
following table summarizes Lex-Win Concord’s consolidated balance sheets (in
thousands):
 
 March 31, 2009
                      
                      
                      December 31, 2008AssetsCash,
      cash equivalents and restricted cash
                      
                      $
                      3,639
                      
                      
                      $
                      15,134Real
      estate debt investments, net
                      
                      
                      661,996
                      
                      
                      
                      863,144Real
      estate debt investments held for sale, at fair value
                      
                      
                      164,228
                      
                      
                      
                      —Available
      for sale securities, net
                      
                      
                      119,640
                      
                      
                      
                      118,491Other
      assets
                      
                      
                      9,234
                      
                      
                      
                      10,353$
                      958,737
                      
                      
                      $
                      1,007,122Liabilities
      and Members’ CapitalRepurchase
      agreements
                      
                      $
                      240,604
                      
                      
                      $
                      240,604Revolving
      credit facility
                      
                      
                      79,300
                      
                      
                      
                      80,000Collateralized
      debt obligations
                      
                      
                      347,525
                      
                      
                      
                      347,525Other
      liabilities
                      
                      
                      31,193
                      
                      
                      
                      43,230Non-controlling
      interest
                      
                      
                      76,663
                      
                      
                      
                      76,555Members
      capital
                      
                      
                      212,900
                      
                      
                      
                      248,262Accumulated
      other comprehensive loss
                      
                      
                      (29,448
                      )
                      
                      
                      (29,054
                      )$
                      958,737
                      
                      
                      $
                      1,007,122
  40




WINTHROP
REALTY TRUST


FORM
10-Q MARCH 31, 2009
 
 ·
              The
      decrease in real estate debt investments and loans held for sale was
      primarily due a loss reserve on real estate debt investments held for sale
      of $36,908,000, an increase in the reserve for loan losses on real estate
      debt investments of $2,500,000 and principal repayments of $498,000 which
      were partially offset by the amortization of purchase discounts of
      $1,372,000 and loan advances of
  $1,614,000;
 ·
              The
      increase in the value of available for sale securities was primarily due
      to the purchase of a new security of $3,502,000, partially offset by
      other-than-temporary impairment charges of approximately $881,000 and
      temporary impairment charges of $2,050,000 during the first quarter of
      2009;
 ·
              The
      decrease in other liabilities was due primarily to (i) the repayment in
      January 2009 of unsecured loans payable in the amount of $5,000,000, each
      to the Trust and Lexington, and (ii) the change in fair value from
      $31,232,000 at December 31, 2008 to $29,413,000 at March 31, 2009 related
      to the effective portion of Concord’s interest rate swap contracts
      designated and qualifying as cash flow
hedges.
 
 CDO-1 Loan Assets and Loan
Securities
 
 Concord’s
note payable under CDO-1 was $347,525,000 at both March 31, 2009 and December
31, 2008.  Concord has retained an equity and junior debt interest in
the portfolio with a notional amount of approximately $117,475,000.
 
 The
financing through CDO-1 enhanced Concord’s return on the loan assets and loan
securities held in CDO-1 as the weighted average interest rate on the loan
assets and loan securities held in CDO-1 at March 31, 2009 was 4.05% and the
weighted average interest rate on the amount payable by Concord on its notes at
March 31, 2009 was 1.003%.
 
 CDO-1
loan assets, loan securities and note obligations at March 31, 2009 are
summarized below (in thousands):
 
 CDO-1 Loan Assets and Loan Securities
                      March 31, 2009
                    
                    CDO-1 Notes Payable
                      March 31, 2009Date
                      Closed
                    Par Value of
                      CDO
                      Collateral (1)
                    
                    
                    Weighted
                      Average
                      Interest Rate
                    
                    
                    Weighted
                      Average
                      Life (years)
                    
                    Outstanding
                      CDO Notes (2)
                    
                    
                    Weighted
                      Average
                      InterestRate
                    
                    
                    Stated
                      Maturity12/21/06
                    
                    $
                    464,903
                    
                    
                    
                    4.05
                    %
                    
                    
                    2.86
                    
                    
                    $
                    347,525
                    
                    
                    
                    1.003
                    %
                    
                    
                    12/2016
 
 (1)       Consists
of loan assets with a par value of $335,513 and loan securities with a par value
of $129,390.
 (2)       Includes
only notes held by third parties.
 
 The
following tables set forth the aggregate carrying values, allocation by loan
type and weighted average coupons of the loan assets and loan securities held in
CDO-1 as of March 31, 2009 (in thousands):
 Par
                              Value
                            
                            
                            Carrying
                              Value (1)
                            
                            
                            Allocation by
                              Investment Type
                            
                            
                            Fixed Rate:
                              Average Yield
                            
                            
                            Floating Rate:
                              Average Spread
                              over LIBORWhole
      loans, floating rate
                            
                            $
                            20,000
                            
                            
                            $
                            20,000
                            
                            
                            
                            4.30
                            %
                            
                            
                            —
                            
                            
                            195
      bpsWhole
      loans, fixed rate
                            
                            
                            30,168
                            
                            
                            
                            30,043
                            
                            
                            
                            6.49
                            %
                            
                            
                            6.36
                            %
                            
                            
                            —Subordinate
      interests in wholeloans,
      floating rate
                            
                            
                            108,864
                            
                            
                            
                            108,853
                            
                            
                            
                            23.42
                            %
                            
                            
                            —
                            
                            
                            244
      bpsSubordinate
      interests in wholeloans,
      fixed rate
                            
                            
                            27,404
                            
                            
                            
                            25,215
                            
                            
                            
                            5.89
                            %
                            
                            
                            7.45
                            %
                            
                            
                            —Mezzanine
      loans, floating rate
                            
                            
                            81,410
                            
                            
                            
                            81,410
                            
                            
                            
                            17.51
                            %
                            
                            
                            —
                            
                            
                            255
      bpsMezzanine
      loans, fixed rate
                            
                            
                            67,667
                            
                            
                            
                            65,663
                            
                            
                            
                            14.56
                            %
                            
                            
                            6.98
                            %
                            
                            
                            —Loan
      securities, floating rate
                            
                            
                            109,696
                            
                            
                            
                            77,371
                            
                            
                            
                            23.59
                            %
                            
                            
                            —
                            
                            
                            160
      bpsLoan
      securities, fixed rate
                            
                            
                            19,694
                            
                            
                            
                            11,155
                            
                            
                            
                            4.24
                            %
                            
                            
                            5.90
                            %
                            
                            
                            —Total/Average
                            
                            $
                            464,903
                            
                            
                            $
                            419,710
                            
                            
                            
                            100.00
                            %
                            
                            
                            6.80
                            %
                            
                            215 bps
  41
 
 (1)
              Difference
      between par value and carrying value is the result of discounts of
      $12,294, unrealized losses of $1,115 and impairment losses of
      $31,784.
 
 CDO-1
loan assets were diversified by industry as follows at March 31,
2009:
 
 Industry
                    
                    % of Par ValueHospitality
                    
                    
                    30.83
                    %Office
                    
                    
                    39.50
                    %Mixed
      Use
                    
                    
                    11.10
                    %Retail
                    
                    
                    4.47
                    %Industrial
                    
                    
                    7.11
                    %Multi-family
                    
                    
                    6.99
                    %100.00
                    %
 
 The
following table sets forth the maturity dates for the loan assets held in CDO-1
at March 31, 2009 (in thousands):
  Year of Maturity (1)
                
                Number of Loan
                  Assets Maturity
                
                
                Carrying Value
                
                
                % of Total2009
                
                
                8
                
                
                $
                160,248
                
                
                
                48.38
                %2010
                
                
                5
                
                
                
                61,595
                
                
                
                18.60
                %2011
                
                
                1
                
                
                
                6,300
                
                
                
                1.90
                %2012
                
                
                1
                
                
                
                5,052
                
                
                
                1.53
                %2013
      and thereafter
                
                
                8
                
                
                
                97,989
                
                
                
                29.59
                %Total
                
                
                23
                
                
                $
                331,184
                
                
                
                100.00
                %
  (1)
              Weighted
      average maturity is 2.86 years. The calculation of weighted average
      maturity is based upon the remaining initial term and does not take into
      account any maturity extension periods or the ability to prepay the
      investment after a negotiated lock-out period, which may be available to
      the borrower.
 
 The
following table sets forth the maturity dates, assuming remaining extensions are
exercised by the applicable borrower, for the loan assets held in CDO-1 at March
31, 2009 (in thousands):
  Year of Maturity (1)
                
                Number of Loan
                  Assets Maturing
                
                
                Carrying Value
                
                
                % of Total2009
                
                
                —
                
                
                
                —
                
                
                
                —2010
                
                
                3
                
                
                
                26,580
                
                
                
                8.02
                %2011
                
                
                9
                
                
                
                177,966
                
                
                
                53.74
                %2012
                
                
                3
                
                
                
                28,649
                
                
                
                8.65
                %2013
      and thereafter
                
                
                8
                
                
                
                97,989
                
                
                
                29.59
                %Total
                
                
                23
                
                
                $
                331,184
                
                
                
                100.00
                %
  (1)
                Weighted
      average maturity is 3.99 years. The calculation of weighted average
      maturity is based upon the remaining initial term and the exercise of any
      extension options available to the
borrower.
  42
 
 The
following tables set forth a summary of the loan securities held in CDO-1 at
March 31, 2009 (in thousands):
 
 Description
                
                Par
                  Value
                
                
                Amortized
                  Cost
                
                
                Temporary
                  Loss
                
                
                Other-Than-
                  Temporary Loss
                
                
                Carrying
                  ValueFixed
      rate
                
                $
                19,693
                
                
                $
                18,235
                
                
                $
                (449
                )
                
                $
                (6,631
                )
                
                $
                11,155Floating
      rate
                
                
                109,697
                
                
                
                103,189
                
                
                
                (666
                )
                
                
                (25,152
                )
                
                
                77,371Total
                
                $
                129,390
                
                
                $
                121,424
                
                
                $
                (1,115
                )
                
                $
                (31,783
                )
                
                $
                88,526
 
 Non CDO-1 Loan Assets and
Loan Securities
 
 The
following tables set forth the aggregate carrying values, allocation by
investment type and weighted average yields of loan assets and loan securities
including the loan assets held for sale held by Concord outside of CDO-1 as of
March 31, 2009 (in thousands):
 
 Par
                              Value
                            
                            
                            Carrying
                              Value (1)
                            
                            
                            Allocation by
                              Investment
                              Type
                            
                            
                            Fixed Rate:
                              Average
                              Yield
                            
                            
                            Floating Rate:
                              Average Spread
                              over LIBORWhole
      loans, floating rate
                            
                            $
                            110,165
                            
                            
                            $
                            85,516
                            
                            
                            
                            16.80
                            %
                            
                            
                            —
                            
                            
                            181
      bpsWhole
      loans, fixed rate
                            
                            
                            39,900
                            
                            
                            
                            27,500
                            
                            
                            
                            6.09
                            %
                            
                            
                            9.13
                            %
                            
                            
                            —Subordinate
      interests inwhole
      loans, floating rate
                            
                            
                            149,266
                            
                            
                            
                            138,660
                            
                            
                            
                            22.77
                            %
                            
                            
                            —
                            
                            
                            216
      bpsSubordinate
      interests inwhole
      loans, fixed rate
                            
                            
                            15,750
                            
                            
                            
                            14,317
                            
                            
                            
                            2.40
                            %
                            
                            
                            8.59
                            %
                            
                            
                            —Mezzanine
      loans, floating rate
                            
                            
                            190,335
                            
                            
                            
                            184,858
                            
                            
                            
                            29.03
                            %
                            
                            
                            —
                            
                            
                            215
      bpsMezzanine
      loans, fixed rate
                            
                            
                            65,690
                            
                            
                            
                            45,882
                            
                            
                            
                            10.02
                            %
                            
                            
                            8.40
                            %
                            
                            
                            —Loan
      securities, floating rate
                            
                            
                            81,910
                            
                            
                            
                            30,636
                            
                            
                            
                            12.49
                            %
                            
                            
                            —
                            
                            
                            145
      bpsLoan
      securities, fixed rate
                            
                            
                            2,653
                            
                            
                            
                            477
                            
                            
                            
                            0.40
                            %
                            
                            
                            5.60
                            %
                            
                            
                            —Loan
      loss reserve
                            
                            
                            —
                            
                            
                            
                            (1,692
                            )
                            
                            
                            —
                            
                            
                            
                            —
                            
                            
                            
                            —Total/Average
                            
                            $
                            655,669
                            
                            
                            $
                            526,154
                            
                            
                            
                            100.00
                            %
                            
                            
                            8.60
                            %
                            
                            198 bps
 
 (1)
              Difference between par
      value and carrying value is the result ofdiscounts of $6,258, loan loss
      reservesof $33,553, unrealized loss
      reserves of$36,908, impairment reserves
      of $51,952
      and temporary impairments of $845.
 
 Concord’s
non CDO-1 loan assets were diversified by industry as follows at March 31,
2009:
 
 Industry
                    
                    % of Par ValueHospitality
                    
                    
                    41.54
                    %Office
                    
                    
                    49.28
                    %Mixed
      Use
                    
                    
                    0.61
                    %Retail
                    
                    
                    —Industrial
                    
                    
                    0.26
                    %Multi-family
                    
                    
                    8.31
                    %100.00
                    %
  43
 
 The
following table sets forth the maturity dates, assuming no remaining extensions
are exercised by the applicable borrower, for Concord’s non CDO-1 loan
assets:
 
 Year of Maturity (1)
                    
                    Number of Loan
                      Assets Maturing
                    
                    
                    Carrying Value
                      (in thousands)
                    
                    
                    % of Total2009
                    
                    
                    13
                    
                    
                    $
                    196,051
                    
                    
                    
                    39.60
                    %2010
                    
                    
                    11
                    
                    
                    
                    196,666
                    
                    
                    
                    39.73
                    %2011
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    —2012
                    
                    
                    3
                    
                    
                    
                    67,075
                    
                    
                    
                    13.55
                    %2013
      and thereafter
                    
                    
                    8
                    
                    
                    
                    36,940
                    
                    
                    
                    7.46
                    %Loan
      loss reserve
                    
                    
                    
                    
                    
                    
                    (1,692
                    )
                    
                    
                    (0.34
                    )%Total
                    
                    
                    35
                    
                    
                    $
                    495,040
                    
                    
                    
                    100.00
                    %
 (1)
                The
      calculation of weighted average maturity of 1.98 years is based upon the
      remaining initial term and does not take into account any maturity
      extension periods or the ability to prepay the investment after a
      negotiated lock-out period, which may be available to the
      borrower.
 
 The
following table sets forth the maturity dates, assuming all remaining extensions
are exercised, for Concord’s non CDO-1 loan assets:
 
 Year of Maturity (1)
                  
                  Number of Loan
                    Assets Maturing
                  
                  
                  Carrying Value
                    (in thousands)
                  
                  
                  % of Total2009
                  
                  
                  3
                  
                  
                  
                  28,945
                  
                  
                  
                  5.85
                  %2010
                  
                  
                  2
                  
                  
                  
                  32,021
                  
                  
                  
                  6.47
                  %2011
                  
                  
                  9
                  
                  
                  
                  130,054
                  
                  
                  
                  26.27
                  %2012
                  
                  
                  13
                  
                  
                  
                  268,772
                  
                  
                  
                  54.29
                  %2013
      and thereafter
                  
                  
                  8
                  
                  
                  
                  36,940
                  
                  
                  
                  7.46
                  %Loan
      loss reserve
                  
                  
                  
                  
                  
                  
                  (1,692
                  )
                  
                  
                  (0.34
                  )%Total
                  
                  
                  35
                  
                  
                  $
                  495,040
                  
                  
                  
                  100.00
                  %
 (1)
                The
      calculation of weighted average maturity of3.38
      years is based upon the remaining term, assuming the exercise of all
      extension options available to the
borrower.
 The
following tables summarize Concord’s non CDO-1 loan securities at March 31, 2009
(in thousands):
 
 Description
                  
                  Par
                    Value
                  
                  
                  Amortized
                    Cost
                  
                  
                  Temporary
                    Loss
                  
                  
                  Other-Than-
                    Temporary Loss
                  
                  
                  Carrying
                    ValueFloating
      rate
                  
                  $
                  81,910
                  
                  
                  $
                  81,634
                  
                  
                  $
                  (845
                  )
                  
                  $
                  (50,153
                  )
                  
                  $
                  30,636Fixed
      rate
                  
                  
                  2,653
                  
                  
                  
                  2,276
                  
                  
                  
                  —
                  
                  
                  
                  (1,799
                  )
                  
                  
                  477$
                  84,563
                  
                  
                  $
                  83,910
                  
                  
                  $
                  (845
                  )
                  
                  $
                  (51,952
                  )
                  
                  $
                  31,113
   44


WINTHROP
REALTY TRUST
 FORM
10-Q MARCH 31, 2009


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, 2008.





Recently Issued Accounting
Standards





See Item
1. Financial Statements – Note 2.




ITEM 3.
            QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK





Interest Rate Risk





We have exposure to fluctuations in
market interest rates.  Market interest rates are highly sensitive to
many factors beyond our control.  Various financial vehicles exist
which would allow management to mitigate the potential negative effects of
interest rate fluctuations on our cash flow and earnings.





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




·
            An
      interest rate swap with a $40,000,000 notional amount that effectively
      converted the interest rate on that portion of principal of our note
      payable to KeyBank from a floating rate equal to LIBOR plus 1.75% to a
      fixed rate of 5.80%.  We made a $40,000,000 prepayment on
      KeyBank’s floating rate debt during the second quarter of 2007. As a
      result, we settled a portion of the existing interest rate swap with a
      notional amount of $14,000,000 for $366,000, resulting in an unrealized
      gain which will be amortized to income over the remaining life of the
      swap.  The outstanding balance at March 31, 2009 on this loan is
      approximately $24,678,000.





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 March  31, 2009 (in thousands):





ChangeinLIBOR(2)-0.50%
                                  
                                  1%
                                  
                                  2%
                                  
                                  3%Change in consolidated interest
      expense
                                  
                                  $
                                  —
                                  
                                  
                                  $
                                  —
                                  
                                  
                                  $
                                  —
                                  
                                  
                                  $
                                  —Pro-rata shareof change in interestexpenseof debt on
      non-consolidatedentities (1)
                                  
                                  
                                  (1,162
                                  )
                                  
                                  
                                  2,321
                                  
                                  
                                  
                                  4,642
                                  
                                  
                                  
                                  6,963Non-controlling interestsshare
                                  
                                  
                                  —
                                  
                                  
                                  
                                  —
                                  
                                  
                                  
                                  —
                                  
                                  
                                  
                                  —(Increase) decrease in netincome
                                  
                                  $
                                  (1,162
                                  )
                                  
                                  $
                                  2,321
                                  
                                  
                                  $
                                  4,642
                                  
                                  
                                  $
                                  6,963





(1)
            Represents
      our pro-rata share of a change in interest expense in our equity
      investment – Concord.


(2)
            The
      one month LIBOR rate at March 31, 2009 was
  0.50063%.





We
believe that due to our significant investment in a non-consolidated entity
(Concord), the presentation of our pro-rata share of a change in interest
expense from this entity is important to fully understand our exposure to
fluctuations in interest rates.




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, as of March 31, 2009
our pro-rata share of Lex-Win Concord’s variable rate loan assets and loan
securities with a face value aggregating $425,823,000 partially mitigate our
exposure to change in interest rates.




45




WINTHROP
REALTY TRUST


FORM
10-Q MARCH 31, 2009





Market
Value Risk




Our hedge
transaction, and those utilized by Concord, 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.  The three counterparties of these arrangements are
Credit Suisse International, KeyBank and JP Morgan.  At the present
time, due to the loan interest rate environment, the Trust’s hedge transaction
represents a liability to the Trust and Concord’s hedge transactions represent a
liability to Concord.  The Trust has no obligation to post any
collateral for the benefit of the counterparty.




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
March 31, 2009, 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 March 31,
2009.





Other Matters




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


46


WINTHROP
REALTY TRUST
 FORM
10-Q MARCH 31, 2009




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.




47




WINTHROP
REALTY TRUST
 FORM
10-Q MARCH 31, 2009
  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:  May
      11, 2009
                By:
                /s/ Michael L. AshnerMichael
      L. AshnerChief
      Executive OfficerDate:  May
      11, 2009
                By:
                /s/ Thomas C. StaplesThomas
      C. StaplesChief
      Financial Officer




48




WINTHROP
REALTY TRUST
 FORM
10-Q MARCH 31, 2009
  EXHIBIT
INDEX





Exhibit
                                
                                Description
                                
                                Page

                                    Number3.1
                                
                                Amended
      and Restated Declaration of Trust as of December 15, 2005 - Incorporated
      by reference to Exhibit 3.2 to the Trust’s Annual Report on Form 10-K for
      the year ended December 31, 2005
                                
                                -3.2
                                
                                Bylaws
      of the Trust as restated on November 8, 2005 - Incorporated by reference
      to Exhibit 3.1 to the Trust’s Form 8-K filed November 10,
      2005.
                                
                                -3.3
                                
                                Amendment
      to Bylaws adopted January 10, 2007 - Incorporated by reference to Exhibit
      3.1 to the Trust’s Form 8-K filed January 16, 2007
                                
                                -3.4
                                
                                Amendment
      to Bylaws adopted February 27, 2007 - Incorporated by reference to Exhibit
      3.1 to the Trust’s Form 8-K filed March 2, 2007
                                
                                -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.
                                
                                -10.1
                                
                                Indemnification
      Agreement with Neil Koenig, dated as of April 29, 2002 - Incorporated by
      reference to Exhibit 10.Q to the Trust’s Annual Report on Form 10-K for
      the year ended December 31, 2002.
                                
                                -10.2
                                
                                Stock
      Purchase Agreement between the Trust and FUR Investors, LLC, dated as of
      November 26, 2003, including Annex A thereto, being the list of Conditions
      to the Offer - Incorporated by reference to Exhibit 10.1 to the Trust’s
      Form 8-K filed December 1, 2003.
                                
                                -10.3
                                
                                Second
      Amended and Restated Advisory Agreement dated March 5, 2009, between the
      Trust, WRT Realty L.P. and FUR Advisors LLC. Incorporated by reference to
      Exhibit 10.3 to the Trust’s Annual Report on Form 10-K for the year ended
      December 31, 2008
                                
                                -10.4
                                
                                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.
                                
                                -10.5
                                
                                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.
                                
                                -




49




WINTHROP
REALTY TRUST
 FORM
10-Q MARCH 31, 2009


10.6
            
            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.
            
            -10.7
            
            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.
            
            -10.8
            
            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.
            
            -10.9
            
            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.
            
            -10.10
            
            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.
            
            -10.11
            
            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.
            
            -10.12
            
            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.
            
            -10.13
            
            Amended
      and Restated Omnibus Agreement, dated March 16, 2005, among Gerald Nudo,
      Laurence Weiner and First Union REIT L.P. - Incorporated by reference to
      Exhibit 10.1 to the Trust’s Form 8-K filed March 18, 2005
            
            -10.14
            
            Securities
      Purchase Agreement, dated February 16, 2005, between First Union Real
      Estate Equity and Mortgage Investments and Kimco Realty Corporation -
      Incorporated by reference to Exhibit 10 to the Trust’s Form 8-K filed
      February 18, 2005.
            
            -10.15
            
            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.
            
            -10.16
            
            Securities
      Purchase Agreement, dated June 15, 2005, between First Union Real Estate
      Equity and Mortgage Investments, Perrin Holden & Davenport Capital
      Corp. and the Investors named therein - Incorporated by reference to
      Exhibit 10.1 to the Trust’s Form 8-K filed June 21, 2005.
            
            -10.17
            
            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.
            
            -




50




WINTHROP
REALTY TRUST
 FORM
10-Q MARCH 31, 2009


10.18
                        
                        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.
                        
                        -10.19
                        
                        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.
                        
                        -10.20
                        
                        Registration
      Rights Agreement, dated November 7, 2005, between the Trust and Vornado -
      Incorporated by reference to Exhibit 10.2 to the Trust’s Form 8-K filed
      November 10, 2005.
                        
                        -10.21
                        
                        Securities
      Purchase Agreement, dated November 7, 2005, between Newkirk Realty Trust,
      Inc. and the Trust - Incorporated by reference to Exhibit 10.3 to the
      Trust’s Form 8-K filed November 10, 2005.
                        
                        -10.22
                        
                        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.
                        
                        -10.23
                        
                        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.
                        
                        -10.24
                        
                        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.
                        
                        -10.25
                        
                        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,
      2008-10.26
                        
                        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.
                        
                        -10.27
                        
                        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.
                        
                        -10.28
                        
                        Second
      Amended and Restated Limited Liability Company Agreement of Concord Debt
      Holdings LLC, dated August 2, 2008, between Lex-Win Concord LLC and Inland
      American (Concord) Sub LLC  - Incorporated by reference to
      Exhibit 10.1 to the Trust’s Form 8-K filed August 4, 2008
                        
                        -10.29
                        
                        Limited
      Liability Company Agreement of Lex-Win Concord LLC, dated August 2, 2008,
      among WRT Realty L.P., The Lexington Master Limited Partnership and WRP
      Sub-management LLC - Incorporated by reference to Exhibit 10.2 to the
      Trust’s Form 8-K filed August 4, 2008
                        
                        -10.30
                        
                        Amendment
      No. 1 to Second Amended and Restated Advisory Agreement dated May 11,
      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




51